How does a government entity score a hat-trick of clean audits not once, twice, but three consecutive times? This is no mean feat and requires hard work, goal-setting and putting in place systems to ensure the maintenance of stringent financial controls, according to Kagiso Lerutla, the enterprising Group Chief Financial Officer (GCFO) of the City of Ekurhuleni.
Ekurhuleni is the only Metro in Gauteng to obtain a clean audit for the 2021/2022 Financial Year.
The Auditor General of South Africa declared that the city’s financial statements are free from material errors, and there are no significant findings on performance information and compliance with legislation.
“This is a significant achievement for the city,” Lerutla says, adding that he was delighted at the news. Still, there was no room for complacency as he was determined to ensure this pattern of success continued.
Why is a clean audit important?
According to Lerutla, the clean audit outcome doesn’t only confirm the commitment to clean financial governance. It also gives the citizens of the City comfort that systems established to better their lives are being utilised, in line with all applicable prescripts, to deliver on that mandate.
“This is by far the most important aspect for the City, citizens being reassured that the City’s financial affairs are being run as they intended,” adds Lerutla, a chartered accountant born and raised in Jane Furse, a peri-urban town in Sekhukhune, Limpopo.
As the driver of what has been termed Operation Clean Audit, a special purpose operation that was introduced to monitor the implementation of the Auditor General’s previous recommendations for dealing with audit queries, Lerutla has been instrumental in carrying out the directions to ensure the City constantly maintains the highest standards required of government entities.
Consequently, the operation has proved successful, with the City’s financial statements receiving an unqualified audit opinion for the third year.
Receiving a clean audit opinion takes work, particularly for a municipality as large and complex as Ekurhuleni, says Lerutla.
“It requires a commitment to transparency, accountability, and good governance. The City has demonstrated its commitment to these values by implementing a range of measures to ensure that its financial management practices are of the highest standard,” he adds.
Lerutla says these measures include establishing an internal audit unit, introducing an electronic financial management system, and appointing an independent audit committee.
“Ensuring we get a clean audit requires goal setting and designing mechanisms for achieving these goals. However, I cannot emphasise the importance of teamwork and consistency enough. Teamwork in the sense of administratively but also through political support in the form of providing strategic leadership and direction,” he says.
One of the steps taken was introducing a financial system, which forms part of a more significant project the City has ventured into – developing a smart city and automating critical functions to align with technological developments. Introducing a financial system, which integrates with other systems, has yielded benefits to the finance division. This is in the form of the accuracy of the information for reporting purposes and efficiencies.
While people are at the heart of the City’s achievements, Lerutla says the financial system played a critical role in achieving the clean audit.
This is evident, as no material misstatements were identified by the external audit, further validation that the system produces information which is complete, accurate and valid.
As a young chartered accountant who completed his matric at Lengama Secondary school before finishing a BCom degree at the University of Limpopo, Lerutla believes in empowering the young, having seen doors open for him too.
He joined the City of Ekurhuleni in 2014 from the office of the Auditor General as head of Governance and Compliance. He was appointed as CFO in 2019.
Consistency is the key at various levels, including the political class. Consistency and stability have ensured that the team remains focused on setting goals and implementing designed mechanisms.
Giving the team the tools to do the job was something Lerutla says he paid extra attention to as he strived to make sure that the correct professionals were appointed in their roles, mindful that they understood their roles and responsibilities and, most importantly, also shared the vision of the clean audit.
“A clean audit outcome is important for the City as clean governance is the epitome, this remains the objective of leadership in the municipality. The City has seen challenges lately relating to the delivery of services. However, this audit outcome reaffirms that all done is done according to the book, and even during the challenges, we remain committed to ensuring compliance and clean financial administration,” he says.
Lerutla says that over the years, the City has invested, through oversight committees and other internal mechanisms available for the accounting officer to utilise, time and resources in introducing the concept of consequence management.
This process entails establishing disciplinary procedures, in the form of committees and other avenues, to ensure that non-compliance is investigated and transgressors are held to account.
The City has since seen the benefits of this model. It has translated to improved financial discipline throughout the municipality. Alongside zero tolerance for non-compliance, accountability remains key to maintaining the outcome.
What about the influence of experience and youth? As in previous years, Lerutla says the Finance team comprises young, qualified and experienced individuals. “This has yielded benefits in innovation, drive and excellence. The team has demonstrated their commitment to the vision of the City and continues to serve the City with discipline”.
He insists that the team has no room for failure and has indicated that they remain focused on ensuring the City performs at its best.
The secret of his success – and ensuring that young people mixed with experience are driven through inclusivity and independence. “Young people have a drive, which allows them to automatically structure their thoughts around delivering the maximum, which also passes the quality test.”
Another feature common amongst young people is innovation, which requires that they be given the platform to develop ideas and implement changes to yield benefits to the performance of the City.
“Through inclusivity and independence, I have involved the team in decision-making processes and allowed for their innovative inputs. I have also allowed them to run their divisions independently, ensuring high performance and compliance,” he says. The goal for the next financial year is to retain the clean audit and improve the City’s financial health.
“The best moment of having a young finance team of professionals is that one can build the success around them, and getting these three clean audits is a testament to our collective efforts,” Lerutla concludes.