AG spends millions forcing depts to pay audit fees
It has been forced to resort to litigation to recover fees from government departments, entities and municipalities
The Auditor-General South Africa (AGSA) has already had to spend more than R2.4m in legal fees to recoup more than R244m in unpaid audit fees by government departments, entities and municipalities.
But there is still a mountain to climb to recover the R650m in unpaid fees, some dating to 2016.
Back then, the AG signed payment plans with a number of its debtors in an effort to reduce their audit fee debt. Auditor-general Kimi Makwetu said: “We collected R73m of the money owed to us through litigation in 2017-18, compared to R63m in the previous year. Since we began litigation to recover debt, we have collected R244m since 2016.”
Makwetu said the AGSA had incurred R1.4m in legal fees to recover the debt through litigation for the 2017-18 financial year, and more than R1m for 2016-17.
“We continued our ring-fencing and litigation efforts to further improve collections. We collected a cumulative R274m through ring-fencing agreements, with R91m collected in 2017-18, and collected R94m in the 2016-17 financial year.
Makwetu said national departments owed R66m, while provincial departments owe R137m. But the biggest culprits were municipalities, which owed more than R249m, followed by government entities on R153m. Other statutory bodies owe the AG R45m.
Makwetu said two government institutions – the South African Revenue Service (Sars) and the water and sanitation department – took the AG to court in in September 2018 to challenge its audit opinion.
However, they have since withdrawn their legal action.
Water and sanitation department (DWS) spokesperson Sputnik Ratau said: “The DWS is no longer challenging the auditor-general’s audit opinion. We withdrew that court case now beginning of January 2019.”
Acting Sars commissioner Mark Kingon withdrew the court challenge against AGSA after the suspension of Tom Moyane, spokesperson Sicelo Mkosi confirmed.
During the past year, 40 audit contestations were reported for the 2016 -17 Public Finance Management Act (PFMA) and 16 for the Municipal Finance Management Act (MFMA) audit cycles.
“We continue to be vigilant and work with auditees and the relevant authorities to resolve disputed issues outside of the legal process. Support will continue to be given by the legal team to ensure that these risks are mitigated.”
One of the issues at Sars was the bonuses paid out without obtaining permission from the minister of finance.
Mkosi said that in 2017, Sars paid a total of R561m in performance bonuses relating to the 2015/16 financial year, of which R3m was paid to members of the executive committee.
Sars would seek ministerial consent for all future bonus payments.
In his report to President Cyril Ramaphosa, Judge Robert Nugent said: “As far as I am aware, litigation by a state entity against the auditor-general contesting his or her audit findings is unprecedented, and for good reason.
Nugent, chairing the commission of inquiry into the affairs at Sars, said the application brought against the auditor-general by Sars was misconceived, and bound to fail.
“Nonetheless, the litigation was not brought in the interests of Sars, but in the interests of its senior managerial employees. Only a moment of reflection ought to have been sufficient to appreciate that defying both the minister of finance and the auditor-general in pursuit of senior management’s own bonuses, would bring Sars into disrepute,” the judge concluded.