Recommendations

These include creating a culture that promotes effective financial and performance management; reducing irregular, unauthorised, and fruitless and wasteful expenditure; and improving service delivery. Therefore, our call is to galvanise all stakeholders behind the drive to accelerate improvements in accountability.

The improvements we seek do not only reside within the domain and responsibility of the accounting officer or authority and the auditors – they depend on the entire accountability ecosystem, which includes various role-players who all need to play their part effectively to enable a culture of accountability in sustainable and meaningful ways.

Who should act?

There is a multitude of role-players that function at different levels – leadership and decision-making, support, intervention and oversight. We assert that when national and provincial leaders fully commit to transforming government into the capable, efficient, ethical and development-oriented institutions envisaged by the Constitution, significant improvements are bound to follow. Early victories are evident in instances where leadership has moved beyond politics and obstacles and taken definite steps to prioritise creating a better future for the communities they serve.

What is the role of each key role-player in providing assurance?

The mandates of key role-players are well defined in the legislation. The figure below gives an overview of their key responsibilities.

 

All these role-players have multiple responsibilities, and for any endeavour to succeed, everyone involved should share the common goal of improving audit outcomes and, ultimately, the service delivery that will have a positive impact on the lives of citizens. We encourage all role-players to diligently execute their responsibilities, abide by the applicable rules and take full responsibility for their part in the accountability process.

When all parties commit and become responsive to risks and challenges, a culture of accountability will translate into improved control environments. Below, we highlight the crucial matters that should be attended to or implemented to improve audit outcomes.

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Senior management

Senior management should:

• ensure that the budget and performance-planning processes are informed by a solid analysis and forecast, based on credible historical information and knowledge of funding constraints and with clear responses for expected performance pressures. The budgets and performance plans must be carefully monitored to reduce overspending and ensure that planned targets are met
• focus on proper infrastructure project management at an overall level and, where the monitoring process highlights any project failures and targets that are not being achieved, take corrective steps as early as possible. This is necessary to ensure the success of key projects and to avoid the challenges highlighted in chapter 4
• ensure proper record keeping so that complete, relevant and accurate information is accessible and available to support financial and performance reporting
• implement controls over daily and monthly processing and reconciliation of transactions. Controls should be in place to track that transactions are processed accurately, completely and in good time, which will reduce errors and omissions in financial and performance reports
• prepare regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information
• review and monitor compliance with applicable legislation, paying specific attention to compliance with supply chain management legislation in order to reduce, contain and/or eliminate irregular expenditure
• design and implement formal controls over information technology systems
• ensure that corrective recommendations made by internal audit units and audit committees are implemented
• ensure that corrective recommendations made by external auditors are implemented through adequate action plans.

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Accounting officers and authorities

While accounting officers and authorities depend on senior management to design and implement the required financial and performance management controls, it is their responsibility to create an environment that improves such controls.

 

Accounting officers and authorities should:

• ensure that monitoring controls for early detection are improved so that internal controls are adhered to, risks are managed and outcomes are achieved
• ensure that priority is given to implementing action plans that specifically address internal and external audit findings that will support financial management and governance, and to monitoring these action plans on a quarterly basis
• ensure that there are consequences for transgressions, in other words, that disciplinary steps are taken against officials who contravene the Public Finance Management Act and commit or permit unauthorised, irregular, and fruitless and wasteful expenditure. They must also create a culture of accountability for officials who fail to comply with applicable legislation, continuously underperform or are negligent, as well as for those whose actions and decisions cause or contribute to financial losses
• ensure that robust financial disciplines are implemented by institutionalising preventative internal control mechanisms that are mature and responsive enough to prevent and detect misstatements, non-compliance, losses and signs of financial distress, and to correct such matters when they do occur
• ensure that there is credible in-year reporting on financial and service delivery performance, particularly on the progress and achievement of targets for key projects
• ensure that auditees have mechanisms in place to identify applicable legislation and changes to legislation, assess the requirements of legislation, and implement processes to ensure and monitor consistent compliance with legislation
• ensure that appropriate risk management activities are implemented, that regular risk assessments – including the consideration of information technology risks and fraud prevention – are conducted, and that a strategy to address the risks is developed and monitored
• ensure ongoing support for the material irregularity process by responding swiftly and decisively when notified about identified material irregularities
• ensure that infrastructure projects and the progress of key government programmes are monitored against the targets of the Medium-Term Strategic Framework
• ensure that key matters for attention and recommendations made during the status-of-records reviews engagements we have with accounting officers and authorities and executive authorities are prioritised and swiftly addressed.

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Executive authorities and national and provincial leadership

Through their specific monitoring and oversight responsibilities, these role-players can bring about improvements in the audit outcomes of their portfolios by becoming more actively involved in key governance matters.

