The department of defence's annual report shows irregular expenditure of R1 billion, almost half of it due to salary adjustments that were not approved through the proper channels.

The remainder is linked to the cancelled contract for eight Airbus A400 aircraft, housing allowances of R256 million not properly approved and hiring consultants, Defence Secretary Mpumi Mpofu said on Thursday.

Mpofu said the department hoped that R480 million spent on improving the salaries of low ranking soldiers would in coming weeks be given the green light by the relevant mandating committee of ministers.

The committee was sidestepped, she explained at a briefing on the 2009/10 annual report, because the department believed that it would be sufficient to have the approval of the Interim National Defence Force Service Commission, which also recommended the increases.
"The department of defence was of the opinion that the interim service commission could deal with the matter because they were directly involved... it was an error of interpretation."

Legal opinion was then sought. It indicated that only the planned permanent service commission would be able to approve such decisions, replacing the mandatory committee. That body still had to be established once the Defence Amendment Bill had been approved.
Mpofu, who took up her post in April, said the annual report showed that the department had made great strides towards Defence Minister Lindiwe Sisulu's stated aim of getting a clean audit sheet.

Mpofu estimated that this could happen two years from now, ending a long spell of qualified audits.

"We think we have killed the back of the problem. We know what the problem is and how to deal with it," she said of the one qualification the department received from Auditor General Terence Nombembe for its 2009/10 audit.

It compares to six in 2008/09 and relates to outstanding processes from that year, and to the billion rands' worth of irregular spending in the financial year under review.

Mpofu explained that long-standing problems with the department's asset register were the result of it complying with NATO reporting standards, and not those of Treasury.

The department was now implementing a dual reporting mechanism which should see it satisfy international requirements, as well as that of the finance ministry.

She said predictions by Sisulu that the department would not see another qualification in her lifetime were premature.

"We thought that by identifying the cause, the uniqueness, then somebody would say: 'Oh, then you can't be qualified.' But we wish life was so easy.

"Just discovering the problem does not mean you've solved it. The minister was really confident that our discovery of the root of the problem would have meant that the qualification falls away but of course that's not how accounting policies work.

"You have to report for a substantial period before the auditors can audit.

"We will now be reporting in new format and that will help us resolve the problem around the assets in the DOD environment... this is not primarily about buildings. It is about military equipment and about the NATO requirements and that is international law which we can't opt out of."

The AG acknowledged that the department was trying to correct its past failure to keep a proper register of equipment.

But he pointed out that the department's internal audit function was still not fully operational and that it still did not have an approved fraud prevention plan.

The department also lacked proper mechanisms to ensure compliance with laws and policies.
Mpofu said negotiations with Airbus to recover millions spent on the contract before it was cancelled were progressing well and should be completed before the end of the year.

Cabinet cancelled the deal in November last year after it emerged that the cost had escalated to some R47 billion.