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PRESENTATION TO SELECT COMMITTEE ON APPROPRIATIONS 16 O CTOBER 2012 PRESENTATION BY Cllr NG HLONGWANE EXECUTIVE MAYOR: EMFULENI LOCAL MUNICIPALITY.

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Presentation on theme: "PRESENTATION TO SELECT COMMITTEE ON APPROPRIATIONS 16 O CTOBER 2012 PRESENTATION BY Cllr NG HLONGWANE EXECUTIVE MAYOR: EMFULENI LOCAL MUNICIPALITY."— Presentation transcript:

1 PRESENTATION TO SELECT COMMITTEE ON APPROPRIATIONS 16 O CTOBER 2012 PRESENTATION BY Cllr NG HLONGWANE EXECUTIVE MAYOR: EMFULENI LOCAL MUNICIPALITY

2 1 C ONTENTS 2 2 MUNICIPAL CASH FLOW FINANCIAL STATUS 3 3 SOURCE OF REVENUE,COLLECTION AND EXPENDITURE MANAGEMENT 6 6 COMPLIANCE MATTERS 4 4 GRANTS EXPENDITURE 8 8 AUDIT OUTCOMES AND ACTION PLANS 9 9 CHALLENGES,WAY-FORWARD AND PRIORITIES 5 5 MUNICIPAL BUDGETS 7 7 CURRENT ASSETS AND LIABILITIES 1 1 MUNICIPAL OVERVIEW

3 CONTEXT AND BACKGROUND Municipal Assets Value = R 9 billion Municipal Budget 2011/12 Financial Year = R 3.7 billion 2012/13 Financial Year = R 4.5 billion Municipal Jurisdiction( area size) = Square KM’ Water and Sanitation Coverage = 98% Electricity Coverage = 97% Portable Water Quality Compliance = 100% Waste Water Discharge Compliance = 97% Refuse Collection Coverage = 100% 2

4 Top 10 Challenges( institutional) Unemployment Rate = 45% Water and Sanitation Infrastructure Backlog = R10 billion Roads Infrastructure Backlog = R9 billion Electricity Backlog = R2 billion Payment Levels in Poor Areas = 3% Outstanding Debt = R2 billion Cash Flow – Unfavorable Status 3

5 Top 10 Challenges( institutional) Water Losses = R180 million Per Annum Electricity Losses = R20 million Per Annum Billing Functionality 4

6 Some Key Indicators 5 MUNICIPALITYGEOGRAPHIC AREA MUNICIPAL BUDGET 2011/12 POPULATION% of NATIONAL GVA Buffalo City2 527 km²R3.9 bn % Mangaung6 604 km²R4.0 bn % Emfuleni987 km²R3.7 bn %

7 Budget Year on Year 6 Budget from 2003/04 to 2006/07 was not credible and reflected either a surplus or deficit Growth in budget is noticed due to increase service delivery demands

8 Budget Year on Year 7

9 MUNICIPAL CASH FLOW STATUS 8

10 Cash Flow Status- Quarter ended September R R Bank opening Balance 13,797,520 Total Receipts 1,084,477,600 Receipts 780,064,498 Grants Equitable Share 248,952,000 Other Grants receipted and spent 55,461,102 Less Expenditure -1,207,746,079 Eskom 571,991,951 Rand Water 163,911,425 Personnel Costs 182,020,692 Other payables 289,822,012 Operating surplus/(Deficit) for the quarter -109,470,959 Overdraft Facility utilized 109,470,959 Council raised R 150 million overdraft facility as a bridging finance during 2012/13 financial year. Included within the Expenditure, are accruals raised at year-end amounting to +/- R 300 million. Bulk services account to + 60% of expenditure incurred.

11 Eskom Impact (R) 10 Eskom bill has a significant effect on the municipality’s cash flow A R 150 million overdraft was raised as a bridging finance to address, among others, effect of Eskom bill

12 Performance on Electricity 11

13 Performance on Water 12

14 Financial Sustainability 13 Managing cash flow, debtors’ collections, distribution losses on electricity and water and overall financial sustainability of the municipality AUDITOR-GENERAL FINDINGS PLANNED ACTION BY ELM Stage INTERNAL AUDIT COMMENT Distribution losses on water were incurred due to aging infrastructure, burst pipes etc.  Water loss reduction programme launched. Annual target of 2% water reduction has been set. Implementation  Smart Metering procurement in progress Procurement stage  ACTION PLAN

15 Financial Sustainability (Cont…) Improving the debtors collection rate Cash flow concerns due to debtors write off Socio economic factors affecting payment rates 14

16 REVENUE,COLLECTIONS AND EXPENDITURE MANAGEMENT 15

17 STATEMENT OF FIN.. PERFORMANCE 16 Included in the Budget is R 364 million for capital expenditure, for which, its spending pattern is not reflected as the expense, as it has been capitalized, disclosed in the following slide. Also the depreciation increased materially due to the Fixed Assets unbundling process (GRAP 17) Cost Drivers STATEMENT OF FINANCIAL PERFORMANCE (30 JUNE 2012) Description Annual Budget (R) Actual (R) % Actual to Budget YTD REVENUE Assessment Rates % Electricity Services % Water Services % Sewer Services % Refuse Services % Rent of Facilities & Equipment % Interest Earned – Outstanding Debtors % Total Billing % Other Income % Total Revenue % EXPENDITURE Personeel Cost % Remuneration - Councillors % Debt Impairment % Depreciation % Repairs And Maintenance % Interest Expense % Bulk Purchases Water % Bulk Purchases Elect % Contracted Services % General Expenses % Capital Expenditure Total Expenditure % Surplus/(Deficit) - ( )

18 CAPITAL SPENDINGS (2011/12 FINANCIAL YEAR) 17 The under-spending of council funded projects was contributed by the cash-flow restrictions. Most of the projects were rolled over into 2012/13 financial years FundingBudgeted ( R )Expenditure ( R )% Spent MIG & Counter Funding Projects 156,248,360144,227,93792% MIG Projects (Allocation & Roll Over) 143,885,000144,227, % Council Funded Projects 64,236,58037,720, % Capital Budget Spending 364,369,940326,176, %

19 Revenue (2011/12 Financial year) 18 The billed revenue on all services are on par with the budgeted billing for the current financial year, except for rental of facilities at 121%.

20 Expenditure ( 2011/2012 Financial Year) 19 The realized expenditure is sitting at 12% above the realized revenue and 7% above the budget. Due to the revaluation process of the Fixed Assets (GRAP 17), our assets were re-stated at the net book value of R 13 billion. This led to an increase on Depreciation from anticipated R 130 million to R 733 million in 2011/12 financial year.

21 2011/12 Financial Year GRANTS SPENDINGS 20

22 National Grants (2011/12 financial year) 21 Opening Balance Total Receipts Total ExpenditureSurrendered % Spent Closing Balance Restructuring Grant 18,249, Equitable Share 0539,842, Financial Management Grant 750,0008,750, , Regional Sewer Scheme Grant -1,862,81326,298,09923,300, ,134,668 National Electrification Grant 673,52516,256, , Electricity Demand Site Management Grant 06,000,0003,912, ,087,140 Municipal Systems Improvement Grant 500,000800, , DWAF Grant 1,096, , ,484 DACE Grant 728,627500, ,228,627 EPWP Grant 1,290,2583,049,0006,734, ,395,416 Sedibeng Regional Sewer Scheme Grant 9,953,53011,553,37512,396, ,110,125 Municipal Infrastructure Grant 17,242,937126,985, ,242,937 48,622,013740,033,474739,143,92220,173, ,338,565

23 Provincial & District Grants (2011/12 Financial Year) 22 Opening Balance Total Receipts Total ExpenditureSurrendered % Spent Closing Balance Library Grant 2,802,2167,200,0007,206, ,795,627 HIV Aids Grant 37,346524,160561, Health Grant 68, Bontle - ke - Botho Grant 743,3684, ,528 Ex- District Grant 2,704, Social Development Grant 5,102,4989,000,00014,102, Sports Grant 1,118, , ,131 Debtors Book Project (ALOECAP) 02,300,0002,080, ,952 Asset Management Project (GRAP 17) 01,800, Security services subsidy(evictions) 026,330, MSIG Sedibeng 50, ,626,64747,158,58952,708, ,076,365

