Spotlight on outsourced services
THE stuck record that is local government finances continued to screech this week as the latest set of results showed that clean audits remained few and far between — despite the use of handsomely paid consultants.
A row of glum faces from the auditor-general’s office, Department of Co-operative Governance, National Council of Provinces and South African Local Government Association looked back at the media during Monday’s press briefing in Pretoria at which the report on the 2011-12 audit outcomes were released.
Deputy auditor-general Kimi Makwetu said only 17 of the 338 organisations audited achieved clean audits— a rate of 5% for the third year in a row.
Clean audits are achieved if the financial statements are above board and there are no findings on predetermined objectives and compliance with laws and regulations.
Not one big metropolitan municipality made the cut.
Makwetu said a significant reason for this was the lack of skilled personnel in key posts, such as municipal managers, heads of supply-chain management units and chief financial officers.
In 2007, the Treasury issued municipal regulations requir-
71% relied on consultants to prepare financial reports
ing minimum competency levels, which had to be complied with by January this year. These barred senior financial officials without the required skills from holding their posts. Last year, 62% of municipalities applied for an 18month exemption from this rule.
Makwetu said 71% of those audited relied on consultants to prepare financial reports. This cost the government R378-million.
Although the number of organisations relying on consultants declined, the average cost of each consulting contract increased to R1.1-million from R900 000 in the year under review.
The highest costs were observed in those that received adverse audit opinions.
Makwetu said there was a bad habit of hiring consultants at about the time the auditorgeneral wanted submissions because most tended not to think about financial reporting at the start of the year.
According to the audit report, this, coupled with the fact that consultants were often brought in after the end of the financial year, was part of the reason those with disclaimers or adverse opin- ions posted such rotten performances.
“[They] are typically those without the necessary capacity for financial management — vacancies and skills — and use the consultants more extensively,” said Terence Nombembe, the auditor-general. “The lack of improvement or poor audit opinions cannot be directly attributed to the assistance provided by the consultants because the contracted scope of work varies from one municipality to the next.”
Very few consultants transferred skills to financial officials, with the rate of transfer less than 41% at all local government organisations.
The report recommended that skills transfer should be included in service agreements with consultants and, if it was included, be effectively monitored and penalties applied.