Auditor-general Kimi Makwetu is undertaking annual audits of
national, provincial and local government departments. By the end of November government,
political parties, analysts and media will scrutinise and pontificate on his
findings. Depending on his opinions, they shall either accuse other parties of
bad governance or congratulate themselves for a job well done.
The DA particularly shall boast about the “clean audits”
they receive for the Western Cape government, Cape Town City and other
municipalities. But they, like the public, conflate and confuse unqualified
financial audits with good governance in its correct, broad meaning, i.e. financially,
legally and ethically well-run.
However, no South
African state department meets all three requirements of good governance.
It’s a common misconception especially among the DA and their supporters
to confuse clean audits with good governance, their boast when their
administrations receive unqualified audits (when they don’t get it, they
litigate). For example, DA MP Emma
Powel did in an op-ed in the Daily Maverick last year. See also the DA-run administrations' boastful statements (and here).
The Institute of Race Relations’ CEO Frans Cronje wrote the Western
Cape is a “well-run bubble”. DM editor Mark Heywood wrote an uncritical
interview of former head of WC health Dr Beth Engelbrecht after the department
gained a clean audit for 2018/19. He falsely and lazily, for a journalist and former activist, claimed he lacked information to dispute
her complimentary assessment of their performance when the information is
freely available.
The
objective of a financial audit is to express an opinion on the financial
statements, not on management's
decision-making, service delivery and other aspects. A clean audit is fairly easy to obtain
provided the organisation obeys management’s accounting policy, which the
auditor is not responsible for, and relevant laws and regulations.
That
in South Africa there’s fulsome self-praise among politicians and bureaucrats for
doing what they ought to as part of their jobs indicate the low standards and
misunderstanding of good governance. More than once the egregious former
premier Helen Zille infamously wrote (including in her Daily Maverick column)
the internationally based system of auditing should be changed because it was a
problem and inconvenient to her government.
An unqualified audit is not a guarantee of good governance, though. Financial management is only seven of eighteen governance
indicators.
Government including Western Cape and City of Cape Town
continuously fails in the remainder which includes promotion of administrative justice
and ethics.
The AG shares blame for the confusion about what clean
audits really mean. Their website states for a clean audit the entity must meet
the following: financially unqualified, no material irregularities of
performance objectives and obey laws.
In June this year I wrote to Makwetu saying the WC Health
Department doesn’t deserve its clean audit for 2018/19 mainly because its performance
objectives cannot be verified independently. The department admits in its
annual report some objectives cannot even be measured. Yet they gave themselves
very good passes for all objectives including those they said cannot be tested.
The
AG accepted their assessment without apparently examining the objectives themselves
or relying on credible external reports.
Makwetu replied in September. He said his scope is limited by
the Public Finance Management Act. Performance objectives fall outside the
audit.
But he was silent to my original letter and follow-up
response about his definition of a clean audit that lists the three criteria,
the absence of one which denies it. His explanation was improbable and
disingenuous. A practising chartered accountant I spoke to who works for
government and worked for the AG as an external audit provider agreed with me:
“the AG gives an opinion on performance objectives”.
Oddly, Makwetu undermines his expediently narrow definition –
of financial aspects only – which contradicts the official one by saying the
audit sample is limited, which I’m aware of, implying WCHD’s performance
objectives I found problematic were not included in the audit (if they're not in the scope, why audit them?). He also said concerns I had
were about service delivery, which were among my concerns but not the extent of it. Performance
objectives include financial, or have a financial impact, so his explanation
doesn’t hold.
Even if I agree with him – that the year-end audit is only about finances (having worked on
contract on AG audits over ten years ago I know they’re not limited to the PFMA and Municipal Finance Management Act) – the
public and his client government departments think they include non-financial
aspects like ethics and service delivery. He’s aware of their erroneous
perception but remains silent and thereby condones this falsehood.
The simple answer (Occam’s Razor) is performance objectives are
included in the scope of the year-end audit, which is predominantly but not
exclusively financial.
The office of the auditor-general is arguably the only
extant credible state investigative and chapter nine agency left, the others
having falling prey to corruption, nepotism, patronage and incompetence. While
the AG cannot be blamed for lay politicians', media’s and public’s
misunderstanding and misuse of accounting terms, he is responsible when a myth
and lie – about clean audits being a proxy for good governance – takes hold and
becomes entrenched as fact through repetition.
Makwetu delivers his annual reports to the National Assembly
and public. He is not oblivious of the clean audit fairy tale, especially but
not exclusively told by DA and their supporters. He can and should rectify it
with the facts: clarify the definition so it reflects only financial and
related legal matters excluding performance objectives. He can if he chooses
set the public right about what a clean audit really means. This is what a constitutional watchdog and auditor means: acting without fear or favour.
I believe my interpretation of the definition is not wrong
because the AG’s website says what it is. In certain cases like WCHD, the AG
gives a favourable opinion when it wasn’t deserved. This may be isolated,
though, and his opinion can be relied on in the majority of cases.
But blowing smoke about my questioning of the WCHD’s clean
audit opinion because I raised a problem of his findings and about the criteria
of an unqualified audit is unfortunate and confuses the important issue of what
good governance is. We need more clarity, not less, and less of the grey areas that
politicians exploit for their own ends.
I'm disappointed Makwetu and the AG's office has chosen political expedience above courage and conviction.
Disclosure: I have taken legal advice about what I believe, and have evidence for, is the Cape Town City's abuse of process and the Constitution and municipal law and political influence in an ongoing development. Recently I informed Makwetu and Western Cape government about it. It concerns – there are financial implications of a few million rand too – good governance in its full, correct meaning. But unfortunately from my experience with the AG about the city and now WCG, he shall claim it falls outside his scope.
Minor changes, links added 19 & 20/10/2020. See related post here.
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