24 MUNICIPAL BUDGET 23

25 Budget preparation process Establishment of effective Budget Steering Committee Approval of the IDP and Budget Process Plan, highlighting: o Key Stakeholders o Key deadlines o Consultation processes Mid term budget and performance review-January 2012 Adjustment budget 2011/12 February 2012 Draft 2012/13 Multiyear Budget - March 2012 Public participation process Final MTREF Budget adopted 28 May

26 Subsequent Activities considered Experienced Water losses in 2010/11 Inflation hikes, guidelines from budget circulars IDP priorities Input costs v/s Output costs (Tariffs) Achieved collection rates True Cost of Service Delivery  Direct cost  Indirect overhead cost 25

27 Tariff Modelling Policy Shifts o Recognition of Indigents – Property value below R o Free Basic Water – Only to Indigents o Equalisation of tariffs Restructuring of Water Tariffs – Encourage water saving Residential Sewerage tariffs dependent on water consumption 26

28 Tariff Modelling- 2012/13 Fin... Year Tariff structures approved by council together with Budget-May 2012 Tariff Increases approved with the Budget were:  Property Rates – 10%  Electricity– 13.3%  Water – 21.6% (13.5% + 8.1%)  Sewerage– 19.37% (13.5% + 70% of 8.1%)  Refuse– 10%  Sundry Tariffs – 10% Eskom Tariff increase – 13.5% Rand Water Tariff increase – 13.5% 27

29 Tariff Modelling - WATER Business - Restructuring of tariffs proposed - Water o Inclining block tariff (DBT) for water o IBT in compliance with Circular 58 and s10 of the Water Services Act o Circular 58 – prescribes IBT o S10 (2)(d) of the Water Services Act – tariffs should promote or achieve water conservation o Tariffs cheaper for initial usage but higher with increased consumption 28

30 Tariffs – Business ( Continue ) Restructuring of tariffs proposed - Sewerage  Equalisation of tariffs  Due to Impact it – proposed to equalize in 2012/13 and move towards Water consumption based in 2013/14  Additional tariffs in respect of type of business to be included in 2012/13 – Fat Traps, etc. 29

31 Tariffs – Business ( Continue ) Refuse o Rendered at a significant loss o Previously subsidised through other tariffs o Breakeven tariff calculated at 18% increase Electricity tariff o Nersa approved an average tariff increase of 13.3 % o Emfuleni pays 13.5% towards Eskom 30

32 Tariffs – Residential Restructuring of tariffs proposed - Water o Inclining block tariff (IBT) for water, electricity, sewerage o IBT in compliance with Circular 58 and s10 of the Water Services Act o Circular 58 – prescribes IBT o S10 (2)(d) of the Water Services Act – tariffs should promote or achieve water conservation o Tariffs cheaper for initial usage but higher with increased consumption 31

33 Tariffs – Residential Restructuring of tariffs proposed - Sewerage o Waterborne Sewerage principle to be followed o Basic Plus Sewerage tariff (billing units) linked to 50% of Water consumption Refuse o Rendered at a significant loss o Previously subsidized through other tariffs o Breakeven tariff calculated at 18% increase Electricity tariff o NERSA approved a average tariff increase of 13.3 % o Emfuleni pays 13.5% more towards Eskom 32

34 Tariff Structure - Residential Water Tariff Structure  Tariff increase per block (Incremental)  Maximum Water consumption block – Currently 30kl  Restructuring proposal (Tariff increments)  Additional Blocks – 30kl-45kl and 45kl +  Punitive tariff Sewerage – Consideration of water based tariff  Basic + 50% of water consumption 33

35 Revenue & Collections – Budget 2012/13 34 REVENUE BY SOURCE ADJUSTMENT BUDGET 2011 / 2012 (R)BUDGET 2012 / 2013 (R) % OF BUDGET Electricity Sales1,298,781,7121,489,734,76433,0% Grants844,253,184901,185,93420,0% Water Sales553,766,019695,224, % Assessment Rates343,684,023396,524,9778,8% Sewer220,818,683303,809,8026.7% Pre-paid Electricity192,947,750213,000,7984,7% Refuse Removal98,916,159125,222,1572.8% Other Income169,859,395315,865,4237,0% Tariff Charges Other25,234,00247,489,4271.0% Fines26,415,54332,399,0490.7% Total3,774,676,4694,520,457,165100%

36 Expenditure –Budget 2012/13 35 ITEM ADJUSTMENT BUDGET 2011 / 2012 (R) BUDGET 2012 / 2013 (R)% OF BUDGET Employee Costs 699,503,868693,341,94615,3% Remuneration of Councilors 30,960,59832,841,2550,7% Depreciation and Asset Impairment129,684,958351,444,0597,8% Bulk Purchase – Electricity115,616,14031,360,317,00030,1% Bulk Purchase – Water370,000,000380,918,6438,4% Provision for Doubtful Debts293,420,256596,271,00513,2% Contribution to CAPEX364,369,940367,488,7508,1% Repairs and Maintenance158,301,955141,545,7903,1% Other572,273,491596,288,61713,2% TOTAL3,774, ,520,457,165100%

37 Key Expenditure Budget components Bulk purchases38.5 %  Electricity30.1 %  Water8.4 % Personnel Costs16 % Repairs and Maintenance3.1 % Capital expenditure8.1 %  Total 2012/13 MTREF BudgetR 4.5 billion 36

38 LEGISLATIVE COMPLIANCE 37

39 Compliance with Audit Processes & the Law Municipal Structures Act  Section 79 Establishment – (1) The Council has appointed a functional Audit Committee and MPAC for the effective and efficient performance of its functionalities.  Audit Committee members appointed has requisite skills as follows:  Financial Accounting and Management  Internal and External Audit  Performance and Risk Management  Engineering  Legal and Governance 38 (Final)

40 Compliance with Audit Processes & the Law (Cont)  Emfuleni Local Municipality is in the process to appoint an IT Specialist to serve as a member to further capacitate the Committee.  Audit Committee and MPAC co-ordinate their efforts on oversight as per MFMA Circular 32 and COGTA and National Treasury Instructions. 39 (Final)

41 Compliance with Audit Processes & the Law (Cont) Municipal System Act  Section 45 – The results of the performance measurements are audited by Internal Audit in terms of section 41(1).  Internal audit is auditing 100% not on a SAMPLE basis as other municipalities, the reason for that is to reflect the total service delivery efforts of the municipality; it is the ONLY municipality which does this in the country.  The AG audited the performance measurements annually as required (part of OPCA). 40 (Final)

42 Compliance with Audit Processes & Law (Cont) Municipal Systems Act  Section 46 – The municipality has prepared a performance report which was subjected to IA and AG audits. Municipal Systems Act – Regulations 14(1)(a)(c)(i)  The Municipality has developed and implemented mechanisms, systems and processes for auditing the results of performance measurements as part of its internal auditing process as already alluded to before. 41 (Final)

43 Compliance with Audit Processes & Law (Cont) Municipal Systems Act – Regulations 14(1)(a)(c)(ii)  The Internal Audit Department of Emfuleni Local Municipality submits quarterly reports to the Municipal Manager and Performance Audit Committee Municipal Systems Act – Regulations14(2) (a)  Emfuleni Local Municipality has appointed Performance Audit Committee which meets quarterly, reports to Mayoral Committee (Mayco) on issues of Performance, and in so doing keeps Mayco informed in that respect 42 (Final)

44 Compliance with Audit Processes & Law (Cont)  The Performance Audit Committee reports to the Council on matters of Performance, three reports have already been submitted to Council for this financial year. 43 (Final)

45 Compliance with Audit Processes & Law (Cont) Municipal Finance Management Act 121(i) Preparation and adoption of annual reports:  The Annual Report for Emfuleni Local Municipality was prepared and adopted by Council. 121(3)The Annual report  Complied with Legislation required as per Section 121(3)(a) and (b). 122 Preparation of Financial statements:  Emfuleni Local Municipality has compiled the annual financial statements on the basis as required by this Section basis. 44 (Final)

46 Compliance with Audit Processes & Law (Cont) Municipal Finance Management Act (Cont) 123 Disclosure on intergovernmental and other allocations 124 Disclosure of Interest concerning Councillors, Directors and Officials 125 Other compulsory disclosures  The Annual Financial Statements of Emfuleni Local Municipality complied with these abovementioned Sections 45 (Final)

