The auditor-general of South Africa (AGSA) must now resort to litigation to force municipalities, departments and state entities to pay their outstanding audit fees.
Auditor-general Kimi Makwetu said that as of year-end March 31, AGSA was owed a total of R650m for its audit services in the local, provincial and national government spheres.
The Eastern Cape municipalities, departments and entities owe the AGSA’s office more than R80m.
“We continued our ring-fencing and litigation efforts to further improve collections,” Makwetu said.
“We also collected R73m 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,” he added.
Makwetu said overall, the debt owed to the AGSA had decreased, which was indicative of the success of their enhanced collection strategies and a significant payment from the National Treasury.
“The debtors’ book closed at R650m, a decrease of 19% from last year’s balance of R806m.
“Local government debt of R249m [2017: R391m] constituted 38% of the total debt, which improved from a high of 49% in the previous year,” he said.
“There was a noticeable decrease in all debtor’s balances except ‘other debtors’ [public entities, including some of the larger SOEs], which closed at R153m from R132m the previous financial year,” Makwetu said.
He said of the debt owed by other debtors, 81% was still within their credit payment terms, with the balance of R27m being collected through litigation and ring-fencing mechanisms.
“We collected a cumulative R274m through ring-fencing agreements, with R91m collected in 2017-18 (2016-17: R94m).
“This initiative is still effective as it allows debtors to settle their old debt while liquidating the current debt.
“The AGSA is a non-profit-making institution which generates its own funding through revenue earned from auditing the public sector.
“Audit income is made up of a combination of own revenue, income generated through the audit work performed on our behalf by contracted audit firms and recovery of subsistence and travelling costs from our auditees,” said Makwetu.
AGSA spokesperson Africa Boso said: “Budgets are prepared to see us break even or generate a small surplus. The retention and utilisation of any surplus are agreed upon with parliament’s standing committee on the auditor-general and National Treasury.”
Boso said if there was any surplus, the AGSA consulted with National Treasury on whether to retain it or surrender it to the National Revenue Fund.
Boso revealed that the total debt owed by Eastern Cape debtors amounted to R80m, or 12% of the total debt.
“R56m or 70% is within our credit terms with a balance of R24m or 30% owing for longer than 120 days.
“The improvement in the quality of this debt is due to settlement of audit fees through ring-fencing agreements [payment arrangements] over time and litigation against [those who default],” he said...