Municipal audit: public sector financial management must be professionalised

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Freeman Nomvalo |  CEO | South African Institute of Chartered Accountants (SAICA) | mail me


We have noted with concern the Auditor General’s report of the audit outcomes for local government, which showed that only 8% of municipalities received clean audits for the 2018/19 financial year, despite R1.26 billion being spent on financial reporting consultants.

The report reveals how vital strong internal controls, appropriately skilled people and ethical conduct by both municipal staff and consultants are to ensure that municipalities deliver on their priorities in an efficient, effective, and economical manner.

We call for a review of the mandatory minimum skills and qualifications required for all key financial management positions within the public sector.

The 2018/2019 municipal audit results continue to show worrying trends of the lack of financial skill and accountability in our municipalities. But the truth is that you can’t improve accountability and internal controls if municipal financial employees don’t also have the skill needed to perform these controls.

As a country we need to employ proactive solutions to build the relevant skills base within the municipalities and address the issues through skills development programmes that are created and customised to meet the unique needs of the local government sector.

We urgently need to review the mandatory minimum skills and qualifications required for all key financial management positions in local government.

Then we need to train and upskill personnel or recruit suitably qualified staff for these vital roles. And finally, we need to ensure that professional conduct and ethics are upheld at the highest level by both municipal staff and consultants used to prepare Annual Financial Statements for audit. That is why we call on government to make the professionalisation of these roles mandatory through higher qualifications and professional body membership.

In doing so, these staff will be obliged to comply with Codes of Professional Conduct as part of their membership commitment (for example all our members and associates must comply with the SAICA Code of Professional Conduct) and they will have the necessary financial management skills to enable municipalities to meet their mandates and service their communities. The need for better financial management in municipalities is undeniable.

Auditor-General Kimi Makwetu’s municipal audit outcomes report for the 2018/19 financial year showed that:

  • Over the past three-year period, the audit outcomes of 76 municipalities have regressed, while only 31 improved.
  • Irregular expenditure increased to R32.06 billion from last year’s R25.2 billion.
  • The level of fruitless expenditure remains high at R2.07 billion for 2018/19.
  • The AG’s recommendations to improve accountability and internal controls had largely gone ignored by most municipalities.

Having examined the deficiencies highlighted in the report, one way to improve these results is to ensure that formal qualifications are offered to all municipal finance and accounting officials in order to fix the skills gap that is so glaringly obvious.

The Auditor General himself mentioned that even with the help from financial reporting consultants, the skills weren’t transferred. It is concerning that R1.26 billion was spent on financial reporting consultants and yet the desired outcome was still not achieved.

By upskilling municipal finance and accounting officials, municipalities will not only immediately reap the benefits of their employees’ newly acquired skills in their own environment but this will, in turn, directly benefit citizens of this country as service delivery improves and financial resources are correctly allocated to the jobs they have been assigned to.

Enhanced skills need to also be matched with ethical and professional conduct as well as effective oversight. We undoubtedly need accountability from all finance professionals and we need the public to understand and protect their rights. We will play our part to help support ethical and professional conduct.

As a direct measure to increase the skills base in finance departments in the local government environment, we are committed to working together with the Auditor General and municipalities to offer its finance officers accounting skills and qualifications through its Chartered Accountants [CAs(SA)], Associate General Accountant [AGA(SA)] and Accounting Technician [AT(SA)] designations as part of its work to address the financial skills shortage at a municipal level.

Individuals who hold these designations are subject to SAICA’s Code of Professional Conduct (the Code), which means that the risk of unethical behaviour resulting in wasteful expenditure, for example, will be mitigated. Indeed, to date we have already upskilled over 6,000 public sector employees with these skills, yet much more needs to be done.

We will not tolerate non-adherence to the SAICA Code. In the event a SAICA member is alleged to have been a part of unethical behaviour within the public sector, whether as part of a municipal finance team or as a consultant, he/she can be reported via the anonymous fraud line by calling 0800 005 930 or sending an email to saica@tip-offs.com.

These details can also be found on our website. We expect all our members, which include CAs(SA) as well as associate members AGAs(SA) and ATs(SA), to adhere to the SAICA Code, which is based on the following fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.

If any member or associate member is alleged to have contravened this Code, we will investigate the matter, and where appropriate, discipline the member(s) in question. We act on all allegations without fear of favour.

It is our hope that municipalities will enforce the minimum competence requirements for all municipal officials working in financial positions.

Should this become the norm, citizens can look forward to improved local government performance, quality service delivery, clean audits and, ultimately, a local government sector that is on a positive path to achieving the visions of the National Development Plan through sound financial and administrative management of taxpayers’ money.

More about SAICA’s AGA(SA) and AT(SA) can be found here.


 



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