47 Compliance with Audit Processes & Law (Cont) Municipal Finance Management Act (Cont) 126 Submission and auditing of Annual Financial Statements  The Annual Financial Statements of the Municipality was submitted within two months after the end of Financial Year to the Auditor-General for auditing purposes. 46 (Final)

48 Compliance with Audit Processes & Law (Cont) Municipal Finance Management Act (Cont)  Section 62(1)(c)(ii) and 165(1)(a)  The municipality has established a functional internal audit department which have prepared a risk based annual audit plan as approved by the Audit Committee.  Section 165(1)(b)  The Internal Audit department has continuously advised the Accounting Officer and reported to the Audit Committee on the implementation of the plan in relation to internal controls, accounting procedures and practices, risk and risk management, performance, loss and compliance with other legislation. 47 (Final)

49 Compliance with Audit Processes & Law (Cont) Municipal Finance Management Act (Cont)  166 Audit Committee-  166(a)The committee was established as already alluded.  166(b) Audit Committee reviewed the AFS.  166(c) Audit Committee responded to the Council on issues raised by AG. 48 (Final)

50 Reporting and other compliance requirements Compliance with reporting requirement  MFMA compliance reporting timelines adherence Other Compliance issues  Establishment of Risk Management Framework and registers  Performance management System  Formulation of risk-based audit plans 49

51 CURRENT ASSETS AND LIABILITIES 50

52 Current Assets ITEM 2011/12 (Unaudited)2010/11 Cash and cash equivalents12,857,57218,497,047 Trade and trade receivables from exchange transactions 237,843,335255,423,565 Trade and other receivables from non-exchange transactions 139,166,69844,585,250 Inventories20,536,14719,886,954 Investments114,928,212106,269,517 Value added tax receivable71,033,30421,649,624 TOTAL 596,365,268466,311,957 51

53 Current Liabilities ITEM 2011/12 (unaudited)2010/11 Trade and other payables from exchange transactions 701,169,997526,816,744 Unspent conditional grants and receipts21,567,41161,248,661 Borrowings5,268,9846,858,622 Finance lease liability23,161,40762,193,495 TOTAL 751,167,799657,117,522 Included in the Trade payables is the Eskom billing for R175 million (2011/12) and R 136 million (2010/11), Rand Water bill for portable water amounted to R 23 million (2011/12) The municipality managed to settle the raised Overdraft facility amounting to R 90 million during 2011/12 52

54 Outstanding debtors June % debt in residenti al Goverment Debt in the Region of R44 million Total Debt Stand at almost R2.7 billion (84% is Residential)

55 Outstanding Government Debt 54 NAME OF DEPTAMOUNT OUTSTANDING AS AT JUNE 2012 GOV - EDUCATIONAL R 5,749, GOV - EDUCATIONAL RATES R 962, EDUCATIONAL (SECTION 21 SCHOOLS) R 2,994, EDUCATIONAL (SECTION 21 SCHOOLS) RATES R 100, HOSPITALS AND HEALTH R 10,100, HOSPITALS AND HEALTH RATES R 1,167, GOV - HOUSING R 2,354, GOV - HOUSING RATES R 1,363, POLICE R S.A POST OFFICE R 21, S.A POST OFFICE RATES R PROVINCIAL HOUSING R 532, PROVINCIAL HOUSING RATES R 394, GOV - PUBLIC WORKS NATIONAL R 233, GOV - PUBLIC WORKS NATIONAL RATES R 2,347, GOV - PUBLIC WORKS PROVINCIAL R 11,314, GOV - PUBLIC WORKS PROVINCIAL RATES R 3,428, GOV - ROADS R 39, GOV - ROADS RATES R 21, GOV - TELKOM R 4, GOV - TELKOM RATES R 8, Grand total R 44,179,411.75

56 Risk Management 55 ELM Fully functional Risk Management, Anti-Fraud & Anti-Corruption Committee Quaterly meetings are held and report is presented to Audit Comm and Council Risk Management represented at SMT level through the CRO being appointed on 15/10/2011 Risk Management is aligned to Strategic Planning through the IDP, whereby strategic & high level risks are identified A Risk Management register has been developed ans approved by the Audit Committee and Council Whistle blowing policy is in place A reviewed Risk Management Framework & Strategy has been approved by AC and RMAAC & is ready for next Council meeting for approval Risk matury has improved from 3 to 4.8 maturity level (NT assesment)

57 Top 10 Risks of ELM 56

58 Top 10 Risks of ELM (Cont…) 57

59 Top 10 Risks of ELM (Cont…) 58

60 Top 10 Risks of ELM (Cont…) 59

61 Top 10 Risks of ELM (Cont…) 60

62 Risk Management (Cont…) 61 A Risk-based Internal Audit Plan was developed determining high risk areas of ELM based on the risk registers Operational risks are identified through the SDBIP’s & assessed quarterly and reported to Audigt Commitee and Council Risk Champions has been appointed for each cluster to monitor and report on each cluster risks IT Risks were identified and Action Plans are in place to remedy some risks which include:  Overall IT Assessment (hardware and software)  Disaster Recovery Plan  Business Continuity Plan  IT Governance Framework & Control  IT Policies & Procedures

63 AUDIT MATTERS 62

64 Audit Report Audit Opinion: 2006/2007 – Disclaimer 2007/2008 – Disclaimer 2008/2009 – Qualification 2009/2010 – Qualification 2010/2011 – Qualification Basis of Qualification 2010/2011:  Property, plant and equipment Valuation of Property, Plant and Equipment (PPE)  Statement of changes in net assets 2007/08 misstatements of service charges and employee costs that affects the 2010/11 accumulated surplus/deficit 63

65 Audit Report (Cont…) Matters of Emphasis:  Significant uncertainties - Civil matters  Restatement of corresponding figures - GRAP 17 implementation  Material losses - Water 51% and Electricity 11%  Material Impairments – Irrecoverable debt SCM Deviations:  20 deviations due to urgency.  12 Irregularities reported of providers in service of the state. 64

66 Status of Audit Action Plan for 2010/2011  Appointment of same service provider to finalize GRAP 17 implementation.  Establishment of OPCA steering Committee (Senior Management Team)  Action Plan-Addressing Audit findings 2010/2011  Quarterly Internal Control assessments(dash board reports) –AG  OPCA progress report presented quarterly to Audit Committee (CAE), MAYCO and Council (by Chairperson of Audit Comm) 65

67 Cluster Number of findings Not Applicable Total Findings needed to be address during this financial year Resolved Partially ResolvedNot Resolved N/A %  %  % Internal Audit %00%0 Basic Services %00%0 Corporate Services 20200%2100%00% Economic Development and Planning 20200%2100%00% Public Safety and Community Development %1 00% Municipal Manager %840%15% Infrastructure Planning and Assets Management %1100%00% Finance %824%00% Cross Cutting findings 11000% % 22 35% 1 2% 66 SUMMARY OF FINDING!!

68 ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT 67 Audit FindingsClusterAction Plan Taken Employee in charge Resolve d Partially Resolve d Not Resolve d Not Applicab le for Reviewin g Remarks  N/A 1. Infrastructure assets- No supporting documents for cost recorded on the financial statements Financial Services/Infrastr ucture Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard Langa Nil N/A The audit finding will be reviewed by Auditor- General after PWC (Consultants) complete the rectification of asset Register. 2. Information not submitted Financial Services/Infrastr ucture Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard Langa Nil N/A The audit finding will be reviewed by Auditor- General after PWC (Consultants) complete the rectification of asset Register. 3. Assets incorrectly valued Financial Services/Infrastr ucture Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard Langa Nil N/A The audit finding will be reviewed by Auditor- General after PWC (Consultants) complete the rectification of asset Register. 4. Newly identified assets Financial Services/Infrastr ucture Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard Langa Nil N/A The audit finding will be reviewed by Auditor- General after PWC (Consultants) complete the rectification of asset Register.

