Dr Vincent Ntema Sazita

With regional and municipal councils, it should be made clear here that an auditor does not dictate policy but only reviews the procedures and processes after the fact. Therefore, when expenditures have been incurred, it may already be too late. In cases where a regional or municipal council makes a borrowing, loan or guarantees the repayment of a loan that causes it to exceed its debt limit, councillors that voted for the by-law authorising the borrowing, loan or guarantee are made liable to the regional or municipal council for the amount borrowed, loaned or guaranteed, unless the borrowing, loan or guarantee has been approved by the minister. 

In simpler terms, no regional or municipal council shall borrow, involved in a loan or guarantees the repayment of any loan, which has not been duly approved by the minister. The problems of regional and municipal financial accountability does not exist in a specified regional or municipal council alone, but in other jurisdictions as well and as may have specific rules in place. 

Regional and municipal council funds should be used in accordance with the terms and conditions of the contribution agreements. The recipient of these funds should comply with specified laws and regulations. The recipient should use financial and other administrative procedures complying in all respects with internal controls in order to protect regional and local authorities and the stakeholder interests. 

Auditors are therefore involved in all regional and local authorities’ audits. It is vital that all financial information is included in reports and financial statements and then present them fairly and consistently. It is in the regional or municipal council reporting requirements that the auditor should comment on whether or not a regional or municipal council has complied with the provisions as stipulated. The auditor may not necessarily be required to comment on the quality of reports that are produced by the regional and municipal councils. 

The standards of auditing and powers of the auditor must be changed when there is need to do so in order to be abreast with the new changes in auditing as a result of additional standards and rules that need to be pursued and implemented. The new auditing model required would be the one that will encompass the independence of the auditor when performing his audit duties. The audit should also have a good oversight, accountability and transparency because of the independence the auditor has. The audit is viewed as an assurance service although it might be different in the case of the public sector which may have a complex nature of reporting. 

The relationship of the auditor with the regional or municipal council may also allow for some recent problems not to be detected. An auditor is obliged to follow auditing standards and this may not sanction the fact that these standards fulfil his or her duties being performed. The auditor has a principle to ensure that he or she seeks compliance with the form and not necessarily what the standards may require. If standards are upheld, they can enable the auditors to abdicate responsibility as processors of information in the performance of their duties. Auditors are detectors of fraud but do not detect management fraudulent activities. 

Detecting fraud can be done, but it is very costly and consumes more time. In the public’s eye, it is perceived that an auditor should ensure detection of fraud as well as those numerous corporate fraud and public sector mismanagement. Auditors are supposed to be truly compliant and should not only cooperate with those firms they audit, but as well suggesting techniques that are acceptable in redressing the problems that need to be addressed to rectify the situation. Auditors must consider fraud when auditing financial statements in accordance with the governing regulations and laws. The laws require that auditors are able to maintain an attitude of ‘professional skepticism’ in a way recognising the possibility that a material misstatement due to fraud could exist. 

The audit profession finds itself in an unenviable position because of a critical mismatch: “The world views the audit profession as a bloodhound that is expected to hunt fraudsters and prevent all frauds. The audit profession views itself as more of a watchdog that can make recommendations. Given this skepticism, one can therefore strongly believe that there are other ways to deal with the current situation of excessive expenditures by municipal councils. To this effect, a number of alternatives can be given which may or may not be used either individually or in combination at the discretion of the Legislature in place. 

Local authorities should promote and encourage regional and municipal councils to adopt the Act (Act 22 of 1992 and Act 23 of 1992, respectively and as amended) and ensure that they apply the principles of accounting and budgeting in order to manage and report their finances properly. The minister under this Act should demand that all regional and municipal councils are bound to ensure that financial matters are adhered to at all times. 

The powers, functions and duties of regional and municipal councils should revolve around the complete audit for fraud and mismanagement by any regional or municipal council and that action for correction must be enforced and adhered to. Clearly, the role of the auditor should be completely and truly independent of regional or municipal councils or any political or central government interferences. 

The regional and municipal councils should not only report to an audit committee, as it is usually the case, but also to the public. Municipal councils should be given powers to start a review of proposed expenditures and programmes prior to implementation and during implementation as well as after the implementation process. The auditor should as well be given enough time in the performance of his/her duties in order to charge with extreme power to track down all inconsistencies relating to financial mismanagements by regional and municipal councils or the central government. It is vital that central government through the minister concerned include penalties to deal with any infractions found by the auditor with regards to non-compliance of those regional or municipal councils under scrutiny. 

Central government when allocating funds should ensure that strings are attached to such funds being allocated. It is imperative that all funds are granted for specific purposes, total amounts being funded to be equally used and finance the whole project up to the end without fractions of these amounts missing or filtered in pockets of some officials or politicians and should only be used for the specified purpose as stated in a specific agreement between the regional and municipal councils and the central government. 

The auditor should be charged with the responsibility of looking for infringements and fraud with total independence, and reporting to the general public and that several cases of mismanagement and lack of oversight in both the public and private sectors are halted and called to order. 

Regional and municipal councils when things get tough should not be unwittingly involving themselves in supporting politicians to create a new level of bureaucracy to cover their mistakes. Most regional and municipal councils are reluctant to appoint an auditor to come and conduct audits and report these audits to relevant authorities for remedial actions to be instituted. Some regional and municipal councils are opponents of the auditing work to be performed on their regional and local councils, because they have tough turfs on their councils to protect and defend. Regional and municipal councils are obliged by law and the residents they serve to ensure that they maintain a modicum of independence for their expenditures and are willing for auditing purposes to take place without any hindrances. As the case may be, it has been observed with honesty that some regional and municipal councils would want auditing performances get out of their way completely and thus become a ‘concealed empire’. 

These municipal councils may as well have the audacity to continue demanding for more funds from the central government to continue their extravagant expenditures, all with no strings attached to them for scrutiny. It is the central government and the regional and municipal councils that should actually advocate for transparency and accountability at all levels of government. But if they are the ones obstructing the course of justice through concealing transparency and accountability; who would then control fraud and corruption in these institutions?