Financial transparency for SA's municipalities - it's not rocket science

With government financial mal-administration and inappropriate spending in the news again, it's tempting to think that this could never happen in the private sector - but there are definite parallels.

The woes currently facing municipalities in particular are an absolutely classic example of what happens when the basics of financial transparency are not in place.

Achieving transparency is not rocket science, and there are many affordable and effective systems available to help organisations do it. It comes down to one very simple thing: Does everybody who needs to, understand what's going on with the money?

Transparency is lacking when financial information is too complex for most managers to understand, when it doesn't get communicated to the people who need it or when it raises more questions than it answers. Managers don't just need to know the numbers, they need to know why the numbers are the way they are - why did we overspend on that account, or underspend on this one? They also need to have this information in time - it does no good to find out that your budget is in trouble two or three or six months later, when it's too late to do anything about it.

When there is no transparency - when there is no light shone on the darker corners of an organisation's financial environment - bad things happen. If there's only one person who knows what is going on, corruption becomes too easy. If nobody at all knows what is going on, chaos follows pretty soon after.

Plenty of companies in the private sector have gone under, or got into severe difficulties, because of this. But at least in the private sector there is a stricter kind of accountability at work than in government. A listed company that gets a qualified audit will have angry shareholders to answer to, the CEO or financial director will have some explaining to do, and the company will face consequences in terms of the JSE listing conditions. But governments and municipalities get qualified audits all the time - it's the norm, in fact - and yet it doesn't seem to matter all that much.

This is hardly an exaggeration. At the recent launch of the government's “Operation Clean Audit 2014”, Minister of Co-operative Governance and Traditional Affairs Sicelo Shiceka revealed that in 2007/08, 54.4% of our municipalities received qualified, disclaimer or adverse audit reports. Only 10 out of 283 municipalities, or a measly 3.5% received clean audit reports. Imagine only 3.5% of the JSE having clean audit reports.

The Auditor-General's report identified a lack of controls, mismanagement and lack of governance principles as the main reasons for this disarray.

Part of the problem is a lack of skills - but given that this problem isn't going away anytime soon, we need to empower municipal managers and staff with the best support and tools available. The old, complex financial systems still running many municipalities make information hard to find and harder to understand; getting a high-level overview of what is going on is almost impossible.

Yet transparency isn't hard to achieve; and from transparency flows the accountability we so desperately need if South Africa is to meet its challenges. With a tiny tax base and a huge need for service delivery, we cannot afford as a nation not to spend every cent effectively.