69 68 Audit FindingsClusterAction Plan Taken Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A 5. Assets recorded at incorrect amount Financial Services/Infrastructu re Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 6. Understatement of depreciation Financial Services/Infrastructu re Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 7. Assessment of Impairment for assets Financial Services/Infrastructu re Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 8. Assets not considered for write off Financial Services/Infrastructu re Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 9. Assets not bar-coded on the asset register Financial Services/Infrastructu re Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 10. Valuation of newly identified assets- differences on supporting documents Financial Services/Infrastructu re Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 11. Valuation methods for assets Financial Services/Infrastructu re Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

70 69 Audit Findings€ClusterAction Plan Taken Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remarks  N/A 12. Asset Register not GRAP Compliant Financial Services/Infrastructur e Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 13. Assessment of residual values Financial Services/Infrastructur e Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 14. Impairment of transport assets Financial Services Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 15. Valuation of newly identified assets Financial Services/Infrastructur e Planning and Asset Management Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 16. Intangible assets- Classification Financial Services Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 17. Overstatement of landfill site Financial Services Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 18. Post balance sheet-events after reporting date Financial Services The matter was resolved during the audit as the statements were updated with the recommendations of the AG. A repetitive review of the AFS will be undertaken before the submission to AG. Tsietsi Rafube Nil The audit finding was resolved during the AG audit process. Portfolio of evidence was provided and verified. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

71 70 Audit FindingsClusterAction Plan Taken Employee in charge Resolved Partially Resolved Not Resolved Not Applicabl e for Reviewing Remarks  N/A 19. The specifications were not approved by the accounting officer prior to publication of the invitation of bids. Financial Services Supply Chain Management functions have been decentralized and different clusters have delegated powers in terms of section 8 of SCM policy were by the Bid Specification Committee get appointed by the Accounting Officer and Bid Specification Committee is delegated to draft the specification and other requirements including approving and determining advertising methods. Thabo Thwala Nil The audit finding was resolved. An approved letter of delegation authority by the Accounting Officer was provided for as Portfolio of evidence was verified. 20. Registered address of the contractors is different to the one disclosed in the bid documentation Financial Services Bid Document (MBD 4 & MBD 8) requires the bidder to indicate the address where the business is operating and also declarations. The bidder is required to include Municipal Account or lease agreement to indicate were the business is operating. Thabo Thwala Nil Resolved 21. Register of bids is not published on the municipality website Financial Services The awarded bids will be published on the website Thabo Thwala NitNil The audit finding was resolved. Printout from Website was provided as Portfolio of Evidence and Verified. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

72 71 Audit FindingsClusterAction Plan Taken Employee in charge Resolve d Partially Resolve d Not Resolved Not Applicabl e for Reviewin g Remark  N/A 22. Non compliance with Section 32(2) of the MFMA Municipal Manager Irregular or fruitless and wasteful expenditure Register will be developed and monitored by delegated personnel (CFO) and feedback will be provided on a quarterly basis. ALL DMM Nil  Irregular or Fruitless and Wasteful expenditure Register was developed and submitted to the relevant management, monthly monitoring and evaluation process will be implemented with effect from 1 st July Furthermore it is recommended that MFMA 32(2) must observe at all times in respect of unauthorized, irregular or fruitless and wasteful expenditure. 23. Suppliers not on the database Financial Services SCM department encourage suppliers to register on the data base and also our website have database forms were suppliers can print and submit to our offices during working hours Thabo Thwala Nil N/A Management did not agreed with the AG audit finding. 24. Operating expenditure - Transactions recorded in incorrect period Financial Services Year End procedures(SOP) will be work shopped to the Creditors personnel by Mid June Derrick Maaroganye Nil N/A Creditors list will be ready on the 25 July Therefore this finding will be subjected to AG processes. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

73 72 Audit FindingsClusterAction Plan Taken Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remarks  N/A 25. Understatement and Overstatement of Creditors Listings Financial Services SCM is supposed to complete GRN first to enable the fin system to accrue automatically. Year-end procedures to be followed up by SCM. Inter-departmental communication channels with be enhanced and regular strategic meetings with SCM will be held going forward Derrick Maaroganye Nil N/A Creditors list will be ready on the 25 July Therefore finding will be subjected to AG processes. 26. Expenditure-Information not submitted for audit Financial Services Documents were misfiled. An investigation of root causes is undertaken and proper record keeping is in place to prevent recurrence of such events. Derrick Maaroganye Nil The finding was resolved, Documents selected from the Register was duly filed and were verified. 27. Predetermined objectives No evidence that IDP and budget are aligned Municipal Manager/Performan ce Management System Budget Sheets SA4, SA5 and SA6 which reconcile the budgeted amounts to the strategic objectives in the IDP will be completed and submitted with the final budget for approval. Budget Manager Nil  Partially resolved, the core strategic objectives are reflected in the IDP2011/12 and Budget (SA4, SA5 and SA6) as aligned and verification was done. Further verification will be subjected to AG processes. Communicate coding convention with Budget Office and IPAM IDP Manager Budget Office to include IDP codes into Budget Budget Manager 28. IDP does not include core components Municipal Manager/Performan ce Management System MSA determines 9 core components for the IDP. Two were not included - disaster management plan, and financial plan (7/9=78%) Nil  The audit finding partially resolved, Disaster Management Plan was provided as portfolio of evidence however the financial plan is still in a draft. Develop disaster management plan Manager Public Safety Submit disaster management plan Manager Public Safety Develop financial planManager Budget Submit financial planManager Budget ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

74 73 Audit FindingsClusterAction Plan Taken Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remarks  N/A 29. KPI's and targets not set for all the core strategies Municipal Manager/Performa nce Management System The 2011/12 IDP and OSDBIP, as amended, addressed and resolved this finding Performance Specialist and IDP Manager Nil The audit finding was resolved. Copy of Council Resolution was provided as Portfolio of evidence and was verified 30. IDP does not include general KPI's as per regulation requirements Municipal Manager/Performa nce Management System The 2011/12 IDP, as amended, addressed and resolved this finding Performance Specialist and IDP Manager Nil The audit finding was resolved. Copy of Council Resolution was provided as Portfolio of evidence and was verified. 31. KPI's and targets are not well-defined and verifiable Municipal Manager/Performa nce Management System The 2011/12 IDP and OSDBIP, as amended, addressed and resolved this finding Performance Specialist and IDP Manager Nil The audit finding was resolved. Copy of Council Resolution was provided as Portfolio of evidence and was verified. 32. IDP not aligned to the SDBIP Municipal Manager/Performa nce Management System The 2011/12 IDP and OSDBIP, as amended, addressed and resolved this finding Performance Specialist and IDP Manager Nil The audit finding was resolved. Copy of Council Resolution was provided as Portfolio of evidence and was verified. 22A. IDP not aligned to the annual performance report Municipal Manager/Performa nce Management System The 2011/12 IDP and OSDBIP, as amended, partially addressed and resolved this finding Performance Specialist and IDP Manager Nil N/A Audit finding will form part of AG processes 33. Lack of performance management system for predetermined objectives as per the IDP Municipal Manager/Performa nce Management System Drafting the 2011/12 performance report Specialist PMNil N/A Audit finding will form part of AG processes 34. Targets in the performance contracts are not based on KPI's in the IDP. Municipal Manager/Performa nce Management System The creation and commissioning of the M & E solution for the 2011/12 OSDBIP addressed and resolved this matter Nil The finding was resolved. Performance of section 56 employees is aligned with SDBIP and was verified. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

75 74 Test Audit FindingsClusterAction Plan Taken Employee in charge Resolved Partially Resolved Not Resolved Not Applicabl e for Reviewing Remark  N/A 35. Annual performance report is not prepared in terms of Municipal Systems Act S46 Municipal Manager/Performa nce Management System Annual performance report must reflect comparative performance information of previous reporting period Nil N/A Audit finding will form part of AG processes Determine existence of comparative performance data from 2010/11 reporting period Specialist PM Determine performance data gap analysis Specialist PM Report on performance data gap analysis Specialist PM 36. Annual performance report not supported by evidence Municipal Manager/Performa nce Management System Annual performance report is based on Q4 OSDBIP assessment with PoE Specialist PMNil N/A Audit finding will form part of AG processes 37. The prescribed process to amend the IDP was not followed. Municipal Manager/Performa nce Management System Deficiency: not properly advertised and SDM not properly consulted IDP Manager Nil The audit finding was resolved. Advert and Letter to Sedibeng was provided as portfolio of evidence and verification was done. 2011/12 IDP amendment was properly advertised and SDM formally consulted IDP Manager 38. Lack of community involvement in the setting of KPI's, targets and the performance management process Municipal Manager/Performa nce Management System KPIs and targets of Basic Services and IPAM and EDP to be communicated during public participation process Specialist PMNil N/A Audit finding will form part of AG processes 39. Cash and cash equivalents- None compliance with the Act Financial Services A letter stipulating banking details of the Municipality will be compiled and submitted to AG and Dept of Finance. Tsietsi Rafube Nil Resolved, Letter stipulating banking details of the municipality was provided as portfolio of evidence ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

