Transcript The State of Municipal Audit Committees

www.salga.org.za
Welcome…
Administrative and Political Oversight
towards 2014 and beyond
Lungelwa Dlulisa
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CONTENTS
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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
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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
MSA
MSyA
MFMA
Constitution
DORA
MFPFA
PAA
IGRF
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OVERVIEW OF OVERSIGHT STRUCTURES
In the main, overall financial oversight in a municipality is fulfilled by:
Council
External Audit
Independent assessment of financial
& non financial performance to issue
an opinion
Oversight Committees
MPAC
–Audit
……………………
Committees
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Internal Audit
Independent objective assusrance
Major source of info to the AC
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PURPOSE OF THE MFMA
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Modernise local government budgeting and financial management processes and
practices
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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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POWERS, ROLES & RESPONSIBILITIES
Political
•
Management
• Senior management
Council and Mayors
• providing political guidance
• exercise fiduciary responsibilities
• define outcomes
• decide on methods
• approve and evaluates policies
• implement the policies
• allocate resources
• control over use of resources
• hold managers accountable
• accountable for outputs
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
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Councillors are restricted from using their positions to improperly benefit themselves or
others from municipal contracts
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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
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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)
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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;
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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
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Fiduciary responsibilities
– Compliance with the rules and regulations
– Exercise fidelity, honesty, integrity and in the best interest of the municipality
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Treasury functions
– Utilizing resources effectively, efficiently, economically and transparently
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Asset and liability management
– Safeguarding and maintenance
– Develop proper assets and liabilities of the management systems
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Revenue management
– Collect all revenue due and recognized when earned
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Expenditure management
– Maintain effective system of expenditure control & manage working capital effectively
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Provide regular reports to relevant stakeholders
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Establishment of effective and efficient internal audit
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CHALLENGES
Audit committees
Auditee
Eastern Cape
Free State
Gauteng
KwaZulu-Natal
Limpopo
Mpumalanga
Northern Cape
North West
Western Cape
Total
Audit committee Compliant with
in place
legislation
41
19
13
58
25
19
14
8
24
221
24
3
13
44
13
14
4
4
18
137
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Impact on
outcome
Interaction
with executive
18
0
8
44
2
7
4
1
18
102
28
2
11
43
13
16
3
1
17
134
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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
Council
Policy Direction and Oversight
Independent, objective
information
Auditor-General
Transparency
Audit
Executive
Political
Administrative
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