Professionalise the public finance role, says CIGFARO president

Public sector audit issues can be solved through appointing the right people, says Peet du Plessis.

This Future of Audit Series interview is proudly brought to you by ACCA.

“The audit function has two distinct purposes,” says Peet du Plessis, president of the Chartered Institute of Government Finance, Audit & Risk Officers (CIGFARO). “The first is ensuring the future of external audit and the second is that of internal audit.

“From a public sector perspective, when looking at external audit, I think the objectives are captured in the Public Audit Act, as amended. What is required, though, is auditors who are willing to perform their tasks without fear, favour or prejudice. In future, external auditors need to look more towards curtailing the appointments of family members in the same organisations, which opens the risk of collusion in the normal day-to-day operations in an organisation. For example, you can’t have a head of a department and his/her brother-in-law is directly reporting to that position. Ethically, this is wrong.”

From an internal audit perspective, Peet says the future will see the profession continue to act as a supporting function, but it needs to “take artificial intelligence more seriously and start developing information-generated intelligence around possible fraud and corruption, which could include senior and executive management”.

CIGFARO’s objectives are to advise institutions, commissions and other bodies and persons, to train and advance members’ knowledge, and to promote the interests of the finance profession within the public sector. It also aims to protect the interests of both the public sector and the public at large through enforcing a strict code of conduct for its members.

“In my view, the most pressing challenge today for audit is the extent of preventative and detective controls implemented by management to ensure fraud and corruption is eradicated,” says Peet. “The second challenge is to determine to what extent there is compliance with legislation, policies, procedures, and by-laws. The last point is, are we serious about consequence management – to what extent has this been implemented? Most of the issues in the public sector can be resolved if the right people are appointed.”

Calling for professionalisation of the public finance role
This is one of the reasons CIGFARO is lobbying for the professionalisation of the public finance role. CIGFARO is of the firm opinion that if legislation is passed, this will compel all public officials to belong to a professional institute, and reduce the current illegal practices.

The organisation argues that not only will it ensure that officials do what is ethical, but will also provide some form of protection against possible undue pressure to act unethically, while holding the officials accountable through professional standards and codes with related disciplinary procedures.

“The position of treasurer in local government, now known as CFO, was (since 1988) a professionalised position whereby a person had to be registered as a municipal accountant with a specific qualification, before he/she could be appointed. This is distinct from a CFO in the private sector,” explains Peet. “This requirement was repealed by the Local Government Municipal Finance Management Act, (MFMA) Act 56 of 2003, as amended. This action by National Treasury in the MFMA created a vacuum, which allowed for the appointment of persons in the position of CFO who are not qualified as professionals in the field.”

CIGFARO argues that this sort of required registration would be a step towards ensuring only people with the requisite high standard of ethics, who are suitably qualified, would be allowed to steward public finances.

“Professional bodies should issue members with a licence, which could be revoked if a member were found to be guilty of any offence as stipulated in the rules of that professional body,” insists Peet. “The first step in this process has already been started by the Ministry of Public Service and Administration acknowledging that the public sector needs to be professionalised and a discussion paper to this effect being published. CIGFARO participated in the discussions surrounding the ‘how’ part.”

He says the next step in the process is to draft a proper policy document that would spell out the requirements and how the process would be undertaken. “Thereafter, we will need national legislation to implement the requirements across the public sector. The main aim should be that a person should not be able to practice his/her trade without a valid licence, registered with a professional body, such as CIGFARO.”

CIGFARO points out that this required professionalism and registration is a practice followed in many countries over the world, including the US and the UK, among others.

Currently, CIGFARO is the only SAQA registered professional institute that registers members working in the three spheres of government (national, provincial and local).

“If South Africa truly wants to address this scourge of incompetence, corruption and fraud, reinstate good audit results with clear accountability and excellent financial management practices, the solution is simple: professionalise the public finance role through passing the applicable legislation and allowing CIGFARO to take up the role it is designed to perform,” Peet urges.

Busting myths in public sector audit
Peet says that there’s a misconception that the auditor knows everything, and their word is always right. “It is important to understand that auditors have a determined function to perform, and their findings must be looked at critically and examined before they are implemented,” he says. “It is then important that audit recommendations – if not found to be contrary to policy and or legislation – to be implemented as soon as is practically possible.”

He says on the other side of the coin there is the myth that the auditor is only there to pick up on errors. “This is totally incorrect,” he stresses. “Auditors have to assist management in the execution of their duties, and this would then include the detection of errors with correction measures.”

He says he’s grateful for the opportunity he’s had to serve as president of CIGFARO, to address some of these issues and advocate for change. “Let’s hope and cross our fingers that the public sector will change over time so that the rot of fraud and corruption is eradicated,” he concludes.