Summary
Concerning the statement about a lack of proper leadership, I personally agree that it is a relevant problem that significantly obstructs the development of transparent public administration and democratic principles in the country. I believe that AG’s call for action is an appropriate strategy to make organizations re-evaluate their managerial practices and pay more attention to financial management. Moreover, the claim is relevant because it openly communicates how many organizations fail to adhere to the principles of transparency. For instance, AGSA (2021) reported that more than 50% of all auditees presented “poor-quality financial statements for auditing” (p. 6). It implies that organizations are either unqualified or conceal information about financial spending. It is a relevant problem because this poor management can lead to budget overspending and deteriorating public trust (AGSA, 2021). Moreover, AGSA (2021) notes the high levels of “wasteful expenditure” among state-owned organizations, which is another reason for people losing confidence in the government. Hence, I agree with the statement and believe that it is critical to improve leadership approaches and associated financial management practices in the country.
Achieving this objective is a complicated task that requires improvements in all management functions, such as planning, organizing, staffing, developing, controlling, operating, reporting, and financing. Enhancing the quality of internal and external audits is critical in this context because it has a positive impact on the accountability and transparency of organizations (Presentation, Unit 4). Hence, the first step to sound leadership is to create adequate incentives for organizations to implement audits and mitigate problems in leadership and financial management.
In practice, it is a highly complicated approach due to bureaucracy and poor qualifications of numerous companies. As noted by AGSA (2021), one of the potential recommendations is appointing a separate department within the organization to govern its managerial practices and address “poor audit outcomes” (p. 41). For instance, the example of the Passenger Rail Agency of South Africa shows how this approach simultaneously improves all functions of management, with particular emphasis on staffing, controlling, and reporting. Moreover, this strategy focused on filling the positions on the executive management team with competent professionals to ensure the credibility of audit plans and reporting (AGSA, 2021). As a result, AGSA (2021) evaluated this approach as an “outstanding audit” that significantly improved the company’s transparency and accountability over the course of one year. Hence, companies should assess their weaknesses with the help of external audits and address these problems via internal executive management teams with qualified and experienced personnel.
The examined approach significantly improves the credibility of financial statements; however, it is effective when organizations have competent employees who can fit the role of internal auditors. As practice shows, it is not always the case, and many organizations might struggle, particularly with staffing and operating functions of management. The investigation by Sibanda, Zindi, and Maramura (2020) on a South African metropolitan municipality revealed that ineffective supply chain management (SCM) was a notable reason why local governments demonstrated low levels of accountability in financial management. The authors emphasize that “municipalities have to adopt a strategic approach to SCM,” implying a structured process of reporting in adherence to legislative frameworks (Sibanda, Zindi and Maramura, 2020). Moreover, this example is relevant to the discussion because it emphasizes the developing management function. Many companies might want to implement more transparent processes and adjust their financial regulations; however, a lack of necessary competencies and qualifications is a significant problem that could be mitigated through Training & Development (T&D) in many areas.
Another strategy to improve leadership in relation to financial management is to implement more practical and definitive performance measures. AGSA (2021) assigns this recommendation in the area of coordination and monitoring development, emphasizing planning, controlling, and reporting management functions. Hence, it is critical to introduce initiatives that evaluate all organization’s processes and aim to mitigate risks to the transparency of financial statements. In this context, senior management and accounting officers should be responsible for budget planning and have the necessary competencies to understand the exact needs of the company to achieve financial accountability (AGSA, 2021; Presentation, Unit 4). There is extensive evidence that effective leadership practices positively affect financial transparency and accountability; hence, it is advisable to implement a top-down approach with competent leaders and auditing officers to govern the organizations (Bonsu et al., 2022). Ultimately, leadership assurance, internal audits, and external oversight are the three key areas that ensure a high level of financial transparency and adhere to all management functions.
Reporting
Reporting is one of the most critical management functions that can significantly improve the transparency of all organizational processes. However, the reporting information should be trustworthy and reliable to draw any definitive conclusions from the data. Moreover, this function should be appropriately integrated into the organization’s framework, meaning its compliance with planning and budgeting (Presentation, Unit 6). In my opinion, transparent reporting is critical for every organization to build public trust and ensure the credibility of spending, and it is unfortunate that so many organizations fail to achieve this goal. As mentioned briefly before, more than 50% of auditees provided AGSA (2021) with low-quality financial reports that had little valuable information. Similar to the previous discussion, this problem emerges from multiple causes, including ineffective leadership, lack of competencies among personnel, and the reluctance to implement internal audit teams. As a result, the companies do not report multiple issues, creating significant communication barriers with external audits and losing public trust.
To improve this system, it is advisable to focus on the recommendations of external audits and the implementation of competent internal executive teams. These approaches can effectively identify the flaws in monthly, quarterly, and yearly reports, providing companies with valuable insights into how to fix the system to achieve transparency (Presentation, Unit 6). Moreover, it helps detect fraud and corruption in the early stages, preventing any illegal activity that might obstruct the credibility of financial statements and organizational processes (AGSA, 2021). However, external audits have restricted authority in changing organizations; hence, companies should implement internal executive teams to control the quality of reporting if they want to maintain public trust.
