Despite the financial reforms within the South African Public Sector over the past few years, a large number of National and Provincial Government departments, local governments as well as government entities receive disclaimers, adverse and qualified audit opinions from the Auditor-General.
Teams from KPMG’s Advisory practice are assisting a number of institutions in different spheres of government with the clearing of their audit qualifications. It is our experience that although each organisation differs in terms of size, budget and structure, the challenges (and root causes for these unfavourable audit opinions) remain the same:
- There are high staff turnover and vacancy rates in the Finance Departments, in particular senior staff (linked with a tedious recruitment process)
- There is a shortage of financial management and/or accounting skills
- Legacy systems which are still in place support cash rather than accrual accounting principles
- Proper policies, processes and procedures are not in place or not enforced
- Lack of accountability – there is often a tendency for people not to take ownership and responsibility, or shy away from taking decisions
- There is a shortage of mature leadership (in general, and in the finance departments in particular)
- Those charged with governance are not committed to achieving a clean audit report
- There is a lack of prompt decisionmaking and the implementation of critical decisions is also slow
- Some managers have advanced too quickly without gaining the necessary experience at each level
- There is a lack of a performance management culture
- There has been a migration from cash to accrual based accounting principles
- Over time, a large number of unresolved issues have piled up and created a ‘back log’.
Legislation such as the Public Finance Management Act, Act 1 of 1999 as amended (PFMA) and Municipal Finance Management Act, Act 56 of 2003 (MFMA) tries to define ‘best practice’ in Public Sector Financial Management, but the very same challenges listed above hamper full compliance to these acts. It is clear that a rigorous turnaround strategy is needed to improve financial management in the Public Sector.
Our service offering is unique in the sense that we do not only concentrate on clearing the existing qualifications but also on creating a sustainable solution.
In creating a sustainable solution, the focus is on a partnership with the organisation to:
- improve policies, processes and procedures
- ensure the successful implementation of the recommended improvements
- enhance the use of the current systems
- develop management reports and their use
- enhance the skills of staff members.
Transfer of skills is the key focus area and it is important to understand the organisation, its needs, culture and staff before engaging in training activities. In most cases the need is to revert back to the basic computer skills and principles of accounting before one can address the more technical and complex issues.
In a society where the need for service delivery is growing by the day and funding is limited, it is important to get the basics right to shift the focus to creating a future for our children.