Accounting Manual for Departments - National Treasury. Annual... · Accounting Manual for Departments Unauthorised, Irregular, Fruitless and ... (or NRF for national ... During the

Accounting Manual for Departments

Unauthorised, Irregular, Fruitless and Wasteful Expenditure

Unauthorised, Irregular and Fruitless and Wasteful Expenditure

Contents

1 Overview ...................................................................................................................... 3

2 Key Learning Objectives .............................................................................................. 3

3 Unauthorised Expenditure ............................................................................................ 4

3.1 Accounting for unauthorised expenditure .............................................................. 4

3.2 Examples of unauthorised expenditure ................................................................. 7

4 Irregular Expenditure ................................................................................................. 13

4.1 Accounting for irregular expenditure .................................................................... 13

5 Fruitless and Wasteful Expenditure ............................................................................ 17

5.1 Accounting for fruitless and wasteful expenditure ................................................ 18


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1 Overview

The purpose of this Chapter is to provide guidance on the accounting and disclosure of information about unauthorised, irregular, fruitless and wasteful expenditure.

The Office of the Accountant-General has compiled a Modified Cash Standard (MCS) and this manual serves as an application guide to the MCS which should be used by departments in the preparation of their financial statements.

Any reference to a “Chapter” in this document refers to the relevant chapter in the MCS and / or the corresponding chapter of the Accounting Manual.

Explanation of images used in the manual:

2 Key Learning Objectives

Understanding the required accounting and disclosure relating to irregular, fruitless and wasteful and unauthorised expenditure

Definition

Take note

Management process and decision making

Example


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3 Unauthorised Expenditure

Unauthorised expenditure arises either when the department spends excessively or inappropriately.

The definition for unauthorised expenditure sets out exactly when the amount should be determined:

3.1 Accounting for unauthorised expenditure

For guidance on the identification and the application of the legislation with regard to unauthorised expenditure, refer to the “Guideline on Unauthorised Expenditure” issued by the Office of the Accountant-General.

Unauthorised Expenditure is the overspending of a vote or a main division within a vote; or 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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All valid unauthorised expenditure must be disclosed as a note to the financial statements which must include particulars of amounts approved with funding, amounts approved without funding, amounts not approved, etc. by the relevant authority in the same financial year and/or before finalisation of the financial statements.

Valid unauthorised expenditure is created as a “receivable” in the statement of financial position by crediting the exchequer grant account of the department (i.e. reducing the available vote) and debiting a corresponding receivable / debt account in the statement of financial position:

Debit Unauthorised Expenditure Account (POS)

Credit Exchequer Grant Account (POS)

This entry must be recorded as soon as the investigation reveals that the expenditure meets the definition of unauthorised expenditure. The register should be updated to reflect the outcome of the investigation.

The implications on the accounting and cash position of a department are described in the table below:

Type 1 Unauthorised Expenditure Type 2 Unauthorised Expenditure

All expenditure remains in the statement of financial performance (not disallowed);

Overspending may result in a deficit for the year;

No surrender of the unauthorised expenditure (UE) to the revenue fund;

Excess expenditure usually funded by way of bank overdraft (or NRF for national departments);

An UE receivable is recognised in the statement of financial position;

All expenditure remains in the statement of financial performance (not disallowed);

The expenditure should not have been funded by the revenue fund - a department must surrender the unauthorised expenditure (UE) back to the revenue fund;

The surrender may result in a bank overdraft;

An UE receivable is recognised in the statement of financial position;

Only once the Finance Bill has been passed by Parliament / relevant Provincial Legislature is the unauthorised expenditure formally approved.

In the modified cash environment, no accounting entries are permissible when the department is still waiting for the approved funding from the relevant revenue fund. The department should however disclose this fact in the notes to its financial statements.

Unauthorised expenditure is derecognised from the statement of financial position when it is approved with funding and the department has received the funds from the relevant revenue fund OR when it is approved without funding and the department charges the amount approved (or part thereof) against its vote.

Unauthorised expenditure approved with funding

Once the Finance Bill has been passed, the department will reverse the unauthorised expenditure approved with funding as follows:

Debit PMG Account (POS)

Credit Unauthorised Expenditure Account (POS)


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If the unauthorised expenditure was approved with funding prior to or at the end of the financial year, but the funds were only received after 31 March, the department must disclose this fact in the unauthorised expenditure note. The accounting entries can only be passed once the funds have been received.

