Auditors raise concerns about public-sector lifestyle audits
They take too long, they may infringe on people’s privacy — and corrupt ‘masterminds will always get away’
Performing lifestyle audits on public-sector employees is unlikely to make a meaningful impact on corruption as corruption ringleaders often use channels where their transactions cannot be detected, speakers at the Public Sector Forum said on Tuesday.
President Cyril Ramaphosa renewed the call for lifestyle audits on public servants in his 2018 state of the nation address when he said he was looking at introducing the audits for ministers and civil servants to strengthen disclosure and fight corruption in the public sector.
A technical task-team, consisting of law enforcement agencies, Sars and the Financial Intelligence Centre, among other entities, has been established to develop the framework that will make lifestyle audits possible. Ramaphosa is expected to announce the progress of the framework in his 2019 address.
While the idea is a noble one, the government will first need to deal with loopholes that could make these audits another means for corrupt leaders to victimise those investigating them, said Claudelle von Eck, CEO of the Institute of Internal Auditors SA (IIASA).
“It’s a very good idea on the surface but how are we going to implement it and how are we going to ensure that individuals in the game will play it as they should?” asked von Eck.
She said the government will need to ensure the information gathered during the audits is highly secured and cannot be used against audited individuals to blackmail them.
Pumla Sogoni, governance officer at IIASA, said the biggest concern with the envisaged audits is that they will encroach on people’s privacy, contravening the constitution. “There are existing controls — the Sars audits, the Public Finance and Management Act (PFMA) and the Municipal Finance Management Act (MFMA). They are very comprehensive pieces of legislation. The systems are there but they are manipulated by individuals.”
Sogoni said people who don’t declare all their assets and relationships will always find a way to segment that information, and corruption masterminds will always get away.
However, Pulane Mkhize, the director for internal support in the office of the Accountant-General said lifestyle audits will allow the government to cast the net wider than Sars audits as the tax agency only audits a sample of people who have to explain the difference between their income and lifestyle.
“If we can arrest this in the public service, we can halve the amount of corruption because it takes two to tango. It can have an impact on what is happening in the private sector as well, if we don’t have people who take bribes in the public sector.”
Jacqui-Lyn McIntyre-Louw, financial accountancy programme leader at the North West University who performs lifestyle analysis, said these audits are costly, complex and take a long time to complete.
Forensic investigators look at whether the gap between a person’s assets and their current and past income can be explained by other factors such as an inheritance or other legal windfalls. Sources used to gauge the gap between income and lifestyle include statements of assets and liabilities, tax returns, looking at occupations of spouses, the deeds office, and the master of the High Court for trusts.
They also subpoena bank statements in certain circumstances. Social media has also become a good source as people like to show off their lifestyle, McIntyre-Louw said. “But doing a lifestyle audit takes a lot of time. You need a lot of resources. I don’t think it’s going to happen very soon.”