This article followed all ethical standards for a research without direct contact with human or animal subjects.

Literature analysis showed that failure to implement the recommendations of the AG can be caused by many factors, which include the availability of financial resources, human resources and time. According to Cohen and Savag (2010:297), ‘the foundation of the implementation of audit implementation is the availability of resources and time to adopt the recommendations’. Abdullah (2014:6) further described, ‘[t]he unavailability of adequate funding results in the delay or non-implementation of audit recommendations’ It has to be emphasised that Abdullah’s (2014:6) hypothesis presented here was deduced in an economic set-up other than South Africa. In fact, as this study will demonstrate in the following paragraph, the unavailability of financial resources and time is not one of the three major factors that affected the implementation of audit recommendation in the South African municipalities during the period considered in this research. However, the notion of unavailability of resources in South Africa seems to be mainly around the issues of inadequate human resources capacity and lack of leadership. This notion also reflects on the extensive use of consultants in the municipalities when there are the personnel employed to do such work. This comes at a significant cost paid to consultants. To this end, consultancy costs for financial reporting services continued to increase over the past 10 years, amounting to R1.26 billion in 2019–2020 (AGSA 2020:21).

As the following paragraphs will show, these two factors also have influenced the implementation of audit recommendations given by the AG in local government during the period covered by this research (AGSA 2016:46). Human capacity is a critical factor in the South African context. No government institution can achieve its objectives without the support of properly trained and committed human capital (PSC 2011:16). Inefficient utilisation of public resources is one of the many problems contributing to high levels of inefficiency in many South African municipalities and provincial governments (National Treasury 2015:3). As found from the AGSA reports, an inadequate resource can hamper the recruitment of additional personnel to ensure an adequate segregation of duties in the finance area (AGSA 2011:14). For example, the fact that municipalities take a very long time to fill vacant positions at senior management level with skilled and committed people contributes immensely to their failure to achieve their objectives. The vacant positions are reportedly filled on the basis of nepotism and political connections (cadre deployment) rather than fit for purpose (Deloitte 2012:3). In line with the issues of staffing, the AGSA report expressed serious concerns about the continued local governments’ inabilities to manage vacancies especially ‘in the key senior positions of municipal managers, chief financial officers and heads of supply chain management units’ (AGSA 2013a:17, 2014:58, 2015:77–79) of the major problems facing the local government in South Africa, which have been compiled by Ramutsheli and Janse van Rensburg (2015:110), include the ones presented in Table 3.

From these results, it is clear that one of the reasons identified by many researchers, such as Ramutsheli and Janse van Rensburg (2015:110), Kanyane (2006:116), SALGA (2010) and Deloitte (2012:3), is that nepotism and cronyism continue to be the major contributing factor to the skills shortages in the South African local government. Nepotism and cronyism remain the basis on which senior local government officials are appointed at the local government level. People who are appointed in these positions because of them being the card-carrying members of the ruling parties are generally unqualified, lacking skills and inexperienced (Deloitte 2012:3; Kanyane 2006:116; SALGA 2010).

The second major factor found in the literature is the lack of vibrant audit committees in municipalities. According to Ibrahim, Baker and Doyle (2014:15), these are committees that are responsible for the following up of the implementation of audit recommendations of the ministries and government departments and bodies to determine the extent to which they have responded to the AG’s recommendations. The audit committee can strengthen the organisation’s ability to identify and assess risks. Van des Nest (2006:183) argued that ‘[a]udit committees are required to continuously review their oversight role in an effort to maintain their effectiveness’. The audit committee act stipulates that audit committees’ performance needs to be evaluated on an annual basis and that such evaluation should include self-assessment and evaluation by management, internal and external auditors (Van des Nest 2006:183). Ibrahim et al. (2014:176) argued that the implementation of audit committee recommendations is one measure of the committee’s usefulness and effectiveness. However, whilst literature suggests that a lack of vibrant audit committees hampers the implementation of the AG’s recommendations, a review of the AGSA report shows that most governmental bodies (77%) in South Africa that have been audited during the period covered by this research have established audit committees as prescribed by the legislation and recommended by the King Report III. More specifically, according to Sigidi (2012:14), 91% of municipalities have established audit committees. However, despite the availability of the audit committees, it would seem that they were not performing their work properly. Van des Nest (2008:176) contended that although many audit committees exist in the South African public sector, the degree to which they are effective varies. Indeed, the present study found that a number of audit committees in the public sector are dysfunctional. One of the main reasons as to why audit committees are seemingly ineffective is that there is a shortage of people with financial auditing skills and technical expertise with respect to the internal control (Dodo 2017:19). The present study also identified other root causes leading to the audit committees’ ineffectiveness, such as recruitment of committee members and political interference in the selection process, which need to be addressed.

