Bespoke interview: Q&A with the Office of the Auditor-General South Africa | by Kate Ferreira

kimiLate last month we heard the shocking results of the latest municipal audit report, that revealed that in 2017/18 a mere 19 percent of municipalities provided financial statements without “material misstatements”. According to the damning report published by Auditor-General (AG) Kimi Makwetu and the organisation the leads (known as the Office of the Auditor-General), just 18 municipalities obtained clean audits during the financial year in question – that’s eight percent of municipalities.

A total of 257 municipalities were audited, the details of which can be found in the Municipal Finance Management Act report section of the AG’s website, www.agsa.co.za For the July edition of Bespoke’s Bulletin, we got the inside scoop on skills gaps, and ethics, from Africa Boso, a spokesperson from the Office of the Auditor-General of South Africa (AGSA).

Q. The results highlight many audit failings in the municipalities. Do you think the skills level in poorly performing municipalities is a contributing factor?

A. Skills levels are definitely a factor, as highlighted in the general report executive summary (page 12). On page 34, the lack of skills is also highlighted as one of the root causes for the state of financial statements and performance reports and the high levels of non-compliance.

Q. Related to above, how would you characterise the functional accounting/financial and procurement skills level of our public service?

A. Much has been done by national and provincial government to improve the skills levels of municipal managers, finance officials and officials responsible for supply chain management. The minimum competencies requirements for these positions were determined and through municipal regulation the process and timelines to obtain these competencies were legislated. The National Treasury also provided access to training and competency assessments for local government officials.

There has been a slow uptake to this initiative and the implementation dates have been moved a few times, but it has contributed to some improvement; on page 72 of the general report it shows that high percentages of municipal managers and chief financial officers have met these requirements.

However, in our audits, we often find finance officials struggling with the basics and a high reliance on consultants (as detailed on page 73). In poor performing municipalities there are also low levels of knowledge of municipal legislation and how it should be adhered to.

Q. How can we promote the work of the AG’s office to strengthen the systemic response to their findings?

A. The amendments to the Public Audit Act (PAA) have strengthened the position of the AG as detailed in the press release – more information is also included in the executive summary of the general report and page 39 of the report.

Q. Some critics blame these audit failings on poor accountability and interference by executives. What could be done to address these issues?

A. We acknowledge in our report that political infighting at council level and interference at some municipalities are affecting the administration of municipalities. As detailed on page 35, the focus of mayors and councils should be on capacitating, stabilising, supporting and overseeing municipal administration to the benefit of the community that elected them.

Q. Do the audit findings support a call for more stringent processes and controls and more power given to the supply chain manager / CPO to curb such expenditure?

A. The audit findings do call for improved internal controls to prevent, detect and deal with supply chain management abuse and improved oversight and monitoring by the senior management level, but we did not recommend or have a specific view on more power to be given to the head of SCM.

Q. What are some of the specific risks associated with improper or poor spending practices at municipalities?

A. From page 29 in the general report we highlight the impact of the poor practices at municipalities – that (1) local government finances are deteriorating to a degree that it is affecting service delivery and impacting on the financial health of the suppliers to local government such as Eskom and water boards (also refer to page 64 of the report that gives a view of the impact) and (2) the impact on the development and maintenance of municipal infrastructure.

Q. This report shows a decline in audit performance, compared to the previous year. Are you optimistic or pessimistic looking to next year’s results?

A. If the leadership (political, municipal leaders and provincial leadership) steps up and addresses the root causes for accountability failures in local government, we will see an improvement going forward.

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Kate Ferreira is the contributing editor of Bespoke's Bulletin - www.bespoke.co.za

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Posted on July 18, 2019

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