Auditors intimidated, ordered to hide corruption at councils

Some of the auditors scrutinising municipal books were intimidated and, in some instances, instructed to sweep corruption under the carpet. According to Dr Claudelle von Eck, CEO of the Internal Audit Association of SA, South Africans should be concerned, particularly because in many municipalities the whistle-blowing efforts of internal auditors are being derailed by those in the council and in management. Von Eck said members of the association who worked in the municipal environment had reported intimidation, but the association had no powers to intervene and could only advise its members to report back to the municipal audit committees.

“In some cases, auditors are given instructions that ‘you will sweep this under the carpet’. It becomes worrying because internal auditors are meant to be the whistle-blowers,” she said. However, some audit committees have been found to be weak and in other cases their reports don’t even make it to council. Von Eck said the unaudited billions were “very concerning”, pointing to both corruption and incompetence at management and council level. “There is a lack of understanding of internal audit. Finance is one the most important areas, because it looks at every aspect of the organisation. By the time the auditor-general gets to the statements it’s too late. You need a strong internal audit to catch these things early. But you also need strong leadership,” she said.

The money has already been spent by municipalities which in some cases have kept such poor records that R3.5 billion worth of procurement could not be audited from the 2010/11 financial year, because the required documentation was not made available. That only 5 percent (13) of the country’s 283 municipalities walked away with clean audits is a disgrace. The figure is up from last year, but from a very low base of seven. Even more abhorrent is the fact that the number of audit reports not concluded on time has shot up from 9 in 2009/11 to 40. It’s not hard to understand why reports are not being handed in, or why 91 percent of municipalities hand in reports with serious errors (material misstatements) if you consider that “officials in key positions at more than 70 percent of the auditees do not have the minimum competencies and skills required to perform their jobs”.

The auditor-general’s report says the skills gap is “most pronounced in the financial discipline”. Von Eck believes part of the solution is dealing with the skills gap. “Right now we probably need a very good skills audit (at municipal level). We need to see who can be brought up to speed quickly. It sounds harsh, but we might have to flush out the rest. “We’re in crisis. If you look at the AG’s report, we’re in crisis. This is a leadership issue. We need to identify the problem and address it,” says Von Eck. But the problems have been identified several times before. In 2009, the Co-operative Governance and Traditional Affairs Department conducted an assessment on the state of local government which pointed to many of the same problems identified by the auditor-general’s latest report.

The auditor-general found that more than half of the municipalities which were audited “can attribute” their poor audit outcomes to mayors and councillors who don’t take previous recommendations seriously. Meanwhile, Dr Gaynor Paradza, senior researcher at the Institute for Poverty, Land and Agrarian Studies, says oversight committees can be strengthened by political parties being more discerning about council representatives. While a number of opposition parties often have certain criteria for prospective councillors, it is unlikely to make a difference until the ANC does the same, Paradza says. “There needs to be criteria for the recruitment of councillors. If you are going to be on the health or finance committee, you need to have that sort of competency,” she says.

“There is also a problem with the recruitment of professionals and the high turnover of staff. Someone who is acting in a position is not able to take a lot of decisions. Professionals can take advantage of that lack of oversight. It is a volatile situation,” says Paradza. While the labour practices involved with rooting out those who are incompetent may be a task too daunting for the authorities to want to tackle head on, municipalities ignore the information age at their own peril. University of KwaZulu-Natal public administration lecturer Bongani Qwaba believes the adoption of improved IT systems would go a long way to root out corruption and improve data capturing. “Most municipalities still use outdated IT systems and lack people with IT skills.

These are immediate issues to be addressed. The lack of such systems will continue to undermine the ‘delivery agenda’ of the government. Evidence of that is the fact that most municipalities with qualified or disclaimer audit opinion often cannot provide evidence-based and quality financial reports to justify their financial transactions as required. “ In that, it becomes difficult to verify how resources were utilised,” Qwaba says. While problems in accounting for spending in local government persist, it’s clear that getting it right is neither rocket science nor magic. Thirteen municipalities – some of which are rural – managed to get it right. That is six more than the previous year, meaning improvement is possible. The root causes have also been spelled out by the auditor-general, three years after they were spelled out in the co-operative governance assessment. What is required for change is the political will to avert rampant waste at municipal level.