Unauthorised expenditure approved without funding

If Parliament / relevant Provincial Legislature approves the amount of unauthorised expenditure, but does not approve an additional amount for the overspending, that amount becomes a charge against the funds allocated for the next or future financial years under the relevant vote. The following journal entry will then be made:

Debit Relevant individual expenditure account* (PER#)

Credit Unauthorised Expenditure Account (POS)

*The programme and expenditure account where the unauthorised expenditure originated is debited

#Statement of financial performance

If unauthorised expenditure is approved without funding and the department charges the amount approved (or part thereof) against its vote:

Since the amount received is not recognised as revenue in the statement of financial performance or as appropriated funds in the appropriation statement, there is no reconciling line item between the two statements.

The additional expenditure recognised in the statement of financial performance is a reconciling item between the statement of financial performance and the appropriation statement. The appropriation statement reflects the funding of the current years’ expenditure and any expenditure relating to a prior period will be included in the reconciliation between the statement of financial performance and the appropriation statement.


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3.2 Examples of unauthorised expenditure

Example: Unauthorised expenditure relating to expenditure exceeding the vote

During the year a department overspent its appropriated funds by R1,034,013. The over expenditure relates to salary payments that were not adequately budgeted for (i.e. the department overspent on its compensation of employees). The over expenditure will contribute to the net deficit for the year as reflected in the extract of the statement of financial performance below.

Extract from Statement of financial performance

Note 20x3 20x2

R’000 R’000

Revenue

Total revenue 14,093,878 xx

Total expenditure (14,959,441) xx

Surplus/(deficit) for the year (865,563) xxx

Reconciliation of Net Surplus/(Deficit) for the year

Voted funds (1,034,013) xx

Departmental revenue 148,544 xx

Local and foreign aid assistance 19,906 xx

SURPLUS/(DEFICIT) FOR THE YEAR (865,563) xxx

The unauthorised expenditure is recorded in the statement of financial position by way of the following entries:


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At year end Debit Credit

R’000 R’000

Unauthorised Expenditure 1,034,013

Exchequer Grant Account 1,034,013

The impact of the above journal entry on the Exchequer Grant Account is illustrated below:

Exchequer Grant Account

Total appropriated funds at beginning of the year (14,093,878 -

148,544 - 19,906)

13,925,428 Funds requisitioned during the year

13,925,428

Y/E close of general account of the vote

13,925,428

Total expenditure incurred during the year

14,959,441 Unauthorised expenditure journal entry (14,959,441 -

13,925,428)

1,034,013

28,884,869 28,884,869

Total expenditure includes the over expenditure on compensation of employees

From the above T-account it is clear that the department does not need to surrender any funds to the relevant revenue fund. This is also reflected in the line item voted funds to be surrendered to the revenue fund on the statement of financial position as follows:


Note 20x3 20x2

Voted funds to be surrendered to the Revenue Fund

R’000 R’000

Opening balance - xx

Transfer from statement of financial performance

x 1,034,013 xx

Add: Unauthorised expenditure for current year*

x (1,034,013) (xx)

Voted funds not requested/not received x - xx

Transferred to retained revenue to defray excess expenditure (Parliament/Legislatures ONLY)

x - xx

Paid during the year - (xx)

Closing balance - -


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Example: Unauthorised expenditure relating to expenditure exceeding the vote and expenditure incurred that was not in accordance with the purpose of the vote / main division within a vote

During the year a department overspent its appropriated funds by R1,034,013 (as per Example above). In addition, the department used R192,730 of its funds inappropriately which resulted in the expense being classified as unauthorised expenditure. The total unauthorised expenditure is recorded in the statement of financial position by way of the following entries:


R’000 R’000

Unauthorised Expenditure (1,034,013 + 192,730)

1,226,743

Exchequer Grant Account 1,226,743

The impact of the above journal entry on the Exchequer Grant Account is illustrated below:

Exchequer Grant Account

Total appropriated funds at beginning of the year

13,925,428 Funds requisitioned during the year

13,925,428

Total expenditure incurred during the year

14,959,441 Y/E close of general account of the vote

13,925,428

Voted funds to be surrendered to the revenue fund

192,730 Unauthorised expenditure journal entry

1,226,743

28,884,869 28,884,869

From the above T-account it is clear that the department must surrender the R192,730 to the relevant revenue fund. This is because the funds were inappropriately used and should not have been funded by the revenue fund. This is also reflected in the line item voted funds to be surrendered to the revenue fund on the statement of financial position as follows:


