Home Accounting and Auditing Schools need accounting officers, not just CAs, to stamp out financial mismanagement

Schools need accounting officers, not just CAs, to stamp out financial mismanagement

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In 2015 Corruption Watch issued a report Loss of Principle which chronicled corruption and financial mismanagement in schools across the country. Sadly, it ended up being a full-on sales pitch for CAs to step in and clean up the mess. This is perhaps excusable on the grounds that CAs hadn’t yet suffered the kind of reputational calamity brought on the Guptas and their captured agents (which included a good number of CAs).

It’s time to set the record straight.

The Department of Basic Education sent out a circular (M3 of 2017) last year seeking to take measures to strengthen compliance with the SA Schools Act. It specifically cites the Corruption Watch report and seems to be taking its instructions from that self-same report, by giving CAs preference or even exclusivity in providing financial services to schools.

This is not what the Act says. The Act provides for accounting officers – including SA Institute of Business Accountants (Saiba) members – to examine financial statements and provide bookkeeping services to schools.

Shining a light on corruption

The report shone much-needed light on financial mismanagement in the education sector, which accounts for a huge proportion of our national budget.

Corruption Watch: “According to the report, financial mismanagement accounted for 37% of the reports, theft of funds accounted for 20%, and tender corruption made up 13%. Employment corruption, abuse of power and theft of goods made up the rest of the reports received with the bulk of reports coming from Gauteng, Free State, KwaZulu-Natal and Eastern Cape.”

School principals the primary culprits in corruption

Corruption Watch said it had received over 1,100 cases of corruption since the organisation started its schools campaign. Of these reports, 54% implicate principals as the primary culprits in corrupt activities. “Principals and school governing bodies have been shown to manipulate basic financial rules and regulations in order to directly enrich themselves,” said Leanne Govindsamy, the head of Corruption Watch’s legal and investigations department.

Then it makes its pitch for CAs to move in: “Principals must be trained and capacitated to assist SGBs (School Governing Bodies) in the financial management of the school.”

Govindsamy commended the Gauteng Department of Education (GDE), saying it has led the way in helping with training teachers. GDE has established a directorate for schools financial management and governance, and has also partnered with the South African Institute of Chartered Accountants (Saica) to equip principals with the skills they need for good governance.

“We urge Saica members to volunteer their services and participate in this programme. Provincial departments are also urged to contact Saica so that similar programmes may be rolled out in their provinces,” said Govindsamy.

We’re all in favour of cleaning up financial mismanagement in schools, but why should CAs get the favoured seat at the table? Does anyone need reminding of the damage caused to our economy by CAs in high positions?

The SA Institute of Chartered Accountants (Saica) has been in damage control mode for much of the last year, trying to assure the public that it is cleaning house after some high profile members helped themselves and their cronies to billions of rands in public and private sector funds and poisoned the once revered status of the CA. School governing bodies may well be wondering why CAs should be given the task of running their finances.

Perhaps it’s time for business accountants (non-CAs) to prove their mettle and clean up the mess themselves.

Contradictory

The Act is somewhat contradictory: it makes it compulsory for schools to appoint registered auditors to audit the financial statement, and to provide budget for this. Then it says if this is not practicable, the school can appoint an accounting officer (Section 43(2) of SAS Act).

The SAS Act requires that a governing body of a public school “as soon as practicable, but not later than three months after the end of each financial year, draw up annual financial statements in accordance with the guidelines determined by the Member of the Executive Council (MEC).”

If a school goes the audit route, it needs three quotes from different audit firms. If it chooses not to go the audit route, it needs a motivation letter from the School Governing Body that “control measures were in place and a feasibility study was performed to appoint an Accounting Officer instead of a registered auditor.”

So that seems pretty clear. Schools can choose to have accounting officers instead of auditors, and the motivation would surely include cost. Saiba members are among those specifically mentioned as capable of providing accounting officer services in terms of the Close Corporations Act of 1984.

In the event an accounting officer is appointed, the relevant professional body must also undergo an inspection of the work performed by their respective professional bodies. “It is also the responsibility of the Accounting Officers who are appointed in accordance with the Close Corporations Act to promote integrity and accuracy of the work performed by the Professional Bodies that they belong to.”

In response to the Department of Basic Education (DBE) circular, Saiba CEO Nicolaas van Wyk replied: “In considering all the extracts above, accounting officers in general and Saiba members in particular may not be excluded from doing work with schools provided the necessary approvals are in place.

“Saiba will however engage with the DBE in order to strengthen the SAIBA position in this regard.”

Get out there and start selling your services to schools

The message could not be clearer: if you are a Saiba member, get out there and market yourself to schools. They surely need you.

 

3 COMMENTS

  1. For the school to appoint accounting officer instead of auditor, there must be a motivation that is prepared by the SGB and that must be approved by the MEC. There are requirements that should be met however due to the fact that motivations are not always reviewed properly, they always pass and I wish to know how.

    The schools receive hughe amounts of grants from government and they should be audited. That cash is not always accounted for properly, the SGB/principals/accounting officers involved refer to their work (preparation of AFS and review for compliance) as audit. There is clearly a huge confusion if those in charge in the majority of the schools that receive funding from government do not understand the contents/requirements of the Act that applies to them and this can be an indicator or main cause of issues in the schools. Accounting officers should also make their services clear to the schools that we are not auditors however, we can only perform the agreed upon procedures for compliance.

    We need to work together on this, its for our country and its our responsibility as professionals to influence our schools towards progress and good governance.

  2. Good day, is it possible to make contact with the author of this article?
    I am lecturing Accounting for Educators at the Central University of Technology, Bloemfontein campus and in the process to develop a plan in order to address this possible problem mentioned in the article.

    Kind regards

  3. Compliance and good governance are the bases of accountability and they should be viewed as beneficial for both the schools and the Education Department. Business Accountants add value in ensuring prevalence of internal controls and performance indicator measurement in strategic management of schools.

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