Trends in the local government NAO annual report : 2018 to 2020

Abstract

PURPOSE: Annually, certain weaknesses are highlighted in the ‘Report by the Auditor General on the Workings of Local Government’. In this study the internal control and non-compliance weaknesses identified between 2018 and 2020 will be analysed. Focus will also be placed on the working capital positions, operating results, submission of financial statements by the deadline and the audit opinions issued. This will be conducted to identify the trend over time of such weaknesses to outline whether these have improved, persisted or deteriorated. Given that certain weaknesses have persisted or deteriorated the main contributing factors will be identified. DESIGN: To address this study’s objectives a qualitative approach was adopted. Thus, a documentary analysis was conducted on the National Audit Office reports on the Workings of Local Government between 2018 and 2020 and semi-structured interviews were held with fifteen executive secretaries, three National Audit Office officials, three Division of Local Government officials and a Local Government Auditor. FINDINGS: Between 2018 and 2020, a total of 475 weaknesses were identified of which 70% related to internal controls, whilst 21.4% related to non-compliance. When compared to Gauci (2014), no improvement was observed in these weaknesses. Inadequate record-keeping was the most dominant internal control weakness. Additionally, between 2018 and 2020, qualified audit opinions and late submission of financial statements to the National Audit Office persisted. The issuance of qualified audit opinions remained the most common. Not only did certain weaknesses persist, but a trend of deterioration was observed for some. Between 2018 and 2020, noncompliance weaknesses increased especially those related to procurement regulations. Contrarily, improvement was observed in the following three areas. Firstly, there was a decrease in Local Councils having a negative working capital. Secondly, the issuance of clean audit opinions increased. Thirdly, the number of Local Councils reporting a deficit position decreased. The main factor contributing to the recurrence of the weaknesses was found to be the inadequate accountancy expertise of executive secretaries. CONCLUSION: Although for certain identified weaknesses a trend of improvement was observed, for other weaknesses there is room to do better. Given that certain weaknesses keep on reoccurring, this indicates that the steps taken to date to eliminate such weaknesses were not enough. Ultimately, Local Councils should not take this matter lightly since they are allocated public funds. Thus, such weaknesses should be reduced to enhance accountability and transparency. VALUE: This study will further contribute to the local literature, whereby, the trend of the weaknesses identified over time was analysed. Not only does this study provide the general public with insight on identified weaknesses in the ‘Report by the Auditor General on the Workings of Local Government’ between 2018 and 2020, but it also enhances the awareness of the general public on the importance of such report.