Note 20x3 20x2


R’000 R’000



x 1,034,013 xx


x (1,226,743) (xx)


Transferred to retained revenue to defray excess expenditure (Parliament/Legislatures

x - xx


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ONLY)

Paid during the year - (xx)

Closing balance (192,730) -

* Must agree to the unauthorised expenditure note

If the amount is paid over before the finalisation of the financial statements then the note will appear as follows:


Note 20x3 20x2


R’000 R’000



x 1,034,013 xx


x (1,226,743) (xx)


Transferred to retained revenue to defray excess expenditure (Parliament/Legislatures ONLY)

x - xx

Paid during the year 192,730 (xx)

Closing balance - -

Example: Approval of unauthorised expenditure

Following the previous two examples. In a subsequent period the relevant Provincial Legislature approved the unauthorised expenditure incurred by the department as follows:

R1,034,013 – approved with funding (the funds were subsequently received)

R192,730 – approved without funding

The entry to record the above is as follows:


R’000 R’000

PMG Account 1,034,013

Relevant expenditure account* 192,730

Unauthorised Expenditure (1,034,013 + 192,730)

1,226,743

* The relevant programme and expenditure item against which the expenditure was originally incurred is debited


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The impact of the above journal entry on the Unauthorised Expenditure Account is illustrated below:

Unauthorised Expenditure Account

Balance at beginning of the year

1,226,743 Funds received 1,034,013

Amount charged to expenditure

192,730

- -

Example: Unauthorised expenditure approved without funding and has not been written off

The department has unauthorised expenditure of R27 million in 20x0. The unauthorised expenditure is approved without funding in 20x3. The amount will be recorded as follows in the notes to the financial statements:


Note 20x3 20x2

Unauthorised expenditure R’000 R’000

Reconciliation of unauthorised expenditure

Opening balance 27,000 27,000

Unauthorised expenditure - discovered in the current year

x - -

Less: Amounts approved by Parliament/Legislature with funding

- -

Less: Amounts approved by Parliament/Legislature without funding and written off in the statement of financial performance

(27,000) -

Current (27,000) -

Capital - -

Transfers and subsidies - -

Less: Amounts transferred to receivables for recovery

- -

Unauthorised expenditure awaiting authorisation / write-off

- 27,000

Unauthorised expenditure that was approved without funding and has not been written-off in the statement of financial performance must remain on the statement of financial position as “unauthorised expenditure” until it is written off (against savings) in the statement of financial performance. Departments should disclose the reasons


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for not writing off any unauthorised expenditure previously approved without funding with the date on which it was approved by SCOPA.

Example: Unauthorised expenditure approved without funding and has been written off

Once unauthorised expenditure is approved without funding the entry that must be put through is:

DR Relevant expenditure account (PER) – as expenditure

XXX

CR Unauthorised expenditure (POS) XXX

The programme and expenditure account that originally caused the unauthorised expenditure is debited.

For reporting purposes UE approved without funding should be shown separately on the face of the PER. Departments will therefore have to manually adjust the figures to shift the amount written off from the relevant expenditure category to the appropriate “Unauthorised expenditure approved without funding” line on the face of the PER.

For example, Department X incurred unauthorised expenditure of R20 million on a programme when it overspent on salaries. The unauthorised expenditure was approved but without any additional funding. The department subsequently wrote off the amount.

Entry 1: Clearing of unauthorised expenditure:

Dr Compensation of employees – salaries & wages (PER)

Cr Unauthorised expenditure (POS)

Entry 2: Reclassifying unauthorised expenditure on the face of the PER

DR Unauthorised expenditure approved without funding (PER)

Cr Compensation of employees (PER)

2010/11

R’000

Current expenditure

Compensation of employees +20’ (Entry 1) - 20’ (Entry 2)

……

Unauthorised expenditure approved without funding +20’ (Entry 2)

Entry performed in the financial system

Entry performed on the AFS not in the system


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4 Irregular Expenditure

4.1 Accounting for irregular expenditure

All irregular expenditure must be disclosed as a note to the financial statements which must include particulars of amounts condoned by the relevant authority in the same financial year and/or before finalisation of the financial statements.

