Audit committees could be one of Gordhan’s secret weapons
09 June 2014
It is widely
accepted that the appointment of Pravin Gordhan as Minister of Local Government
and Traditional Affairs signals government’s seriousness about getting local
government—and thus service delivery— on track. Minister Gordhan has been one
of the ruling party’s top performers, first as the Commissioner at the South
African Revenue Services and then as Minister of Finance.
As the Minister
faces up to this new challenge, the positive role that competent audit
committees could play in improving governance in local government, and thus
enhancing performance should be borne in mind. That’s the opinion of Parmi
Natesan, senior governance specialist at the Institute of Directors in Southern Africa (IoDSA) and a member of the Public Sector Audit Committee Forum (PSACF).
Auditor-General’s Consolidated General Report on the Audit Outcomes of Local
Government 2011-12 shows that this tier of government faces severe challenges
at the leadership, financial and performance management, as well as governance
levels,” says Natesan. It also shows that only 51 percent of audited
organisations were able to obtain an unqualified audit opinion—and most of them
only by correcting the mistakes identified during the audit process In
addition, it notes that the quality of the financial statements submitted for
auditing was poor, with only 14% of the auditees submitting financial
statements with no material misstatements.
Auditor-General noted that 94 percent of audited organisations were found to be
materially non-compliant with legislation, while there was an increase in the
already high levels of unauthorised, irregular as well and fruitless and
wasteful expenditure. Key role players did not provide assurance to improve
controls and address risk areas and root causes.
Fay Mukaddam, IoDSA facilitator and a member of the PSACF working group, "In
the private sector, audit committees are recognised as lynchpins of financial
oversight, and need to play the same decisive role in the public sector.
However, simply having an audit committee in place is not enough—more than 82
percent of the audited organisations whose financial statements were disclaimed
had audit committees” "Audit committees
need to have the right people with the right skills sitting on them to be
effective—and they need the support of all other key governance role-players.”
governance is the foundation for exceptional performance, and it’s clear from
the findings that poor governance is one of the principal contributors to poor
service delivery in local government,” Natesan concludes. "Strengthening audit
committees in the public sector will go a long way towards providing the
effective oversight that the important institutions of local government
need—and assist the minister in achieving his goals.”
The PSACF, of
which the IoDSA is a founding member and the Secretariat, has released a number
of guidance papers to assist public sector audit committees strengthen their
performance and effectively fulfil their responsibilities.