Corrective measures help audits improve

Tuesday, August 12, 2014

By Communications Minister Faith Muthambi

Contrary to the media coverage, the municipal audit outcomes improved. In the same vein, the reports did not interrogate whether there was improved service delivery, something that need to be assessed.

It has been five years since government launched Operation Clean Audit; this initiative that was one of the key pillars of President Jacob Zuma’s administration when he took office in 2009. Its aim is to improve service delivery in the public service, especially at local government level.

Led by the Department of Co-operative Governance and Traditional Affairs, its overall objective was to address challenges faced by municipalities related to financial management, quality of performance reports and submitted financial statements, supply chain management, information technology controls and human resource management.

The latest report released by the Auditor-General (AG) of South Africa on Local Government Audit Outcomes shows that the initiative is bearing fruit, albeit at a slower pace than anticipated. The 2012/13 report based on the Municipal Financial Management Act (MFMA) shows that the number of auditees with financial statements that received an unqualified opinion over the past five years increased from 46 percent to 50 percent. The adverse and disclaimed opinions decreased significantly.

The positives instill confidence that we are moving in the right direction. The improvements can be linked to government’s intervention to address shortcomings highlighted by previous AG reports.  

The 2012/13 audit outcomes also show that the number of auditees that received clean audit opinions increased from 16 to 30. This constitutes an overall 9 percent as compared to the 5 percent obtained the 2011/12 period. The auditees comprise one metropolitan municipality, five district municipalities, 16 local municipalities and eight municipal entities.

The Auditor-General Kimi Makwetu praised them. “At these auditees, the breakdown of controls is easily detected and corrected timeously. Such environments are characterised by readily available documentation. Most importantly, they have accountable managers and leaders who are able to provide explanations and additional evidence in support of the transactions they are reporting on. They also have the support of strong oversight by mayors and councils that back the efforts of municipal managers and chief financial officers.”

The report, which covers 278 municipalities and 62 municipal entities, shows an overall improvement of 63 auditees in different categories of audit outcomes against 25 regressions. The number of auditees with adverse/disclaimer of opinions decreased from 29 percent to 20 percent.

Mr Makwetu highlighted challenges that need to be tackled. These include R21.61billion in unauthorised, irregular, fruitless and wasteful expenditure.

We plan to address the root causes and main risks of poor audit outcomes. In this regard, the South African Local Government Association has unveiled the Municipal Audit Support Programme.

The Minister of Co-operative Governance and Traditional Affairs Pravin Gordhan announced that municipalities would be capacitated to implement adequate supply-chain management processes to deal with irregular expenditure. Arrangements around such expenditure would be strengthened and the office of the chief procurement officer would play a significant role in reducing the supply-chain management deficiencies.

The government has also introduced many new financial management programmes to modernise the systems and operations of municipalities. From 2005/06 to 2009/10, it incrementally has implemented changes to the reporting framework. This change, the standards of Generally Recognised Accounting Practice, brought about substantial changes in processes, systems and capabilities.

Minister Gordhan described the reforms as substantial, noting that they had set higher standards for local government financial accounting. This has gone hand in hand with a greater emphasis on training and personnel competencies.

The result of the interventions has led to an improvement in audit outcomes. We are, however, convinced that in future, there will be an exponential increase in the number of auditees that receive unqualified audits, specifically due to our interventions.

The achievement of unqualified audits is not a once off event; rather it is a process of putting systems in place that will produce the required results for years to come.



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