*Editor’s note: Kimi Makwetu passed away on Wednesday (November 11, 2020) after suffering from stage four lung cancer. The outgoing Auditor-General was serving his last month in office. This Voices article was originally published in March 2020.
In recent times, South Africans have been numbed by the sheer staggering numbers of wasteful, fruitless, unauthorised and irregular expenditure.
In common definition, this is the type of expenditure that should not be tolerated by citizens whatever technical justifications are attached to their occurrence.
The very existence of such expenditure suggests that those who persistently incur it are not bothered as long as there is no accountability or consequences.
Over the years, auditors-general have reported these matters with very negative audit outcomes.
This indicates that people entrusted with public money do not always carry this task with the level of care required by the country’s Constitution.
It is not about whether there is such a thing as “a clean audit” or “it does not necessarily mean money was lost” or “there was corruption” when lame defences are mounted against irregular expenditure.
It means accountability and due care in managing public resources are not part of the overall objective.
As a consequence, we have been exposed to many projects that are abandoned midstream.
Suppliers are being paid far more than the amount to which was initially agreed.
Extensions and variations on contracts without following prescribed regulations are prevalent and pervasive.
There is a widespread lack of proper and verifiable documentation to substantiate commitments and transactions.
These are cumulative observations and negative findings over a decade and a half.
The worst has been a lack of due care in managing finances.
These weaknesses are common across all spheres and have found particular pride of place in local government.
It is shocking that people without the requisite skills and competencies are charged with handling citizens’ finances.
This shows utter disrespect to both taxpayers and non-taxpaying citizens – all of whom are often on the receiving end of services that are not delivered or are, at best, shoddily delivered and not even worth the paper on which they are written.
These finance weaknesses will often find expression in the books of the institution not being constantly and regularly checked and balanced.
The people entrusted with this task do not feel guilty when they cannot explain certain transactions when auditors make enquiries.
In certain cases, external consultants engaged to prepare the books and financial statements are asked to explain these transactions to the auditors.
How do you do this when the consultant is clearly not accountable for anything they say?
Let alone that they themselves were not favoured with supporting documents to explain certain adjustments they process through the accounts – a local government nightmare.
It is not uncommon for documentation supporting a transaction to be unavailable, again without any consequences when this becomes the new normal.
The many laws that govern public finances are all clear as to the responsibilities of those charged with the administration and superintendence of these finances.
They even stretch to the extent of prescribing certain sanctions should deviant behaviour persist.
The leadership outside the administrative functions are assigned the most significant role, with a clear bias towards preventing and correcting wrongdoing and the flagrant disregard of financial management disciplines.
In addition, the work of the Auditor-General has always cautioned against the devastating affect this is having on accountability – one of the key tenets of our Constitution – and the achievement of planned objectives, including delivering various services to citizens and much-needed infrastructure to the economy in general.
When the matter of the persistent disregard of our audit findings and recommendations was examined after about 15 years of “singing a sweet song like an owl sitting on an oak tree”, the amendment of the Public Audit Act became the only plausible option left on the table.
This step was preceded by many years of initiatives by the audit office – from door-to-door campaigns at all municipalities between 2009 and 2012 to regular briefings of all public representatives, accounting officers and various other bodies across the country.
Key messages continue to advocate good financial management control and governance to promote transparency and accountability by those looking after other people’s money.
At this point impunity was beginning to take centre stage as evidenced through the audit outcomes. Impunity cannot coexist with accountability.
The intervention of the Public Audit Act amendments seeks to achieve what is traditionally the role of those charged with oversight if this task is carried out with due care, diligence and professional competence.
In addition, the public purse is hugely exposed not only to those who handle the decisions and actions that trigger the flow of money but also to those outside public institutions once they detect that the preventive controls are not at a level designed to protect the money.
Auditors, by the very nature of their work, perform tests on transactions after the money has been spent or received as well as after assets have been generated or obligations entered into with third parties.
The actions often sought by auditors take place after money has exchanged hands.
It is most difficult to recover such monies in an environment in which everybody exercises their rights – the “I’ll take you to court to protect my rights” kind of refrain.
The experience is that the audited institution often spends additional money before it can even entertain the prospect of recovering that which had been lost.
What are these additional powers of the Auditor-General?
The Auditor-General is mandated to inspect and report on the books of account of all institutions that are publicly funded.
Put simply, all the institutions and entities that were allocated money by Minister Tito Mboweni must be subjected to a level of scrutiny by the Auditor-General to determine, through the audit report, whether this money (R1.9 trillion, in other words, 12 zeros before the comma) was spent, managed, accounted for and reported in accordance with the financial laws of the country.
Once a report is issued, the leaders are required to attend to the matters raised in the report as they are often those matters that create leakages.
When all of this proved too slow to react to or was completely disregarded, the Auditor-General agreed with its oversight committee in Parliament to amend the Public Audit Act.
These amendments introduced the concept of a material irregularity in the audit of the financial statements of any entity that is subject to an audit by the Auditor-General.
This means that whenever the Auditor-General performs an audit, the staff on the audit must satisfy themselves, through various tests of transactions, account balances and systems of control, that there has been no noncompliance or contravention of a financial statute; that the entity is not exposed to situations of fraud which could result in a financial loss or the loss of a public asset; or that the entity is not deprived of providing certain services due to the financial losses incurred.
Should the audit team identify a material irregularity, such must be reported to the accounting officer, requesting the latter to explain the transaction and provide any documentation that might be sought to explain the transaction.
If a financial loss has been incurred, the auditors are required to source from the accounting officer steps that will be taken to recover the loss; or if the loss is continuing, steps to be taken to stop it.
In certain instances, the accounting officer will be required to quantify the extent of the financial loss should the auditors decide that there is indeed a material irregularity.
- Refer any suspected material irregularity identified to a relevant public body for investigation, and the relevant public body must keep the Auditor-General informed of the progress and the final outcome of the investigation;
- Take any appropriate remedial action; and
- Issue a certificate of debt, as prescribed, when an accounting officer or accounting authority has failed to comply with remedial action.
These are clearly onerous responsibilities added to the already tough and contested terrain that is the mandate of the audit office.
There are immediate and medium-term steps that can be prioritised to operate alongside these powers if the objective were to be achieved.
If the whole of government invests in activating preventative controls across the key areas of accountability, it would not be necessary to activate the new powers.
Obviously, preventive controls discourage the emergence of material irregularities.
If properly designed and implemented, such controls would detect most material irregularities that could result in a financial loss.
These controls are proactive and are an eloquent expression of the key guards being at their posts at all times.
This is relatively cheaper than relying on investigations that would be triggered after money has changed hands in ways that are not credible or transparent.
Preventive controls promote transparency, strengthen accountability and are predictable with known expected outcomes.
In essence, preventive controls are an invincible fortress against all possible abuses of the public purse.
For a regime of preventive controls to see the light of day, a strong tone at the top and an ethical culture must be the concrete foundation on which such a discipline is built.
This requirement is no different to what should be in place if the amended powers of the Auditor-General are to have a lasting effect.
Where preventive controls are implemented with diligence, they become a natural source of consequences.
So there will be no need to debate so-called “consequence management” – consequences will simply be part of the outcome.
Strong preventive controls create tension especially when consequences are part of the deal.
It is the positive and progressive tension that must be embraced as it makes preventive controls work for the entire value chain.
Should these new powers be interpreted as a constructive contribution to revitalising the concept of accountability, a strong foundation for proper financial management and related service delivery will emerge.
Makwetu is the Auditor-General of South Africa
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