Municipal audit outcomes reveal public sector financial management must be professionalised


SPONSORED

The South African Institute of Chartered Accountants (SAICA) notes 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. SAICA calls 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,” says Freeman Nomvalo, SAICA CEO. “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 SAICA 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:

1. Over the past three-year period, the audit outcomes of 76 municipalities have regressed, while only 31 improved.

2. Irregular expenditure increased to R32.06-billion from last year’s R25.2-billion.

3. The level of fruitless expenditure remains high at R2.07-billion for 2018/19.

4. 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, Nomvalo said, “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.”

Nomvalo continues: “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. At SAICA 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, SAICA is 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.”

He adds: “SAICA 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 [email protected]. These details can also be found on the SAICA website. SAICA expects all its 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, SAICA will investigate the matter, and, where appropriate, discipline the member(s) in question. SAICA acts 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,” concludes Nomvalo.

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

About SAICA

SAICA, South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 46 000 members and associates who are chartered accountants [CAs(SA)], as well as associate general accountants (AGAs(SA)) and accounting technicians (ATs(SA)), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.

Chartered Accountants are highly valued for their versatile skill set and creative lateral thinking, that’s why the top 100 Global Brands all employ Chartered Accountants, according to CAW, 2020 – Interbrand, Best Global Brands 2019.

What is an AGA(SA)?

AGAs(SA) play key managerial roles within diverse sectors of the economy. Professionals who hold this qualification have successfully completed a SAICA accredited degree and a SAICA training contract or assessment to ensure they offer a strong set of technical accounting and financial skills required to navigate today’s complex and evolving business environment. They are technically-minded accountants, who have the ability to bridge operational and strategic management functions. Their expert ability to drive accountancy and financial excellence in organisations enables them to deliver results and accelerate organisational financial performance.

SAICA’s mid-tier AGA(SA) designation enables finance staff to have stronger technical and analytical rigour to drive accounting, financial and operational excellence in organisations. They can perform various roles including the compilation of financial statements for companies, act as a commissioner of oaths, register as a tax practitioner and perform independent reviews.

What is an AT(SA)?

AT(SA) is a recognised and respected competency-based accounting qualification offered by SAICA. It is job-related, application-driven and meets the need for sound accounting and financial skills in the workplace. With ATs(SA), employers get the assurance and benefit of high quality, practical accounting skills — adding real value in finance teams.

In essence, AT(SA) is a mark of professional competence. Once trained, bearers of the designation show a solid understanding and practical application of accounting and finance skills. As a foundation phase qualification, these professionals play a key support role in finance and business, competently working across all sectors of the economy to improve organisational productivity and efficiency. The qualification enables accounting technicians to occupy diverse roles such as Accounts Administrator, Payroll Administrator, Debtors/Creditors Clerk, Payroll Assistant and Financial Accountant.



Leave a Reply

Your email address will not be published. Required fields are marked *