76 75 Audit FindingsClusterAction Plan Taken Employee in charge Resolved Partially Resolved Not Resolved Not Applicabl e for Reviewin g Remark  N/A 40. Debt management not effective Financial Services C. Review Credit Control and Debt Collection Policy and By-laws Debt ManagerNil N/A Management did not agreed with the AG audit finding. D. Indigent process 1. Write off of arrears prior to 2011/2012 financial year 2. Write off of arrears in abeyance on a monthly basis 7. Finalization of Legal agreements 8. Report to Council for approval of process 41. Differences between grant amount on the financial statements and the amount on the trial balance Financial Services Grants Management Committee to be established to ensure among others the correctness of grant amounts on a monthly basis. Dobe MokgethiNil  The audit finding is partially resolved. Grants Reconciliation from July 2011 to May 2012 was provided as portfolio of evidence. Review of completeness and accuracy of Trial balance will be performed by CFO to ensure that the AFS agreed to the trial balance. 42. Information not provided for Clearance Certificates Financial Services The clearance certificate costs are paid directly into applicable vote number. These payments are done when a bank guarantee is received for the capital amount payable for clearance certificate. The current receipting system does not generate the property description on the direct payment. Sam Mokoena/Laura Schmidt Nil Finding was resolved. Clearance Certificate Register was established. A sample was selected and the requested portfolio of evidence was provided to support the Clearance Certificate Register. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

77 76 Audit FindingsClusterAction Plan Taken Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remarks  N/A 43. Incorrect and incomplete calculation of VAT Financial Services 1. Calculate the VAT apportionment rate at the end of June 2012 and affect the recalculated rate from the 1st of July To run a report on all transactions zero rated, i. o.t find transactions which VAT was mistakenly not calculated. Tsietsi RafubeNil N/A Management has appointed Service Provider to address the matter raised by Auditor General. 44. Incomplete disclosure of fruitless and wasteful expenditure Financial Services Post dated payments control for third parties payments is in place on Business Integration system (ABSA) on the 7th of each month. Derrick Maaroganye Nil N/A Fruitless and wasteful register was developed the monthly monitoring and evaluation will be effected from 1 st July 2012/13.This finding will form part of AG processes. 45. Non compliance with Section 65(2)(e) Financial Services It is an on-going issue institutional challenge. First-in-first out paid principle will be enhanced on tax invoice receipt. Derrick Maaroganye Nil N/A The audit findings may not be resolved due to the financial constrains 46. Information not provided for audit - Grant Expenditure Financial Services Documents were misfiled. Investigations of root causes are undertaken and proper record keeping is in place to prevent recurrence of such events. Derrick Maaroganye Nil The finding was resolved selected sample was performed. 47. Some municipal councilors did not declare their interest Municipal Manager Register of Declaration of interest was developed and were issued on every Council meeting Manager: Speaker Nil  Not all Councillorship and Personnel declare their interest. 48. Differences in amount disclosed in the financial statement and invoices Financial Services The matter was resolved during the audit as the statements were updated with the recommendations of the AG. A repetitive review of the AFS will be undertaken before the submission to AG. Tsietsi Rafube Nil The audit finding was resolved during the audit. Audit finding will form part of AG processes ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

78 77 Audit FindingsClusterAction Plan Taken Employee in charge Resolved Partially Resolved Not Resolved Not Applicabl e for Reviewin g Remarks  N/A 49. Incomplete disclosure of Environmental Rehabilitation provisions Financial Services The matter was resolved during the audit as the statements were updated with the recommendations of the AG. A repetitive review of the AFS will be undertaken before the submission to AG. Tsietsi Rafube Nil The audit finding was resolved during the audit. Audit finding will form part of AG processes 50. Difference between Venus and Pay Day Financial Services Reconciliation of salaries suspense control account on monthly basis including review and supervision i.o.t prevents the re- occurrence of variances. Derrick Maaroganye Nil  The funding is partially resolved, Currently service provider has been appointed to address the reconciliation between Venus and Payday System Total Percentage 73%27%0% Number of audit findings remaining for retesting. 0 Percentage0% ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

79 78 Audit FindingAction Plan TakenCluster/Department Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A 51. Bank account balances not properly disclosed The matter was resolved during the audit as the statements were updated with the recommendations of the AG. A repetitive review of the AFS will be undertaken before the submission to AG. Financial ServicesTsietsi Rafube Nil The audit finding was resolved during the audit. Audit finding will form part of AG processes 52. Control environment: Shortcomings with regards to audit committee Finding was resolved, Clause was included in the Reviewed Audit Committee Charter. Internal AuditJS Masite Nil The audit finding was resolved; the relevant clause was included in the charter. 53. Risk assessment: Implementations of internal audit findings The finding was resolved. Internal AuditJs Masite Nil The audit finding was resolved. 54. Control environment: Performance of deputy municipal managers not monitored Monitoring and evaluation of performance is done on a quarterly basis. 1st Q informal, half yearly Municipal Manager/Performance Management System Henre de Hart Nil  Half yearly assessment was conducted; however there is one senior manager performance assessment conducted still outstanding however, management has put process is in place to finalize the performance assessments of all senior managers. 55. Control environment: Weakness pertaining to preventative measures on environmental factors affecting the municipality The Environmental By-Laws are at the 3rd Draft and the ELM is assisted by Sedibeng and DEA. The target date for submission to ELM Legal Department is 31 August The report regarding the Environmental Plan of Action will be resubmitted to the Sec. 80 Committee and thereafter to Mayor and Council. Should be approved by 30 June Implementation will follow approval subject to funding. All the other matters raised in the Management Letter are subject to funding. The indications are that nothing will be approved for the 2012/13 financial year. Public Safety Nnete Makhubo and Benny Mhlanga Nil  The audit finding is partially resolved. Draft Air Quality Management By law, Climate Change Tools and draft Environment education and awareness strategy and action plan were provided as portfolio of evidence. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

80 79 Audit FindingAction Plan Taken Cluster/Departme nt Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remarks  N/A 56. Control environment: Remuneration policy outdated Review the salary scales for and replace them with current salary percentage Corporate Services Mr. Vincent Phalange Nil  The audit finding is partially resolved. Management will have an addendum to the policy to address the AG finding 57. Monthly budget statements not placed on the municipality's website The Manager: Communications will be engaged in writing and the monthly budget statements will be placed on the website from February Financial Services Doe Mokgethi Nil The audit finding was resolved. Print out from Emfuleni Local Municipality website was provided as Portfolio of evidence verification was conducted. 58. Monthly budget statements do not include variances and projections for the remainder of the year 1. Monthly statements to be completed on the new template (C-Schedule). 2. Comments on material variances to solicited and recorded in the template. Financial Services Senior Manageme nt Team Nil  The finding is partially Resolved. Template of C schedule was introduced with effect from January 2012, explanation of variance and corrective action was given, starting from May Furthermore management to ensure that the explanation for material variance and corrective actions are submitted to Budget so as to comply with Section 71 of MFMA. 59. Non compliance with section MFMA 62(1) (d). Irregular or fruitless and wasteful expenditure Register was developed and monitored by delegated personnel (CFO) and feedback is provided on the quarterly bases. Financial Services Senior Manageme nt Team Nil  The Irregular or Fruitless and Wasteful expenditure Register was develop effective date for monthly monitoring and evaluation will is 1 st July ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

