National Treasury needs more time to finalise its own financials

The National Treasury that holds the country’s purse strings, is among a long list of state entities that have failed to submit to Parliament their financial statements by the legislated September 30 deadline.

Read: Still waiting for 2021 results from some state-owned companies

These are the statements for the year ended 31 March 2022, which they had six months to finalise.

This comes after Eskom announced that its financial statements will only be released at the end of November and warned that there will also be a list of restatements of the previous year’s statements “which will have an impact on the Eskom Group’s statements of financial position and income statement.”

Other entities that missed the deadline include several water boards, and agencies that handle massive amounts of money, such as the Unemployment Insurance Fund (UIF), Sasria (the state insurance company that provides cover for special risks like politically-motivated riots), the Compensation Fund, the National Student Financial Aid Scheme (NSFAS) and the Road Accident Fund.

This is according to a list Parliament provided to Democratic Alliance member of the parliamentary standing committee on public accounts (Scopa), Alfred Lees earlier this month.

Other state-owned companies that missed the deadline, include Denel, Alexkor, Postbank, Government Printing Works, Passenger Rail Agency of SA (Prasa) and South African Airlines (SAA) – which last published its financial results several years ago.

Lees says this leaves a huge question mark over the real state of a large portion of government’s finances.

‘Outstanding disputes’

In a letter addressed to Speaker Nosiviwe Mapisa-Nqakula and dated September 28, Finance Minister Enoch Godongwana asked for an extension to 4 November, as “the audit of the 2021/22 annual financial statements for the National Treasury are still not finalised due to outstanding disputes that have been declared and are being dealt with through the Mechanism for Resolving Disagreements between the Auditor and the Auditee.”

There is no indications what the disputes entail.

Eskom blamed the delay in finalising its results on the late appointment of Deloitte as auditors about a year ago, when the contract of its predecessors SNG Thornton came to an end.

In 2020/21 Eskom reported a loss after tax of R18.9 billion. This may be significantly more and its liquidity may be even tighter than is currently thought, once all the expected restatements have been made, says Dawie Roodt, chief economist of the Efficient Group.

Roodt says the delays in submitting financial statements are unlawful and it is becoming a habit for state entities to miss the reporting deadline. “It has been years since SAA has released its results,” he says.

Roodt says bad management and pure slackness is to blame.

Further, the fact that National Treasury is among those that missed the deadline is of great concern.

National Treasury and the Reserve Bank have always been seen as two well-functioning institutions and it is a huge problem if their statements are late, says Roodt. “This is the department that has oversight over the financial management of other state entities. If [SOEs] falter, the reporting lines change so that they report directly to Treasury until they regain stability, as was the case with SAA.”

To blame the delay on disputes with the auditor, in this case the Auditor General (AG), is nonsense, he says. “Disputes are part of the process and there should be time allocated to resolve such disputes.”

Lees agrees that a dispute with the auditors is just not a good enough excuse to miss the deadline. “What if it takes a decade to resolve?” he asks. Must parliament then wait with no information in the meantime about the state of the entity’s finances?

“There are often disputes between management and the auditor, but management can respond in their management letter. There comes a point where the auditor must say the audit has been completed and they finalise their report, but the AG doesn’t do that,” says Lees.

Lack of expertise?

He says there is a lack of skills in the public sector and they struggle to do what they must do. This leaves the impression that they have something to hide.

Professor Dirk Kotzé from the Department of Political Science at Unisa says the delays are a clear indication that financial management in the public sector is chaotic, as has been shown by the Zondo Commission and the AG.

He says it is not necessarily indicative of corruption, but rather of a lack of skills and expertise in financial management.

Many state-owned entities’ staff see these organisations in transition to bigger private sector participation. “Because these entities are mostly monopolies, such opportunities are very attractive to private sector players and they will be prepared to compromise (with regard to financial reporting)”, he says.

Kotze speculates that large budget adjustments necessitated by the Covid-19 pandemic may complicate the finalisation of the statements. National Treasury has also lost several top leaders without having obvious candidates to succeed them, he says.

Late submissions make it difficult for Parliament to execute its oversight role, he says. He adds that financial management in government is being over-regulated. It is becoming unmanageable and must be simplified, he says.