The Gauteng Provincial Treasury (GPT) is working to prevent potential bankruptcy, pay down e-toll debt, mitigate underperformance, and work within a drastically reduced budget.

Discussing the finances of South Africa’s most populous province late last month, Gauteng Finance and Economic Development MEC Lebogang Maile assured that the GPT had the situation under control, with work being undertaken to arrest and mitigate any decline.

“Managing the budget is about agility. The money is always there; it is just how you manage the funds and how you prioritise [them],” he said, warning, however, that, without heightened vigilance and if caution is not taken, Gauteng could end up R6-billion in the red, and potentially bankrupt by June next year.

“[However], the public funds are in good hands and [the GPT is working to] ensure that we do not have a regression in the entities. Most of our entities are doing well; there are very few that are not doing well.”

Further, next month, the province will table its Medium Term Budget, which will provide the GPT with an opportunity to balance the scales and adjust the province’s equitable share and conditional grants, where needed.

The province is also accelerating its revenue enhancement strategy to raise more than R10-billion a year in own revenue, as, with a R15-billion budget cut and needing to pay R20-billion towards e-tolls, the province’s budget faces R35-billion less to work with.

Further discussing Gauteng’s audit outcomes and the state of the finances of the Gauteng provincial government (GPG), Maile commented that the provinceʼs finances are monitored daily and weekly to ensure that any challenges are identified in time to intervene.

Maile pointed out that, despite bills stacking up and the poor performance of the Gauteng Department of Health (GDoH) in particular – and weaknesses that need to be dealt with – not one of the 14 provincial departments or 19 entities in Gauteng received a qualified audit or adverse audit opinion.

In the 2023/24 financial year, seven departments received clean audit outcomes, including the GPT and the Office of the Premier (OOP), as well as the departments of Cooperative Governance and Traditional Affairs, Economic Development (GDED), Education (GDE), eGovernment, and Community Safety (GDCS).

This was an improvement on the 2022/23 financial year, when only six departments obtained clean audits. The GDCS improved from an unqualified audit opinion to a clean audit.

While there were no regressions in the 2023/24 audit outcomes, there were notable stagnations on unqualified audit opinions, with the seven remaining departments recording unqualified audit opinions with findings.

These include the GDoH, along with the departments of Infrastructure Development, Human Settlements (GDHuS), Social Development (GDSD), Agriculture, Rural Development and Environment (GDARDE), Roads and Transport (GDRT) and Sports, Arts, Culture and Recreation (GDSACR).

“For departments that received unqualified audit opinions with findings, material noncompliance with supply chain management legislation and expenditure were the main challenge. This noncompliance leads to increased instances of irregular expenditure, which has an adverse effect on the departments’ financial health.”

Further, five of the departments with unqualified audit opinions, namely the GDoH, the GDSD, the GDHuS, the GDRT and the GDSACR, have a challenge with consequence management, indicating that recommendations from completed investigations have not been implemented.

Additionally, material misstatements in the annual financial statements were found to be an issue in eight of the provincial departments. This indicates weak internal controls and a lack of adequate management reviews in the financial reporting processes.

The GDoH, in particular, poses a “huge” threat to Gauteng’s budget, according to Maile.

The GDoH, with an unqualified audit opinion in the 2023/24 financial year, was the only department with noncompliance across all areas, including grant management, revenue management, procurement and contract management, asset management and human resources.

“This indicates lack of [an] effective internal control environment in multiple areas,” Maile commented, assuring that no more money will be allocated before efficiencies are improved and better value for money is achieved for every service provided.

The GPT is “keeping things tight” to ensure no wastage and to hold people accountable.

In the 2023/24 financial year, 14 entities received clean audit outcomes, representing 74% of all entities in the provincial government.

This is an improvement from 11 in the previous financial year, including G-Fleet Management, the Gauteng Tourism Authority and the Gauteng Gambling Board,which improved from unqualified audit opinions in the previous financial year to clean audit outcomes in the year under review.

The Gauteng Enterprise Propeller, the Medical Supplies Administration System, the Gauteng Partnership Fund and the Transport Authority of Gauteng maintained unqualified audit outcomes, while the Gauteng Housing Fund (GHF) received adverse opinions.

While this outcome is not ideal and indicates significant problems in the GHF, it was a slight improvement from the 2022/23 financial year, when it received a disclaimer.

Across the five entities with noncompliance, two are noncompliant with expenditure management and supply chain management laws and regulations, which has led to increased instances of irregular expenditure, while three entities were found to have material misstatements in the annual financial statements, which indicates weak internal controls and lack of adequate management reviews in financial reporting processes.

Improving the financial status of the province is a key priority of the GPG, which is committed to ensuring improvement in audit outcomes for the 2024/25 financial year.

Mechanisms have been put in place to provide nonfinancial support for departments and entities to enable them to address the concerns raised by the Auditor-General South Africa.

One of the key objectives of the GPT is to facilitate a substantial decrease in irregular expenditure incurred by departments and entities. In this regard, working with departments, the GPT is developing interventions to help departments and entities strengthen weak internal controls and a lack of adequate management reviews in the financial reporting processes.

As at the end of August, overall expenditure for the GPG stood at R72.9-billion, or 49% of the main budget, with projected overspending of R7.4-billion.

This overspending was mainly within the GDoH, GDED, GDSD, GDARDE, DGCS, GDID, GDSACR, OOP and the Gauteng Provincial Legislature.

In the main, the projected overspending is attributed to unfunded improved conditions of service and accruals across all the departments.

The provincial governmentʼs overall expenditure on conditional grants at the end of August stood at R10.7-billion, or 38% of the main budget of R27.8-billion, with the GDoH, GDED and GDRT accounting for the largest portion of the expenditure, at 19%, 13% and 11% respectively.