81 80 Audit FindingAction Plan TakenCluster/Department Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remarks  N/A 60. Fixed assets: No evidence obtained of periodic review of asset register A Consultants (PWC) has being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor- General will retest the Assets Register Methodology. Financial ServicesBernard Langa Nil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 61. Unidentified library books during physical verification of library books A Consultants (PWC) has being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor- General will retest the Assets Register Methodology. Financial ServicesBernard Langa Nil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register. 62. Expenditure: Contracts not available for inspection The invoice will be submitted to Internal Audit Basic ServicesManager Nil The audit finding was resolved. The invoice was submitted to internal audit for verification which was conducted. 63. Amount on the invoice does not agree to the amount as per General Ledger Invoices are adjusted by user depts. for CREDITOR'S section to effect payment. A letter from supplier confirming the changes on the invoice will have to be attached before processing pmt. Financial Services Derrick Maaroganye Nil N/A Audit finding will form part of AG processes 64. The final award of above R5 million may only be sub delegated only to the Chief Financial Officer Supply Chain Management functions have been decentralized and different clusters have delegated powers in terms of SCM policy. Adherence to SCM Policy will be encouraged. In terms of section 8 (7.3), The Accounting Officer or delegate may review and reconstitute the members of the Bid Adjudication Committee periodically. Financial ServicesThabo Thwala Nil N/A Will be subjected to AG process. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

82 81 Audit FindingAction Plan TakenCluster/DepartmentEmployee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remarks  N/A 65. Non Compliance with Division of Revenue Act regarding the reporting of unspent conditional grants Grants Management Committee to be established to ensure among others the correctness of grant amounts on a monthly basis. This will enable the correct reporting of grants at the end of the financial year. Financial ServicesDobe Mokgethi Nil N/A 1. Reconciliation of Grants were performed up to May Reconciliations up to June 2012 will be performed and submitted to the grants committee once the financial system is running. (Year end processes are in progress) 3. An application for all unspent grants to be rolled over into the 2012 / 2013 financial year will then be made to the National treasure Audit finding will be form part of AG processes. 66. Trade Payables: Overstatement of Midvale Local Municipality liability Creditor's sec didn't have all the invoices as Midvale at the time of request. The matter was resolved with the inter-council indebtedness account reconciling. The department will vet recons prior submission of info for AFS preparation. Financial ServicesDerrick Maaroganye Nil The audit finding was resolved. The copy of the invoices and payments were provided as portfolio of evidence and were verified. 67. Non-disclosure of Operating Leases Ensure full compliance with GRAP 13. The excise can only be performed during the compilation of 2011/12 AFS Financial ServicesTsietsi Rafube Nil N/A Audit finding will form part of AG processes 68. Budget is not based on the development priorities and targets Tables SA4 to SA6 in the annual budget reconcile the strategic objectives in the IDP to the Budget. The tables indicate the funding for all strategic objectives as per the IDP. The Schedule will be completed again in the 2012 / 13 financial year and will be verified for correctness. Financial ServicesDobe Mokgethi Nil The finding was resolved, SA4 to SA6 which reflect how strategic objectives are funded by the budget was completed and that was approved by Council. Portfolio of evidence was provided ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

83 82 Audit FindingAction Plan Taken Cluster/Departme nt Employee in charge Resolved Partially Resolved Not Resolved Not Applicabl e for Reviewing Remark  N/A 69. Monthly budget statements not submitted in terms of S71 of MFMA S 71 reports have been submitted on a monthly basis. Starting January 2012 both the old formats as well as the format prescribed by the Municipal Budget and Reporting Regulations will be submitted to the National Treasury. Strict measures will be implemented to ensure that these reports will continue being submitted on a monthly basis. Financial ServicesDobe Mokgethi Nil The audit finding was resolved. Copies of S71 report were provided as Portfolio of evidence (Letter from Provincial Treasury that outline the information that was supported). 70. Unauthorized expenditure Transfer of amounts to relevant votes on a monthly basis to ensure that votes and sub-votes are not overspent. Financial ServicesDobe Mokgethi Nil N/A Audit finding will form part of AG Processes. 71. Incorrect allocation of the provision amounts The matter was resolved during the audit as the statements were updated with the recommendations of the AG. A repetitive review of the as will be undertaken before the submission to AG. Financial ServicesTsietsi Rafube Nil The audit finding was resolved during the audit and verification will be performed after tabling of Annual Report. 72. Deposit register not reconciled to the General Ledger The deposit register is updated daily as new leases or vacations are received and Reconciliation was perform on the monthly basic Financial Services Sam Mokoena/Gawi e Nil The finding was resolved and verification was conducted. 73. Vacant land charged refuse It is the basis of the valuation and the technical indication as (VL) that gives the status of the property as improved. Financial Services Sam Mokoena/Shak es Nil N/A The finding still not resolved, Management should review Rates Policy so as to address the tariff of Vacant land charged refuse. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

84 83 Audit FindingAction Plan Taken Cluster/Departme nt Employee in charge Resolved Partially Resolved Not Resolved Not Applicabl e for Reviewing Remark  N/A 74. Duplication in valuation roll Properties within the jurisdiction which are registered appear on the valuation roll. In community of property, both names will appear and only one account will be generated on the billing system. Financial Services Sam Mokoena/Laura Nil N/A Audit finding will form part of AG processes. 75. Meters in the upload file not linked to any meter number in the transaction file Errors corrected when picked up on the deviation report Financial Services Sam Mokoena/Nerina Nil N/A Audit finding will form part of AG processes. 76. Difference in readings as per upload file and the transaction file. Deviation report and test readings done monthly. Financial Services Sam Mokoena/Nerina Nil N/A Audit finding will form part of AG processes. 77. Disclosure for Property, Plant and Equipment The matter will be resolve during the preparation of Financial statement for 2011/12 Financial Services Tsietsi Rafube Nil N/A Audit finding will form part of AG processes. 78. Asset count not submitted to the CFO Assets verification will be conducted and report will be prepared. Financial Services Bernard Langa Nil  Progresses of the assets verification were conducted. Currently PWC has been appointed to assist Emfuleni with Property Plant and Equipment. Total Percentage 63%37% Number of audit findings remaining for retesting. 0 Percentage 0% ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

85 84 NumberAudit Finding Action Plan Taken Current Management Comment Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A Control environment: Information requested but not submitted for audit Financial Services 1. The Budget Office has a Budget Policy which is used as a guideline in the compilation of budgets. 2. The MFMA, MFMA Circulars and the Budget Regulations are guidelines to the Budgeting Process as well. 3. The IDP and Budget Process Plan detailing timeframes and deadlines for events within the budget cycle was also approved by Council in August The Budget Policy, MFMA Circulars 58 and 59, The Budget Regulations and the IDP/Budget Process Plan are attached as evidence. Dobe Mokgethi N/A Nil 1. Copy of Budget Policy and Council Resolution was provided as portfolio of evidence Quarterly reports were not submitted to the mayor Financial Services In terms of standing orders of Emfuleni Local Municipality The quarterly SCM reports serves at SMT, Section 80, MAYCO, and Council. All this committees have different dates which overlap beyond the 10 of every quarter. The Executive Mayor is the member of MAYCO and Council and the quarterly report serve in those committees. Thabo ThwalaNil  Partially Resolved. Quarterly reports were submitted to the Mayor, however the reports are not submitted within ten working days framework stated in the Supply Chain Management regulations 7 (3) Monthly reports were not submitted to the accounting officer Financial Services In terms of standing orders of Emfuleni Local Municipality The SCM reports serves at SMT, Section 80, MAYCO, and Council. The Accounting Officer is the member of SMT, MAYCO and Council and the reports serve in those committees. Thabo ThwalaNil  Partially Resolved. Monthly reports were submitted to the Accounting Officer, however the reports are not submitted within five working days framework stated in the Supply Chain Management regulations 5 (3) ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

