OPTIMISING INTERNAL AUDITS
The PFMA Perspective
Mathabatha Julius Mojapelo Chartered Accountant (SA), Certified Internal Auditor, RGA
In the realm of public sector auditing and accounting, the Auditor General’s reports under the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA) serve as crucial barometers, providing insights into the efficiency and effectiveness of governance structures. The latest reports underscore a critical issue the underutilisation of Audit Committees and Internal Audit Units as resources for enhancing governance.
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The 2022-23 AGSA PFMA report reveals that, despite the significant role of Audit Committees and Internal Audit Units in advising on internal controls, risk management, and compliance, their impact remains suboptimal. While Audit Committees show a marginally higher influence, a staggering 20% of auditees did not implement their recommendations. Internal Audit Units, designed to offer independent assurance on controls and risk mitigation, face similar challenges, with 26% having little to no impact due to management's failure to act on their suggestions.
The MFMA Outlook Shifting the focus to the 2021-22 AGSA MFMA report, a more nuanced picture emerges. Audit Committees demonstrated slightly better
Advancing Auditing &Accountability
effectiveness, with 51% making some impact. However, the report highlights that 34% faced inertia from management in implementing their recommendations. Coordinating institutions and executive council members played a role in interventions, yet their impact was limited. To unlock the full value of investments in Audit Committees and Internal Audit Units, municipalities need to ensure robust implementation, monitoring and accountability mechanisms for the recommendations.
Key Challenges and Opportunities Despite the strides made in aligning governance structures with legislative requirements, challenges persist, particularly in the quality of financial statements
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