Clean audits in the public sector are rare. Only 41 municipalities in South Africa achieved a clean audit for 2020-21. However, there are CFOs in the public sector that are getting it right. Here are their top tips.
1.Get everyone on the same page
“I think what was quite important at the DTI was ensuring that the leadership and the executive at the DTI understand what a clean audit means, and literally once we’ve managed to get that basic understanding in place, it became a lot easier for us to implement the turnaround strategy,” says Shabeer Khan CFO at the Department of Trade and Industry.
Khan has previously worked for the Auditor General and has achieved numerous clean audits with the DTI.
“It’s not easy going into this journey. You need to mobilise everybody to assist you,” explains Andile Dawn Mbatha, CFO of the Electoral Commission of South Africa (IEC). When I started off we were definitely sitting on unqualified [audit], and I started engaging my auditors and saying, ‘guys, what is it going to take for us to get to a clean audit'”.
At the time of speaking to CFOClub, Mbatha had led the IEC to two successive clean audits.
2.Try to ensure political buy-in
Mbatha notes that buy-in from higher-ups is also essential. She explained that she met with the CEO and explained what needed to be done based on the Auditor General’s recommendations.
“After tabling that to the CEO, I then took up the conversation with the Commission, which is our equivalent of the board.”
Involvement from higher up was also essential in Khan’s case. “The key thing at the DTI was getting the leadership buy-in and having a minister like Minister Rob Davies, who is so passionate about getting a clean audit, he made my job a lot easier in driving this clean audit,” says Khan.
“A lot of the cracking of the whip was done by the minister himself because he set this target, and he requested every single person to work towards achieving this.”
3.Coming to terms with irregular expenditure
One of the easiest ways to blemish your institution’s audit report is by not adhering to supply chain legislation and having something deemed irregular expenditure.
“The minute you talk about having irregular expenditure, the perception is that you’ve gone into a transaction illegally, someone has pocketed the money and there’s fraud in the institution. But there are also very technical issues in the procurement space,” explains Mbatha.
“During the first year, I focused on the irregular expenditure, I started by cutting the irregular expenditure by 500%, then 20%.” Mbatha explains that she implemented a strong compliance process and conducted soft audits in preparation for the Auditor General’s audit.
Khan’s team also took practical steps. “For us, it was just a few basic things.” These included: regularly preparing and reviewing financial reports, implementing an internal control unit, and producing financial statements of the highest quality. “I think the most important thing in this environment is ensuring compliance with the supply chain legislation.”
“Once these basic principles were in place, a clean audit was inevitable.”
Navigating the public sector landscape in South Africa as a CFO is no easy task and has unique challenges that only other CFOs in this space can truly understand. CFOClub South Africa brings private and public sector CFOs together to share knowledge on how to tackle our toughest problems.
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