With the current focus on local government and municipalities the CFO community both locally and abroad is seeking the immediate implementation of the recommendations by the Audit-General to improve public sector and municipal financial management.
According to the 1 June 2016 released Auditor-General SA (AGSA) report irregular expenditure has more than doubled since 2010-11 to R14,75 billion. Fruitless and wasteful expenditure in 2014-15 was more than R1 billion higher than in 2010-11 at R1,34 billion. Unauthorised expenditure also increased threefold from 2010-11 to R15,32 billion. In 2014-15 the AGSA rated the financial health of 92% of the municipalities as either concerning or requiring intervention.
Appropriately qualified and protected public sector CFOs and financial managers and officers are a key ingredient in turning the fortunes of South African municipalities around.
“With 60% of the country’s key municipalities in financial trouble and South Africa’s credit rating being reviewed, the CFO community believes that an increased focus on financial sustainability within municipalities is a critical priority for all stakeholders,“ says Nicolaas van Wyk, SA Institute for Business Accountants’ (SAIBA) CEO and Board member of the global CFO body the International Association of Finance Executives Institutes (IAFEI).
The auditor-general (AG), Kimi Makwetu has noted the encouraging improvement in the audit results of municipalities as a result of political, municipal and provincial leadership delivering on commitments to fill key positions with competent people, stabilised the administration and adopting minimum competency requirements.
The CFO community therefore calls on the public sector and municipal finance leaders to fast track the recommendations made by the AGSA and provide additional independence and protection for public sector CFOs and municipal finance managers. The only way to ensure the financial sustainability of municipalities and achieve greater governance and efficiency, is to strengthen the role of the public sector CFO and municipal finance officers.
“Public sector CFOs and municipal finance managers are subjected to diverse demands from political party leaders, traditional leaders and the electorate. Their role needs to be strengthened through legislation to protect them from unwarranted influence and to allow them freedom of access and movement to make independent decisions,” comments Van Wyk.
Local and international professional bodies such as SAIBA and IAFEI, seeks to strengthen the finance function by setting standards of conduct and supporting the professionalisation of this sector.
Van Wyk states, “We will do everything in our power to protect and assist municipal finance officers with the very difficult task of balancing and accounting for budget spend. SAIBA, through its membership of IAFEI, facilitate international cooperation among financial executives towards making financial systems and regulations governing the performance of finance officers more uniform, compatible and harmonious worldwide.” For the public’s interest, especially after the elections, it is important that the municipal finance function is re-evaluated and professional support provided to regain public confidence.
In support of the AGSA we therefore call on public sector leaders to:
- Respond urgently to the AGSA’s consistent messages about addressing risks and improving internal controls,
- Fill vacancies and and address instability in the key positions of municipal managers and chief financial officer as this affects the financial and performance management of municipalities and can have a direct effect on audit outcomes,
- Take appropriate action against any person responsible for the high levels of unauthorised, irregular as well as fruitless and wasteful expenditure.
The global finance community views the threat to finance professionals in the public sector so serious that this is a main theme of the upcoming World Congress for CFOs in Cape Town this November. The Congress will take a strong stance in favour of more protection, independence and professionalisation of the public sector finance function.
“This a unique opportunity for more than 300 international CFO’s, Finance Managers and Controllers, from public and private organisations, to meet and discuss topics and issues facing South Africa and that are common to a number of countries and municipalities around the world. Best practices around governance, controllership and financial sustainability will be shared,” says Armand Angeli, President IAFEI, EMEA.
The global CFO community needs to play a stronger role in mapping the path to recovery and will support municipalities with solving their problems by strengthening the role of the public sector CFO and municipal finance officer.