Another method is to implement additional forms of reporting to identify flaws in the organizational structure. Examples of this approach include environmental, social, managerial, and performance reporting frameworks that provide information that financial statements cannot specify (Băndoi et al., 2021). It is an effective strategy precisely because it reveals more issues in each operational area and adheres to various international business objectives, such as Sustainable Development Goals (SDGs) (Băndoi et al., 2021). For instance, disclosing more information about social characteristics and performance management can indicate the areas of concern. After identifying these problems, leaders and auditing officers can directly address the issues via T&D programs or disciplinary measures, improving the overall transparency of operational processes. As a result, this approach has a positive impact on reporting and adherence of the company to sustainable development, which is becoming a more and more relevant business advantage (Băndoi et al., 2021). Ultimately, it is critical to promote transparent reporting to increase public trust and mitigate wasteful expenditure.
Fraud and Corruption
Fraud and corruption remain relevant problems that obstruct the effectiveness of public administration policies. Hence, an ideal public administration implies a culture of transparency, accountability, and public participation to ensure fairness and justice (Brynard, 2011). In South Africa, the Zondo Commission was an investigation into corruption in the public sector that revealed several cases of fraud in public companies. It was a necessary measure, as noted by President Cyril Ramaphosa, “The corruption that was perpetrated is a crime against the people of South Africa” (The Presidency Republic of South Africa, 2022). Within the Zondo Commission investigation, the Department of Correctional Services was one of the organizations accused of insider trading and money laundering.
As a chairperson of the Ethics Committee at the Department of Correctional Services, I believe that the best approach in this situation is to transparently acknowledge the flaws of the organizational system and put effort into preventing illegal activities within the department in the future. The annual report demonstrates that fraud and corruption remain relevant problems in the department, and it is critical to address these issues (The Department of Correctional Services, 2022). It is a key development area that is particularly crucial for the company because of allegations and the necessity to reform the organization in order to regain public trust.
Some of the identified types of fraud that occurred in the organization were bribery, theft, money laundering, misuse of authority, use of State property without permission, and accepting money from members of the public. All these issues are unacceptable types of misconduct thoroughly explained in the annual report, and all employees are aware of the potential repercussions (The Department of Correctional Services, 2022). In most cases, these problems emerge from intentional fraud as opposed to accidental mistakes. As a result, it is the responsibility of leaders, auditing officers, and the Ethics Committee to eliminate corruption at the Department of Correctional Services.
There is a variety of preventative measures that could help mitigate fraud in the organization. The two primary strategies for achieving this objective include educational and disciplinary approaches. The former concerns workshops, lectures, proactive dialogues with employees, performance control, and regular meetings to ensure that all teams are aware of the potential damage caused by fraud and associated punishment (The Department of Correctional Services, 2022). Moreover, this approach can help establish a healthy organizational culture in which people would be hesitant to commit fraud (Presentation, Unit 8). Lastly, in the preventative sector, setting policies that support transparency and accountability of processes is useful for creating an ethical culture (Presentation, Unit 8). This strategy is an effective preventative measure, but it might be less practical when there are already identified cases of fraud at the workplace.
In such situations, disciplinary actions, such as termination, demotion, verbal warning, written warning, and pay cut, could be used depending on the severity of the fraud. Moreover, it might be possible to alleviate the punishment if it was a mistake instead of intentional illegal action. Nevertheless, the proactive approach to educating employees about the consequences of fraud and the reactive strategy to punishing people who conduct unlawful activity are two primary preventative frameworks. Following these methods, it is possible to create a workplace that respects a culture of transparency and accountability, supporting Brynard’s idea of ideal public administration.
Reference List
Auditor General South Africa (2021) Consolidated general report on national and provincial audit outcomes. Web.
Băndoi, A. et al. (2021) ‘Including sustainable reporting practices in corporate management reports: Assessing the impact of transparency on economic performance’, Sustainability, 13(2), 940.
Bonsu, A. et al. (2022) ‘Public sector accountability: do leadership practices, integrity and internal control systems matter?’, IIM Ranchi Journal of Management Studies.
Brynard, D. J. (2011) ‘Procedural fairness to the public as an instrument to enhance public participation in public administration’, Administratio Publica, 19(4), 100-116.
Sibanda, M. M., Zindi, B. and Maramura, T. C. (2020) ‘Control and accountability in supply chain management: Evidence from a South African metropolitan municipality’, Cogent Business & Management, 7(1), 1785105.
The Department of Correctional Services (2022) Annual report 2021/22 financial year. Web.
The Presidency Republic of South Africa (2022) Address by President Cyril Ramaphosa on the response to the State Capture Commission report. Web.