Irregular, Unauthorised, Fruitless — Three Different Disasters
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This article counts 0.25 units (15 minutes) of unverifiable CPD. Remember to log these units under your membership profile.
The supplier was excellent. The price was fair. The work was done on time. And now your client has a R2.3 billion finding, your name is in the management report, and the SIU has questions.
That is not a hypothetical. That is the KwaZulu-Natal Department of Health in 2024-25. And the finding had nothing to do with the quality of the work.
Three categories. One very expensive confusion.
Most accountants who work with public sector clients have heard the terms irregular expenditure, unauthorised expenditure, and fruitless and wasteful expenditure. Most use them as if they mean roughly the same thing.
They do not.
They are three separate statutory categories under the Public Finance Management Act, Act 1 of 1999, triggered by three different failures, with different consequences. A single transaction can fail all three tests at the same time, with each assessed independently. All figures below reflect the findings from the Auditor General’s 2024-25 Consolidated General Report on National and Provincial Audit Outcomes.
Unauthorised Expenditure: Overspent
Your budget allocation was R10 million. You spent R11.5 million. The extra R1.5 million is unauthorised, regardless of how well it was spent or how competitive the procurement was. This fact is determined by budget discipline failure, not a procurement one.
In 2024-25, the Department of Defence (SANDF) overspent its budget by R2.51 billion, primarily on employee costs and deployments beyond its allocated funding. The Free State Department of Education overspent by R790 million, also mainly on employee costs. Across national and provincial government, total overspending reached R6.23 billion, with high-impact auditees responsible for 89% of that amount. High-impact auditees are the departments and entities the AGSA has identified as having the greatest effect on service delivery and public finances, including health, education, housing, energy and the major state-owned enterprises.
One trap to watch: as opposed to ‘profit’ for a private sector entity, a ‘surplus’ on a department's financial statements does not mean it is in good financial health. Departments report on a modified cash basis, so unpaid bills sit in a separate note as accruals. At 31 March 2025, those accruals totaled R51.25 billion. When adjusted for those, 67 departments (45%) actually ended the year in deficit.
Irregular Expenditure: Incorrect Process - The Outcome is Irrelevant
This is the biggest one. R42.58 billion in 2024-25, at 252 auditees, with 95% of it driven by procurement and contract management failures.
The most important thing to understand: the outcome for irregular expenditure is irrelevant. The supplier could be outstanding, the price below market rate, the work finished on time. None of that matters. If the process was not followed, the expenditure is irregular.
The KwaZulu-Natal Department of Health incurred R2.3 billion in confirmed irregular expenditure in 2024-25. That includes R892.2 million in awards to suppliers without valid tax clearance certificates, R265.9 million in awards based on criteria not in the original bidding documents, and contracts awarded with deviations approved on the grounds of poor planning. That last point matters: poor planning is not a valid deviation reason. If the emergency was foreseeable, it was not an emergency.
The Mpumalanga Department of Education shows a different but equally common problem: month-to-month contract extensions. The department had 10 such contracts worth R513.53 million still running, with some original start dates going back to August 2015. Extending a contract month-to-month to avoid going back to tender is a procurement finding, regardless of how good the supplier is.
For business accountants working as service providers to public entities, the exposure is direct. Starting work without a signed purchase order, accepting a verbal briefing as authority to proceed, or invoicing for scope not in the contract all create irregular expenditure on your client's books. These are standard practice in the private sector. In the public sector, they are findings.
Fruitless and Wasteful Expenditure: It Was Unneccessary
This category is about value, not process. The legal test is whether the expenditure was made in vain, and whether it would have been avoided if reasonable care had been exercised. Intent is irrelevant.
In 2024-25, fruitless and wasteful expenditure totaled R1.42 billion. R480 million of that came from interest and penalties on late creditor payments alone. On average, government entities took 73 days to pay creditors, more than double the 30-day legal requirement.
Two examples show how the reasonable care test works. The Mpumalanga Department of Health installed queue management systems at five hospitals in November 2020, at a cost of R25.45 million. The systems were largely unused. The procurement may have been fully compliant, the problem is that the money was spent in vain.
The Energy and Water Seta bought a building in 2014 for R21.7 million and renovated it for a further R36.7 million. In 2021, while the building sat unused, the Seta signed a five-year lease for alternative office space. Estimated financial loss amounted to R58.36 million.
When one transaction fails all three tests
A single transaction can be unauthorised, irregular, and fruitless and wasteful simultaneously. Each is assessed independently.
For example a department:
Spends R12 million on security services. The budget only covered R10 million of the spending leaving R2 million unfunded (unauthorised).
The contract was awarded without a valid deviation approval (irregular).
The facility was vacant for the entire contract period (fruitless and wasteful).
Three findings. Three investigations. Three separate liability paths.
All three categories carry the same disclosure obligation: identify, disclose in the financial statements, investigate, and recover or formally write off. Missing the disclosure is itself a compliance finding. In 2024-25, 16 departments failed to report all their irregular expenditure, and half of those ended up with a qualified audit opinion as a result.
What to do before you take the engagement
When taking on a government contract, read your prospective client's latest AGSA report before agreeing to anything. It is public and free. Look at which findings are recurring, which procurement categories keep appearing, and whether any material irregularities are active. That tells you what controls are weakest and where your own exposure starts.
Then adapt your engagement letter. State what you will not do without a signed purchase order. Include your right to withdraw if asked to proceed in a way that creates a finding. Confirm that your professional indemnity cover extends to public sector work and regulatory investigations.
The KwaZulu-Natal Department of Health, the Mpumalanga Department of Education, the Gauteng Department of Health with R1.5 billion in non-competitive procurement findings: all named in the management report. So were their service providers.
Know the three categories before you walk in. Not after the finding lands.