The evaluation of audit committees’ function needs to be done to determine whether it is discharging its role in line with its terms of reference in the charter (Deloitte 2011:48). Deloitte (2011:48) further argued that ‘[f]eedback from the evaluation is very important, as it can identify areas which need improvement by audit committees and ensures adequate alignment with the charter’. The charter refers to a formal document that defines audit committee’s activities, purpose, authority and responsibility. Based on the discussion in this section, it is apparent that the complexities of the local government operations and an increasing need for effective leadership for the management of its resources require the local government to have an effective governance system in place to ensure that audit recommendations are effectively implemented (Deloitte 2011:5). Therefore, it is essential for audit committees in local government to demonstrate the ‘worth’ of following up audit recommendations whether they are implemented (Chaka 2013:83).

The fact that audit committees in many municipalities seem to be dysfunctional is a cause of concern, which needs urgent corrective actions. According to the National Treasury (20015:5), audit action-monitoring process is a remedial exercise to ensure that corrective action is taken on issues identified by the external auditors and internal auditors or the AGSA. Furthermore, monitoring progress is integral to the audit process in order to establish the status of agreed action plans or recommendations. Thus, reporting of the results of follow-up activities, in the form of a verbal or written report, is critical for senior executives and audit committees to have a better understanding of the status of internal controls, risk management and governance processes (National Treasury 2005:4). To monitor the implementation of audit findings and recommendations, the audit committee requires the internal audit to compile a formal findings register that would indicate corrective actions taken and list the unresolved findings. This could also assist the audit committee in overseeing how management is responding to the recommendations made by external and internal auditors. It may also assist the audit committee to affect accountability and to follow up on critical audit recommendations (Motubatse 2014:34). However, this present study found that some internal audit units have insufficient resources, which undermine their performance to function effectively. In other municipalities, the internal audit units are not afforded opportunities to attend training (Motubatse, Barac & Odendaal 2015:16). A number of studies have also indicated that this could be simply the result of a lack of resources or planning foresight by the implicated municipalities (De Lange 2014:56; Enofe et al. 2013:162). Rubin (2011:78, cited in Wadesango, Chinamasa, Mhaka, & Wadesango, 2017:51) also explained that the lack of audit action monitoring involves a process whereby auditors do not use effective communication channels, such as face-to-face approaches, in a clear, concise and organised manner to determine how findings and recommendations can best be presented to promote acceptance.

This is the case in the local government of South Africa. Presenting his audit report for the 2014–2015 financial year, the AG observed that management in 73% of auditees has been slow to respond to the recommendations aimed at assisting them to improve key controls and addressing risk areas. He further stated that ‘[i]f there is no follow up, municipalities will not be persuaded to do anything different’ (AGSA 2015:23). In light of the above discussion, the study found that there are no formal audit action-monitoring processes in the South African municipalities, and this influences the managements’ attitude for not committing themselves by responding swiftly to the AG’s recommendations.

The third major problem causing failure to implement the AGSA recommendations is the AGSA’s failure (or at least inability) to establish regular progress checks follow-up and monitoring to find out whether the recommendations given to the auditees by his or her office are being implemented. Recommendation monitoring is an ongoing responsibility and the status of open recommendations should be determined on a regularly scheduled basis. According to Aikins (2012:65), monitoring and follow-up systems can be sophisticated or rather simple depending on a number of factors, including the size and complexity of the audit client organisation. Zahran, Chulkov and Inomata (2010:54) stated that follow-up systems in place for implementing audit recommendations vary in terms of refinement and effectiveness as only a few organisations have implemented online systems. However, Daugherty et al. (2012:56) argued that it is the audit firm’s or organisation’s responsibility to be clear that audit follow-up is a significant and valued activity and that audit staff should not be made to believe that follow-up time must be borrowed from other activities considered more significant. Aikins (2012:45) stated that the follow-up activity performed by professionals is a process by which they determine the adequacy, effectiveness and timeliness of actions taken by the management on reported observations and recommendations, including those made by external auditors and others. According to Aikins (2012:45), a follow-up process should be established to help provide reasonable assurance that each review conducted by professionals provides optimal benefit to the enterprise by requiring that agreed-on outcomes arising from reviews are implemented in accordance with management undertakings or that management recognises and acknowledges the risk of delaying or not implementing proposed outcomes and/or recommendations.