Executive authorities should:

• ensure that they are familiar with the performance expected from accounting officers and authorities and that such performance is properly managed by holding the accounting officers and authorities accountable for the actions and decisions they take and implementing consequences for transgressions and poor performance
• ensure that accounting officers and authorities implement the recommendations of internal audit units and audit committees, and use the opportunity to interact with these bodies to help improve governance and control. They should also support the accounting officer or authority by ensuring that there is an adequately resourced and functioning internal audit unit, overseen by the audit committee, that can effectively identify internal control deficiencies and recommend corrective action
• ensure that they support and oversee the implementation of recommendations and lessons learnt from the covid-19 audits we performed
• ensure that they monitor progress and support accounting officers and authorities in addressing reported material irregularities and improving controls
• ensure that they use the status-of-records reviews and engagements that we conduct to further empower their oversight responsibilities
• ensure that, at the provincial level, a greater sense of urgency is instilled to drive sustainable improvements in audit outcomes (e.g. in the Free State and the Eastern Cape). Where audit outcomes are improving, the discipline of implementing and monitoring preventative controls must be instilled so that these improvements can be sustained. Further recommendations for provincial leadership are included in chapter 8 of this report.

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Internal audit and audit committees

Internal audit units should:

• provide assurance on key areas of the financial statements and performance reports, and focus on the key risks faced by auditees as well as misstatements identified in prior years.

Audit committees should:

• support accounting officers and authorities in promoting accountability and service delivery by evaluating and monitoring responses to risks and overseeing the effectiveness of the internal control environment, including financial and performance reporting and compliance with legislation
• intensify their reviews of the financial statements and performance reports to prevent material misstatements in the versions submitted to us for auditing
• monitor and support the resolution of material irregularities, as this will add great value to the material irregularity process.

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Coordinating and monitoring departments

We assess the impact of these departments on the controls of the auditees based on our interactions with them, commitments given and honoured, and the impact of their actions and initiatives. Sustainable solutions are vital for improving accountability failures.

As such, we recommend that coordinating and monitoring departments should:

• enforce performance measures for executive authorities and accounting officers and authorities in order to change behaviour and introduce accountability into the ecosystem (what does not get measured usually does not get done)
• implement decisive coordination, monitoring and corrective action on intergovernmental systems and processes without delay to reduce extraordinarily long turnaround times on consequence management processes (such as investigations by the Special Investigating Unit, prosecution by the National Prosecuting Authority, debt recovery by the State
  Attorney, etc.)
• invest in adequate systems that are properly integrated and fully utilised across government, which should help to avoid challenges such as those experienced during the covid-19 pandemic where, for example, ineligible or deceased individuals received social grants
• support departments and public entities to enable better intergovernmental relations, as well as coordination, monitoring and implementation of key projects and programmes in the key service delivery sectors across all spheres of government. For key service delivery sectors without standardised indicators, developing such indicators will contribute significantly towards achieving a uniform and structured approach to planning and reporting on the provision of key services
• take a well-considered, coordinated and centralised approach to address the legacy issues in the public sector information and communication technology environment
• continue to focus on finalising and implementing the professionalisation process, and ensure active tracking and monitoring to ensure the process is successfully implemented
• implement any required consequences for accountability failures swiftly, bravely and consistently to help departments address delays in the disciplinary processes and obstacles in recovering financial losses from liable officials. This will, in turn, support us with the material irregularity process, which aims to strengthen the accountability mechanism overall
• accelerate the bold and decisive implementation of initiatives for those state-owned enterprises that are facing governance, financial and other challenges.

We are optimistic about the professionalisation project, which seeks to achieve a capable, ethical, and developmental state by reinventing the administration of the state as a profession. The goal is to position public administration as a career of choice for the nation’s brightest and most talented, with a strong ethical disposition and a sense of public service that is committed to delivering services to the public. Further details on the professionalisation project are included in a report prepared by the National School of Government that is available on our website (www.agsa.co.za)

Public accounts committees and portfolio committees

Informed by our constitutional mandate, we enable oversight, accountability and governance in the public sector through our regular engagements with Parliament and the provincial legislatures. We do this through oversight, leadership and portfolio committee engagements, during which we present and discuss key controls and compliance findings arising from the audit process and the related root causes. The discussions include our recommendations for focus areas that require oversight intervention. In 2020, we also launched our preventative controls guides, which aim to enable preventative oversight. We will also be releasing an additional guide alongside the tabling of this report to further assist in dealing with challenges on infrastructure.

We encourage these committees to use these insights and guides to enable more effective oversight. They should also continue to monitor and oversee the resolution of material irregularities. Such oversight will lead to improved governance and elevate accountability in the public sector.

Conclusion

We encourage you as key role-players in the public sector to continue working diligently to contribute towards the shared vision of our National Development Plan – to build a capable and developmental state that encourages high adherence to ethics throughout society, and a government that is accountable to its people.
We remain committed to partnering with and supporting the public sector through our audits, the Public Audit Act amendments, and the many initiatives we have implemented to assist and guide all role-players.
If we all walk together, connected by a unifying vision to uplift the lives of all South Africans, we can achieve so much more.

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