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Control and Enforcement > Financial Control and Audit
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What
types of financial controls exist in ministries
or agencies to deter corruption?
| See
results of the survey undertaken by the
Forensic Accounting Division of the Auditor
General's Office. This survey received an
official response for each ministry's accounting
officer documenting the nature of internal
controls within national minstries to prevent
fraud and corruption.
The
National Exchequer Act, the Treasury Instructions
and the Public Finance Management Act
(No1 of 1999) outline procedures for dealing
with financial controls.
Within
ministries and agencies the type of financial
controls include the appointment of accounting
officers who are responsible for ensuring
that the relevant department or institution
has and maintains effective, efficient
and transparent systems of financial and
risk management and internal control,
and a system of internal audit under the
control and discretion of an audit committee
complying with and operating in accordance
with regulations an instructions.
The
Department of State Expenditure has recently
issued broad guidelines to provinces and
is attempting to kickstart provincial
internal audit units with funding. For
example the Mpumalanga Internal Audit
Unit has already saved the Province R24million
in a payroll verification exercise.
Accounting
officers are responsible for the effective,
efficient, economical and transparent
use of the resources of the department/institution
and must take effective and appropriate
steps to:
a) collect all money due to the department
b) prevent unauthorised, irregular/fruitless
and wasteful expenditure and losses resulting
from criminal conduct; and
c) manage available working capital efficiently
and economically.
The
accounting officer is also held responsible
for the management including the safe-guarding
of and the maintenance of assets, and
for the management of liabilities, trading
entity or constitutional institution.
In terms of the Act, (Public Finance Management
Act 1999 , S45) other officals must take
effective and appropriate steps to prevent,
within that official's area of responsibility,
any unauthorised expenditure, irregular
expenditure and fruitless and wasteful
expenditure and any other collection of
revenue due.
Internal
control systems in departments should
include the accounting officer ensuring
proper authorisation of payments, certification
that benefits have been received, certification
that actual payments have been undertaken
by separate officers, the signing off
of payment voucher and that financial
records are kept safely and securely.
The
Auditor-General's Report Overview notes
that there are once again inadequate internal
controls and that these were not functioning
as desired. Material shortcomings in the
internal control of staff expenditure,
medical services, medical expenses regarding
prisoners' hoslitalisation and other medical
services, bulk medicine purchases as well
as the guarantee scheme for housing loans
to the Department's officials and employees
were again revealed. Unauthorised expenditure
was another area which attention was drawn
to in the Report Overview.
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Is
there an internal audit or inspection unit
in all ministries or agencies?
 
Is
it independent of the chief finance officer?
Who
does the unit report to?
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Head
of Agency (275a) |
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Finance
ministry or the treasury (275b) |
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Other
(275c)
Specify:Accounting Officer and Audit Committee.
Parliamentary standing committee on Public
Accounts |
Does
it undertake special investigations or reviews,
apart from routine audits or inspections,
at the request of the head of ministry or
agency?
Is
its staff specially trained?
Who
has access to the reports of the routine and
special reviews?
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Supervisory
Bodies(278b) |
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Supervisory
Bodies(278b) |
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Parliament/Legislature
(278c) |
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Public,
including the press (278d) |
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Other
(278e) Specify: |
What
role does external audit or inspection
play in deterring, investigating, and
reporting unethical or corrupt behaviour
of public servants? What is the scope
of the jurisdiction covering the external
audits? Who is responsible for taking
action based on the external audits
or inspections, e.g. the head of government,
minister or head of agency concerned,
a legislative committee, etc.? What
are the steps to be followed? How are
cases referred from and transferred
to other agencies?
It
should be noted that the discovery of
fraud is not the main objective of the
auditor's work. The auditor has a professsional
duty to the client to exercise reasonable
skills with respect to the detection,
investigation and reporting of fraud and
error. Hence the auditor should plan and
conduct his audits so as to have a reasonable
expectation of detecting material misstatements
in the financial statements as a result
of fraud or error. The responsibility
of the auditor is thus twofold:
1) to plan his audit so as to detect fraud
2) to implement additional measures when
there is an indication that fraud may
exist, and to report thereon.
The
responsibility of preventing and detecting
economic crime is the first instance
attributed to the accounting officer
of institutions by the Public Finance
Management Act. As such the accounting
officer is responsible for taking action
based on the external audits.
