Records can help mitigate audit opinions in municipalities. Since the dawn of democracy in SA, year in, year out, from Shauket Fakie to Terence Nombembe to the late Kimi Makwetu and the current incumbent, Tsakani Maluleke, the office of the auditor-general is always on record reporting on the perilous financial state in municipalities.
The sad part is that these municipalities are at the coalface of service delivery in SA and they are failing to deliver. One of the contributing factors is that when the auditor-general audits municipalities, one of the constraints it faces is that records are either not available or could not be retrieved.
This is tantamount to a child who is on an errand to buy groceries, and the child does not return change, receipts or worse even the goods he was sent to buy. In the case of the auditor-general, a disclaimer audit opinion is issued to such a municipality.
This means the auditor-general was not able to express an opinion on the financial statements primarily due to insufficient records. Auditors regard disclaimer of opinions as one of the two worst case opinions – the other being an adverse opinion where auditors fundamentally disagree with the management representations being made.
Municipalities or any organisation receiving disclaimer of opinions face consequential implications such as lack of interest from investors, loss of credibility, impatience from communities for better service delivery or unexpected change of leadership without succession planning.
Due to this problem since 1994, the department of cooperative governance and traditional affairs tried in 2009 to help municipalities to achieve unqualified audit opinions but failed.
On July 14 2009, the then late minister Sicelo Shiceka, launched the 2014 Clean Audit Project commitment statement indicating that: by 2014, all 283 municipalities and government departments of all nine provinces in SA would have achieved clean audits of their annual financial statements.
As predicted by the pundits that the late minister was ambitious like a "blind man in darkness searching for a black cat", the target became a mirage as to this day most municipalities continue to receive disclaimer audit opinions. As a result, the subsequent ministers abandoned the target.
The auditor-general places a high premium on proper record-keeping to the extent that in its general reports on audit outcomes, it lists “a clear trail of supporting documentation that is easily available and provided timeously” as the first of the good practice indicators for public bodies to achieve positive audit results.
It seems this indicator is often ignored by municipalities. In the reports of the auditor-general, we are told that municipalities often scrambled at the financial year-end to compile information in terms of the Municipal Finance Management Act for submission to the supreme audit institution.
As a result, many of these municipalities have sunk into an auditing abyss with records so badly organised that the auditor-general has been unable to express an opinion on the financial statements. In the recently published report of the 2019/20 audit cycle, the auditor-general lists a number of municipalities with a history of disclaimed audit opinions, unsurprisingly North West province topping the list with seven municipalities.
These municipalities with persistent disclaimer audit opinions do not see any correlation between poor record-keeping and auditing results. Legend has it that a municipality manager even once celebrated a qualified audit report thinking that it is a clean audit opinion.
The leaders in these municipalities see record-keeping as a mundane chore with which management should not be concerned.
Perhaps, these municipalities should engage regulatory bodies in records management such as the National Archives of South Africa and its provincial subsidiaries to help create proper controls. To recognise that records when well managed provide the framework for the management of all other resources is an essential fundamental step on the path to achieving good governance.
Records support the entire accounting function, as the beginning of accounting cycle starts with the creation of a record. If municipalities achieve a high percentage of clean audit opinions, this will help free up auditor-general resources to concentrate on other types of public sector audits, particularly performance audits, so that auditing can add more meaningful value to the country.
• Ngoepe is an archivist, author and a Unisa academic
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