Mismanagement of accruals will trigger financial crisis

By Andrew Louw, MPL, DA Provincial Leader in the Northern Cape:

The Democratic Alliance is concerned that mismanagement of accruals at the Office of the Premier will trigger another financial crisis. It seems invoices are simply carried over between financial years to give a superficial appearance that the Office of the Premier is not overspending its budget. This shows why the Premier refused to give the assurance during her State of the Province Address that the provincial government is capable of paying suppliers timeously.

During the presentation of the first quarterly report for the 2015/16 financial year, it was revealed that the Office of the Premier has already spent 46% of its yearly Good and Services budget. The Administration programme has, in fact, spent more than half of its Good and Services budget for the whole year in the first three months.

This massive overspending relates directly to ongoing abysmal management of accruals by the Office of the Premier.

We do not accept the explanation that invoices were submitted late and believe that it has much more to do with enduring poor financial management. It is far more likely that the Office of the Premier did not have the necessary funds to cover all invoices, whether submitted before or after the closing of the financial year.

The same pattern of overspending occurred in the previous financial year and triggered a financial crisis at the Office of the Premier.

Circular 1/2015 from the Office of the Premier, dated 12 January 2015, indicated that the Office of the Premier had only R401 461 available from an initial allocation of R44.2 million to cover all Goods & Services. According to Circular 1/2015, all requests for travel and accommodation had to be submitted by the 20th of January. No groceries or diaries would be purchased and stationary would have been run down to a bare minimum.

The Office of the Premier is now in a worse position than it was a year ago. In the first quarter of 2014/15, the Office of the Premier had spent 37% of its yearly budget on Goods and Services due to poor management of accruals. It is likely that the payment of invoices from

2013/14 placed pressures on the 2014/15 budget, leading to invoices from 2014/15 being paid in the 2015/16 financial year. Unless decisive action is taken to improve the management of accruals, we will be trapped in this cycle indefinitely.

The Democratic Alliance believes that SMME’s and entrepreneurs must be supported if we are to stimulate the provincial economy and solve the problem of unemployment. Many small companies do not have the necessary cash reserves to operate without timeous payments from government.

As head of the provincial government, the Office of the Premier should be able to lead by example and should provide solid financial management. Everybody wants an economy that works and that gives suppliers the assurance that, if they deliver to government, they will be paid on time.