The
functions of the Auditor-General to
support constitutional democracy in
South Africa are described in section
188 of the Constitution of the Republic
of South Africa (Act No 108 of 1996.)
Sections 3 and 5 of the Auditor Generals'
Act (Act No 12 of 1995) describe the
functions of the Auditor-General in
detail. and section 3(3) gives the Auditor
General the discretion to determine
the nature and extent of the audit to
be carried out.
According
to S3 of the Auditor General's Act he
or she may at his or her discretion
determine the nature and extent of the
audit to be carried out and request
the details and statements of account
which he or she considers necessary.
In
terms of the steps to be followed for
the external audit and the way in which
cases are referred from and transferred
to other agencies, see Public Service
Management Act no 1999.
Although
the responsibility for the prevention
of economic crime rests with management,
through the implementation and continued
operation of adequate accounting and
internal control systems, external audit
does play a definite role. The role
that the auditor must play is not prescribed
in any legislation or standards but
through the execution of a normal audit
can go a long way in helping prevent
economic crime. For example, during
the normal regularity audit, the systems
of internal control are evaluated and
the shortcomings and possible risk areas
are reported to .
However,
the need to establish a forensic auditing
capability was identified and established
in the Office of the Auditor-General
in 1997. The motivation behind this
initiative was to facilitate the proper
and timeous indentification and, where
possible, successful investigation and
prosecutoin of the more material cases
of economic crime in the public sector.
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How
is the independence of the supreme
audit institute guaranteed?
| Constitution
1996, S193 guarantees the independence
of the supreme audit institution.
See
Document C - The Auditor-General
Act 12 of 1995 and Document D
- The Audit Arrangements Act 122
of 1992 |
How
many employees are there? How many
auditors are there? What was the annual
budget for these activities in 1998
(or latest available year)?
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Employees
(281a)
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1268
(filled 1999) |
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917
(operational staff - 99) |
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R27
681 000 |
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Reference
Year (281d)
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1998/1999 |
What
areas are
covered
by external
audit or
inspection?
| The
auditing methods
adopted as
policy by
the Office
are based
mainly on
the systems
approach,
which focuses
largely on
evaluating
the system's
control aspects
and structuring
substantive
test accordingly.
Steps are
taken to subject
all the major
activiites
to auditing
according
the priority
on a longer
term audit
plannince
cycel. Audit
tests of transactions
are focused
on identified
high-risk
areas that
do not have
adequate systems
of checking
and control.
The
Forensic
Auditing
division
has a unique
focus which
distinguished
it from
regularity,
performance
and computer
auditing,
but the
interdependence
of the disciplines
in acknowledged,
which are
instrumnetal
in highlighting
instances
of possible
economic
crime.
See
Documents
F (Report
overview)
and G (Forensic
Auditing
Brochure)
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What
is
the
frequency
of
external
audits?
(283)
| If
the
audit
of
the
institute
determined
a
low
risk,
such
audit
may
be
postponed
for
a
year
acccording
to
prioritisation.
Audits
revealing
high-risk
areas
are
done
annually. |
Are
external
audit
reports
routinely
published?
If
yes,
how
often?
(284c)
| Reports
are
routinely
published,
also
once
annually,
as
based
on
the
findings
in
the
previous
question.
The
Auditor-General's
Office
must
generate
its
own
income
by
charging
the
institutions
that
it
audits.
In
many
instances,
however,
because
of
a
refusal
or
inability
to
pay
for
the
audit,
it
is
prevented
from
even
gaining
access
to
the
financial
statements
of
public
institutions.
Even
when
payment
is
secured,
in
many
more
instances,
the
non-submission
of
financial
statements,
deficiencies
in
accounting
systems
and
the
incomplete
submission
of
records
may
make
it
impossible
for
the
Auditor-General
to
'express
an
opinion'
on
the
state
of
the
institution's
financial
management.
In
such
cases
there
might
not
only
be
a
lack
of
financial
accountability
but
wholesale
corruption.
(Currently
the
Auditor-General
is
unable
to
'express
an
opinion'
regarding
the
financial
accountability
of
42
local
authorities
-
out
of
a
total
of
approximately
80
-
within
the
Eastern
Cape).
In
addition,
the
information
is
very
often
of
a
highly
general
nature
and
makes
it
very
difficult
to
track
individual
cases
of
misconduct
within
departments. |
Please
list
the
Auditor-General
or
the
Inspector
General
(if
he
or
she
is
responsible
for
the
external
review
of
government
expenditure
and
performance),
the
address,
telephone
numbers,
fax
numbers
and
e-mail
address.
| Mr
Shauket
Fakie
has
been
appointed
Auditor
General.
