GPG'S RESPONSE TO A-G'S FINDINGS

The Gauteng Provincial Government (GPG) wishes to respond to the matter as reported in the weekend media.

We note that the manner in which the media reported the findings of the Auditor-General (A-G) is lacking contextual information and meaning to the public. Firstly it is important to distinguish the difference between unauthorized expenditure, wasteful expenditure and irregular expenditure and importantly the manner in which these are dealt with within public sector.

An unauthorized expenditure is defined as (a) an overspending of a vote or a main division within a vote and (b) expenditure not in accordance with the purpose of a vote or in the case of a main division, not in accordance with the purpose of the main division.

Wasteful expenditure means an expenditure which was made in vain and would have been avoided had reasonable care been expected.

Irregular expenditure means expenditure, other than unauthorized expenditure incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including (a) this Act; (b) State Tender Board Act, 1968, or any regulations made in terms of that Act; or (c) any provincial legislation providing for procurement procedures in that provincial government.

These distinctions are important in as far as clarifying the matter raised in weekend reports. From the amount of R6.6 billion as reported, R1.4 billion is an unauthorized expenditure, R4.8 billion is an irregular expenditure and R400 million is fruitless expenditure.

UNAUTHORIZED EXPENDITURE

Everyone within government who is a custodian of public finance should always endeavour to spend within their allocated budget and avoid unauthorized expenditure. However, there are certain circumstances where an unauthorized expenditure is unavoidable, hence there is a defined process in law to deal with unauthorized expenditure. An amount of R1.4 billion unauthorized expenditure was incurred in 2010/11.

In terms of the law, where a department has incurred an unauthorized expenditure, it is only the Standing Committee on Public Accounts (SCOPA) which will engage with the veracity of such an expenditure and make final determination if it was warranted. It will thus make specific recommendations to the MEC Finance to regularize it. The MEC will have to prepare and introduce the unauthorized bill in the legislature. The Department of Finance has set funds aside to clear the unauthorized expenditure.

IRREGULAR EXPENDITURE

The provincial government incurred an irregular expenditure amounting to R48 billion, the biggest contributor being the Health and Social Development department at R2.2 billion; the Department of Roads and Transport at R22 billion and Department of Infrastructure at R242 million.

It is factually correct that the Gauteng Department of Roads and Transport incurred irregular expenditure amounting to R2.2bn. In January 2011, the Gauteng MEC for Roads and Transport initiated an investigation into several tenders which were awarded by the Department. Almost R1bn of this R2.2bn relates to this investigation.

Furthermore, a payment of R1.6bn was made to bus service providers during the 2010/2011 financial year. This arises from a ring-fenced grant which is allocated annually by the National Department of Roads and Transport to the department to pay bus subsidies to contracted bus operators. In order to remedy this situation, some contracts of senior managers were not renewed on expiry, disciplinary proceedings were instituted against responsible departmental officials, and the Department approached the High Court to nullify irregularly awarded tenders.

The Department of Infrastructure Development has instituted the necessary remedial action which disciplinary action against officials who were responsible will be taken. Other actions include the implementation of proper financial management systems, and the revamping of Supply Chain Management processes in accordance with the PFMA and related regulations. Finally, we are also collaborating with the Auditor-General, the Department of Finance and National Treasury to sustain these interventions.

Regarding the Department of Health and Social Development's challenges as it relates to both unauthorized and irregular expenditure, it is a fact that these have been acknowledged by the Provincial Cabinet, which has led to the Premier approaching the national government for assistance. To this end, an agreement between the Premier, Minister of Health and Minister of Finance has been reached. The agreement deals with collaborating efforts in dealing with financial management within the Department of Health and Social Development with specific emphasis being placed on supply chain management and inventory management, which in most cases are the biggest contributor towards both irregular unauthorized expenditure.

CONCLUSION

Looking at the R1.4bn unauthorized spending; the GPG has put in place processes to deal with this matter in conjunction with the Standing Committee on Public Accounts and the Provincial Legislature with a view to regularizing the expenditure. We are confident that this will be looked upon favourably as the funds are available.

Statement issued by the Gauteng Provincial Government, January 23 2012

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