Dr Vincent Ntema Sazita
The process and the expenditures of regional and municipal councils go out of hand as a result of politicians and groups, who may or may not have supported these expenditures. Although the level of bureaucracy may be practised to a certain level, it may not be the solutions to the growing spending problems of some regional and municipal councils. In most cases, many small regional and local authorities councils may not need the level of scrutiny, but should be encouraged to continue to be governed by the line ministry, which requires that the current reporting structure be altered to accommodate the current trend.
But, for larger regional and municipal councils who are given autonomy, the minister mandates that they do so; and thus the percolation of corrupt practices flow without being detected in time. Indeed, they need autonomy at that level, but should ensure putting requisite qualified staff and councillors who have strong ethics to guard against corruption. Larger regional and municipal councils have been given special powers which give them the ability to monitor and not just audit after the factual financial reports. They are given the ability to become critical scrutinisers of financial expenditures and have more teeth in the performance of their duties. They should also report to the public regarding their budgetary control and management.
The practice of regional and municipal councils to divert additional funds to pet projects will always continue with regional and municipal councils if they are not strictly controlled and pushed against the bar. With no performance measurements in place and penalties for non-compliance, regional and municipal councils will be in the position of doubtfulness to align to strict financial controls to such an extent that even an auditor will not be able to prevent government excesses and financial mismanagements. It is imperative that stringent rules of external restrictions are proposed and put in place to increase accountability, and ensure that allocated funds are spent only on approved capital projects. Accounting standards for the public sector and regional and municipal councils should be strictly tight and that these should just have to be observed and practised at all times. The auditor must ensure that these rules and principles are adhered to for stringent controls.
There are no penalties attached to the public sector regarding any excess expenditure with the only result being gripping the wrist and the taxpayer ultimately directly or indirectly pays for the additional expenditure it incurs. There are too many instances of financial mismanagement, which if not halted, will endanger our democratic systems in African states and the world at large. We are now in the 21st century and we can no longer manage our public institutions with 20th century models. We do not need people who are not capable of running these modernised institutions.
It is incumbent on the political and central governments to ensure that they appoint as councilors and staff members who truly manifest talent and capabilities of running these democratic institutions with approved knowledge and skills. The role of government needs to be re-examined in our society and look for new ways in which public service will be delivered based on talent and competencies of people appointed in political and administrative portfolios. More transparency and accountability in the public sector is crucial and highly needed.
There is a need to allow citizens to express their opinions and provide new ideas to maintain the prosperity of our nation t
hrough these institutions. Governments, regional and municipal councils are demanded to promote transparency and accountability in the public sector as well as in all private organisations. Government should be filled with the dedication to enhance democracy that is felt and that embraces our nation regardless of who and what they are. The government should inform the public on issues related to the operations of the public sector and all institutions operating in the land.
The people should be allowed to act as a voice that makes government more transparent and accountable at all times. The government and all its institutions should be able to educate the public on matters concerning public policy and that which promote dialogue between the public, politicians, and public sector administrators. Let the government be an institution that can enhance democracy and promote individual and popular ideas without prejudice.
The auditing function according to Scholtz (2014), states that there are two main forms of auditing, viz., external auditing and internal auditing. According to Woolf (1997), external auditing is a review process in which the financial statements of an organisation are subjected to scrutiny in order to enable auditors to form an opinion on the truthfulness, completeness, and fairness of the statements.
The opinion of the auditor is then reduced to a report and communicated to the organisation that commissioned the audit and other mandatory stakeholders. Loughran (2010) points out that external auditing is a process of examining financial information prepared by an independent party in order to establish whether the information is presented fairly and accurately.
The Institute of Internal Auditors (2013) defines internal auditing as an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
The definition of internal audit indicates that the profession evolved from being finance-based to a management-oriented profession focusing on assisting management to accomplish its objectives through the evaluation and improvement of risk management processes; internal control adequacy and effectiveness; and governance processes (Barac & Coetzee, 2012).
The issue of risk management in regional and municipal councils is crucial. The definition of internal audit outlines risk management as one of the main elements that internal audit is anchored on. Risk management can be defined as a systematic and formalised process to identify, assess, manage, and monitor risks (National Treasury, 2010). The concept of risk management is fairly new in the public sector. The study of the risk maturity of South African private and public sector organisations found that generally, management was not embracing the risk management concept, as a result, public sectors were not risk mature (Coetzee & Lubbe, 2013).
According to Sobel (2011), the core internal audit role with regard to risk management include reviewing the management of key risks, evaluating the reporting of key risks, evaluating risk management processes, giving assurance that the risks are correctly evaluated, and giving assurance on the risk management processes. The Institute of Internal Auditors (2009) suggests that internal auditing may extend its involvement in risk management provided the following conditions apply: (1) The internal audit should be prohibited from managing risk on behalf of management as that may affect the impartiality of internal audit function. Management should therefore remain the custodians of risk management.
(2) The nature of internal auditor’s role and the extent of work that will be undertaken should be documented in the internal audit charter and approved by the audit committee. (3) The involvement of internal audit is limited to providing advice, training, or support to management. This is regarded as part of the consulting service offered by internal audit with an intention to assist the organisation to achieve its objectives.
(4) Once the internal audit function extends its involvement in risk management, it ceases to undertake assurance audits on risk management because internal audit cannot give an impartial opinion on any part of work for which it was responsible. If management requires an assurance on risk management, such activities should be undertaken by other suitably qualified parties that will not be biased. (5) Internal audit should perform its work in accordance with the applicable procedures, best practices, and standards in order to ensure that its impartiality is not compromised.
Furthermore, the Institute of Internal Auditors (2009) highlights the following consulting roles that the internal audit activity may undertake: (1) Making available management tools and techniques used by internal auditing to analyse risks and controls; (2) Championing the introduction of risk management in organisations; (3) Providing advice, facilitating workshops, coaching the organisation on risk and control and promoting the development of a common language, framework and understanding; (4) Coordinating, monitoring and reporting on risk management activities; and 5. Supporting managers as they work to identify the best way to mitigate a risk.
Control is the second element that the definition of internal audit is anchored on. Controls can be defined as processes or actions taken by management and other stakeholders to minimise the risks facing the organisation, thus ensuring that the organisation achieve its objectives (Coetzee, du Bruyn, Fourie & Plant, 2014). According to Spencer-Pickett (2010), management should undertake the following activities in implementing controls: (i) Determine the need for controls - This suggests that management should be in a position to identify situations that warrant the implementation of controls and respond appropriately. (ii) Design appropriate controls - After identifying a situation that warrants the implementation of controls, management must design suitable controls that will be able to address the identified risk. iii. Implement the selected controls - Once the control is designed, it is the duty of managers to ensure that the control is implemented. (iv) Verify whether controls are applied correctly - It is the responsibility of management to ensure that the controls are not circumvented. (v) Maintain and upgrade controls - Securing controls is a continuous activity that should be spearheaded by managers. Management should continuously seek ways to improve controls to foster the achievement of the organisation’s objectives.