Poor financial management in state organs not only cannibalises service delivery but also puts pressure on the country's fiscus and its investment profile, writes Sifiso Skenjana.
The financial management capacity of the country's state organs continues to be a pain point, following the latest report from the Auditor-General (AG) which cites financial mismanagement, poor budget appropriation and limited internal skills capacity.
Auditor-General Tsakani Maluleke recently tabled the audit outcomes of provincial departments and reported that unauthorised expenditure had increased from R1.8 billion in the previous year to R18 billion in 2020.
The report also detailed that as much as 31% of those audited failed to disclose irregular expenditure, while R2 billion of contracts could not be audited due to missing and incomplete information.
In her briefing notes, the AG said her office "cannot yet see the progressive and sustainable improvements required to prevent accountability failures and deal with them appropriately and consistently across national and provincial government".
Financial management skills pooling and deployment
Among many of the ambitions of the National Capacity Building Framework (NCBF), which details the government's capacity-building ambition and the implementation strategy that underpins those, were ambitions to create a support function towards improved governance, performance and accountability. It spoke of individual capacity, institutional capacity and environmental capacity as important lenses through which the capacity challenge could be addressed:
- Individual Capacity: We need to deepen the skills pool for financial information systems, bookkeeping, risk management, internal audit and compliance roles etc in the financial management functions of all state organs. Much like we have seen instances where newly graduated medical doctors do not get placed, despite the health practitioner shortage in the country, we see something similar for young graduates in these finance roles above. Proposals are for the Auditor-General to design a public financial management curriculum / certification (The AG Way) from which the financial management teams at state organs must be compelled to source qualified skills. This will materially drive the much-needed financial management reform and standardisable skills capacity building at state level.
- Institutional Capacity: Investment in harmonised systems and ensuring that the institutional approach to core financial management is standardised will be key to ensuring organisational effectiveness and strengthening of particularly internal institutional capacity. For example, some departments still do their "accounting" on excel spreadsheets, while the government continues to spend millions on the procurement of licences for the use of systems like Sage, BAS, LOGIS etc.
- Environmental Capacity: Brain drain and rapid migration to urban and economic centres means that the smaller provinces have additional sociopolitical environmental considerations that can be constrainers towards sustainable operating models for state organs in these smaller, more remote areas. The extent of the fibre infrastructure availability, for example, is the kind of environmental pressure point that can create internal challenges for data management and data backup protocols, etc. The AG reports need to start incorporating the environmental framework that supports the state organs it audits.
The AG report detailed that 14 departments, five state-owned entities and 21 other public entities were in vulnerable financial positions. In the root cause analysis, the report detailed that 89% of the audited were slow improve internal controls to address key risk areas, 34% reported inadequate consequences for poor performance and transgressions and 39% reported that key officials lacked the necessary competencies.
Poor financial management in state organs not only cannibalises service delivery but also puts pressure on the country's fiscus and its investment profile, where ratings agencies continue to lament as a key pressure point in the basket of reforms we need to implement.
We can ill afford to ignore the findings of the AG report and even more so if we do not focus on the key capacity pillars as primary challenges for reform implementation and support.
- Sifiso Skenjana is the chief economist at IQbusiness. Follow him on Twitter: @sifiso_skenjana