Departments must quantify the total amount of irregular expenditure identified either by the department or its assurance providers. Departments are however allowed to disclose instances where it is busy investigating the full extent of the transgression. The value of irregular expenditure previously disclosed in the financial statements may need to be adjusted based on the outcome of the investigation, unless the department can demonstrate that it is impracticable to estimate the total extent of the irregular expenditure. When the department can demonstrate that it is impracticable to quantify the full amount, it should disclose this fact along with the impracticability reasons.

NOTE: Insufficient time cannot be used as a justification for impracticability. Applying a requirement is impracticable when the department cannot apply it after making every reasonable effort to do so.

Accruals are not expenditure as no money is spent as yet when they are disclosed. Therefore accruals cannot result in unauthorised expenditure. Nonetheless, Departments should monitor the level of commitments in the financial system. If the expenditure for the year plus accruals exceed the department’s vote this may be emphasised in the auditor’s report.

For guidance on the identification and the application of the legislation with regard to irregular expenditure, refer to the “Guideline on Irregular Expenditure” issued by the Office of the Accountant-General.

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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Debts written off must be disclosed in the relevant note to the financial statements.

Unauthorised vs Irregular expenditure If a department undertakes a transaction that contravenes legislation, the transaction meets the definition of irregular expenditure. The same transaction may be outside the mandate of the department and/or cause overspending on a programme or vote which meets the definition of unauthorised expenditure. A transaction of this nature must not be accounted for as both irregular expenditure and unauthorised expenditure. Irregular expenditure is defined as expenditure other than unauthorised expenditure. This means that unauthorised expenditure takes precedence over irregular expenditure. Therefore the transaction will be accounted for as unauthorised expenditure.

Measurement and disclosure of irregular expenditure

The disclosure of irregular expenditure incurred is a legal rather than an accounting requirement. It is the act that results in irregular expenditure that is of importance to the user of the financial statements. The amount does not add to its significance and focusing on the quantification of irregular expenditure, while it is important, may divert attention away from the act itself. The primary focus from an oversight perspective is ensuring that spending agencies abide by the law in executing their mandates.

The amount disclosed as irregular expenditure arising / discovered in a particular financial year, however, will allow the user to assess the extent to which that period’s allocated funds were utilised in an irregular manner. The amount disclosed does not necessarily give a reliable measure of internal control weaknesses in an entity but the nature and or the regularity of the infraction.

It is acknowledged that there may be instances where the irregular expenditure arose from fraudulent, corrupt and criminal activities or actions that deprived the state of value for money and may result in the state instituting a civil claim against a third party. In such cases the department would have to evaluate the impact of the infraction and the likelihood of someone being liable in law. The extent of the liability would thus have to be established. If the total amount could not be established by the date of approval for issue of the annual financial statements, the sub-notes should disclose this fact along with the reasons why.

Departments should keep in mind that all possible irregular expenditure (irrespective of what financial year or supplier it relates to) must first be recorded in the register of irregular expenditure and they should then ensure that a proper investigation is done, in line with the Guideline on Irregular Expenditure issued by the National Treasury.

If such investigation is still in progress after the audit is completed then a narrative to this effect should be included in the irregular expenditure note in the financial statements.

When should the irregular expenditure be recorded in the relevant register and/or irregular expenditure note in the annual financial statements?

On discovering a possible irregular expenditure, the department must record the alleged irregular expenditure in the relevant register.

The department must evaluate if the alleged irregular expenditure is valid.

If the irregular expenditure is valid, the relevant register must be updated stating that the expenditure is in actual fact irregular expenditure. These amounts must be included in the irregular expenditure note.

If the irregular expenditure is not valid, the relevant register must be updated stating that the alleged irregular expenditure was found not to be valid.


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Irregular expenditure not condoned

The BAS accounting entries used to record the transactions relating to irregular expenditure not condoned are illustrated below.

If the irregular expenditure relates to the current financial year AND was not condoned in the current year:

Debit Receivables (POS)

Credit Expenditure (relevant programme and item) (PER)

A current asset is created on the statement of financial position, and the expenditure is “reversed” against the relevant objective and item.

