Departments and state owned entities seldom embrace the recommendations put forward every year by Auditor-General Kimi Makwetu. When they are, though, and a culture of consistency and improvement is adopted, it is reflected best in the decent audits they receive. Makwethu released his annual national and provincial audit outcomes yesterday. Of all the provinces audited, Western Cape outshone the rest – with 79% of its departments and entities receiving clean audits. Gauteng was first runner up (60%) while KwaZulu-Natal came a distant third at 35%. The three were the top performers of the last report as well, and the one before that. But the province to watch, if the implementation of Makwetu’s recommendations is to be taken seriously, is the Eastern Cape. The province doubled the number of its clean audits from four in the 2014/15 financial year to eight this year, and had only one qualified audit with findings. This is another improvement, since the previous reporting period saw five such audits. The quality of financial statements submitted also improved compared to the 2014/15 results, as did the province’s status of compliance with procurement legislation. “In the previous general report, we expressed a concern that [the departments of] education, health and roads and public works – which represented 79% of the provincial budget – were unable to provide credible financial and performance reports,” reads the report. “We cautioned the leadership of the province that until the entire provincial leadership starts holding people accountable for their actions by implementing consequence management for non-compliance with legislation, the desired movement towards accountable, accurate and transparent financial and performance reporting would not take place.” The leadership listened, and according to Makwetu, accountability efforts were put in place and the latest results show that “the province has made strides in dealing with qualifications and increasing the number of unqualified opinions.” All the Eastern Cape departments received clean audits except for the Department of Education. There were also no disclaimers – audit results where a clear outcome could not be established due to the poor quality of financial records submitted – for the third year in a row.

What are they doing right?

Makwetu attributed the province’s advancement to:
  • A sound leadership tone that promotes a culture of accountability
  • Stability of both political and administrative leadership
  • Enhanced oversight efforts from coordinating departments and oversight bodies
  • The filling of key finance vacancies by competent people
  • Strategic use of consultants
The general feedback from officials of the auditor-general’s office was that they received positive engagement and a co-operative attitude from department staff in the province, who were proactive in their efforts to highlight problem areas in terms of information required to complete the audit process. With the help of the auditors they were able to reverse what would have become negative results in some cases.

The problem child

Although the Department of Education in the Eastern Cape is the only one to receive a qualified opinion with findings, the significance of its performance lies in the fact that it is responsible for 45% of the budget of the entire province. Instability in leadership at key, senior levels was a factor, as was the lack of coordination between the provincial department and the district offices that are accountable to it. This particular issue is highlighted – for Corruption Watch – in the number of reports of corruption and maladministration we receive that relate to Eastern Cape schools. “To date Corruption Watch has received 251 reports of corruption in schools from the Eastern Cape,” says the organisation’s deputy director Ronald Menoe. “Most reports are on financial mismanagement, embezzlement and stealing of funds and irregularities in appointments of officials (teachers and principals). In 2016 CW partnered with the National Association of School Governing Bodies in the Port Elizabeth district to conduct a financial management capacity building workshop aimed at equipping school governing body members with tools to manage funds allocated to their schools.” Some members of the group are school principals, Menoe adds, and they expressed frustration with the provincial and district offices in delaying transfers of funds to schools. According to Makwetu’s report, discrepancies were revealed in the department’s record of learner rolls in the province’s schools. The number of learners on the official record system, for instance, differed to what officials found in the schools themselves. “These differences had an impact on the reliability of the reported performance and the disclosure of fruitless and wasteful expenditure in the financial statements of the department.”

Leading by example

Despite the improved results of the province, said Makwetu in the report:
  • Weak internal controls were still common within departments that did not get clean audits and those that could not improve on their previous results
  • Basic financial management disciplines were still not in place at these departments
  • IT controls across the province remain a concern
  • Not all instances of irregular, fruitless and unauthorised expenditure were investigated
  • Where investigations occurred, these were not concluded timeously
  • In instances where recommendations were made for action to be taken against perpetrators, nothing happened
As slowly as the tide is turning for the Eastern Cape, however, the province can be commended for showing leadership in areas that its peers continue to fail at. The auditor-general’s office noted good practices in some key responsibilities in provincial infrastructure projects:
  • Proper planning [of projects]
  • All required feasibility studies were conducted
  • Proper checks were performed on contractors to ensure that they are capable of delivery
  • monitoring of delivery [of projects]
  • proper maintenance and follow up of site records
  • Implementation of consequences for poorly performing contractors
“The levels of assurance provided by senior management, accounting officers/authorities, MECs, audit committees and internal audit units have improved slowly by steadily over the past three years.”