Auditor General briefing on financial management at national and provincial spheres of government and legislatures


07 Oct 2009

The Auditor- General, Mr Terence Nombembe, reported on the financial management at national and provincial spheres of government and legislatures. He noted marginal improvement over the past five years, but expressed concern about a lack of momentum when it came to the provision of credible and reliable information. Additionally, he underlined the importance of improved discipline, oversight and internal control.


Q: In the briefing to Members of Parliament, there was emphasis on the practicability of audit information. Is it not necessary to identify the provinces that did not receive unqualified audits?

A: The AG replied that it was not the purpose of the briefing to identify individual problem departments and provinces, but to establish trends. With the road show presentations to provincial legislatures approaching, it would be embarrassing to the provinces concerned to have their names bandied about.

Q: Are finance officers in individual departments incompetent?

A: The AG acknowledged that the lack of skills was an issue. This was evident by the many vacancies that existed and the fact that many departments made use of consultants. It was important that there be personnel available to deal with the issues at hand.

Q: You started off by praising the timeliness of reports submitted, but then identified the lack of progress in other respects. Members of Parliament were more concerned about the perceived lack of progress. What is most important?

A: The AG replied that both were important. The value of timely information was not to be underestimated. An environment in which information was generated in a sustained manner could lead to informed decisions.

Q: What would an analysis of the prevalence, consequences and risks attached to unqualified reports, reveal?

A: The AG responded that a review of prevalence was important to identify risks. Material changes in submitted reports, pointed to decisions based on unreliable information. Budgets were overrun, and cash dried up. Risks resulted in non-compliance, malpractice, fraud, and the erosion of service delivery promises. It was not yet possible to measure the extent of risk. The best that could be done was to develop awareness of warning signals.

Q: Are government departments getting better or worse?

A: The AG noted that there were some encouraging developments and this was cause for optimism. The Office of the AG took a conscious decision to put out warning signals at regular intervals to prevent things from getting worse.

Q: Reporting on capital assets contributes to qualified audits. What is happening with regard to movable assets? Does fraud and theft of government money contribute to disclaimers?

A: The AG replied that immovable assets such as land comprised the bulk of the problem. Movable assets like equipment were not so difficult to manage, but property and land were more complex. There was a lack of knowledge about what was owned, and what condition it was in. The existence and whereabouts of such assets were not sufficiently accounted for. The AG intended to refer the issue to the level of the ministerial cluster. Merely involving officials was not enough. There had to be better accounting of assets lost. Inadequate reporting on such matters caused qualifications.

Q: Does fraud and theft contribute to cash losses?

A: The AG replied that no national government department had received a disclaimer or adverse opinion. At the provincial level, 4 departments had received disclaimers, and 2 had received adverse opinions. Risks were therefore confined to a handful of departments. Risks of corruption and fraud were restricted to a few instances. However, the control environment had to be improved.

Q: How strong is leadership, and what are the shortcomings thereof? Is there sufficient oversight from parliamentary committees, for instance?

A: The AG responded that leadership had to assume responsibility for compliance with the PFMA. There was a need for discipline and sound accounting habits. Accepted accounting practice required the monthly and even daily balancing of books. These simple disciplines had to be brought back and entrenched as part of daily and monthly rituals. Oversight structures must fulfill their role and ensure that they were taken seriously. The AG sought to know if such habits were indeed in place. Regarding the level and style of interventions, the focus was on what mattered most. The approach was that if the basics were adhered to, the rest would fall in line.

Q: Are you happy with levels of oversight?

A: The AG answered that as long as leaders complied, there would be no problems. Levels of monitoring had to be heightened, nonetheless.

Q: There are problems relating to government departments not paying their bills on time. Why is this the case?

A: The AG replied that this was due to administrative inefficiencies and lapses, again related to the neglect of daily disciplines. Oversight bodies had a duty to enquire about the causes of delayed payments.

Q: What is the impact of such delays?

A: The AG answered that timely payment to vendors was highly important. There were signs that could lead to interventions. Government had established a hotline for vendors to report on delayed payment.

The briefing was closed.



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