Why Behavioural Analytics Could Be the Missing Link in Reducing Irregular Expenditure in the Public Sector

Introduction: A Persistent Problem

According to the Auditor-General South Africa (AGSA), national departments reported R4.59 billion in irregular expenditure (IRR) in the 2023-2024 financial year. Municipalities added several billion more, with metro IRR alone exceeding R33 billion over the past 3 years.

One of the challenges of tracking IRR is that the numbers themselves are fragmented and spread across the Public Finance Management Act (PFMA), Municipal Finance Management Act (MFMA) and individual State Owned Enterprise (SOE) reports. While financial figures are scattered across reporting lines, the behavioural patterns behind them are remarkably consistent.

Irregular expenditure occurs when government entities spend money without following the processes outlined in the PFMA and the MFMA, as well as related supply chain management regulations. Audits conducted by AGSA and recommendations made by oversight bodies have reported some improvements, but the problem persists. In this blog, we argue that IRR is not just a financial issue; it is also a behavioural one.

A hand discards several hundred-dollar bills into a trash bin, symbolising the concept of wasteful or irregular expenditure.

Where Irregular Expenditure Happens: Different Contexts, Different Behavioural Patterns

Irregular expenditure occurs across both national departments and state-owned entities. While both fall under the public sector, their structures and the behavioural dynamics that drive irregular expenditure can differ significantly.

• National Departments are directly funded through the national budget, and they deliver public services. Behavioural issues stem from the operational level, e.g., rushed procurement, inadequate training, or weak controls. For example, a national department may award a tender without following proper procurement processes.

• State-owned entities (SOEs), on the other hand, operate with more autonomy and tend to manage infrastructure or strategic projects. IRR in these instances is often linked to governance weaknesses, board-level decisions, or contract management lapses. For example, an SOE might sign a multi-billion rand contract without proper board approval.

Noting these differences matters because behavioural analytics may need to focus on different signals in each setting.

Understanding the Types of Expenditure Irregularities

Before we discuss possible solutions, it’s important to note that IRR is one of the 3 major categories of problematic spending tracked by AGSA.

Expenditure Type	What It Means	Typical Cause	Behavioural Link
Unauthorised Expenditure	Spending more than the approved budget or on unapproved items.	Poor planning, bypassing budget controls.	Overshooting limits or ignoring approval stages.
Irregular Expenditure (Main Focus)	Spending that breaks procurement or legislative rules, even if value was received.	Rule bypassing, weak compliance, repeated deviations.	Rush approvals, “comfort zone” suppliers, ignored controls.
Fruitless & Wasteful Expenditure	Spending that yields no benefit or could have been avoided.	Negligence, weak contract management.	Late payments, abandoned projects, lack of oversight.

All three categories have behavioural patterns behind them, but IRR is the most widespread, costly and predictable through data signals.

How This Fits Into Behavioural Analytics

While unauthorised and fruitless expenditure reflects poor planning and inefficiency, irregular expenditure often shows clear behavioural patterns long before the financial loss occurs.

The Behavioural Patterns Behind Irregular Expenditure

When we speak of behavioural patterns, we are not looking into individual psychological motivations. Instead, we are addressing repeated actions, shared expectations, unwritten rules, rituals and norms that govern how employees behave, make decisions and interact within an organisation. At the National department level, such patterns include non-compliance, normalised deviations, rushed approvals, ignoring red flags, unethical procurement practices and reliance on “comfort zone ” suppliers.

Other behavioural factors include the presence of ineffective internal controls, lack of consequence management, inadequate training and pressure to deliver on unrealistic deadlines. Unfortunately, these behavioural patterns perpetuate IRR instead of curbing it. Fortunately, these behavioural patterns can be measured and monitored, making behavioural analytics a powerful tool for prevention.

Why Behavioural Data Matters

Often, a reactive approach to IRR is taken, addressing issues only after financial loss. A preventative approach using early warning systems to detect behavioural warning signs is crucial.

For example, a consistent lack of procurement training within a department should be flagged early, as it correlates strongly with upcoming irregular expenditure cases. Monitoring behavioural data provides insights beyond traditional financial metrics and enables proactive risk management.

What are the Practical Ways Behavioural Insights Can Be Used?

• Tracking approval patterns: who is approving, when, and how frequently.

• Identifying recurring procurement deviations, such as excluding qualified bidders.

• Include behavioural insights during policy development.

• Identify teams/departments that are at risk of non-compliance.

• Creation of dashboards for real-time behavioural risk assessment.

In South Africa, a behavioural insights initiative in Cape Town successfully reduced energy waste by 14%. While this initiative was outside the scope of irregular expenditure, it exemplifies how behavioural strategies can substantially impact complex public sector challenges.

Why This Approach is Different

Most IRR reporting focuses on audit findings, financial loss figures, often neglecting the behavioural patterns that underlie these outcomes. Even audit recommendations are reported to be ignored anyway. The missing link is addressing the root cause: behaviour.

When behavioural issues are systemically addressed, the consequence – IRR – is significantly reduced. A combined approach using behavioural analytics and traditional auditing enhances accountability, risk detection, and ultimately prevention in the public sector.

References

1. Matlala, L.S., & Uwizeyimana, D.E. (2020). Factors influencing the implementation of the Auditor General’s recommendations in South African municipalities. African Evaluation Journal, 8(1), a464. https://doi.org/10.4102/aej.v8i1.464

2. Auditor-General South Africa. (2024). Consolidated General Report on National and Provincial Audit Outcomes 2023 24. https://www.agsa.co.za

3. Auditor-General South Africa. (2024). Consolidated General Report on Local Government Audit Outcomes 2023 24. https://www.agsa.co.za

4. BusinessTech. (2024). South Africa’s R124 Billion Irregular Expenditure Problem. https://www.businesstech.co.za

5. IOL. (2023). Auditor-General: Unauthorised Expenditure Remains High in South Africa. https://www.iol.co.za

Further Reading / Suggested Resources

1. Public Finance Management Act (PFMA), 1999. https://www.treasury.gov.za

2. Municipal Finance Management Act (MFMA), 2003. https://www.treasury.gov.za

3. Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux. (For understanding behavioural patterns)

4. Sunstein, C. R. (2014). Why Nudge?: The Politics of Libertarian Paternalism. Yale University Press.