86 85 NumberAudit Finding Action Plan Taken Current Management Comment Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A Variance between the creditors listing and the financial statements Financial Services Ensure that cut-off procedures are observed and adhered to by issuing out a Memo informing all departments about the yearend cut-off dates. The system must be temporarily closed after the cut-off date to prevent further processing Tsietsi RafubeNil N/A Creditors list will be ready on the 25 July Therefore finding will be verified after the completion of creditor's list therefore it will be subjected to AG processes Community not invited to make representations in connection with the 2009/2010 annual report Municipal Manager Matter was resolved, Currently ELM invited the community for participation through media (news paper, Local Radio, Emfuleni external News letter, etc) Henry De hartNil N/A Audit finding will form part of AG processes Completeness of finance lease disclosure Financial Services Ensure full compliance with GRAP 13. The excise can only be performed during the compilation of 2011/12 AFS Tsietsi RafubeNil N/A Audit finding will form part of AG processes Differences in amount disclosed as restructuring Grant Withheld and amount as per Correspondence with National Treasury Financial Services The matter was addressed during the audit. Tsietsi Rafube Nil The audit finding was resolved during the audit. This will form part of AG audit processes Differences in Grants opening balances Financial ServicesThis was resolved during the audit.Tsietsi Rafube Nil The audit finding was resolved during the audit. This will form part of AG audit processes Reconciliation between valuation roll and update on thereof on Venus not made available Financial Services The matter will be resolve during the preparation of Financial statement for 2011/12 Tsietsi RafubeNil N/A Audit finding will form part of AG processes Differences in grants reconciliation and grants receipts disclosed in the financials Financial Services The matter was resolved during the preparation of financial Statement for 2010/2011 Tsietsi RafubeNil N/A Audit finding will form part of AG processes. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

87 86 NumberAudit FindingAction Plan TakenCurrent Management Comment Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A Leave policy in draft Corporate Services Policy has been work shopped by Speaker. Mr. Vincent Phahlane Nil  The finding is partially resolved. Policy has been work shopped by Speaker Rentals agreement not signed by both the lessor and lessee EDP Properties: Agreements with outstanding rental amounts be investigated by Debt Collection. Properties: A. Streak Housing: F Human Nil  The audit finding is partially resolved. Current status was provided as portfolio of evidence Approval for cancellation of fines Public Safety There was SOP in place when the incidents occurred. The SOP will be amended to address the specific error that occurred and will be distributed to all personnel. There matter will be discussed with traffic division to inform their personnel about the correct procedure on how to cancel a document Wynand Pretorious Nil The finding was resolved, Copy of Standard Operation Procedures was provided as portfolio of evidence Rental agreements not received EDP Properties: Finance to be informed of agreements not valid anymore. Housing: Properties: A. Streak Housing: F Human Nil  The audit finding is partially resolved. Current status was provided as portfolio of evidence Insufficient controls around stock Financial Services Quarterly stock take will continues be done to detect discrepancy with the stock and to improve controls around stock Thabo Thwala Nil The audit finding was resolved, Quarterly stock takings were conducted. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

88 87 NumberAudit Finding Action Plan Taken Current Management Comment Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A No formal appointments of members serving on bid specification, evaluation and adjudication committee Financial Services Appointments of members serving on bid committees are done Thabo Thwala Nil The audit finding was resolved. Copy of formal appointment letter was provided as portfolio of evidence Extensions of contracts Financial Services Clusters or Department will be encouraged to do proper costs projections when doing planning of the projects. This will help to ensure that extensions of contracts are not encouraged. Thabo ThwalaNil N/A Internal Audit still verifying the audit finding raised Performance of contractors not monitored on a monthly basis Performance Management System/ Infrastructure Planning and Asset Management Department usually hold Project Steering Committee once a month whereby all Consultants and Contractors report on progress reports and verified all action taken during weekly projects meetings Khulekani Nxumalo Nil  Audit finding is partially resolved, not all performance of the contractors was monitored on a monthly basis Bid awarded other than the one recommended by bid evaluation All DMM's Should the Bid be awarded to other than one recommended by Bid Evaluation Committee, section 114 (1) & (2) of MFMA No. 56 of 2003 should be complied with. For this finding the National Treasury, Provincial Treasury and Auditor General were not informed and section 114 (2) of MFMA No. 56 of 2003 was applied to rectify an irregularity. Thabo ThwalaNil N/A Internal Audit could not provided assurance as the tender file could not be provided by SCM. The file is still with Ratanang Balances disclosed on the financial statement with no supporting evidence (Debt Management & Sports and Recreation) Financial Services The matter will be resolve during the preparation of Financial statement for 2011/12 Tsietsi RafubeNil N/A Audit finding will form part of AG processes. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

89 88 NumberAudit Finding Action Plan Taken Current Management CommentEmployee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A Assets not bar-coded on the asset register Financial Services Assets Register will be updated by Management after Auditor General express the opinion Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register Completeness of asset register-other assets Financial Services Consultants (PWC) has being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard LangaNil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register Non compliance with section 62(1)(d). Financial Services Develop a policy on unauthorised, irregular, fruitless and wasteful expenditure. Design a register to populate these expenditure and distribute it to different clusters for identification. Tsietsi RafubeNil  Irregular or Fruitless and Wasteful expenditure Register was developed and submitted to the relevant management however monitoring and evaluation???? Non compliance with Section 65(2)(e) Financial Services Put strategy to improve cash flow through revenue enhancement and cost cutting measures. Derrick MaaroganyeNil N/A The audit findings may not be resolved due to the Financial constrains Finance lease - Appendix A not agreeing to the Trial Balance Financial Services The matter was resolved during the audit as the statements were updated with the recommendations of the AG. A repetitive review of the AFS will be undertaken before the submission to AG. Tsietsi Rafube Nil The audit finding was resolved during the audit. This will form part of AG audit processes Minimum bank accounts not kept Financial Services Still not in agreement with the AG. Write a correspondence to AG to validate the finding and give appropriate recommendation Tsietsi RafubeNil N/A Management did not agree with the audit finding raised. Therefore the finding is not applicable for verification. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

90 89 NumberAudit Finding Action Plan Taken Current Management Comment Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A Late Submission of the details of new bank account Financial Services Obtain a list of all banking details each month and report new accounts to AG and Provincial Treasury. Tsietsi Rafube Nil Resolved, letter was submitted Provincial Treasury and Auditor-General. (P.O.E sent) Incorrect tariffs used Financial Services Sam Mokoena/Laura Nil N/A Audit finding will form part of AG processes Supporting documentation not provided for audit purposes (Expenditure Management) Financial Services Proper record keeping procedures are currently implemented and in place to maintain and safeguard information for easy access. Derrick Maaroganye Nil The finding resolved as per our selected sample Mid-year budget and performance assessment report not placed on the municipality's website Municipal Manager Midyear budget and Midterm SDBIP was placed in the Emfuleni Municipality website. Paseka Rakosa Nil The audit finding was resolved. Printout of website was provided as portfolio of evidence Security Management Municipal Manager The Issue was raised with BCX who are the vendor of the Venus system. Their response to this issue was forwarded to the AGSA. The IT section cannot do any alterations to the system as they have no rights. BCX felt that this could not be done for reasons. Attached find the documents from BCX Marked as BCX109 CIONil  Draft security Management policy was developed still awaiting for council approval. NumberAudit FindingAction Plan TakenCurrent Management Comment Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A Late Submission of the details of new bank account Financial Services Obtain a list of all banking details each month and report new accounts to AG and Provincial Treasury. Tsietsi Rafube Nil Resolved, letter was submitted Provincial Treasury and Auditor-General. (P.O.E sent) Incorrect tariffs used Financial Services Sam Mokoena/Laura Nil N/A Audit finding will form part of AG processes Supporting documentation not provided for audit purposes (Expenditure Management) Financial Services Proper record keeping procedures are currently implemented and in place to maintain and safeguard information for easy access. Derrick Maaroganye Nil The finding resolved as per our selected sample Mid-year budget and performance assessment report not placed on the municipality's website Municipal Manager Midyear budget and Midterm SDBIP was placed in the Emfuleni Municipality website. Paseka Rakosa Nil The audit finding was resolved. Printout of website was provided as portfolio of evidence Security Management Municipal Manager The Issue was raised with BCX who are the vendor of the Venus system. Their response to this issue was forwarded to the AGSA. The IT section cannot do any alterations to the system as they have no rights. BCX felt that this could not be done for reasons. Attached find the documents from BCX Marked as BCX109 CIONil  Draft security Management policy was developed still awaiting for council approval. ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

