Poor supply chain management prevents clean audits

25 July 2012

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25 July 2012 | Kamalpreet Badasha

South Africa's auditor general Terence Nombembe has identified supply chain management as one of five major risks affecting whether municipalities receive a clean audit.

Nombembe’s comment came following the publication of the latest audit results for the financial year, showing that 13 municipalities achieved a clean audit this year, six of which have received a clean audit for the first time.

“They are moving forward towards the clean audit space by consistently committing to take ownership of municipal performance practices, insisting on adequately qualified staff and effective performance management practices,” said Nombembe.

Nombembe identified five major risks preventing a clean audit: supply chain management - which is being demonstrated by a growing trend of irregular expenditure; ineffective internal IT controls; a failure to provide services they are meant to; poor human resource management resulting in a skills gap; and finally, despite the use of consultants, there are errors in financial statements.

Internal controls also remain an issue, with 70 per cent of municipalities lacking necessary controls, with the remaining 30 per cent making progress to address the issue.

“We are seeing the impact of the lack of skills, the slow response of leadership to owning key controls, as well as the absence of managing poor performance and the risks that municipalities continue to face. At the moment these risks are beyond tolerable levels," added Nombembe.

The auditor general called upon leaders from municipalities and provinces to partner with the South African Local Government Association in initiatives which would improve the accountability of authorities.

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