WHILE it is unlikely the government’s ambitious Operation Clean Audit 2014 target will achieve its original deadline of the end of the reporting period this year, analysis undertaken by Grant Thornton indicates that a realistic target for a strong, high percentage of unqualified governmental audits is 2018.
According to this year’s auditor-general reports, which were released at the end of July, a total of 9 percent of municipalities and municipal entities achieved clean audits in the 2012/13 audit review. Of the 319 audits, 22 municipalities and eight municipal entities had unqualified audits with no findings, otherwise known as clean audits. This was compared with the 5 percent achieved in the previous year.
The appointment of Pravin Gordhan as the new Minister of Co-operative Governance and Traditional Affairs will certainly help to ensure that municipalities effectively overcome delays in achieving this target, to confirm that by the national elections in 2018, the drive towards achieving a 100 percent Clean Audit target will be conceivable.
While there have been some improvements in recent years, aiming to achieve a clean sweep of audits with no qualifications, matters of emphasis or matters of non-compliance in 2014, just has not been possible for most departments and entities.
Operation Clean Audit 2014 was launched by the Department of Co-operative Governance and Traditional Affairs in 2009 with the aim of cleaning up governance and audit outcomes, and thereby improving service delivery across the spectrum of the public service.
When Gordhan outlined his plans for the department during his Budget vote in July, he specifically themed his address on “functional municipalities and a collaborative intergovernmental system”.
He discussed how the audits conducted by the auditor-general had shown over a long time that municipalities’ financial management fell short of requirements.
Gordhan added his commitment that the Co-operative Governance and Traditional Affairs Ministry would work closely with the Treasury and the auditor-general to improve their audits and ensure that performance improved.
He said within six months the Cooperative Governance and Traditional Affairs Department would put in place systems to enable the day-to-day monitoring of the performance of every municipality – this would provide a high degree of transparency and accountability to citizens.
In his report on public sector audits across the spectrum, the auditor-general highlighted five areas that required intervention, namely supply chain management, the quality of performance reports, the quality of submitted financial statements, information technology controls and human resource management.
The financial health of municipalities was concerning, while that of government departments and public entities had improved slightly, the auditor-general said.
Achieving a clean audit involves far more than a process of remedying errors and misstatements in the annual financial statements or ensuring that the supply chain delivers goods and services efficiently and effectively. What is needed is the implementation of a comprehensive framework to ensure continuous effective processes, which include addressing the skills shortage that is evident in many government entities.
It is vital that Grant Thornton’s proven framework, which takes into account the role that perception, people, processes and performance, plays an important part of organisational culture if improvements are to be sustainable.
Developing strong policies and procedures that are reviewed and updated annually, and which are then consistently applied, creates a strong foundation for achieving a clean audit target.
The lack of sound policies and operating procedures are the beginning of the downfall, to put it frankly.
According to the auditor-general, in around three quarters of cases, the main causes for key financial controls not improving related to people; either key positions were vacant or were filled by people who lacked the appropriate competencies, or there were no consequences for poor performance and transgressions.
Performance should be managed in a way that cascades from the strategic layers of the organisation to the operational levels and from individual executives to operational staff. People should be measured and remunerated based on the achievement of their individual performance scorecards, which should be a direct consequence of the credible and efficient performance management system.
The auditor-general, Kimi Makwetu, said national, provincial and local spheres of government had started to implement actions to address the root causes of these poor outcomes. We believe that if this commitment continues, and there is proper support and training, and with Gordhan in the driving seat, massively improved audit outcomes by 2018 have certainly become achievable.
Seth Radebe is the director and head: public sector audit at Grant Thornton Johannesburg.