91 90 NumberAudit FindingAction Plan TakenCurrent Management Comment Employee in charge Resolved Partially Resolved Not Resolved Not Applicable for Reviewing Remark  N/A User Access Control Municipal Manager/Informatio n Technology This will form part of the IT assessment and review and IT strategy development. Current status: Unix, Access control procedures are documented for Payday and Venus. The IT usage approved policy control is available and have been in use since the year CIO Nil The finding was resolved, Adding and Modifying is the same procedure. Removal of users are done when personnel resigns/ retire or deceased upon request form pay office informing IT User Access Control Municipal Manager/Informatio n Technology The changes to these items were discussed with BCX who is the vendor of this system. As BCX does all changes and database administration on the system this would have been done via an upgrade to Solaris 5.9 operating system. This could not be done for reasons as set out in the letter (Marked as BCX 111) in the attached file. CIONil  IT to discuss the finding with Business Connexion as they are the once having database administration rights Program Change Management Municipal Manager/Informatio n Technology The requested Procedures have been developed and implemented by IT. Proof is marked Change Management112 in attached file CIO Nil Change management procedure have been developed and approved by IT Management Information Technology Service Continuity Municipal Manager/Informatio n Technology The Disaster recovery plan for PAYDAY was developed, implemented and tested by IT. Finalised The test results and proof is marked PAYDAY DRP113 in the attached file. CIONil  DRP plan was in place for Venus and Payday system and were tested, however BCP was still not developed, Management committed to develop an ogranogram BCP by Service provider (Umnombo) ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

92 91 NumberAudit FindingAction Plan Taken Current Management Comment Employee in charge Resol ved Partial ly Resol ved Not Resolv ed Not Applicable for Reviewing Remark  N/A Information Technology Governance Municipal Manager/Information Technology The IT Steering Committee have not been fully functioning. Only one meeting was held during the current financial year as at May CIO Nil Resolved, meetings held on 30 September 2011, 9 December 2011, 25 May.2012 The IT Department is still not being fully capacitated. The intenda system has been shut down and no longer in use. Nil N/A CIO has been appointed and currently Emfuleni Local Municipality and Sedibeng District still busy negotiating to move IT department to Emfuleni. Payday user Account Management Nil Resolved – account management is now done by IT Asset Management Department Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology. Bernard Langa Nil N/A Assets Register of IT department will form part of AG process Total Percentage 56%40% 4% Number of audit findings remaining for retesting. 0 Percentage 0% ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

93 Road Map to an Unqualified Audit GRAP 17 Compliant Assets Register - Aug 2012 SCM capacity and Regulatory Compliance - Aug 2012 Financial Sustainability & Revenue Completeness - Aug 2012 PMS & Capacity - Aug Sumission of Annual report - On time submission of AFS Strengthening Governance Project Management 92

94 Road Map to an Unqualified Audit GRAP 17 Compliant Assets Register - Aug 2012 SCM capacity and Regulatory Compliance - Aug 2012 Financial Sustainability & Revenue Completeness - Aug 2012 PMS & Capacity - June Sumission of Annual report - On time submission of AFS Strengthening Governance Project Management Interventions: Engagement with AG on compilation of AR during 2011/12 – Completed Revised asset valuation method - Completed Submission of Assets register to AG - 30 Aug Computerized Assets Inf Syst (IQMS) – In progress Interventions: Engagement with AG on compilation of AR during 2011/12 – Completed Revised asset valuation method - Completed Submission of Assets register to AG - 30 Aug Computerized Assets Inf Syst (IQMS) – In progress 93

95 Road Map to an Unqualified Audit GRAP 17 Compliant Assets Register - Aug 2012 SCM capacity and Regulatory Compliance - Aug 2012 Financial Sustainability & Revenue Completeness - Aug 2012 PMS & Capacity - June Sumission of Annual report - On time submission of AFS Strengthening Governance Project Management Interventions: Decentralisation of SCM – Aug Deadline Capacitation – Skills – In progress Creation of Contract Mngt – In progress Review of SCM policy – In progress Data base clean up – Partially completed Price benchmark implementation (value for money ) - Completed Interventions: Decentralisation of SCM – Aug Deadline Capacitation – Skills – In progress Creation of Contract Mngt – In progress Review of SCM policy – In progress Data base clean up – Partially completed Price benchmark implementation (value for money ) - Completed 74

96 Road Map to an Unqualified Audit GRAP 17 Compliant Assets Register - Aug 2012 SCM capacity and Regulatory Compliance - Aug 2012 Financial Sustainability & Revenue Completeness - Aug2012 PMS & Capacity - June Sumission of Annual report - On time submission of AFS Strengthening Governance Project Management Interventions: Meter Audit, verification and data clean-up – In progress Accounts reconciliation – On going Segment customers – In progress Appointment of debt collecting agencies - Completed Restructure the debtors book – Process to be reviewed Creation of Revenue Agency – in progress (50%) Review Tariffs and funding model – In progress DSM interventions (water & elec loss reduction) – in progress Appointment of key personell in revenue - Complete Interventions: Meter Audit, verification and data clean-up – In progress Accounts reconciliation – On going Segment customers – In progress Appointment of debt collecting agencies - Completed Restructure the debtors book – Process to be reviewed Creation of Revenue Agency – in progress (50%) Review Tariffs and funding model – In progress DSM interventions (water & elec loss reduction) – in progress Appointment of key personell in revenue - Complete 95

97 Road Map to an Unqualified Audit GRAP 17 Compliant Assets Register - Aug 2012 SCM capacity and Regulatory Compliance - Aug 2012 Financial Sustainability & Revenue Completeness - Aug 2012 PMS & Capacity - June Sumission of Annual report - On time submission of AFS – Aug 2012 Strengthening Governance Project Management Interventions: Allignment of KPI’s with IDP Review of KPI’s Review of IDP & SDBIP Submission of Performance Information for Audit by Aug 2012 Interventions: Allignment of KPI’s with IDP Review of KPI’s Review of IDP & SDBIP Submission of Performance Information for Audit by Aug % complete 96

98 Road Map to an Unqualified Audit GRAP 17 Compliant Assets Register - Aug 2012 SCM capacity and Regulatory Compliance - Aug2012 Financial Sustainability & Revenue Completeness - Aug 2012 PMS & Capacity - June Sumission of Annual report - On time submission of AFS Strengthening Governance Project Management Interventions: Functionality of Sect 80 /79 Committees and Other Committees esp MPAC Interventions: Functionality of Sect 80 /79 Committees and Other Committees esp MPAC 100% complete 97

99 Road Map to an Unqualified Audit GRAP 17 Compliant Assets Register - Aug 2012 SCM capacity and Regulatory Compliance - Aug 2012 Financial Sustainability & Revenue Completeness - Aug 2012 PMS & Capacity - June Sumission of Annual report - On time submission of AFS Strengthening Governance Project Management Interventions: Establishment of IPAM Development project mngt framework/system Implementation of contract mgt Implementation of ePmLive Interventions: Establishment of IPAM Development project mngt framework/system Implementation of contract mgt Implementation of ePmLive 70% complete 98

100 CHALLENGES,WAY-FORWARD AND PRIORITIES 99

101 CHALLENGES Billing and non payment of services – R2.6 billion Debtor’s Book High Water and Electricity Losses, theft and non payment  Water (66% ) = R241 million  Electricity (11%) = R60 million Skills shortage and high vacancy rate In adequate Funding – High indigence Infrastructure Back log – R20 billion Non payment for Services in former black townships – No Metering Unfunded Mandates – Provincial Functions (Health, Libraries & Facilities) Arrear Government Accounts – R44 million Insufficient Cash Flow – Overdraft facility of R150 million raised as at 01 July 2012 Data Integrity Customer Services Ethos Amongst Staff 100

102 WAY FORWARD & KEY PRIORITIES Ring-fence the revenue function  Establish a customer call and walk in center Meter verification and data clean up (Meter audit)  Installation of meter at un-metered areas  Ensuring accuracy of meter readings at the right time.  Addressing internal control deficiencies Improvement of Revenue Collection  Impose Stringent Credit Control Measures  Appoint collecting Agencies for all debt  Restructuring of Debtors’ book Address all AG Findings Obtain an Unqualified Audit 2011/ Intend

103 WAY FORWARD & OTHER PRIORITIES Upgrade and Maintain infrastructure through MIG – R Allocation for Basic Service Delivery Programs Enforce all Municipal By-Law by creating a super by-law enforcement unit Review Organizational Structure (People, Processes & Systems) Implement Demand Side Management Partnerships to Reduce Water and Electricity Losses  Water = Reduce by 25%  Electricity = Reduce by 5%  Waste= Reduce waste to landfill sites by 5 to 10% 102

104 THANK YOU AND SINCERE APOLOGIES!! FROM EXECUTIVE MAYOR 103


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