How to achieve a clean audit, an interview with CFO Shabeer Khan (the dti)
In an exclusive interview with CFO South Africa, Shabeer Khan, chief financial officer of the Department of Trade and Industry (the dti), explains how he and his dedicated team managed to achieve a clean audit. Somewhere in Pretoria there is a big government department where the financial statements reported are of the highest quality, supply chain management legislation is adhered to and wasteful expenditure is a thing of the past. In September the Minister of Trade and Industry proudly announced that the dti had just received a clean audit for the 2014/15 financial year. He also deservedly deflected much of the praise to CFO Shabeer Khan and his highly committed team.
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"Not everyone understands what a clean audit is," says Shabeer. "It means the department's financial statements are free from material misstatements and there are no material findings on reported performance objectives or non-compliance with legislation. Achieving a clean audit was definitely a highlight for our department and it was also the proudest moment of my career. It was the first clean audit ever for the dti and considering our enormous budget, this was quite an achievement. I could see that our Minister was proud. That made it really worthwhile. He sees what the team has accomplished."
"Achieving a clean audit was definitely a highlight for our department and it was also the proudest moment of my career."
Speaking like a professional sportsman who has just been crowned a champion, Shabeer knows how much work he and his team put into achieving this goal - but that the fight is not over. "The biggest challenge now is maintaining this level. This is a huge department and we can't review every document or transaction, so the systems supporting the engine of the department must always be in good running order."
Cleaning up across the board
When Shabeer joined the dti in February 2013, he found a department that was doing well in many respects. "We were paying our creditors within 30 days and the dti was ranked as the top department by the Department of Performance Monitoring and Evaluation. However, it was struggling with the basic disciplines of financial reporting and compliance to supply chain management legislation."
From an audit with no less than six findings across areas of performance and compliance in 2012, the dti managed to reduce this to two findings in 2013 and one finding in 2014. "Producing financial statements that were free from material misstatements was of the utmost importance; so we improved our discipline with regards to preparing and reviewing regular financial reports. Producing financial statements of the highest quality is something we now pride ourselves on. In order to get a deeper understanding of the environment, I spent days analysing everything on a micro level and luckily my understanding of audit and risk guided us in the right direction."
Another thing Shabeer needed to tackle head on was the irregular expenditure as a result of the non-compliance to supply chain management legislation, which was the only finding that kept the dti from receiving a clean audit in 2014. "This is a huge concern across government as this is expenditure that was not made in the manner prescribed by legislation." Such expenditure does not necessarily mean that money was wasted or that fraud was committed, but is an indicator that legislation is not being adhered to, including legislation aimed at ensuring that procurement processes are competitive and fair. "We decided to implement an internal control unit within finance to review transactions proactively. We also amended relevant policies and procedures and held workshops with key staff to enable them to get a better understanding of what was required. We launched an internal campaign to eradicate irregular expenditure and over the last year we have managed to eradicate irregular expenditure almost completely. The ongoing support from the minister, deputy minister, the director general (DG) and the deputy directors general has been invaluable."
Improving service delivery
At a national department it is not about the bottom line or the strength of the balance sheet, but about stretching the available budget to achieve as much as possible, says Shabeer. "It is about working smartly and controlling the spending behaviour to improve service delivery. It requires one to be strategic and innovative." Shabeer has implemented various cost-cutting measures across the department in areas such as communications, entertainment and consultants. "To me, the tough economic conditions and budget constraints are a blessing in disguise as staff members now have a better understanding of the importance of the limited resources we have and have thus learnt to plan properly and spend wisely. This has changed the culture at the dti."
Shabeer recognised the fact that the dti needed a game changer and his practical experience from working in the Auditor-General's office (AGSA) meant that he knew which areas to focus on and where to channel his energy. "I spent close to ten years in the AGSA, which provided a solid foundation for me both personally and professionally." Shabeer speaks fondly of his time at the AG's offices and acknowledges that was where he was taught discipline, basic values and principles which he still practices today. "It's for this reason that the AGSA's office will always hold a special place for me."
"A CFO should be able to partner with the DG in achieving the strategy of the department."
Shabeer emphasises the need for a combination of the right skills and the right attitude in government departments. "A CFO should be able to partner with the DG in achieving the strategy of the department. It's easy for CFOs to sometimes get dragged in and be driven by numbers and mundane tasks which often causes one to lose sight of what you want to achieve."
Succeeding as a CFO is not only about number crunching. It is also about putting the right systems and processes in place that carry on long after you've gone, says Shabeer. "A CFO needs to continuously wear different caps. You need to be many things, among the most important are a strong leader, a strategic thinker and also be very knowledgeable in all areas, not just limited to finance. You need to not only lead and guide your team but you also need to really engage with them, recognise their talents and draw on their strengths. You need to be technically up-to-date to enable you to empower your team with the correct advice. Motivating your team and getting them to share a common vision is also very important. Finance is a diverse and an ever-evolving environment and it requires you to be a fast thinker and a quick learner and because of this I learn new things every day. Just as much as being a CFO is challenging, it's even more rewarding when things get done."
The right tools for the job
Shabeer feels that the pro-active CFOs are the ones who are on the right track. "Many CFOs spend large amounts of time collating and analysing financial information, because the transversal Integrated Financial Management System (IFMS) has still not been implemented across government. Some of us have put key processes in place to assist with financial reporting and strategic decision making. At the dti, we have the CFO Helpdesk. Its objective is to improve the overall customer experience. Internal and external stakeholders make use of it and through this process they are able to track the status of any document submitted including when an invoice or claim will be paid. There are two officials who log all documents and enquiries and then escalate them to the correct business units within finance. The help desk was started prior to my joining the dti and it really has been a stroke of genius. At one stage, we were only one of two departments managing to pay suppliers within 30 days, now there are a few more departments achieving this. We are also in the process of implementing an electronic system to manage our incentive schemes which will assist in improving turnaround times, efficiency, reporting and the overall customer experience."
A clean desk policy
Balance and discipline are probably the terms that describe Shabeer best. He has a young family with three sons, ages five, three and one, so life at home can be hectic. "It's important for me to leave the office at the end of every day with a clean desk. If that means I have to stay a bit later, that's fine. At least when I get home I can spend quality time with my family."
"Succeeding as a CFO is not only about number crunching. It is also about putting the right systems and processes in place that carry on long after you've gone."
So what's next for Shabeer? He says he often jokes about new challenges but he knows the real work has just begun. Shabeer has been appointed as a non-executive director of the Coega Development Corporation and is eyeing other exciting projects within the dti. "We are working on strategic partnerships with development financiers of other countries to partner with South Africa on financing key projects across the African continent. Africa is fast becoming a growing and strategic investment destination for the rest of the world and South Africa is a gateway into Africa. The industrialisation of the African continent is key."
As much as the public sector can learn from the efficiency and effectiveness of the private sector, Shabeer believes many companies could benefit from taking a more long term view on success, something government departments have to do all the time. "I am one of only one of two chartered accountants in the dti and I am hoping that this statistic will improve not only for the dti, but across the government spectrum in general. I hope to continue making a difference in the lives of others and for me, working in government allows me the opportunity of constantly striving towards making that difference."