Cape Town - Aduitor - General Tsakani Maluleke has found that the National Treasury failed to disclose R68 million in irregular expenditure spent on the Integrated Financial Management System (IFMS) in the 2021-22 financial year.
Maluleke blamed the fiasco on effective and appropriate steps not being taken to prevent the expenditure, as required by the Public Finance Management Act (PFMA).
This resulted in the department recording a qualified audit opinion.
This emerged in the annual report tabled in Parliament only last week, following requests for extensions by Finance Minister Enoch Godongwana after the department did not meet the stipulated September deadline due to a dispute lodged with the Office of the Accountant-General.
In her report, Maluleke said the PFMA required the department to disclose particulars of all fruitless and wasteful expenditure that had occurred during the financial year.
“The department did not record fruitless and wasteful expenditure in note 26 to the financial statements of R68 million (2021: R67 million), in respect of payments for the technical support and maintenance on licences for the Integrated Financial Management System (IFMS) for which no value was derived.
“The balances of fruitless and wasteful expenditure were incorrectly removed in note 26.1 and disclosed as a prior period error in note 26.2 and note 36,” she said.
Maluleke also said the move by the department resulted in the fruitless and wasteful expenditure ballooning from R333m to R400m as at March 2022.
The A-G put the blame squarely on the head of the department for not implementing adequate oversight and monitoring to ensure timeous implementation of the IFMS and to prevent the recurrence of fruitless and wasteful expenditure on the IFMS.
“This was mainly due to the slow implementation of action plans to address deficiencies that were identified in prior years in the areas of governance and project management. In the current year, management addressed some of the prior year’s recommendations, but these did not have a sufficient impact on the overall project status as these matters should have been dealt with at the project initiation stage.”
According to Maluleke, the expenditure has been incurred since the 2016-17, and she had referred the material irregularity to the Special Investigating Unit in January 2022 for investigation.
“The investigation is ongoing and regular feedback is received on the progress being made,” she said.
Acting director-general Ismail Momoniat said all assignments leading up to the common design and pilot implementation of the IFMS have been completed.
“However, an unsuccessful procurement process was initiated for the third time since 2018/19 in May 2021 through the State Information Technology Agency for the appointment of a service provider to implement the IFMS pilot to establish the basis for its national roll-out.”
IFMS will be piloted at the National Treasury, Department of Public Service, Eastern Cape and Western Cape provincial treasuries ahead of a national roll out.
Momoniat stated that the department has been in dispute with the A-G since 2016-17 regarding its approach of finding legitimate expenditure that was incurred in line with a contractual commitment for annual support and maintenance of the IFMS as fruitless and wasteful.
“In National Treasury’s view, the payment is not made in vain as failure to do so would result in legal and financial implications for the department.”
He said none of the expenditure had been regarded by the AGSA or any of the forensic investigations conducted as suspicious or inappropriate from a criminal law perspective.
Momoniat insisted that the licence support and maintenance fees were paid annually to ensure that the IFMS project has automatic access to updated versions of licences and software patches when required in preparation for the full implementation of the IFMS.
“In addition, if the licence support and maintenance fee is not paid, discounts will be lost, and penalties and back-payments will be incurred.”
Cape Times