1. www.salga.org.za MUNICIPAL AUDIT SUPPORT – THE NEED FOR COORDINATED AND FOCUSED SUPPORT JULY 2015

2. www.salga.org.za 1 INTRODUCTION  Audit outcomes  A manifestation of broader institutional dynamics  Backward looking and after-the-fact reflection  No forward looking intelligence and mechanism to deal with challenges before they occur (quarterly dashboards?)  Not only capacity but more critically oversight and accountability key in the equation  Management of consequences of issues giving rise to poor audit outcomes is imperative  Balanced focus on financial viability and institutional viability (governance vs management)

3. www.salga.org.za MUNICIPAL AUDIT SUPPORT  We all talk of focused and coordinated support  What does it mean?  On whose terms?  How to measure progress  As Salga we propose:  Complementary and coordinated role to DCOG and NT  Complementary and coordinated role to PCOG and PT  20 years of support – 20 years of perennial challenges 2

4. www.salga.org.za MATTERS TO CONSIDER  Audit Outcomes have a bearing on the stability of our country and on service delivery  3 issues that are recurring: -Quality of Appointments at all levels -Administrative vs Political Stability -Training is not a panacea or silver bullet  Continuous financial and legislative regulatory reform Agenda in Local Government and Public Sector -SCOA -Financial Misconduct Regulations; POPI 3

5. www.salga.org.za WHY COORDINATED and FOCUSED SUPPORT?  Avoid duplication  Avoid confusion  Support can be more effective and efficient  Municipalities will be more receptive if they understand what each stakeholder is doing  Support stakeholders can provide the support in the areas where they are experts in  Communication on scope will be clear  Measuring and monitoring impact will be easier and meaningful  Accountability and willingness on the part of the recipient municipality is easier to assess 6

6. www.salga.org.za WHAT IS TO BE DONE?  Stakeholder engagement in an effort to understand what has happened, what is happening and what is planned. Also to establish/support a forum for coordination. OTPs seem to be playing a key coordinating role in Provinces.  SALGA plans to play a complementary and also a differentiated role to other stakeholders  SALGA wants to focus on those Municipalities with Adverse or Disclaimer opinions  Ideally SALGA wants in time to come a situation where Municipalities engage proactively on what THEY NEED (self diagnosis)! 7

7. www.salga.org.za MASP Institutional Capacity Financial Management Leadership Governance MASP follows a multidisciplinary approach that is based on 4 Pillars. We believe that all four pillars in a Municipality need to be strong and functioning effectively in order for a Municipality to obtain and sustain unqualified audits and good service delivery SALGA is confident that the MASP based on the 4 Pillars of Support covers the risk areas and root causes identified by the AGSA as well as the three aspects audited.

8. www.salga.org.za PARI RESEARCH  The goal was to investigate the underlying causes of poor audit outcomes in local government and to use the findings of this empirical research to produce targeted, evidence-based proposed support  The aim of the research was to obtain insights in the following areas: –Institutional histories of poorly performing municipalities –Institutional dynamics and complexities around leadership –Basic administration and record keeping –Oversight and compliance

9. www.salga.org.za RED ZONE MUNICIPALITIES  Eastern Cape - 13  Free State - 9  Gauteng - 1  KwaZulu Natal - 3  Limpopo - 8  Mpumalanga - 5  North West - 9  Northern Cape - 12

10. www.salga.org.za APPROACH  Information was collected through the analysis of existing reports, and direct qualitative data tools – a detailed questionnaire, structured discussions and observation.  A SALGA official together with a PARI researcher visited the municipalities. Interviews were conducted, and additional information collected through direct workplace observation.  All interviews were confidential and mostly individual  We adopted a flexible approach: Not all officials were available at all municipalities, and other officials were interviewed as the process unfolded.  We also had access to the workplace, document management systems, and similar facilities.

11. www.salga.org.za SUMMARY OF KEY FINDINGS 13/14 PARI Lack of Evidence – Records Management Asset Management High Administration and Oversight Budget Reliance on Service providers – capacity issue Inadequate Level of Technical Skills of Councilors Level of oversight possible Functionality Internal Audit, Audit Committees and MPAC Lack of business processes Lack of coordination of support AG – Cost and use of Junior Staff National Treasury Training or Hands on Support on Record Keeping 167 Municipalities have plan of action for AFS preparation 95 Municipalities do not have officials capable of AFS preparation Asset Management Co-operation finance and operation managers Auditor General Inadequate record keeping to support disclosures Reliance on consultants Procurement and contract management processes Slow progress of political and administrative leadership to address root causes of poor audit outcomes Inadequate consequences for poor performance and transgressions Inadequate internal controls and basic controls (daily discipline) Level of assurance by ALL role players Non compliance with legislation 11

12. www.salga.org.za DELIVERY VEHICLES 12 Records Management Performance Management Reporting Expenditure Management MPAC Functionality Hands on support Expenditure Management Asset Management Revenue Management MPAC Functionality Accountability and Consequence Management Peer-learning Audit Trainee Finance for Councillors Records Management Audit File Preparation Oversight Conference Workshops Profiling, Collaboration and Continuous Communication Compliance Checklists / Self Assessments Database of Policies, Procedures, Systems Descriptions, Frameworks Technical Support Helpdesk Other

13. www.salga.org.za 13 T E MASP M S (T argeted, E vidence-based, A ction-orientated, M ulti- disciplinary, M ulti-stakeholder S upport )

14. www.salga.org.za WAY FORWARD  Operationalise the multi-disciplinary and multi-stakeholder way (TEAMMS)  Standard Operating Procedures  (assist in co-ordination)  Implementation Plans – per municipality  Partnerships 14

15. www.salga.org.za THANK YOU 9

16. www.salga.org.za 16