Who will stop government’s financial rot?

Accounts a shambles? Who cares?

YEAR after year the Auditor General gives adverse opinions on the accounts of government, provincial and municipal departments.

Somehow, while we all know that millions are being filched from every level of government, nobody seems to get nailed. People who steal taxpayers' and ratepayers' money appear to carry on with the impunity of Robert Mugabe.

Auditor general Terence Nombembe is an impressive man and his department does seem to do its work well. He and his predecessor, Shauket Faki, have built up the department's capacity. They now have 300 CAs(SA) on their staff.

That said, their reports are rather polite. The worst thing they can mete out is an "adverse" audit opinion. Otherwise they damn departments with a "disclaimer" or a "qualified" audit. The reports never mention malfeasance or grand larceny.

It's not clear whose job it is to fire or charge guilty or negligent public servants. The Public Service Commission referred me to the Standing Committee on Public Accounts and/or the parliamentary portfolio committee on finance. I await their calls.

Nearly 50% of municipalities earned and adverse or qualified audit opinion. Several have repeatedly received "adverse" audit opinions, which is the AG's worst epithet.

The report mentions a general lack of adequate internal controls, a lack of discipline in keeping supporting documentation and a "high risk of misappropriation of funds".

In an interview Nombembe said many municipal chief financial officers were under qualified but he himself volunteered that: "you don't need a CA(SA) to keep documents".

In dozens of municipalities, cheques have been made out - and no-one can produce an invoice. That really is sinister and it goes on year after year.

Many departments at all three levels of government don't have a proper register of their assets. Now this was true under the Nats.

But for several years the government has been trying to update its account to comply with international standards. Apparently it hasn't got very far yet and all sorts of assets, from aircraft to clinics, are not yet accounted for.

No wonder bad buys can drive a cart and horses through existing rules and regulations.

The present government has done some good things. It has modernised numerous laws governing companies and the audit profession. The Public Finance Management Act regulates the custody of public money and carries draconian penalties. The proposed Public Administration Management Áct will bring municipalities under similar controls and penalties.

The Public Service Commission has the job of prosecuting offenders. I wanted to find out how many bad public servants have been brought to book but was referred from pillar to post.

I phoned the Public Service Corruption Hotline and was told that 1 500-1 600 calls come through every month. All are investigated. So the machinery is there. But where are the prosecutions?

The Enron scandal sank the world's premier accounting firm, though at the time it was said auditors are not policemen or watchdogs. All over the world, since then, the auditor's role has been tightened. To his credit, finance minister Trevor Manuel has implemented many of the changes wrought overseas. Virtually all legislation affecting business and public sector governance has been improved.

Bernard Agulhas, acting head of the Independent Regulatory Board for Auditors (IRBA), says even post-Enron, it is not the auditor's job to pick up fraud - "but there is a requirement for management and auditors to act with professional scepticism".

The auditor today is obliged to examine all journal entries and all accounting estimates by management that might indicate bias and fraud.

An auditor is obliged to report "reportable irregularities" to IRBA without delay. If he doesn't do so, he can be guilty of an offence carrying a fine of up to R10m and imprisonment for 10 years. He can also be struck off.

Last year IRBA received 782 such reports - up from 564 the year before. In the old days, there were only 50 such reports annually. Uneasy lie the heads of auditing firms overseeing things like Fidentia!

The impression I have is that the guillotines have been put in place. They have yet to be used but the tumbrils could soon be rolling.