Upon receipt of the funds from the responsible official:

Debit Bank Account (POS)

Credit Receivables (POS)

If Accounting Officer provides approval for the write-off the debt or part thereof:

Debit Transactions in financial assets and liabilities (PER)


If the irregular expenditure relates to the current financial year AND was not condoned in the subsequent financial year:


Credit Recoverable Revenue Account (POS)

When recovered from responsible official:

Debit Recoverable Revenue Account (POS)

Credit Transactions in financial assets and liabilities (PER) – recovery of prior year expenditure

Debit Bank account (POS)


Above, the receivable was credited (cancelled) upon recovery and the amount accounted for in the Statement of financial performance.

The irrecoverable amount written off with the approval from the Accounting Officer:

Debit Recoverable Revenue Account (POS)

Credit Transactions in financial assets and liabilities (PER) – recovery of prior year expenditure

Debit Transactions in financial assets and liabilities (PER) – thefts and losses



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Summary of disclosure requirements

In summary, the disclosure requirements with regard to the identification and quantification of irregular expenditure are as follows:

Transgression took place in the current financial year

Transgression took place in a previous financial year

Suspected irregular expenditure identified and in process of investigation to confirm.

No disclosure in the irregular expenditure note

No disclosure in the irregular expenditure note

Alleged irregularity confirmed as irregular expenditure and further investigated to determine the nature, extent and root cause of the transgression (where for

example the department is in the process of establishing whether this is an isolated)

Disclose amount of irregular expenditure confirmed and note that further instances (the extent) of this type of irregular expenditure are under investigation.

Continue with process as described below

Disclose amount of irregular expenditure confirmed and note that further instances (the extent) of this type of irregular expenditure are under investigation.

Continue with process as described below

Institute a process to identify any fraudulent, corrupt and criminal activities or actions that deprived the state of value for money and may result in the state instituting a civil claim against a third party

If confirmed criminal activities etc.:

follow relevant steps required in chapter 4, 9 and 12 of the Treasury Regulations;

report in terms of section 34 of the Prevention and Combating of Corrupt Activities Act, 2003;

determine amount paid in current financial year;

disclose amount in the main note as “irregular expenditure - relating to current year”

include supplementary disclosure on the disciplinary steps taken/criminal proceedings in process;

If not confirmed by date on which the financials are authorized for issue:

follow process below and disclose the fact that further investigations are still underway;

If confirmed criminal activities etc.:


report in terms of section 34 of the Prevention and Combating of Corrupt Activities Act, 2003;

determine amount paid from date of transgression to end of reporting period;

disclose amount in the main note as “irregular expenditure – relating to prior year”

include supplementary disclosure on the disciplinary steps taken/criminal proceedings in process;

If not confirmed by date on which the financials are authorized for issue:

follow process below and disclose the fact that further investigations are still underway;

if confirmed in a subsequent financial period, the full


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Transgression took place in the current financial year

Transgression took place in a previous financial year

amount must be quantified and disclosed as above;

Confirmation that the irregular expenditure was not the result of fraudulent, corrupt and criminal activities or actions that deprived the state of value for money that may result in the state instituting a civil claim against a third party


determine amount paid and disclose amount in the main note as “irregular expenditure - relating to current year”


determine amount paid from date of transgression to end of reporting period and disclose amount in the main note as “irregular expenditure – relating to prior year”

if the department can demonstrate that it is impracticable to determine the total irregular expenditure, disclose details of transgression and reasons why the amount cannot be quantified;

if the department can demonstrate that it is impracticable to estimate the total irregular expenditure, disclose details of transgression and reasons why the amount cannot be quantified;

Departments are encouraged to conclude all investigations and resolve all irregular expenditure as soon as practicable.

5 Fruitless and Wasteful Expenditure

For guidance on the identification and the application of the legislation with regard to fruitless and wasteful expenditure, refer to the “Guideline on Fruitless and Wasteful Expenditure” issued by the Office of the Accountant-General.

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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In this context ‘expenditure’ refers broadly to processes that must be followed, transactions with service providers or suppliers and the use of other resources belonging to the department. The phrase ‘made in vain’ indicates that the department derived no value for money from the expenditure or the use of other resources. Fruitless and wasteful expenditure must fulfil both the conditions in the definition, namely, that it was made in vain and it would have been avoided had reasonable care been exercised.

