City of Tshwane GDS 2055 3 August 2012. 2 Reputation promise/mission The Auditor-General of South...
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Transcript of City of Tshwane GDS 2055 3 August 2012. 2 Reputation promise/mission The Auditor-General of South...
2
Reputation promise/mission
The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.
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Table of contents
• What is a clean audit?• How to achieve a clean audit?• Governance structures • Council, Executive and Leadership driving clean audits• Role of Council, Executive and Leadership• Specific focus areas for MPAC • Specific focus areas for Audit Committees• Specific focus areas for Internal Audit• 2010/11 Audit Outcomes • Impact of MPACs on audit outcomes• City of Tshwane Mayor’s commitments • Conclusion
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What is a clean audit?
• A clean audit relates to only three aspects:
o The financial statements are free from material misstatementso There are no material findings on the annual performance reporto There are no material findings on compliance with key laws and
regulations
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How to achieve a clean audit?
• Matters reported by external and internal auditors should receive timeous management attention
• Internal controls should address the following key areas:1. Leadership2. Financial and performance management3. Governance
1. Leadership– Establish a culture of honesty, ethical business practices and good
governance– Exercise oversight responsibility– Ensure effective human resource practices– Implement appropriate policies and procedures– Approve and monitor the implementation of action plans to address internal
control deficiencies– Approve appropriate IT governance frameworks
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How to achieve a clean audit (cont.) ?
2. Financial and performance management– Ensure proper record keeping of all transactions
– Maintain effective controls over daily and monthly processing and reconciliations of transaction
– Produce regular, accurate and complete financial and performance (‘service delivery’) reports
– Review and monitor compliance with applicable laws and regulations
– Design and implement formal controls to mitigate IT risks
3. Governance– Ensure that risks are periodically identified, assessed and effectively
mitigated
– Maintain an adequately resourced and functioning internal audit unit that audits to accepted norms and standards
– Maintain an audit committee that performs its legislated duties and that promotes accountability and service delivery
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Governance Structures
• Council• Mayoral Committee• Sub committees of Council and Mayoral Committee• Municipal Public Accounts Committee• Audit committee• Intergovernmental relations forums
EXCO/Council
sets the tone / drives clean
audits
Accounting officerCFO
supported by integrated and robust systems
Audit CommitteeInternal audit
MPAC / SCOPA
Endorsement of information as credible and useful, or rejection and repudiation
Endorsement of information as credible and useful, or rejection and repudiation
Interrogation of information in order for MPAC /SCOPA to
provide assurance to Council
Interrogation of information in order for MPAC /SCOPA to
provide assurance to Council
Validation of key controls and information by independent
professionals at least quarterly
Validation of key controls and information by independent
professionals at least quarterly
Production of monthly financial, performance and
compliance information
Production of monthly financial, performance and
compliance information
Council, Executive and Leadership driving clean audits
Flow
of s
ervic
e del
ivery
info
rmati
on
Exco/Board/Council pro-actively draws on support available from district, provincial and national structures to build and sustain capacity
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Role of Council (Legislature), Executive and Leadership
Executive
Other users
Leadership
Legislature Reporting by
department/entity
Cre
dib
le
info
rmati
on O
ve
rsig
ht
Cre
dib
le
info
rmati
on
Credible
information
Credible
information
Oversight
Mo
nit
ori
ng
Monitoring
Audit committee ensuring credibility of information and monitoring implementation of recommendations
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Specific focus areas for MPAC
• Consider and evaluate the contents of the annual report and make
recommendations to council when adopting an oversight report on the
annual report
• Review information relating to past recommendations made in the annual
report, including quarterly mid-year and annual reports
• Examine the financial statements and audit reports and consider
improvements on previous statements and reports
• Evaluate the extent to which recommendations of the audit committee
and the AGSA are being implemented
• Promote good governance, transparency and accountability in the use of
municipal resources
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Specific focus areas for Audit Committee
• Reviews internal audit reports
• Reviews monthly budget statements, mid year performance reports and
AFS
• Advises Council on:
o internal financial controls and internal audits
o Risk management
o Accounting policies
o Annual Financial Statements
o Performance Management
o Performance evaluation
o Effective governance
o Compliance with MFMA, DORA, and other applicable legislation
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Specific focus areas for Internal Audit
• Prepare a risk based audit plan and internal audit programme annually
• Accounting officer to respond to Audit Committee on implementation of
the annual audit plan
• Conduct frequent audits on internal controls and quality of Management
Accounts and Performance Information at Metro and Entities
• Issue reports in line with accepted norms and standards for review by the
Audit Committee
• Management to respond to reports at the Audit Committee and
implement recommendations
• Internal audit must expand its scope to include municipal entities
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2010/11 audit findings: Key focus areas for all governance committees to address
• Supply chain management (Awards to persons in service of state;
SCM deviations; Irregular expenditure)
• Usefulness and reliability of reporting on Predetermined objectives
• Quality of monthly Financial management (Material amendments to
financial statements, Unauthorized expenditure)
• IT controls (Security, Access, Continuity)
• Human resource and performance management
• Effective management and use of consultants
• Sustainability of public finances (working capital, distribution losses)
• Governance structures in municipal entities
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Impact of MPACs on audit outcomes
Interaction with Executive
Monitoring of implementation of
resolutions
Resolutions on financial
management reporting on PDO and compliance
Timeous hearings and resolutions
Resolution should not only deal with purely financial matters but should deal with financial management , PDO reporting and compliance for the committee to be truly effective.
The role within the municipality should submit quarterly reports to MPAC on the implementation of its resolution
A closer relationship with the portfolio committees id required to ensure coordination of resolutions an the monitoring thereof.
Training and capacity building
•New MPAC members should undergo a thorough induction session where all the concepts contained in the audit report are explained.•The AGSA is committed to enhancing the understanding of reports and will assist with this process where considered necessary.
MPAC hearings should be prioritised to ensure that the monitoring and review is conducive to the reporting timelines of municipalities and in a rapid response to audit committees.
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Executive Mayor’s commitments to improve audit outcomes
• Mayor affirmed their commitment to clean audits by ensuring ongoing
monitoring of the oversight of all reports
• Mayor continues to chair the OPCA committee
• Mayor and Audit Committee chair to meet quarterly to discuss key controls
• Supporting internal audit to be involved in preparing of quarterly key controls
• Supporting training on Audit of Predetermined Objectives for internal auditors
• Implement effective oversight over municipal entities
• Providing monthly financial statements that are credible tabled to audit
committee and Mayoral committee
• Facilitate training for municipal officials to raise awareness about compliance
with SCM legislation