Turning the Audit Lens on Litigation Strategy
In the world of public finance, the terms “Fruitless and Wasteful Expenditure” are defined by the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA) as expenditure which was made in vain and would have been avoided had reasonable care been exercised.
While legal fees are a necessary cost of governance, a disturbing pattern has emerged: litigation instituted on issues where the legal answer is already clear, or appeals continued despite repetitive case law to the contrary. When the government is consistently on the losing side of clear-cut cases, we must ask: Is this expenditure still a “cost of business,”or has it become a failure of”reasonable care”?
The Anatomy of Waste: 5 Red Flags in Legal Spend
Strategic oversight requires identifying when litigation moves from protecting the state to wasting its resources. Key indicators include:
- Institution of Clear-Cut Cases: Pursuing litigation where the legal outcome is predictable to a non-expert.
- Repetitive Case Law Contravened: Ignoring established legal precedents.
- The “Appeal Loop”: Appealing every order regardless of the merit, only to lose at every level of court.
- Prescribed Rate Violations: Paying advocates and attorneys rates significantly higher than those prescribed by the Law Society.
- Lack of Consequence Management: A failure to hold decision-makers accountable for pursuing high-risk, low-reward litigation.
From Litigation to Accountability
The time has come for the Auditor-General and oversight structures to make legal fees a specific focus area in audits. True accountability means ensuring that consequence management, as outlined in the PFMA and MFMA, is robustly implemented. We need to move beyond simply recording the loss to questioning the strategy that led to it.
Altimax: Strengthening Oversight and Governance
At Altimax, we serve as a specialist partner to oversight structures and public entities. Our Strategic Support division provides customized solutions to enhance governance, ethics, and risk management.
We don’t just help you comply; we help you understand the “why” behind your expenditure. By aligning legal strategies with the immutable logic of the law and fiscal responsibility, we deliver the peace of mind that comes from knowing taxpayer money is being managed with specialized care and integrity.
Is your entity’s legal spend meeting the standard of “reasonable care”? Request a Governance & Compliance Review or Talk to our PFMA/MFMA Specialists to ensure strategic accountability.
