Commentary: Auditor-general’s report indicates poor leadership practices

The local government audit outcomes report for the 2015-16 financial year was released by the auditor-general (AG), Kimi Makwetu on Wednesday 21 June 2017, revealing that only 49 of the 263 municipalities received a clean audit.

Responding to the report, Danny Naidoo, Partner at Mazars comments that it is disappointing to note that overall, local government has failed to maintain the momentum of prior years.

“The AG reported that follow through on audit action plans requires attention. For those instances, it is important that local government leadership takes ownership of what is commonly referred to as the audit findings matrix report. They need to track and influence decision making to improve controls that would ultimately lead to better financial management and improved service delivery,” he says.

Naidoo adds that this does not mean key decision-makers should wait for assurance providers to tell them what the internal control shortcomings are. “Municipality management at local government level is the first line of defense in identifying risks and implementing practical controls.”

The AG’s report found that municipalities with clean audit opinions in 2015-16 represented only 19% of the total R378 billion expenditure budget for local government.  In 2015-16, 14 municipalities also lost their clean audit status.

According to Naidoo, those charged with governance must insist on regular feedback on these findings and must challenge the timeous resolution of findings. “They must also inquire of management as to the identification and forward planning on emerging risks. Management also needs to ensure that the fundamentals of internal controls are embedded in policies and procedures. Finally, job profiles should be aligned to the responsibilities required that ultimately assists in achieving the overall objectives at a local government level,” Naidoo concludes.

Danny Naidoo, Partner at Mazars, is available for email queries. If you would like additional comments from Naidoo about the auditor general’s report, please do not hesitate to contact me and I will gladly assist.

Have a great evening.

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