Paper Tigers: The Hollow Impact of Internal Audits and Audit Committees in Local Government
Mathabatha Julius Mojapelo CIA, CRMA, CA(SA), RA (IRBA), BSQP, PEQA
Audit and Risk Management Professional, Consultant & Thought Leader | Business Leader | Empowering Accounting & Auditing Professionals
The Consolidated General Report on Local Government Audit Outcomes for 2022-23 paints a rather dismal picture of the effectiveness of internal audit units and audit committees within South Africa’s local government sector. Despite the presence of these governance structures, the gap between their intended and actual impact remains alarmingly wide.
It is reported that 83% of internal audit units and 87% of audit committees are doing their legislative duties. On paper, it looks like a win. But here’s the catch: their real impact is, well, not very impactful. Only 52% of municipalities are seeing any tangible results from their internal audits. The rest? They’re mostly twiddling their thumbs because management isn’t bothering to act on their recommendations.
The intended value of investing in internal audits and audit committees is supposed to be realised through effective recommendations. But many of these recommendations are ignored. The recommendations should serve as a roadmap to better internal controls and risk mitigation, yet they often go unheeded.
Audit committees fare a bit better, with 55% showing some impact. However, even here, 31% report that their recommendations are ignored by management. The audit committee chairpersons are supposed to escalate unheeded recommendations to higher authorities, but it seems this escalation often doesn’t reach the necessary heights.
The recurring theme across reports from 2020 to 2023 is the lack of real impact from internal audit units and audit committees. Despite their establishment and their role in evaluating financial and performance information, effectiveness is often hampered by resource constraints, insufficient support, and the perennial problem of management not implementing recommendations.
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In conclusion, the 2022-23 Consolidated General Report paints a grim picture that while internal audit units and audit committees in South Africa's local government sector seem to be doing their jobs on paper, their real-world impact is worryingly limited. The gap between what’s planned and what actually happens points to a serious governance failure where important recommendations are often ignored, reducing these governance structures to mere box-ticking exercises. Until management starts taking audit findings seriously, real change will stay out of reach, and these audits will remain paper tigers, making noise without real effect.
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Assistant Director: Internal Audit & Quality Assurance at Maluti TVET College
2 个月We need to go back to basics, Audit Committee and Internal Audit should work collaboratively by ensuring that any recommendations that are not implemented by Management are reported to the Audit Committee and reasons for not implementing them are provided especially recommendations agreed upon with Management. So that Audit Committee can play its oversight role effectively by holding Management accountable. The calibre of members of Audit & Risk Committee should be looked at and only best of the best should serve in these committees. Most Internal Audit Units lack resources and to a certain extend expertise to deliver on their mandate.
Executive Coach & Speaker | Multi-Award-Winner Private & Public Sector Executive | First Public Sector Winner of CFO of the year award ?? |Growth Catalyst & Pioneer of Development of High-Impact Leaders. Lift as you Rise
2 个月Great assessment Julius. The combined assurance approach has to be effective in particular IA and AC. They are a critical role player in the Accountability Eco System as they have full year proximity and their impact should be felt. IA must also start to align their plans for impact. Focus must be on financial management, compliance and service delivery in the form of assessing performance planning, assessment of implementation of targets all the way to assessing adequacy of Annual Performance Reports.
Risk, Compliance and Internal Audit Professional
2 个月The question we should be asking is, what will it take to implement consequence management in the public sector?
Fractional CFO, Independent Non-Executive Director, Executive Coach, Chartered Accountant
2 个月If the audit outcomes are not improving, then the Audit Committees are not doing their work properly. They are paying lip service to their duties and ticking boxes. If this is all they are allowed to do in municipalities, then we need changes made to allow them to initiate processes to enforce their oversight.
Speaker| Independent Financial Consultant and expert| Finance Speaker| Virtual CFO| Financial coach Fintec and data analytics. Accounting, tax, payroll internal audit, advisory
2 个月I share the same sentiments regarding the internal audit function in general ( not in all companies though). Coming from an internal audit background then moving into being audited as a finance professional I realised that the risk based audit approach is currently still a concept. Interrogation of where the risk truly lies is still it sufficient. Especially in areas were testing does not atleast involve pre-engagement data analytic before testing is even done and a process and risk matrix is compiled. This issue is not isolated to government. We still have a long way to travel as professionals.