Unauthorised, Fruitless & wasteful, Irregular Expenditure

Presenter: Lindy Bodewig Chief Director, National Treasury

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Unauthorised expenditure: defined

Unauthorised Expenditure is

a) the overspending of a vote or a main division within a vote; or

b) expenditure that was not made in accordance with the purpose of a

vote or, in the case of a main division, not in accordance with the

purpose of the main division.

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Unauthorised expenditure: defined

Unauthorised expenditure

overspending of a vote or a main division within a vote

expenditure that was not made in accordance with the purpose of a

vote or, in the case of a main division, not in accordance with the

purpose of the main division

A department (or programme) spends more than it’s allocation. The over expenditure is usually funded from an overdraft facility

A department (or programme) incurs such expenditure using

voted funds

The additional expenditure was not funded by the NRF/PRF and the unauthorised

expenditure is therefore not surrendered to either the NRF/PRF

The unathorised expenditure was funded by the NRF/PRF and the amount spent is therefore paid

back to the NRF/PRF

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Unauthorised expenditure: accounting policy

When confirmed unauthorised expenditure is recognised as an asset in the

statement of financial position until such time as the expenditure is either

approved by the relevant authority, recovered from the responsible person

or written off as irrecoverable in the statement of financial performance.

• Expenditure is never adjusted through the creation of the unauthorised expenditure asset

• Department could show a deficit on the statement of financial performance (overspending)

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Unauthorised expenditure: accounting policy

Unauthorised expenditure approved with funding is derecognised in the

statement of financial position when the unauthorised expenditure is

approved and the related funds are received.

Where the amount is approved without funding it is derecognised as

expenditure in the statement of financial performance on the date of

approval

• Recommendation when the UA is approved without finding should specify period of time over which the amount is derecognised

• Departments must disclose reasons why not written off at year-end

• What if the approval is not obtained?

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Unauthorised expenditure: procedures

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Unauthorised expenditure: procedures cont

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Unauthorised expenditure: procedures cont

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Fruitless & wasteful expenditure: defined

Fruitless and wasteful expenditure means expenditure which was made

in vain and would have been avoided had reasonable care been

exercised.

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Fruitless & wasteful expenditure: accounting policy

Fruitless and wasteful expenditure is recognised as expenditure in the

statement of financial performance according to the nature of the payment

and not as a separate line item on the face of the statement. If the

expenditure is recoverable it is treated as an asset until it is recovered from

the responsible person or written off as irrecoverable in the statement of

financial performance.

• Movement in balance obtained from the note to the AFS

• Expenditure for the year is not reduced when the F&W is discovered

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Fruitless & wasteful expenditure: procedures

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Fruitless & wasteful expenditure: procedures

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Irregular expenditure: defined

Irregular expenditure comprises expenditure, other than unauthorised

expenditure, incurred in contravention of or that is not in accordance

with a requirement of any applicable legislation, including:

• the Public Finance Management Act 1 of 1999 (as amended by Act

29 of 1999);

• the State tender Board Act, 1968 (Act No. 86 of 1968, or any

regulation made in terms of that Act; or

• any provincial legislation providing for the procurement procedures in

that provincial government.

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Irregular expenditure: accounting policy

Irregular expenditure is recognised as expenditure in the statement of

financial performance. If the expenditure is not condoned by the relevant

authority it is treated as an asset until it is recovered or written off as

irrecoverable.

• Movement in balance obtained from the note to the AFS

• Expenditure for the year is not reduced when the IE is discovered

• Unauthorised expenditure takes precedence over irregular expenditure

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Irregular expenditure: procedures

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Irregular expenditure: procedures