Investigating the causes of irregular, fruitless and wasteful expenditure

Investigating the causes of irregular, fruitless and wasteful expenditure is an advisory workflow that determines the root causes of financial non-compliance.

Within South African public administration, government departments, trading entities, constitutional institutions, and Schedule 2 and 3 public entities operate under the Public Finance Management Act 1 of 1999 (PFMA). Under Sections 38 and 51 of the PFMA, accounting officers and accounting authorities bear statutory duties to prevent non-compliant expenditure. National Treasury Instruction No. 4 of 2022/2023 establishes the national compliance framework for managing unauthorised, irregular, and fruitless and wasteful expenditure.

In contrast, Western Cape Treasury Circular 7 of 2026 (issued 16 April 2026) provides provincial guidance outlining quarterly reporting submission schedules for Western Cape provincial bodies. Implementation recommendations in this article represent advisory methodology rather than statutory obligations.

Establishing a competent investigation mandate and scope

safeguard assets and manage revenue, expenditure and liabilities of the public entity

— National Treasury Instruction No. 4 of 2022/2023, paragraph 2.4, p. 2

An advisory root-cause investigation begins with a clear, approved mandate that defines the investigation scope, objective boundaries, and subject matter. Rather than assuming every financial exception represents confirmed irregular expenditure, loss, or criminal guilt, the investigation brief directs advisers to evaluate transactions objectively. The mandate specifies whether the review focuses on supply chain procedural gaps, contract variation compliance, or payment processing breakdowns.

A well-scoped investigation mandate ensures that internal investigators maintain objectivity throughout the diagnostic review. By defining clear terms of reference and data boundaries upfront, institutional leadership prevents scope creep and ensures that technical analysis focuses strictly on primary financial evidence.

Preserving original transaction evidence is essential throughout the investigation lifecycle. Advisers must secure primary documentation, including tender specifications, bid evaluation minutes, approved purchase orders, delivery notes, and tax invoices. Under Section 51(1)(c) of the PFMA, accounting authorities must "safeguard assets and manage revenue, expenditure and liabilities of the public entity" (National Treasury Instruction No. 4 of 2022/2023, page 2 of 4). Establishing read-only data access and secure evidence custody reduces unauthorised-change risks and supports integrity checks.

Delineating factual chronology, applicable rules and causation

A rigorous root-cause investigation requires separating the factual chronology of events from applicable statutory rules and observed outcomes. Advisers construct a detailed timeline of events, mapping each administrative action from initial procurement requisition to final payment authorisation. Establishing an accurate timeline allows investigators to identify exactly when and where procedural deviations occurred.

Evaluating applicable rules requires comparing observed administrative actions against specific provisions in the PFMA, Treasury Regulations, and approved departmental policies. Identifying exact rule departures ensures that investigation findings provide clear, unambiguous technical evidence for executive consideration.

Furthermore, advisers evaluate causation by linking procedural non-compliance directly to underlying control breakdowns. It is vital to distinguish procedural non-compliance from actual financial loss. A compliance exception may exist even where value was received, but its legal classification still needs to be established. Fruitless and wasteful expenditure has its own definition and cannot be inferred from a missing approval alone. Establishing factual causation prevents institutions from conflating procedural errors with unrecoverable financial losses.

Investigating non-compliant expenditure requires a structured analytical process across five key steps:

• Constructing a verified factual timeline matching primary transaction records against system audit logs.
• Identifying the specific legislative prescript, treasury instruction, or internal delegation rule alleged to have been breached.
• Analysing the direct causal link between internal control breakdowns and the observed compliance exception.
• Quantifying potential financial loss by evaluating delivered goods or services against disbursed funds.
• Documenting systemic control gaps to inform management's corrective action plan and preventative controls.

Corroborating testimonial evidence and separating legal mandates

When conducting witness interviews with operational personnel, advisers must corroborate testimonial statements against authentic documentary records. Verbal explanations provided by procurement officials or line managers should be cross-referenced with meeting minutes, approval signatures, and system transaction logs. Corroborating interview evidence ensures that investigation findings rest on verified empirical facts rather than subjective assertions.

The investigation workflow must maintain a clear distinction between administrative assessment, formal determination, and external legal proceedings. An advisory investigation evaluates control performance and identifies root causes; it does not replace statutory disciplinary, civil recovery, or criminal law enforcement mandates. While investigators analyse facts, final decisions regarding consequence management, employee discipline, or loss recovery must follow the institution’s applicable law, competent authority and lawful delegations.

Advisory design for a root-cause investigation decision matrix

To guide investigation teams, institutions can deploy a structured workflow matrix. The table below presents an advisory design framework detailing investigation phases, primary analytical focus, required evidence, and lawful decision authorities.

Management response and testing corrective controls

Following the completion of an investigation, management must formulate a comprehensive response that addresses identified root causes. Rather than issuing superficial policy statements, management responses should re-engineer defective operational controls, update delegation registers, and deliver targeted staff training. Addressing systemic vulnerabilities prevents recurring non-compliance across reporting cycles.

Documenting the management response provides a verifiable record of institutional remediation for executive and oversight review. Establishing clear operational timelines for implementing control fixes ensures that root-cause remediation remains on track across all functional units.

Before rolling out modified controls across the institution, management should retest redesigned procedures within a controlled pilot environment. Retesting verifies that updated supervisory review checklists and automated system validation rules function effectively in daily operations. Control testing supplies evidence about the tested design, period and population; it does not establish permanent effectiveness or guarantee that non-compliance will not recur.

What good looks like

A mature public sector investigation framework demonstrates objective fact-finding, robust evidence preservation, and disciplined root-cause analysis. By separating factual chronologies from loss calculations, corroborating testimonial evidence, respecting statutory decision rights, and retesting corrective controls, accounting officers and accounting authorities protect public resources, restore financial control integrity, and foster long-term institutional accountability.

Read the wider context in pfma and expenditure controls.