Transcript Slide 1

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Welcome…
IMFO Audit and Risk Indaba
26-28 October 2011
Interchangeable roles of Audit Committee and Municipal
Public Accounts Committee in enhancing oversight
within a municipality
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Introduction
General
• Local Government Turn Around Strategy emphasised the concept of oversight by
council over the executive
•To be strengthened by separation of executive and legislative components of municipal
council
•To be done within the context of existing legislation and council policies.
•Paper deals with exposition of
–audit committee
–Internal audit unit
–King III principles
–Establishment of MPAC
–Incorporation into municipal governance framework
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Audit committee
•
MFMA requires each municipality to have audit committee
•
Is independent advisory body, advises council, office bearers, accounting
officer, board and staff of entity on
– internal financial control and internal audits;
– risk management;
– accounting policies;
– the adequacy, reliability and accuracy of financial reporting and information;
– performance management;
– effective governance;
– compliance with the MFMA, the annual Division of Revenue Act and any other
applicable legislation;
– performance evaluation; and
– any other issues referred to it by the municipality or municipal entity;
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Audit comm cont.
– Review annual financial statements so as to provide authoritative and
credible view of the financial position, on overall compliance with MFMA,
DORA, etc
– Respond to council on any matter raised by A-G
– Carry out such investigations into financial affairs of municipality/entity
– Functions as may be prescribed.
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Members are appointed by council
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At least three persons with appropriate experience
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Chairperson cannot be in employ of municipality
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Councillor cannot be member
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Is a committee of council
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Have no executive or enforcement functions
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Audit comm cont.
•
Audit committee must interrogate the following governance and financial
aspects in the municipality
– internal financial controls in the municipality
– identification of strategic risks in the municipality
– the establishment and updating of a municipal risk register
– management and mitigation of risks contained in the risk register
– accounting policies in the municipality
– the frequency, accuracy and reliability of financial reporting by the
municipality and where applicable, municipal entities
– the performance management system of the municipality
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Audit comm cont.
•
•
– the implementation and effectiveness of the performance management
system
– evaluation of the actual performance of the municipality
– compliance with legislation
– effective governance in the municipality
– review of the annual financial statements
– financial position of the municipality
– the municipal response to the A-G report
– loss control
– the implementation of the King III principles
The development of strategies to address the above rests with the internal audit
unit.
The audit committee therefore casts an expert eye on strategies developed by
internal audit and the implementation thereof by the municipality
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Internal audit unit
•
MFMA requires each municipality to have internal audit unit, best situated in
office of MM, and it must
– prepare a risk-based audit plan and an internal audit program for each financial year;
– advise the accounting officer and report to the audit committee on the implementation
of the internal audit plan and matters relating to
• internal audit;
• internal controls;
• accounting procedures and practices;
• risk and risk management;
• performance management;
• loss control; and
• compliance with the MFMA, the annual Division of Revenue Act and any other
applicable legislation; and
– perform such other duties as may be assigned to it by the accounting officer.
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Internal audit cont.
•
Internal audit plan and internal audit program must be submitted to council
for approval
•
In addition to statutory requirements, internal audit must also ensure that
King III principles, in so far as they relate to LG, are implemented.
•
Actual implementation is cross-cutting but implementation plan and
monitoring rests with internal audit
•
King III deals with
– Ethical leadership and corporate citizenship
– Boards and directors
– Audit committee
– Risk governance
– Governance of IT
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Internal audit cont.
– Compliance with laws, rules, codes, and standards
– Internal audit
– Governing stakeholder relationships
– Integrated reporting and disclosure
– Alternative dispute resolution
– Internal financial controls
– Remuneration of directors and senior executives
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Municipal Public Accounts Comm
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MFMA requires for an oversight report to be prepared commenting on the
annual report
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Council must consider annual report within two months of tabling
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Must adopt an oversight report, with comments on the report
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Must indicate whether annual report has been approved with or without
reservations, or rejected, or refer back for revision
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MFMA circular 32 provides guidance on oversight process
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NT may also issue guidelines on the manner in which councils should
consider annual reports
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NT, in consultation with DCOG, issued guidelines on establishment of
MPACs.
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Main purpose is to provide oversight over the executive obligations of
council.
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MPAC cont
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Is a section 79 committee
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Not to overlap with audit committee but to strengthen oversight function
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May engage directly with internal audit, with direct access to certain
documentation within municipality. Functions include –
– to consider and evaluate the annual report and to make recommendations to the
council when adopting the oversight report,
– review past recommendations made on the annual report and ensure implementation
thereof,
– examine financial statements and audit reports and consider improvements or
deterioration from previous reports and evaluate how Audit Committee and AG
recommendations have been implemented,
– promote good governance, transparency and accountability on the use of municipal
resources,
– recommend or undertake investigations in its area of competency,
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– perform any other function assigned to it by the municipal council.
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MPAC cont.
•
MPAC must prepare annual work programme, and report to council on
quarterly basis
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MPAC must consider the mid-year budget review against the IDP and
SDBIP targets, and measure implementation of clean audit initiatives
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Rules of order of meetings must be agreed to
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Must have administrative support staff, required tools of trade, and
dedicated budget
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Terms of reference must be drafted and approved by council, to avoid
unnecessary overlap with audit committee, internal audit.
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Terms of reference must include a list of documents that must be submitted
to MPAC as a matter of course.
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MPAC cont.
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agendas and minutes of the audit committee meetings
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all formal recommendations made by the audit committee
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the accounting policies of the municipality and all subsequent amendments
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the annual financial statements
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the A-G report
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the risk based audit plan
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audit program
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risk register of the municipality
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details of the municipality’s compliance with its statutory reporting requirements
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the performance management system of the municipality
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the annual performance evaluation of the municipality, the municipal manager as well as senior
managers
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an annual report on loss control in the municipality
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an annual report on the implementation of the King III principles in the municipality
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mid-year and annual reports on any municipal entities
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MPAC cont
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MPAC must have authority to request any official to appear before it
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Content of agenda is determined by Chairperson, and prepared by MM and
the administration
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Meetings of MPAC should be open to the public.
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In conclusion
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Internal management controls are crucial in order to deliver services
effectively and efficiently
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Internal audit and audit committee centres mainly on internal management
controls
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MPAC is centred on oversight over executive obligations of council
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Is a tool, by the municipal council, to hold the executive accountable for the
execution of its mandate in terms of IDP, budget, and SDBIP.
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Thank you
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