Troubled Government Accounts: Lessons from the UK and South Africa
Recent reports on financial reporting and audit outcomes in the UK highlight significant challenges in public sector accountability. Not unsimilar to local experiences, UK local government entities face persistent problems in ensuring reliable financial records and effective governance, with serious consequences for public trust and service delivery.
What Went Wrong in the UK?
The UK’s National Audit Office (NAO) recently revealed alarming statistics about local government financial reporting. Only 1 in 10 local authorities managed to publish reliable, audited accounts for the 2022-23 financial year.
Of the remaining 90%:
Half failed to submit any financial data at all.
Half submitted accounts that were not audited, making them unsuitable for financial oversight.
These issues reflect systemic weaknesses, including poor record-keeping and a lack of preparedness. In some cases, auditors issued disclaimed opinions, meaning they could not assess the accuracy of financial statements due to missing or unreliable evidence. This raises serious concerns about how public funds are being managed and whether they are being used effectively.
Similar Challenges in South Africa
The challenges in the UK mirror problems identified by South Africa’s Auditor-General in the 2022-23 municipal audit outcomes report. Out of 257 municipalities, only 34 achieved clean audits—a mere 13%.
The report highlighted the following issues:
Performance reporting failures: Many municipalities struggled to align their operations with statutory and performance management requirements.
Compliance breakdowns: A staggering 86% had material findings related to non-compliance with key legislation, a slight decline from previous years.
Financial mismanagement: Ineffective revenue collection, unfunded budgets, and unauthorised expenditure remain widespread, undermining service delivery and financial stability.
Inconsistent progress: While some municipalities improved, others regressed, showing a lack of sustained effort to improve governance.
What Do These Issues Mean?
Both the UK and South Africa face a common problem: poor governance and weak financial systems that fail to ensure transparency, accountability, and effective use of public funds.
In the UK, disclaimed audit opinions signal an inability to verify financial statements due to lack of evidence, which erodes confidence in financial management.
In South Africa, widespread compliance failures and mismanagement reflect deep-rooted capacity and oversight issues, leaving municipalities unable to deliver essential services effectively.
Lessons for Improvement
The lessons from both countries are clear:
Improve Record-Keeping: Accurate, reliable records are the foundation of financial accountability and audit readiness.
Strengthen Internal Controls: Effective governance frameworks reduce risks and promote compliance.
Prioritise Financial Systems: Standardised and automated processes can enhance timeliness and accuracy.
Invest in Capacity Building: Ongoing training for financial officers and municipal leaders is critical to maintaining progress.
Moving Forward
The South African Auditor-General’s recommendations remain vital: fostering accountability, strengthening compliance, and promoting sound financial management. Lessons from the UK reinforce the need for systemic changes to address persistent challenges. By adopting best practices and committing to reforms, both the UK and South Africa can improve public sector governance, restore trust, and ensure that public funds are used efficiently and effectively. The path to accountability may be challenging, but it is essential for sustainable service delivery and good governance.
