Thapelo Molefe | 8 December 2024
The Auditor-General has raised significant concerns about Manufacturing, Engineering and Related Services Seta’s (Merseta) governance and financial management.
A presentation at the Portfolio Committee on Higher Education this week revealed that the entity, tasked with driving skills development in South Africa, received a qualified audit opinion for the second consecutive year due to ongoing financial mismanagement, systemic inefficiencies and repeated compliance failures.
“Merseta’s audit outcome is a clear indication that the necessary corrective measures are not being implemented effectively,” said AG senior audit manager Zamahlangu Mditshwa.
“The entity failed to resolve discrepancies in its financial reporting, particularly regarding discretionary grant expenditures from prior years. This, coupled with material misstatements in financial statements and irregular expenditure of R2.9 million, points to a worrying regression.”
The AG highlighted key operational shortcomings, including a lack of coordination between Merseta’s operational and financial units.
This disconnect led to repeated errors in financial reporting and undermined the credibility of its performance information.
“The root cause is the absence of a structured and functional relationship between operations and finance. Without this, we will continue to see a ripple effect of mismanagement and non-compliance,” added Mditshwa.
AG senior manager Desmond Phungula provided further details, explaining that the audit identified payments made outside contract periods, exceeded contract values, and unsupported performance achievements in certain programs.
“For Programme 3, we found that one reported achievement was not backed by evidence, and several targets were not met. Additionally, irregular expenditure occurred because payments were made without adhering to proper controls,” Phungula said.
The AG also pointed to broader systemic issues affecting Merseta and other Sector Education and Training Authorities.
A lack of an integrated system for data sharing among Setas has led to duplicated learner funding and instances where deceased individuals are still listed as beneficiaries.
“We identified cases where Merseta funded learners multiple times or learners were recorded in multiple Setas. This is a glaring inefficiency,” Mditshwa said. “An integrated system is critical to eliminate these costly errors.”
Another concern raised was the significant interest retained by Setas instead of being utilised for their core mandate of skills development.
“We need to revisit the legislation to ensure that funds are not misdirected. Skills development is too critical for South Africa’s future to allow for these inefficiencies,” Mditshwa urged.
The AG recommended a series of interventions, including strengthening project management, improving internal controls and ensuring proper accountability through consequence management.
“It is essential that we create a culture of accountability. Action plans must address root causes, not just symptoms, and there must be consequences for those responsible for repeated failures,” Mditshwa emphasised.
Phungula also underscored the urgency of timely reporting, noting that late submissions compromised oversight and corrective actions.
“We finalised Merseta’s audit in October, halfway through the next financial year. This delay limits the time available to address identified issues before the next audit cycle,” he said.
‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.