Evidence suggests that the establishment of regular progress checks follow-up and monitoring to find out whether the recommendations are being implemented can yield positive results. For example, in South Africa, the Public Service Accountability Monitor (PSAM) was established as an independent research project at Rhodes University in 1999. It initially took on the task of tracking actions taken by the provincial administration in response to reported cases of corruption. A number of these cases had originally been identified in the AG’s reports. Public Service Accountability Monitor collected this information in a database that was made available to the public on its website. The database shows that effective corrective action had been taken and there is information that citizens and civil society organisations could use to gauge the commitment of government agencies in combating corruption involving agency members (Khumalo 2007:43).

Over time, PSAM began to shift its focus to the structural context of weak financial management that was responsible for many of these acts of corruption and maladministration. It began to systematically monitor the compliance of provincial administrative agencies with public finance regulations and administrative directives. This included creating a database of information on the coherence of strategic planning within agencies and their annual and audit reports. In particular, PSAM monitored whether recommendations to improve financial controls made to agencies by the AG and the legislature’s oversight committees were being implemented (Khumalo 2007:43).

Public Service Accountability Monitor utilises a wide range of means to obtain documents pertaining to financial management, maladministration and corruption including, when necessary, using freedom of information provisions. It publicises its findings on a regular basis by producing a weekly column (the ‘Accountability Monitor’) in a provincial newspaper. Public Service Accountability Monitor produces analysis that is geared towards public understanding and specifically designed to engender and support public involvement in governance processes. It endeavours to produce and distribute its analysis of public expenditure management in a manner timed to coincide with the budgeting and oversight cycle in order to influence budget and spending priorities and improve service delivery (Economic Governance and Management 2006:108). This present study is of the view that by establishing a regular progress checks follow-up and monitoring system, such as PSAM, municipalities will be able to encourage and force management to take into consideration the findings identified by the AGSA.

The fourth major problem identified in the above analysis is the lack of consequences for not implementing the AG’s recommendations. Aikins (2012:59) argued that ‘when status monitoring identifies dormant recommendations, follow ups should determine why action is not being taken’. He further argued that ‘the environment could have changed such that the problem no longer exists or that the recommendation is no longer relevant or feasible’ (Aikins 2012:60). In this instance, municipalities could be reluctant towards implementing AG’s recommendations because there are no consequences for inactions from the respective municipalities. The AG, Mr T.K Makwetu, has also criticised the lack of consequences for senior officials responsible for unauthorised, fruitless, wasteful and irregular expenditure of state funds (AGSA 2012, 2013, 2014). In his financial report of 2013–2014, he stated that despite OAGSA’s constant and insistent advice and caution to those charged with governance and oversight about administrative lapses since 2013, their counsel has largely not been heeded (AGSA 2015:14). The AG further reported that in ‘the absence of consequences, the misuse of funds will continue unabated’ (AGSA 2014:45). The AG is of the opinion that these matters are amongst the things that cause these audit outcomes to remain stuck or to continue to come out poor largely because of poor leadership, which has been highlighted oftentimes.

The AG’s statement on the continuing lack of consequences for those who do not implement audit recommendations in local government comes at a time when the parliamentary committee responsible for OAGSA, the SCOAG, ‘is finalising its deliberations on possible amendments to the Public Audit Act, the legislation that governs the operations of the AGSA’ (RSA 2016:13). The amendments will provide the OAGSA with the power to refer material irregularities to appropriate authorities to investigate as well as with a level of remedial power, including the recovery of money lost because of the irregularities (AGSA 2017:34). This study found that lack of power to impose sanctions on those who do not act on the findings identified by the AG is an indication that there will be no consequences that will take place; however, with the amendment of the Public Audit Act, the AGSA will be empowered to take actions against those who do not act on the AG’s recommendations.

Section 182 (1)(c) of the Constitution of South Africa empowers other Chapter 9 institutions, such as the Public Protector, to provide effective remedial actions for state misconduct on the basis of preliminary or prima facie findings. Such remedial actions have the force of law and their legal consequences must be complied with or acted upon (President of the Republic of South Africa v The Office of the Public Protector and Others 2017). ‘Compliance therewith is not optional and it has binding effect until properly set aside by a court of law’ (Economic Freedom Fighters v Speaker, National Assembly and Others 2016).

