Leadership aimed towards enhancing audit results

PATRICIA STOCK

Co-founder and CEO of MGI RAS

Leadership plays a pivotal role in shaping outcomes, as the conduct of leaders directly influences the results achieved. The quality of leadership is truly exemplified by the outcomes they generate and take pride in.

In accordance with the Auditor General SA’s report on the audit outcomes for the fiscal year 2021/22 concerning the 424 PFMA organisations (https://pfma-20212022.agsareports.co.za/auditoutcomes/ ), the audit outcomes have shown a gradual upward trend since the previous administration’s term ended. Overall, 114 auditees now have a better audit outcome than in 2018-19, with 46 having a worse outcome – an overall net improvement in the outcomes of 68 auditees (17%).”

While there has been a general trend of improvement, it’s important to note that the prevalence of unfavourable results remains higher than desired. This indicates a need for more robust and effective management.

In this fourth year of carrying out our enforcement mandate in the national and provincial government, the AGSA expanded their work significantly by implementing the process at 202 auditees – from 95 in 2020-21. They plan to further increase this number to 430 in 2022-23.

According to the AGSA https:// pfma-2021-2022.agsareports. co.za/current-status-of-mis/ , “there has been a shift at departments and public entities: from a slow response to our findings and recommendations over the years to attention now being paid to what we report as MIs and actions being taken to resolve these. We found that until we issued notifications, no actions were being taken to address 82% of these matters.An MI is resolved if all steps have been taken to recover financial losses or to recover from substantial

harm, when further losses and harm are prevented through strengthening internal controls, when there are consequences for the transgressions (which include disciplinary processes) and, if applicable, the matter has been handed over to a law enforcement agency.”

A vision and an individual are intrinsically intertwined

In our quest for progress, we require visionary leaders who are not just individuals with vision but, in fact, embody that vision. Visionary leaders possess a unique ability to perceive the present reality and envision its potential transformation. Their personal vision serves as the guiding force that charts their course and paves the way for others.

These leaders are defined by their unwavering sense of purpose, their keen gaze directed toward the future, and their remarkable foresight in spotting opportunities capable of propelling the organization to greatness. The extent of a leader's vision is evident in the profound impact they can make and the broad horizons to which they can lead the organization.

Nurture the seed's growth, eliminate the weeds

Perceiving the potential for greatness within the organisations we lead sparks a profound desire to safeguard the seeds of progress and take the necessary actions to eliminate any hindrances. It is the duty of leaders across all sectors to instil hope, particularly by implementing solutions that address the challenges our country faces. Thus, tackling the most challenging issues, which erode past gains and values, becomes crucial for bolstering public confidence.

The overall success, growth, and sustainability of an organization are intrinsically tied to the quality of leadership decisions and the extent of stakeholder engagement. However, the effectiveness of these decisions and actions depends on the quality of information available. Therefore, promoting transparency in reporting and enhancing alignment between financial and performance information, planning, and reporting is paramount.

Unfortunately, the sluggish response in addressing the root causes of poor administration and its subsequent consequences often stem from inadequate assurance provided by various stakeholders. This, in turn, results in delayed and inadequate corrective actions.

Leadership is the exercise of influence driven by both competence and character

Leaders should exude a transferable confidence that inspires and influences others. This confidence is deeply rooted in competence and independence. True independence, in both appearance and action, often necessitates the courage to accept the risk of unpopularity.

Leaders wield their influence over people and processes through the strength of their character. While skills are important, character, defined by integrity and honesty, holds a higher position. Honesty ensures a leader's independence of mind, preventing undue influence from those who deploy them or those they oversee, such as the management.

Competency is another critical aspect. It involves the ability to execute responsibilities to a level that yields acceptable quality outcomes. Accepting roles in which one lacks competence can pave the way for mistakes or even wrongdoing. This leads to a situation where "you don't know what you don't know," resulting in a passive approach to leadership.

To foster growth, we need leaders with a growth mindset, committed to their personal development for the benefit of others and the organizations they serve. Pushing for high standards in all aspects is an essential part of this growth-oriented leadership approach.

Leveraging the ecosystem and engaging stakeholders actively to drive improved outcomes

Anecdotally examining the entire ecosystem reveals that some stakeholders fail to provide adequate assurance due to shortcomings in either character or competency. This deficiency in assurance correlates with undesirable outcomes, mirroring the issues repeatedly reported by the AGSA.

Influence, in this context, emerges from the level of expectations— both of oneself and others. High expectations of self and others tend to lead to high-performing organizations. Conversely, high expectations of oneself coupled with low expectations of others often result in individuals taking on work beyond their roles, sometimes causing those responsible for governance to become overly operational. On the flip side, low expectations of leaders and high expectations of others can make boards susceptible to undue influence, particularly from management. Hence, it's crucial to establish clear individual Key Performance Indicators (KPIs) for all assurance providers, including the board, and consistently measure performance against these KPIs.

Within the broader ecosystem, we require leaders who not only set the example by demonstrating competency but also navigate with a strong moral compass. The present state of our country can be partly attributed to the scarcity of such leadership models. People are recognized by the outcomes they achieve, just as one discerns the type of fruit a tree will bear by examining the tree itself.

If leaders neglect the nurturing of their organizations and fail to create the right conditions for growth, they cannot expect positive results. To yield a good

crop, it's imperative to protect it from the encroachment of weeds. This necessitates decisive leadership and effective structures and processes to eradicate impediments. Failure to invest in establishing the right people and processes, as well as nurturing their development, invariably leads to mediocrity and value erosion.

