Too many powerful and well-remunerated people in our public sector are letting South Africans down by continually failing to achieve unqualified audits, writes Cobie van Antwerpen, Director in Risk Advisory Services at BDO.
Officials and other people of influence who work in the public sector must exercise clean governance across every aspect of their operations. This is the only way to ensure that actual clean audits can be achieved.
The Office of the Chief Financial Officer and Supply Chain Management must be capacitated to deal with the vast number of procurement activities that need to occur throughout the financial year.
LOSING TRUST
The public sector is fast losing the trust of us, the people of South Africa which it is supposed to serve My primary concern going into 2022 is our ability to restore trust in public sector procurement processes.
We need to, as the public sector, restore the pride in the social purpose of supply chain management, which is to empower the citizens of RSA.
DAMNING NUMBERS
Recently the Auditor-General Tsakani Maluleke released a damning general 2020/21 Audit Outcomes Report.
Irregular expenditure increased from R109.82 billion reported in the previous year to R166.85 billion. In reality irregular expenditure could be even higher. As per the AGSA’s acknowledgement, this would be due to as much as 30% of the auditees qualified because of incomplete disclosures related to irregular expenditure. As much as R2.14bn worth of contracts could not be audited due to lack of supporting evidence.
Maluleke also reported that the Development Bank of Southern Africa (DBSA) was the only state-owned entity (SOE) to achieve a clean audit in the 2020/21 period, warning that the financial health of parastatals is very poor across SA.
A clean audit is also termed an unqualified audit without findings and in a well-run society this is the norm and not considered a pipe dream.
HOW CAN SUPPLY CHAIN MANAGEMENT CHANGE TO EMBED TRUST?
Driving and striving for clean audits creates a supply chain management that are no longer able to think strategically, operationally and only focus on the number of checklists that they have put in place to not miss any step of the policy or procedure manuals created.
There is no doubt in my mind that supply chain management is at the forefront of service delivery for each entity – when you get the acquisition processes wrong – you will not achieve the objectives set by the accounting officers and authorities.
Instead of investing in appropriate skills, systems and processes – building adequate capacity in Supply Chain Management – we rather create checklists. Instead of training SCM and other officials on why certain processes have to be followed and implemented, we manage them through checklists.
It is time that SCM officials take their rightful space – and that the system stop dumbing SCM officials down to a set of checklists – that still does not achieve the desired outcomes.
The stigma, and at times, justifiably so, that SCM officials are perceived as corrupt /incompetent or both, can only be changed when we capacitate SCM units and officials in the public sector. Further to that, the instructions issued by National Treasury also needs to be appropriately analyzed in terms of its applicability and practicality for all entities involved in the space. At times, although with the best intentions in mind, instructions are issued that simply do not cater for the operational needs of departments and entities and create a compliance burden that constantly needs justification.
I firmly believe that the public sector must implement a Comprehensive Renewal Plan for Supply Chain Management:
This entails four simple steps to implement
- Leadership at the top – our leadership structures through the Accounting officers, Authorities and executive management must lead through integrity, transparency and demand quality.
- Supply Chain management training, upskilling and capacity building must be prioritized by the Chief Procurement Officer’s Office.
Supply Chain management must be upskilled through training and capacity building. Programmes must be implemented to assist SCM in achieving its objectives in each departments. - Ethical Supply Chain Management - Effective Performance of the State can only be achieved by ethical supply chain management – driven by ethical procurement processes.
This includes that all involved in procurement activities reduce their narrow focus on maximizing self interest and enrichment – as currently in experienced. Continuous Performance audits by Internal Audit units will assist in independent reports on SCM. I believe this will reduce rampant greed as noted during the State Capture Saga. It will also have to include Consequence management.
Consequence management does not only drive punitive measures – it has to start with positive and progressive processes related to training, education of all involved. Continuous monitoring and reporting on performance forms critical part of consequence management. Hereafter – when upliftment has failed, and continuous flouting of processes, rules and regulations occur – firm disciplinary action must be taken. - Probity and Pre-Tender award reviews – This process will cover proactive response to procurement and compliance risk to assist in firm governance processes. The result of a pro-active process will include and stimulate Integrity, Impartiality, Accountability, Transparency and Value for money. This is where internal audit can play a significant role in enhancing governance processes where they independently review the compliance processes followed, from start to finish.
However, probity reviews can also be conducted after the award was concluded. The proactive impact will therefore be lost, however it can still play a tremendous role in curbing corrupt activities through sound lifestyle audits (also being promoted by the Public Service Commission), establish links between bidders and officials and achieve a reactive result in the aim of the probity review.
THE VALUE OF INTERNAL AUDIT MEASURES
Public sector officials must look inwards and audit all of their systems and not be shy to ask for help from relevant authorities in government.
They must administer pre-tender audits and reviews, thereby giving chief financial officers assurance that processes are being followed and that they are tendering for legitimate work, legitimately.
Internal auditors must check for compliance with laws and regulations, must review fair, transparent and equitable processes, check for possible conflicts of interest and also administer lifestyle assessments and due diligence reviews.
Rather, we must see consequence management in action. This involves commitment by management to programmes and then implementation and monitoring and measuring thereof. Finally, there must be continual improvement. That is how a public sector entity can impress the auditor general, businesses and the man on the street.