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Clean audits: much ado about nothing

 Auditor-general of South Africa Tsakani Maluleke recently released the results of 2023/24 municipal audits. Only 34 municipalities received a clean audit.

Clean audit is an SA public audit definition of: financially unqualified and full compliance with legislation (mainly but not exclusively PFMA, MFMA and Treasury regulations) and auditee's ie client's own performance objectives. Incidentally, on the objectives, the AG takes the client's word for their completion or not; it's a tick-box exercise for AG as most of auditing is. 

When Helen "Godzille" Zille was Western Cape premier she railed against audits as being an obstacle to efficient administration (really). She used the example of missing library books in the AG's audit of the WC Library department's financials. This was ignorant nonsense.

Government departments, politicians and media get in a froth about "clean audits". When government audit results are released, media and politicians don't stop talking about who got a clean audit and who didn't. The DA brags about theirs so much one wants to throttle them, figuratively speaking; they're so tiresome.

The financial state of government departments at all levels is bad. But, as then AG Kimi Makwetu told me in an email 2019 (I'd disagreed with WC Health's clean audit - certain performance objectives per their annual report we're incomplete), the only thing that matters is the financial audit result, ie unqualified or not. 

Any auditor will tell you how easy it is to get an unqualified financial audit - the bar is really low. So unless one separates the audit result for each government entity to see which of the three components of the clean audit was not met, their overall financial administration state is not clear unless one inspects individual annual reports. And who had the time or inclination to do that. 

So it's hard to take the AG's apparently concerning report about the decline of municipal clean audits at face value without determining how many failed to get unqualified financials (the most important) and the other. I suspect, as she said, this bad state is mostly due to unauthorised ("irregular") and wasteful spending. Unauthorised is when there no vote - formal approval - for expenditures, not that it's necessarily dodgy. 

Under the Public Audit Amendment Act entities are obliged to remedy the AG's negative findings, rather than it being a recommendation, which is what audit findings really are. But like all good intentions in SA, it's unlikely it's being applied. 

Clean audit is a misnomer when it comes to governance. (I don't think it's used in the private sector except perhaps informally.) AG audits have or had a section called "value for money", rarely if ever done, which is what you're talking about. It's essentially a "good governance" audit. 

These are qualitative audits covering various aspects of the entity eg on HR: how many staff, who reports to whom, how close were tenders to the general market price, what proportion of staff are engaged in constructive work, etc (the proportion of budget spent on salaries is part of the financial audit).  There're not done because audits cost money, time is of the essence and the client pays for it - government departments being audited pay the AG's fees. 

Financial plus VFM audits would give a better - complete even - assessment of the client. The DA annoys with their smug conflation of clean audit and good governance; they're not the same but good financial administration is a component and indicator of the latter. 

The Department of Public Administration conducts or conducted with AG a survey of departments covering about 18 aspects of governance - financial, ethics, service delivery etc. Interesting to note financials covered about 7 of the 18 categories. 

Likely these surveys are no longer done, mediocrity being SA's governance benchmark. 

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