Sunday, 21 December 2014

Meet The man in charge of South Africa's government's bank account

Lesser known than his counterpart the Auditor-General, is South Africa’s Accountant-General Michael Sass, also known as the country’s super CFO.

Sass, a qualified chartered accountant and certified internal auditor, is the person responsible for consolidating the country’s books and managing the government’s bank account, so to speak. His office consists of several units and is part of National Treasury.

Does he sleep well at night? “No, unfortunately not,” he says. “You worry about the country, but there is only so much one person can do. I take my job very seriously. To me it’s a calling.

“Often when you’re in the private sector, you make a lot of money, but there’s no self-satisfaction. You get judged purely on how much profit you make for the company. Here you can make a difference.”

The job is not always easy, he says. The consolidation for example has to be tabled in Parlaiment every year on October 31. The financial statements of all state departments and state entities have to be consolidated to give an overview of where government finances stand.

So what do you do when for example, as happened this year, SAA’s financial statements have not been finalised because it is bankrupt? “It impacts on us. If we can’t get it, we can’t table.
“So it’s always a skelter on the last day, running around like mad chickens, to prepare for the minister’s sign-off at the very last moment.”

Currently the government departments and public entities are on different accounting frameworks. The departments use modified cash, while entities are on accrual accounting.
The result is that an asset, let’s say two similar buildings bought for R20 million each may be in the books of the one at a value of R1 and in the books of the other at R20 million.

“This doesn’t make sense, so we do two sets of books” he says, while the public sector is systematically moving over to the same system as the entities.

His office also sets accounting standards for government, working closely with the Accounting Standards’ Board. (Sass is the government representative on the board.) The unit also gives technical interpretations of the standards, issues guidelines and workshops those with financial managers in the public sector.

Being responsible for the National Revenue Fund – government’s bank account - is quite interesting. “…all the money that Sars collects goes into that account, so we account for that.
“We manage all the bank accounts on behalf of government. A government department cannot open a bank account without getting approval from us. The reason for that is we need to know where all the money in government is.”

Investigations

The forensic unit in his office is one that operates under the radar. “We are not the Hawks or the NPA. We work behind the scenes and we’d like to keep it that way.”
The small unit with a staff of about 15 typically investigates high profile political cases. For example if the department engages services and pays beyond the market value or if any of the cases suggest some maladministration, the unit is mandated to investigate.

“Some cases are extremely complex, because it’s fnancial instruments. It’s really difficult sometimes, but some are straight-forward. It’s corruption. You can see it from a mile away. You just need to gather the evidence.”
The unit works with other law enforcement agencies in government’s anti-corruption task team (ACTT) and their approach is from an accounting point of view.

The unit hopes to secure the first ever conviction in terms of the Public Finance Management Act (PFMA) in the near future in a high profile case currently before the courts in the Northern Cape.
“It is important to set the standard that if you transgress there will be action. Sometimes it takes very long.  The forensic investigation may be complete, but then one has to wait for the court process.”

Ministers, governance

The Governance Monitoring and Compliance unit has oversight over the PFMA, does the interpretation and writes Treasury regulations. This unit is also  responsible for government’s austerity measures and has to decide about applications to be exempted.
“Everybody wants exemption,” Sass says.

“It is difficult. There is a lot of pressure. Also political pressure. Sometimes it’s  a minister that writes to us seeking interventions on decisions. However we’ve been lucky in Treasury that we have skilled staff, who understand the principles and are able to stand firm.”

Dealing with municipalities

The office’s MFMA (Municipal Finance Management Act) unit has oversight over the finances of municipalities.
Treasury has a lot of information about each municipality and knows which ones are in intensive care. “We can tell you which ones do not pay their water, their rates. We can tell you in advance this one is not collecting enough from rates and taxes and in another eight months they are going to be in serious trouble.”

The problem is that the Accountant-General and the responsible line department cannot micro-manage from Treasury, says Sass. “You have to give them an opportunity first (to solve their problem). If they don’t fix it, then obviously then we will . . .  Now that may take several months and the public thinks nothing is being done. Well that’s not true.”

Sass agrees with Minister of Cooperative Governance and Traditional Affairs Pravin Gordhan that we must be careful not to over-emphasise the audit outcomes as the only means of evaluating municipalities.
A typical example is when there are service delivery protests in a municipality that has just received a clean audit, he asks.
“It cannot be. There must be a different way of evaluating the overall performance of municipalities. That’s what we are working on … we’ve got all the tools. We know in advance that they are going to default, but knowing is one thing. Doing something about it is a completely different thing.

“We brought in on the municipal level the minimum competancy program….All the new contracts being entered into now must have a clause in it that states you must have the qualifications by [a certain] date.”
“We’ve got a unit tasked with capacity building that sets these standards and also to make sure that they do get the qualifications. It’s not something in isolation.”

The Accountant-General is also the custodian of government’s transversal system – its IT systems where a lot of the procurement reform that is underway, will be situated.

Sass remembers being a young civil servant working for the Gauteng government, driving around with engineer and now Gautrain boss Jack van der Merwe.

“As we drove, he said: ‘I built this bridge’. That’s fulfilling.”

He believes he is building bridges in his field. “If you imagine when we do the consolidation. It’s nice to go home and say: Today I did the consolidation of the Republic of South Africa’s finances. It sounds fantastic, or you can say: I issued a Treasury regulation. I made the rules that the whole of government must follow. Its a nice thing. At least you feel you’ve done something – if you’ve done it right.”

If not, you are playing in the big leagues where the penalties can also be huge.

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