Audit-Ready Public Schools: a Section 43 Governance Playbook

An audit-ready public school is one whose records, controls and governance let the Section 43 auditor or examiner sign off on time and without qualification.

Readiness is a build, not a scramble in the week before the auditor arrives. A school governing body (SGB) that runs the year well hands over a clean set of records and meets every statutory deadline. A school governing body that treats the audit as a year-end event hands over a shoebox and earns a qualification. This playbook sets out the build, step by step.

The duty sits in two short provisions of the South African Schools Act 84 of 1996. Section 42 says what records the governing body must keep and when the annual financial statements are due. Section 43 says who checks those statements and by when. Get the two sections working together and a clean opinion stops being luck.

What Section 42 requires the governing body to keep

Section 42 of the Schools Act places the record-keeping duty on the governing body, not the principal alone. The governing body must keep records of all funds received and spent by the public school, and of the school's assets, liabilities and financial transactions. The records are the raw material of the audit; weak records guarantee a weak opinion.

Section 42 then fixes a hard deadline. The governing body must draw up annual financial statements within three months of the end of the financial year, in accordance with the guidelines the Member of the Executive Council (MEC) for Education determines for the province. Three months is the drafting window — the Section 43 review happens after the statements exist, so a late draft compresses everything that follows.

Two record sets decide most school audits: the cash records and the asset register. Reconciled bank statements, a complete cash book, supplier invoices matched to payments, and a fixed-asset register that agrees to a physical count — these are the four documents an auditor reaches for first. A governing body that keeps the four current all year is most of the way to ready.

Audit or examination: the Section 43 distinction

Section 43 gives the governing body two routes, and choosing the right one matters. Under Section 43(1) the default is a full audit: the governing body appoints a registered auditor to audit the records and statements drawn up under Section 42. A registered auditor is a person registered with the Independent Regulatory Board for Auditors (IRBA), the statutory regulator of the audit profession in South Africa.

Section 43(2) provides the alternative. Where appointing an auditor is not reasonably practicable — typically a smaller school where the audit fee would consume scarce funds — the governing body must instead appoint a person to examine and report on the records and statements. That examiner must be qualified to perform the duties of an accounting officer, or be approved for the purpose by the MEC. An examination is a lighter, lower-cost engagement than a full audit, but the report still goes to the same place.

The Section 21 status of the school shapes the stakes. A Section 20 school has its core finances managed centrally by the provincial education department, while a Section 21 school is self-managing — the governing body controls the bank account and the spending. Self-management raises the readiness bar: a Section 21 governing body owns the full cash cycle, so the Section 42 records and the Section 43 review carry the school's own money, not only the state allocation.

The deadline that ends the year

Section 43(5)(b) sets the deadline that closes the cycle. The governing body must submit to the Head of Department, within six months of the end of the financial year, a copy of the annual financial statements audited or examined under Section 43. Since the BELA Act, Section 43(5)(a) also requires a quarterly income-and-expenditure report to the Head of Department within 30 days of each quarter-end. Miss the six-month mark and the school is in breach of the Act regardless of how clean the underlying books are.

The substituted Section 42 adds a transparency duty that governing bodies often forget: the governing body must present the financial records and statements to a general meeting of parents, and keep those records open for inspection at the school for at least 14 days beforehand. A school that cannot produce its records on request has a governance problem the audit opinion alone will not capture.

Read together, the two deadlines leave little slack: three months to draw up the statements under Section 42, then the Section 43 review, then submission by the six-month mark. The arithmetic is the reason readiness has to be a year-long discipline rather than a final-quarter project.

What the BELA Act 2024 changed for school governance

The Basic Education Laws Amendment Act 32 of 2024 (the BELA Act), assented to on 13 September 2024, and in force from 24 December 2024, did more than tighten governance around the money: it substituted Section 42 in full and amended Section 43. Section 42 now also requires the governing body to present the financial records and statements to a general meeting of parents, with those records open for inspection at least 14 days beforehand; and Section 43 now adds a quarterly income-and-expenditure report to the Head of Department alongside the audited annual statements. Three further changes tighten the surrounding governance, and each closes a gap auditors have flagged for years.

First, the BELA Act inserts a sharper conflict-of-interest duty into Section 26 of the Schools Act. Before a governing body discusses or decides on the procurement of goods and services, or the recruitment or employment of staff, a member must declare any direct or indirect personal or financial interest, recuse himself or herself, and withdraw from the decision. A Head of Department may suspend or terminate the membership of a member who breaches the duty, and the requirement applies to governing-body committees as well.

Second, the BELA Act amends Section 29 so that, where reasonably practicable, the chairperson of the finance committee must be a parent member who is not employed at the school. Separating the finance committee chair from the staff payroll is a control auditors respect: the people approving spending are not the people the school pays.

Third, the BELA Act amends Sections 22 and 25 to let a Head of Department withdraw specific functions from an underperforming governing body, or dissolve a governing body that has ceased to perform its functions, on reasonable grounds and with due process. For a finance officer, the practical reading is direct: weak financial governance is now a faster route to departmental intervention than before.

