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'Poor Municipal Audit Outcomes Signal an Inability to Comply'

Date Released: Fri, 4 November 2016 10:02 +0200

The PSAM says hard questions need to be asked about why municipalities are still not following the correct governance procedures.

Nelson Mandela Bay. Picture: www.nmbt.co.za

JOHANNESBURG – The Public Service Accountability Monitor (PSAM) says while the Auditor-General of South Africa (AGSA) has adopted sound auditing systems, more needs to be done to hold municipalities to account for the maladministration of public funds.

While the local government audit outcomes for the 2014-15 financial year reveal what the AGSA says is an encouraging improvement in the overall audit results over the past five years from 2010-11 to 2014-15, the PSAM suggests there may be continued oversight at the level of political and administrative leadership in local government departments.

Speaking to Eyewitness News, the head of PSAM Nodana Nleya, said: “Over a 10-year period the same thing has been repeated and the same audit finding is being made in terms of insufficient documentation and the likes, which hides what is actually happening. In simple terms we have a system that says it's ok.”

Mentioning the recurring problem of unauthorised and irregular expenditure in particular, Nleya said the information and insights provided by the Auditor-General were not being carefully considered by those municipalities which had repeatedly received poor audit outcomes.

“There is no improvement on the issues that would have been raised by the Auditor-General in preceding years. Over and over again the same things are raised.”

He said this signalled an inability to comply with the rules and regulations already in place.

“There is an inability to actually make sure that the system of financial governance works. So the question that stems from that is, 'Why?'”

Section 5 of the AGSA's report highlights the appointment processes and difficulties in attracting and retaining skilled staff.

It states one of the biggest challenges for local government over the years has been to attract and retain qualified and competent persons in all areas of administration:

Since 2012-13 our audits have focused on the management of vacancies and retention of key personnel. In the past three years the average overall vacancy rate at year-end showed little improvement – from 19% in 2012-13 to 20% in 2014-15. The vacancy rate at senior management level was 19% in 2012-13 as well as in 2014-15.

_As part of our audits, we considered the vacancies and resourcing of finance units, as inadequate capacity in these units negatively affects the management, controls and quality of financial reporting. The average vacancy rate in finance units at year-end was 17% in 2014-15, which represents a slight regression compared to 16% in 2012-13__We also considered vacancies in key positions at year-end and stability in those positions. These key positions include municipal managers, chief executive officers (CEOs), chief financial officers (CFOs), heads of SCM units and senior managers responsible for strategic planning as well as monitoring and evaluation.

With the emphasis on enhancing local government’s capacity to improve municipal performance in section, Nleya says, “Saying a lack of capacity [competence] is an excuse, in the sense that capacity is something that can be built. It cannot be a lack of capacity when you can actually employ people that are qualified. It then leaves me to the next possible answer that there is an unwillingness to improve the system precisely because it benefits certain people to have a system that does not work”

RECOMMENDATIONS

In Section 8.10 of its recommendations, the AGSA states in full that council, municipal managers and senior managers should implement the recommendations of internal audit units and audit committees and use this interaction to assist in improving governance and control.

Areas where these governance structures can jointly make significant contributions to the audit outcomes include the following:

  • Encourage senior management to submit regular financial and performance reports for audit committee review.

  • Assist with designing the audit action plan and monitor the implementation thereof.

  • Review financial statements and annual performance reports before submission for auditing to identify material misstatements.

  • Monitor the appropriateness and timeliness of actions taken by management in instances of known transgressions by officials.

More detailed recommendations on strengthening the support of coordinating/monitoring departments are also included in section 5.6 of the report.

In addition to these recommendations Nleya said the objective of departments on financial governance should be more stringent and leaders should adopt a no-tolerance approach.

“If there is a problem and the political head has no tolerance whatsoever for a certain type of practice they will actually come hard on the director general or the municipal manager and it will be cascaded down to every individual in the system.”

He said: “The audit system is not one person. There is the legislature which has authorised, there is also the political head of that institution – if it is the municipality you are talking about the mayor and the councillors, municipal manager’s premiers etc. Those people are actually liable”

Placing emphasis on consequence management the PSAM director added: “Systems are made to be followed and must actually function and when there is a deviation it must be known who is responsible and under what circumstances. If the system says there is zero tolerance – if there is a requisition and you want to buy a ball point open, this is how you do it – right from the smallest thing to building a school, there has to be a system that everyone knows.”

CAN RESIDENTS ALSO BE HELD ACCOUNTABLE FOR AUDIT OUTCOMES?

While the AGSA's report is largely based on the expenditure of a predetermined budget, residents play a crucial role in the income generation of municipalities and how these monies contribute to the efficient runnings of your local municipality and service delivery in your area.

Some of these income generating services include supplying electricity, water and sewerage, collecting and disposing of refuse removals. In order to provide these services, municipalities charge residents for the provision of services.

Speaking on the issue of non-payments Nleya said: “It’s a complex responsibility as citizens. Everyone is enjoined to ensure that the municipality functions. There is a duty on everyone who is able to afford to pay, to pay and there is a corresponding duty on the municipality to chase after those debts.”

Explaining the complexities, Nyela said a number of municipalities did not have a sufficient tax base to generate the necessary income.

“The majority of people in some municipalities are what one would categorise as indigent where people earn as much as R3,500 a month, so those people are simply not able to pay. Which is why part of the re-demarcation of some municipalities, precisely because some of them did not have a sufficient tax base – enough number of people and businesses that can pay.”

However, he said metropolitan municipalities, such as Cape Town, Ethekwini, the City of Tshwane and others, are less likely to experience this.

“There are big corporates that operate in those municipalities that pay taxes.

"I think part of the issue of payment is also the complexities of what happened pre-1994, as a weapon against apartheid people stopped paying rates, so that was used as a way to bring down the apartheid regime so there are people who have not actually done away with that culture so some people simply say ‘ Angizo badala minna’ ( I am not going to pay). So it’s a complex interplay of many things.”

Irrespective of this Nleya insists that municipalities must be accountable to citizens. He says a direct way is ensuring communications between ward councillors and communities.

 

Source: http://ewn.co.za/2016/11/03/poor-audit-outcomes-signal-an-inability-to-comply-with-the-rules-and-regulations-already-in-place

Source:Eye Witness News