The South African government has been applauded by the World Health Organisation for its quick response to curb the spread of the Covid-19, and prepare its healthcare system. However, this good work can easily be overshadowed by poor controls implemented over the administration of the relief funding, which may result in an increase in fraud and corruption, thereby reducing the potential of the funding desperately needed by its citizens and small, medium and micro enterprises (SMMEs).
Adherence to the Public Finance Management Act (PFMA) applicable to national and provincial government, and Municipal Finance Management Act (MFMA) applicable to local government during the pandemic is more critical now as this will determine if citizens and SMMEs will receive the maximum benefit from the funding reliefs provided by government. The objective of both the PFMA and MFMA is to ensure transparency, accountability, and sound management of the revenue, expenditure, assets and liabilities of the government.
The South African Institute of Chartered Accountants (Saica) urges government to ensure that strong internal controls are implemented over the funding relief provided for the pandemic as this will assist government in ensuring that it is:
- Able to achieve its objectives;
- Mitigating risks of fraud and corruption;
- Improving accountability;
- Achieving stronger confidence in the financial reporting of the funds;
- Preventing findings from the auditor general; and
- Building public confidence in government.
Government has provided funding to individuals and SMMEs through various initiatives which include amongst others:
- Solidarity Fund;
- Assistance and relief via the UIF benefit scheme;
- The Spaza Support Scheme; and
- The Business/Growth Resilience Facility.
It is imperative that these initiatives reach citizens and SMMEs quickly to ensure that it can help the vulnerable and stimulate the economy. However, this should not be done by compromising controls. Internal controls are the mechanisms and processes that should be implemented by government to ensure the integrity of the financial information reported, thus promoting accountability and preventing fraud. Compromising these controls will increase the risk of fraud and misappropriation of funds. The implementation of strong internal controls over the funding reliefs provided by government will establish safeguards, minimise the opportunities of committing fraud and reduce errors going undetected. An effective internal control environment with clear processes outlined, will also allow for greater efficiencies.
The auditor general stated in the 2018-19 PFMA General Report that: “Preventative controls are the most effective way to improve financial management. Dealing with the consequences of poor financial management is costly, time-consuming and often the results cannot be reversed”. This firmly confirms the importance of strong controls over the funding relief in order to avoid misuse which ultimately may have a detrimental effect on the citizens and the economy.