An audit does not create good governance — it reveals whether good governance was there all year. The Section 42 records are the evidence; the Section 43 opinion is the verdict.

Internal controls a school audit looks for

Most qualifications in school finance trace back to a handful of missing controls, not to fraud. An auditor tests whether money cannot move without two people, whether every payment has a document behind it, and whether what the books say agrees with what the bank and the storeroom say. The following controls are the ones that most often decide the opinion.

• Dual authorisation — every payment and electronic transfer requires two authorised signatories, with the finance committee chair as one of them.
• Monthly bank reconciliation — the bank balance is reconciled to the cash book every month and signed off, not reconstructed in March.
• Document-before-payment — no payment leaves the account without a matching invoice, order and proof of delivery on file.
• Fixed-asset register — a current register that agrees to an annual physical count, with additions and disposals recorded as they happen.
• Segregation of duties — the person who captures transactions is not the person who authorises payments or reconciles the bank.
• Petty-cash discipline — a low float, a logbook, and receipts for every withdrawal, with surprise counts by the finance committee.
• Declared interests — a standing register of governing-body members' financial interests, updated before any procurement decision under the BELA Act's Section 26 duty.

None of these controls is expensive. Each is a habit the governing body and finance officer build into the monthly rhythm, and each leaves a paper trail the auditor or examiner can follow without a fight. Controls that run all year cost far less than the remediation a qualified opinion forces.

The audit document pack

When the Section 43 engagement begins, the auditor or examiner asks for a defined set of documents. A governing body that assembles the pack as the year runs — rather than hunting for papers in the final week — shortens the engagement and lowers the fee. The pack below is the set a school audit or examination almost always requires.

1. The annual financial statements drawn up under Section 42, in the format the MEC's provincial guidelines prescribe.
2. Twelve monthly bank statements and the twelve matching signed bank reconciliations.
3. The complete cash book or accounting export, with income and expenditure classified consistently.
4. Supplier invoices, orders and proof-of-delivery notes, filed to match every payment in the cash book.
5. The fixed-asset register and the most recent physical-count sheet, with disposals authorised in the minutes.
6. Governing-body and finance-committee minutes, including the budget approval and the audit-or-examination decision.
7. The approved annual budget and the register of declared financial interests.

The pack is also the school's defence under the Section 42 inspection duty. The same documents that satisfy the auditor are the documents an interested person may ask to inspect, so a governing body that keeps the pack complete is ready for both the engagement and the request.

A readiness timeline for the financial year

Readiness has a calendar. The work spreads across the year so that the three-month drafting window under Section 42 and the six-month submission deadline under Section 43(5)(b) arrive with the records already in order. A governing body can run the following timeline without specialist software.

1. Start of the financial year — adopt the budget, confirm the two signatories, and appoint or re-confirm the auditor or examiner so the choice is documented early.
2. Every month — reconcile the bank, file invoices against payments, and table a short income-and-expenditure report to the finance committee.
3. Each quarter — update the fixed-asset register, refresh the register of declared interests, and check spending against the approved budget.
4. Financial year-end — close the cash book, perform the physical asset count, and freeze the records for drafting.
5. Within three months of year-end — draw up the annual financial statements under Section 42 and assemble the document pack.
6. After drafting — hand the statements and pack to the registered auditor or the approved examiner for the Section 43 engagement.
7. Within six months of year-end — submit the audited or examined statements to the Head of Department, and minute the submission.

The timeline is deliberately plain. A governing body that holds the monthly and quarterly steps will reach the three-month and six-month deadlines with a clean, complete file — which is what audit-ready means in practice.

Common findings, and how to close them

The sector data is sobering. The Auditor-General of South Africa (AGSA) reported that all nine provincial education departments submitted performance information with material misstatements in 2024-25, even as the national Department of Basic Education reached a fifth consecutive unqualified outcome and cut irregular expenditure to R68.2 million from R955 million two years earlier. The contrast shows that strong governance is achievable and that weak record-keeping, not scale, is usually the problem.

At school level the recurring findings are familiar: bank reconciliations performed only at year-end, payments without supporting documents, asset registers that do not agree to a physical count, and procurement decisions taken without declared interests. Each finding maps to a control above, and each closes with a monthly habit rather than a grand reform.

Where a school lacks the in-house capacity to run the cycle, the answer is to build the capability, not to outsource the responsibility — the Section 42 and Section 43 duties stay with the governing body whoever keeps the books. Kettle Consulting works alongside finance officers and governing bodies to stand up the controls, the document pack and the timeline, and to prepare schools for the Section 43 external audit or examination in the entity's own books, on the entity's own deadlines.

Audit-ready public schools are not the schools with the most money. They are the schools whose governing bodies treat Section 42 record-keeping and the Section 43 review as a year-round duty — and who reach the six-month deadline with nothing left to explain.