However,
please
use
the
following
particulars
to
correspond
with
the
Office
of
the
Auditor
General.
Office
of
the
Auditor-General
P.O.
Box
446
Pretoria
0001
Tel:
(012)
426
8277
Fax
(012)
426
8273
Any
other
addresses
or
telephone/fax/e-mail
information
of
particular
members
may
also
be
obtained
from:
Tanja
Duvenage
(editor)
Tel:
(012)
426
8282
Fax:
(012)
426
8274
E-mail:
tanja@agsa.co.za
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Please
indicate
the
number
of
ethics/corruption
cases
established,
and
referred
or
transferred
within
the
past
5
years
(286)
| The
Forensic
Auditing
Component
only
started
functioning
recently
(January
1998).
For
the
period
ending
31
January
1999,
a
total
of
39
cases
were
referred
to
the
Forensic
Accounting
component
for
investigation.
These
cases
included
fraudulent
promissory
notes,
fraudulent
guarantees,
contract
maladministration,
theft,
embezzlement
and
corruption.
Given
the
complexity
of
these
cases,
many
are
still
under
investigation.
Relevant
casese
were
also
referred
to
the
following
institutions
for
further
investigation
and
finalisation:
Heath
Special
Investigating
Unit
(5
cases),
the
Public
Protector
(2
cases)
and
IDSEO
(1
case)
(See
document
H
for
particulars.)
For
the
period
ending
December
1999
an
additional
27
cases
were
referred
to
the
forensic
auditing
component. |
What
has
been
the
average
length
of
time
to
complete
an
investigation
of
a
complaint
by
the
supreme
audit
institution
within
the
past
5
years?
(287)
| Forensic
Auditing
only
started
in
January
1998,
which
does
not
actually
provide
an
overall
'average'
for
the
investigations
dealt
with.
It
can
however
be
said
that
a
near
average
for
some
cases
is
±6
months. |
What
bodies
are
responsible
for
and
what
procedures
are
in
place
to
recover
public
funds
lost
due
to
corruption?
| The
responsibility
for
recovering
public
funds
lost
due
to
corruption
in
the
first
place
is
the
responsibility
of
the
accounting
officers.
The
Office
of
the
Auditor-General
reports
on
the
effectiveness
of
the
measures
taken
by
accounting
officers
to
Parliament
or
the
relevant
legislature,
whereupon
the
Public
Accounts
Committee
will
deal
with
accounting
officers
who
neglect
their
duties
in
this
regard.
The
Heath
Special
Investigating
Unit
(HSIU)
has
a
unique
role
to
play
in
the
civil
recovery
of
public
funds.
It
was
established
in
terms
of
Section
2
of
the
Special
Investigating
Units
and
Tribunals
Act
74
of
1996.
The
unit
is
divided
into
investigating
teams
which
are
under
the
control
of
managers
and
are
linked
to
legal
representatives
and
other
experts,
for
example
forensic
accountants,
computer
experts
etc.
Investigations
involve
the
gathering
of
information
by
obtaining
evidence,
statements
from
relevant
witnesses
and
documents
which
have
a
bearing
upon
the
case.
Documents
are
obtained
by
either
voluntary
handing
over
or
by
search
and
seizure
or
by
subpoening
witnesses
to
produce
documents.
An
assessment
is
then
made
of
as
to
the
probabilities
of
succesful
civic
action.
The
SIU
also
has
the
powers
to
bring
applications
in
order
to
safeguard
the
assets
of
State
institutions
or
to
prevent
further
losses.
The
Heath
SIU
has
to
liase
with
four
separate
government
departments
in
order
to
have
a
Presidential
Proclamation
issued
before
it
can
investigate
any
case.
This
is
a
time
consuming
process.
Once
the
investigation
is
completed,
and
if
the
Special
Tribunal
attached
to
the
SIU
finds
the
official
guilty,
the
official
is
compelled
to
repay
lost
assets
to
the
state.
At
this
stage
the
SIU
may
recommend
that
the
official
be
subjected
to
internal
disciplinary
proceedings
or
criminal
prosecution.
However,
the
Heath
SIU
has
no
mandate
to
monitor
or
enforce
these
recommendations.
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