How to get state entities to open their books and stop wasting our money
Probity audits should become mandatory for tenders over R50m
In an increasingly digital world, where information, exponential technologies and automation allow for the streamlining, fine-tuning and auditing of various legislative processes, citizens are realising their power to hold their institutions and governments accountable to their responsibilities and promises.
Citizens are arming themselves with information and knowledge to better understand how changes to legislation or new regulations will affect them. It is becoming ever clearer to those in power that citizens need to be at the centre of attention when it comes to decision-making. The question remains: are governments engaging their citizens at the right level and being sufficiently forthcoming to ensure transparency in their processes, decision-making and policy implementation? And if not, is this the possible root of corruption and its spread?
The annual Corruption Perceptions Index (CPI) published by Transparency International scores and ranks countries on a scale of 0 to 100, according to how corrupt their public sector is perceived to be by experts and business people. The latest CPI shows that more than two-thirds of the 180 countries and territories surveyed fall below the 50 mark, meaning their public sectors are marred by corruption. This is a shocking statistic, particularly when coupled with the finding that “most countries have made little to no progress in tackling corruption in nearly a decade”.
SA scored 44 out of 100 in the 2020 CPI and was ranked 69 out of 180. Our country is no stranger to corruption and the lack of transparency that comes with it. Over the past few decades we’ve witnessed the plundering of public finances from various parastatals, including Eskom, Transnet and SAA, to the extent that these financial losses across the public sector cannot be quantified. What we do know, however, is that this siphoned money has far-reaching effects on our economy and our attractiveness to foreign direct investors. This level of corruption also hampers service delivery across vital sectors of our economy, such as health, education, security and infrastructure development — all of which are crucial to economic growth.
The latest 2020 Audit Outcomes Report released by the office of the auditor-general puts unauthorised, irregular, fruitless and wasteful expenditure at R74bn. Over the past three years R200bn of such expenditure has been incurred by public institutions (excluding local government institutions) around the country. Just last month, the standing committee on public accounts requested a forensic investigation be undertaken at the Compensation Fund due to the continued unauthorised expenditure incurred by the fund year in and year out. While the question of corruption was asked and inferred, nothing will be known until the probe is completed.
These kinds of investigations, inquiries and commissions are not new to South Africans and they have one fundamental trait in common: they aim to understand and find clarity on apparent fraud or corruption, where there was insufficient transparency from the outset. While the wheels of justice turn slowly in response to the findings of these investigations, the funds in question have already been spent or, worse, have left the country. SA’s budget deficit indicates that those in power cannot continue to turn a blind eye to corruption. Nor should they condone the awarding of contracts and tenders that are irregular in nature.
While the Public Finance Management Act has been in effect for more than 20 years, irregular expenditure by public institutions remains commonplace. It is time that we demand more transparency in the supply chain and procurement processes at public institutions through legislation updates. This greater transparency may serve as an early warning system and may well reduce irregular spending and the high levels of corruption we are witnessing.
To enable this greater transparency probity audits must be performed on the supply chain management process. A probity audit is an assurance engagement that independently scrutinises a procurement process and determines whether the prescribed probity requirements have been met. Sadly, only a few entities have embraced probity audits on their supply chain as these are at the discretion of the entity. Legislation should therefore be amended to make it mandatory for all public sector tenders of at least R50m. A probity audit should also identify connected persons and related parties within shortlisted tenderers to the respective entity and the government. Another key check should include determining if the proposed price is reasonable and market related, as far too often prices are inflated to pay kickbacks and fund bribery.
The resulting probity report should be submitted simultaneously to the entity, the auditor-general and various legal structures so action can be taken to blacklist noncompliant tenderers and undertake further action as required. Mandatory probity audits will certainly reduce irregular spending and curtail the immense number of tenders that are awarded through nefarious means.
SA already has the skills and capacity to perform these checks — why is it that this process is not being implemented? Are we waiting for the next big corruption scandal to emerge, or will we only act when our coffers truly run dry?
• Pillay is audit partner and head of the public sector team at BDO SA
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