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Welcome…

Administrative and Political Oversight towards 2014 and beyond

Lungelwa Dlulisa

www.salga.org.za

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CONTENTS

• Introduction

• Legislative framework

• Overview of oversight structures

• Powers, roles and responsibilities

• Role of Council in financial oversight

• Oversight structures in detail

• Status of the audit committees

• Conclusion

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INTRODUCTION

• Local government sphere has emerged from its third democratic elections (2011)

– many new councillors assuming office

• Leading up to the 2011 elections, Cabinet approved the (LGTAS) in 2009

– Aimed to address constraints that undermine the effectiveness of the LG system.

– Clean, effective, efficient, responsive and accountable LG

• internal municipal structures need to be effective and efficient

• oversight = reviewing and monitoring that each structure within the municipality performs its statutory and delegated functions

• Senior management of municipality prohibited from certain political involvement

• Effective oversight and accountability helps ensure that the administration and executive implements programmes and plans in a way consistent with the IDP, budget, municipal policy as well as the Constitution and related legislation.

– effective oversight strengthens the municipality

– effective oversight improves efficiency of municipality and contributes to more focused service delivery

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LEGISLATIVE FRAMEWORK

ConstitutionConstitution MFPFA MFPFA

MSA MSA

MSyAMSyA

MFMA MFMA

DORA DORA

IGRFIGRFPAAPAA

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OVERVIEW OF OVERSIGHT STRUCTURES

In the main, overall financial oversight in a municipality is fulfilled by:

– …………………… -----------------------

Council

Oversight Committees

MPAC

Audit Committees

Council

Oversight Committees

MPAC

Audit Committees

External Audit Independent assessment of financial & non financial performance to issue an opinion

Internal AuditIndependent objective assusranceMajor source of info to the AC

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PURPOSE OF THE MFMA

• Modernise local government budgeting and financial management processes and

practices

• Improve financial governance by clarifying and separating roles and responsibilities of

councilors vis-à-vis those of municipal officials

• Maximise municipal capacity to deliver services by attending to issues of efficiency,

effectiveness and sustainability, and dealing with corruption

• Set-up the accountability cycle by ensuring proper linkages between IDPs, budgets,

SDBIPs, in-year reports, annual financial statements, annual reports, oversight reports

and audit reports

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Political• Council and Mayors

• providing political guidance

• define outcomes

• approve and evaluates policies

• allocate resources

• hold managers accountable

Management • Senior management

• exercise fiduciary responsibilities

• decide on methods

• implement the policies

• control over use of resources

• accountable for outputs

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POWERS, ROLES & RESPONSIBILITIES

Council has a duty to prevent corruption and Senior Management should collect information to measure performance which begins with a performance contract

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FINANCIAL OVERSIGHT: ROLE OF COUNCIL

Finance Committees :

• Usually considers the tabled budget and adjustments budgets

Municipal Public Accounts Committee (where they are established)

• Usually considers the AFS & may also consider unauthorised expenditure

The Oversight Committees (where there is no MPAC)

• Responsible for reviewing the annual report (accept/reject)

Code of Conduct for Councilors, forbids:

– Interfering in municipal administration

– Obstructing the implementation of council decisions

– Encouraging maladministration

• Councillors are restricted from using their positions to improperly benefit themselves or others from municipal contracts

• Councillor may not do business with any municipality

• A councillor who is full-time may not undertake any other paid work except with the expressed written approval of council

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OVERSIGHT STRUCTURES IN DETAIL

Sect 165 of MFMA requires IAU

– Internal audit must prepare risk based audit plan and internal audit programme for each year

– Internal Audit report to accounting officer (MM) and audit committee on implementation of internal audit plan.

Effective Internal Audit Unit is the one that:

– Evaluates control systems and ensure strategies for Risk Management are in place

– Independent, reporting to the MM (administratively)

– Reports quarterly to audit committee (functionally)

– External audit & Audit Committees must be able to (some extent) rely on work IAU

Benefits of Internal Audit Unit

– Improve transparency, accountability & efficiency

– Detect fraud & corruption

– Enhance service delivery

•

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OVERSIGHT STRUCTURES IN DETAIL

Section 166 of the MFMA requires Audit Committees

– Independent advisory body appointed by the council based on expertise

– At least three persons, with majority not employed by municipality

– No councillor may serve on audit committee

– Reports directly to the council

– Advise the council, accounting officer and staff on matters listed in the MFMA

AG acts as external auditor (S188 of Constitution) & operates in terms of PA Act

• Issues various audit opinions

• Council responsible for preparing for External Auditing by:

– comprehensively studying audit reports as reported by Audit Committees

– ensure municipality has appropriate PMS systems, processes and frameworks in place

• e.g SBDIP

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OVERSIGHT STRUCTURES IN DETAIL

MPAC (established by council by way of council resolution by 31 November) (S79)

• Main function is to perform oversight over executive functionaries and good governance, other as determined by council

– Section 53 of the Systems Act requires the municipality to define the specific role and area of responsibility of each political structure of the municipality

– Section 129 of the MFMA requires council to consider annual report and adopt an oversight report containing council’s comments on the annual report;

• National Treasury has issued guidelines on:

– the manner in which councils should consider annual reports and conduct public hearings

– the functioning and composition of any public accounts committees established by the council to assist it to consider the oversight report;

– guidelines only applicable to municipality if adopted by the council

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ROLE & RESPONSIBILITIES OF ADMINISTRATION

• Fiduciary responsibilities

– Compliance with the rules and regulations

– Exercise fidelity, honesty, integrity and in the best interest of the municipality

• Treasury functions

– Utilizing resources effectively, efficiently, economically and transparently

• Asset and liability management

– Safeguarding and maintenance

– Develop proper assets and liabilities of the management systems

• Revenue management

– Collect all revenue due and recognized when earned

• Expenditure management

– Maintain effective system of expenditure control & manage working capital effectively

• Provide regular reports to relevant stakeholders

• Establishment of effective and efficient internal audit

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CHALLENGES

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Audit committee

in place

Compliant with

legislation

Impact on

outcome

Interaction

with executive

Eastern Cape 41 24 18 28Free State 19 3 0 2Gauteng 13 13 8 11KwaZulu-Natal 58 44 44 43Limpopo 25 13 2 13Mpumalanga 19 14 7 16Northern Cape 14 4 4 3North West 8 4 1 1Western Cape 24 18 18 17Total 221 137 102 134

Auditee

Audit committees

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PROPOSAL

• Ensuring oversight structures are functional and effective is beneficial for service delivery.

• SALGA to conduct an assessment report of audit committees to fully gauge the effectiveness of the audit committees and the challenges they face.

• Must be focussed on the areas /municipalities identified in the AG report as battling

• Should clearly outline the root causes and the challenges a sample of municipalities face

• Measure the relationship with other oversight structures

• Assist in identifying support areas

• Assist with developing generic terms of reference for Audit Committees which should:

– Deal adequately with its membership, authority and responsibilities

– Provide as basis for evaluating the performance of audit committees

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CONCLUSION

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Council

Auditor-General Executive

Independent, objective information

Transparency

Audit

Aud

it re

port

ing

Con

stitu

tiona

lly e

mpo

wer

edConferred Responsibility

Accountability reporting

PoliticalPolitical

AdministrativeAdministrative

Policy Direction and Oversight