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There must be 'bite' at the end of an audit - AG

Jun 14 2017 05:00
Liesl Peyper

Cape Town – The office of the auditor general may in future have the powers to refer entities with poor audit outcomes or which flout supply chain management regulations to an investigating authority. 

Auditor general Kimi Makwetu in his address to the Cape Town Press Club on Tuesday, said he proposed a review of his office’s powers to Parliament whereby transgressors of supply chain management processes and entities which receive disclaimers may be handed over to an entity such as the Public Protector for further investigation. 

READ: Irregular govt spend balloons to over R46bn 

He said the office of the auditor general should not become involved in investigations and remedial action, as this could dilute the independence of the institution. 

Makwetu said alarm was raised in November 2016 when his office identified irregular expenditure of R46.6bn in the Public Finance Management report. 

“The chair of the standing committee on the auditor general said there is a growing trend of irregular financial management activity with no consequences and asked us to come up with recommendations on how our powers can be reviewed.” 

The suggestions made to Parliament received the “thumbs-up,” Makwetu said, which boils down to have the power to refer certain matters where there are indications of financial manipulation of systems to an investigating agency.

Such investigating agencies have the powers to recommend remedial action once they’ve made findings, which are binding unless it is contested in a court of law, Makwetu said. 

“The idea is for entities to know there will be something that ‘bites’ at the end of an audit.” 

READ: Govt departments dig in their heels at audit outcomes 

In addition, the auditor general’s office is also considering penalties, such as a surcharge for those who don’t adhere to supply chain management regulations. 

He explains: “Say for example someone is responsible for buying bottled water and National Treasury prescribed that the bottle must cost between R10 and R15. But if the buyer bypass the supply chain system and buys the bottle for R40, he or she then becomes responsible for the difference between the R40 and R15.” 

Makwetu said the ideal outcome for him following his engagement with Parliament would be to have an instrument in place that can restore the integrity of financial systems in government. 

“It’s about shifting behaviour. In any organisation there are 10% of people who never get involved in tempting issues, while another 10% will take the matchbox even if there are no matchsticks in it. The remaining 80% will consider it (doing something untoward), as they know the benefits derived are huge and the punishment is low. If this 80% knows there are serious consequences they’ll think twice before engaging in such behaviour,” Makwetu said. 

Concern over municipalities

Makwetu said his office will release the outcomes of municipal audits on Wednesday June 21. He raised concern over the fact that municipalities continue to trade despite the fact that their revenues have been taken over by expenditure commitments and that costs or expenditure are not going towards assets for service delivery. 

READ: Financial health of municipalities a big worry 

“Revenue generation and collection are also serious problems which make it difficult for them to continue to operate. If revenue and finance are not adequately controlled the prospect for generating revenue are shrinking by the day,” Makwetu said. 

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