The likelihood of enforcing consequences for poor behaviour and results remains low in an environment that fosters wrongdoing. Consequently, we observe consistent underperformance and minimal improvement. This is because those closest to the organisation play a pivotal role in determining its success or failure.

Not everyone perpetuates wrongdoing, which underscores the importance of protecting and supporting professionals and whistleblowers who are committed to ethical conduct in environments that may exhibit irregularities as the norm. Various bodies such as law enforcement, professional bodies etc. can also play a critical role in offering support.

In summary, what we need are more audacious stakeholders who are willing to manage access to and exit from organizations and the broader ecosystem.

Batho Pele (People First)

The success of an organisation is intrinsically linked to its people and leaders. Regardless of the grandeur of the vision, it's the collective effort of the team that breathes life into that vision. Any transformation within an organization commences with its people; thus, the nurturing of organizational culture plays a pivotal role as it acts as the vehicle to success.

Culture, when cultivated effectively, becomes the driving force for the adequate execution of the organisation's strategy. This, however, hinges on meaningful engagement and empowerment of employees. An engaged workforce is essential to deliver services that meet the desired standards.

Effective leadership is tasked with the responsibility of creating an enabling culture and environment for professionals to thrive. This involves an investment in upskilling longserving employees, which can be facilitated through integration into the rewards and incentive system. By doing so, organizations can unlock the full potential of their workforce and foster a culture of growth and development.

Board diversity and independence

Just like a tree that might yield some good fruit, it's essential to tend to the tree because even the fruitful parts can become corrupted. To address the root

causes of infestation, we require robust and independent leadership in positions of significant influence, such as the Chairman.

The Chairman, irrespective of the outcomes, sets the tone for the entire organisation, serving as a role model and enabling others to act.

This level of influence, when directed toward the organisation's best interests, paves the way for sustainable and long-term value creation, as well as decisive actions when needed. Sustainable value is one that doesn't hinge on the presence of specific leaders but is ingrained in the organisational culture, embodied in policies, procedures, and shared norms that every member of the organization upholds.

Selecting an independent and competent Chairman can be achieved by involving an independent body, whether an individual or an organization, in the director selection process. This should include recruitment based on a predefined competency framework and relevant skills.

Transparency in disclosing the selection process is crucial. When it comes to board diversity, it extends beyond demographics to encompass diversity of thought, ensuring that individuals with differing perspectives are part of the decision-making process.

Lawmakers should also consider the requirement for each member of the assurance providers to be affiliated with an accountability body, guaranteeing oversight and monitoring by an independent accountability structure within the ecosystem.

Crafting enabling regulations to facilitate prompt consequence management

Improving legislation often begins with the adoption of the best provisions from existing laws, creating a foundation for more effective consequence management. For instance, the Companies Act has provisions to successfully declare delinquent directors accountable for enabling wrongdoing. However, there are still gaps within the PFMA and MFMA regarding consequential measures for directors serving entities not covered by the Companies Act.

I commend the AGSA for setting a commendable example in promoting accountability through the Public Audit Act and effectively implementing the MI process. Nevertheless, there is a pressing need for decisive leadership to act on the AGSA's recommendations for consequence management. While enabling legislation is crucial, we must also emphasize action oriented leadership. Leaders should be proactive and responsive, rather than merely complying with requirements by creating more manuals and policies without translating them into meaningful actions. Achieving a balance between improving legislation and maintaining the ability to respond effectively is essential. Stagnation can hinder innovation, so we must be open to evolving and adapting to changing circumstances.

Embrace digital transformation within the public sector

In the face of the growing importance of AI and the abundance of tools and skills both domestically and worldwide, it's apparent that there's no complete shortage of the required expertise. Therefore, the shortage of progress in this area can often be attributed to a lack of leadership and political will.

One solution is to implement AI tools under the monitoring of an independent or centralized body. This can be a significant step in reducing non-compliance and, in some cases, curbing corruption.

For instance, by implementing enhanced conflict screening during the procurement process before awards are made. Digital tools also offer the potential for improved coordination in service delivery, streamlining processes and enhancing efficiency.

Prepare professionals by intensifying the focus and enhancing collaboration for the greater public interest

Elevating the significance of the public sector within our economy and the professional sphere is a paramount step. It's vital to acknowledge that the public and private sectors are intricately connected. When we accord the public sector the attention it deserves, it opens doors for better integration of public sector education from the foundational stages of education to higher education and corporate skills development programs.

To achieve this integration, universities, professional bodies, and firms must be deliberate and proactive. For example, adopting a mandatory public service component, akin to the model in medical education, can be part of the qualification program. Furthermore, public sector specialization programs should receive strengthened support through enhanced collaboration between professional bodies, universities, firms, and other relevant stakeholders. This interconnected approach will nurture the next generation of public sector leaders and professionals while emphasizing the integral role of the public sector in our society.

Conclusion

The true measure of a leader's greatness is not defined by the best of times, but by their ability to navigate and transform adversity into success. Greatness isn't solely determined by success but by the capacity to overcome challenges and adversities, particularly during the most trying times.

Reflecting on the life of Nelson Mandela, we find a profound example of determination to prove that Africans are fully capable of self-governance. He understood that his personal example would carry more weight and influence than any policies he could enact.

Mandela's legacy teaches us that when the title of leadership fades, what truly matters is who you were, who you choose to become, and the values you uphold. Thus, the real test of leadership is not during its zenith but after, when the true character of the leader endures. It's the friends that remain in your heart when all is said and done that truly matter, as they reflect the essence of your inner self.