5.1 Accounting for fruitless and wasteful expenditure

During the period of the investigation the expenditure must remain in the expense account. The results of the investigation will determine the appropriate action to be taken regarding this expenditure.

If the fruitless and wasteful expenditure cannot be recovered from an employee (not liable in law), the expenditure must remain as a debit against the relevant programme / expenditure item and disclosed as such in the relevant note to the financial statements.

Fruitless and wasteful expenditure relates to the current financial year

If any expenditure meets the definition of fruitless and wasteful expenditure (after an investigation)

and it is recoverable from a responsible official:


Credit Expenditure (relevant programme and item) (PER)

A current asset is created on the statement of financial position, and posted to the relevant expenditure account unlike the previous financial years when the expenditure was “reversed” and presented on the statement of financial performance as ‘Add back fruitless and wasteful expenditure’.

When the department receives the funds from the responsible official (fruitless and wasteful expenditure is recovered):

Debit Bank account


Fruitless and wasteful expenditure relates to a previous financial year

If any expenditure meets the definition of fruitless and wasteful expenditure (after an investigation) and it is recoverable from a responsible official:


Credit Recoverable revenue (SOCNA)

A current asset (staff debt) is created on the statement of financial position, and the available voted funds are reduced.

When the department receives the funds from the responsible official (fruitless and wasteful expenditure is recovered):

Debit Bank account

Credit Debt account (staff debt) (POS)

Debit Recoverable revenue (SOCNA)


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Credit Financial transactions in assets & liabilities

Fruitless and wasteful expenditure discovered in the current year but dates back to prior years

If a department discovered fruitless and wasteful expenditure in the current year (say 2011/12) resulting from a prior period transaction the following must be presented and disclosed in the notes to the financial statements:

Show the fruitless and wasteful expenditure amount in the current year (2011/12) column on the line item “Fruitless and wasteful expenditure – relating to prior year”;

No adjustment to prior year (2010/11) disclosure notes or the opening balance for the current year (2011/12) is required;

Include narrative information concerning the period of time over which the expenditure occurred and what gave rise to it along with the investigation process and progress in resolving the fruitless and wasteful expenditure.


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Unauthorised Expenditure to Irregular Expenditure and Fruitless and Wasteful Expenditure

Unauthorised Expenditure Irregular Expenditure Fruitless and Wasteful Expenditure

Definition the overspending of a vote or a main division within a vote; or 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.

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 PFMA

the State tender Board Act, 1968; or

any provincial legislation providing for the procurement procedures in that provincial govt.

Fruitless and wasteful expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised.

Accounting policy/ recognition

Current Asset

Approve with funding

Approve without funding – use savings

Disclosed in Note

(Expenditure - Against actual expense line item)

Receivable, if not condoned)

Recover from official

Write off (Financial transactions in Assets and Liabilities)

Disclosed in Note

(Expenditure - Against actual expense line item)

Receivable, if not condoned)

Recover from official

Write off (Financial transactions in Assets and Liabilities)

Other considerations

Relates to CY or PY?

Only occurs when cash has flown and not when funds are over-committed


Arises at transaction date


Arises at transaction date

Examples Overspending on budget

Earmarked funds used for other purposes

Funds used outside mandate eg NT buys condoms for the public

Incurred as a result of:

PPP expenditure without prior approval by relevant treasury (TR16.4.2)

Purchase exceeding threshold (TR16A6.1)

Procuring without inviting competitive bids (TR16A6.4)

Non-compliance with Delegations of Authority

Non-compliance with legislation eg Public Service Regulations

Negligence - (reasonable man’s test/ accounting officer’s judgment Eg miss a flight – cancellation fees incurred)

Interest on overdue accounts

Penalties

Conclusion There has to be expenditure incurred before consideration of whether or not it is unauthorised is made. The entity must only spend funds provided and spend it only for the purposes provided.

There has to be expenditure incurred before consideration of whether or not it is irregular is made.

The entity may only incur expenditure if expenditure is within the legislative framework

There has to be expenditure incurred before consideration of whether or not it is fruitless or wasteful is made. Management’s judgement required to determine fruitless and wasteful expenditure within the ambit of law.


Documents

Accounting Manual for Departments - National Treasury. Annual... · Accounting Manual for Departments Unauthorised, Irregular, Fruitless and ... (or NRF for national ... During the