However, neither the Constitution of the Republic of South Africa nor the High Court judgements empower Chapter 9 institutions such as the AGSA to enforce their own recommendations. However, as things stand now, Chapter 9 institutions depend on the good will of the other arms of the state, such as the executive or parliament, to enforce their decisions. The fact that Chapter 9 institutions are not empowered to enforce the implementation of their recommendations or remedial actions is one of the reasons why the AGSA recommendations have not been implemented. As a result, the National Assembly (NA) is of the view that amendments to the Public Audit Act of 2004 will empower the AG to recover monies lost through financial mismanagement and corruption and to refer fraud and irregularities to relevant agencies for investigation (RSA 2016:2). Mr Vincent Smith, chair of the SCAG, reiterated the importance of the bill, which he raised in the period when the AG released audit outcomes for local government. Smith stated that ‘[e]very cent of taxpayer money must be put to best use – for the benefit of citizens – not for a corrupted few in the public and private sector’ (AGSA 2017:14).

Smith further emphasised the AG’s frustration that since back from the year 2013 - 2017 the AG’s constant and insistent advice had not been heeded by those charged with governance and oversight regardless of the fact that there is legislation in place, such as the PFMA and the Municipal Financial Management Act (MFMA); however, the situation with prudent financial management still left much to be desired (AGSA 2017:19). With this act, the AG will be able to make recommendations with remedial action that is binding much like the case with the Public Protector – to recover losses incurred. The AGSA is now of the view that continued mismanagement of taxpayers’ money can be stopped and will be stopped when harsh consequence management is meted out (AGSA 2017:21). The AG will also be able to hold municipal officers to account for irregular expenditure. These may be the director generals of departments, as well as the management of boards, who are the primary custodians of public money. The AG can issue a debt certificate to accounting officers who are not compliant with the PFMA or the MFMA. The relevant director general, board or municipal manager will be personally liable to repay funds to the state for poor financial management (AGSA 2017:23).

Following the publication of the local government audit findings report of 2016–2017‚ the AG Mr Makwetu suggested that the bill would help to halt the deterioration in municipal finances. The AG’s report showed that only 33 of the country’s 278 municipalities received a clean audit in 2016–2017‚ compared with 48 the year before. Irregular expenditure rose to R28.4bn in the 2016–2017 financial year compared with R16.2bn the previous year, an increase of 75%. The AG’s report also designates that of the 257 municipalities audited for the 2017–2018 financial year, of which only 18 received clean audits, showing a deterioration from the 33 municipalities that had received a clean audit in the previous year. In the latest local government audit findings report of 2018–2019 financial year, the AG’s report has found that out of the 257 municipalities in the country, only 20 have been awarded clean audits. The AG further stated that repeated advice and warnings to accounting officers over the past 9 years had been ignored. Most municipalities are failing to act on the AG’s findings and recommendations (AGSA 2017:27, 2018:31, 2020:33). Considering the above discussion, the present study is of the view that the new bill will influence most municipalities to consider AG’s recommendation and act on them. This is because the new bill is now binding, and if municipal officers continue to ignore AG’s findings and audit recommendations, the AG will take punitive actions against them.

The fifth and final major factor, which hampers the implementation of the AGSA recommendations, relates to the failure to track progress regarding implementation of audit recommendations. The factors pertaining to implementation of audit recommendations within the municipalities call for the establishment of monitoring and evaluation (M&E) unit in the local government. At a municipal level, a part of M&E functions includes, amongst others, municipalities reporting on their performance to the respective national and provincial government departments, legislature as well as other related local government stakeholders. This means that municipalities are supposed to produce credible quarterly, midyear and annual performance information reports that will be used for financial performance review and assessment by the above-mentioned stakeholders (National Treasury 2015:9). It is crucial for the institutions in charge of auditing (AGSA), monitoring and evaluation Department of Planning Monitoring and Evaluation (DPME) to communicate with each other for the benefit of municipals’ financial performance. That communication should focus on covering their objectives, approaches and the tools they apply in order to get the most out of potential synergies. The M&E unit should be seen as a complementary activity to strengthen the implementation of audit recommendations. This is because M&E can provide robust and persuasive audit evidence to support the achievement of audit objectives in the local government (National Treasury 2015:13). Monitoring and evaluation unit is a strategy that South African municipalities may use to ascertain if existing recommendations given by the AGs are being implemented as they ought to be. Furthermore, M&E provides critical information by which to determine the economy, efficiency and effectiveness of government action and the basis for holding accountable those that are responsible for implementing the policies and audit findings at the municipal level. The proper use of M&E at the municipal level can save audit time and money (Presidency 2008:4). Through M&E unit, the AGSA will be able to assess the performance of the municipality based on what was agreed upon in terms of plans or priorities (AGSA 2010:14). Consequently, this will lead to the achievement of the long-term results of the local government from the result-based M&E (National Treasury 2015:16).