Strengthening audit committees in local government is key
31 July 2014
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In his first report as
Auditor-General, Kimi Makwetu notes a small improvement in the audit outcomes
for local government. Overall, the consolidated general report on the audit
outcomes of local government for 2012-13 shows a net improvement in audit
outcomes with the number of improvements exceeding the number of regressions.
The number of clean audits has risen to 30, an
increase of 4 percent over last year, representing 9 percent of the 319
institutions audited. The report also stated that a further 41 percent received
a "financially unqualified opinion with findings”, meaning that while they have
accounted accurately for their financial transactions, 138 auditees still did
not follow the required processes. In
addition, almost 70% of auditees incurred fruitless and wasteful expenditure with
an overall value of R815 million. This expenditure increased by 31% from the previous
year.
Audit committees are supposed
to provide a high level of independent oversight, but results show that they only
provide the required level at 26 percent of auditees - this despite the fact
that 95 percent of auditees have audit committees. Particular areas of concern
were highlighted: 38 percent of audit committees did not evaluate information
systems and 31 percent did not evaluate performance information. The most
telling finding, says 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), is that the report shows that only just over
half (54 percent) of all audit committees were assessed as having a positive impact
on the audit outcome of their organisations. It is especially concerning that
audit committees are found to be "not yet effective in providing internal
assurance and oversight” due to "insufficient focus on the reliability of
performance information and evaluation of information technology controls and
compliance.”
From a closer reading of the
report, it seems clear that the performance of audit committees in local
government needs improvement, especially given their critical oversight role. The IoDSA and the PSACF regard the audit
committee as being a key contributor to good governance. It plays a crucial
role in overseeing financial and performance management, compliance with legal
and other regulatory requirements and internal controls.
"The Auditor-General provides a
number of useful recommendations to help audit committees improve their
contributions,” says Natesan.” Further guidance and training is available
through the PSACF.”
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