Standing Committee on Appropriations Audit Outcomes 2010-11 City of Tshwane 16 October 2012

Reputation promise/mission The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

Brief to AGSA To give a overview on the audit outcomes of 2010-11 of the following municipality: City of Tshwane Metropolitan Municipality

MFMA audit outcomes Municipality 2010-11 2009-10 2008-09 2007-08 2006-07 City of Tshwane Metropolitan Municipality Financially unqualified with findings Qualified

Highlights of concerns/ interventions Mayors and Councillors need to take ownership of key controls Supply chain management Some improvement Predetermined objectives Some improvement HR No material findings IT controls No improvement Material errors in AFS submitted for audit No Improvement Supply chain management – Minimal improvement. Irregular expenditure identified compared with prior year reduced, however legacy issues (multi-year contracts) remained a challenge for the City Predetermined objectives – 2009/10 the AOPO findings related to City of Tshwane. In 2010/11 the AOPO findings included in the reports related to the findings on PO for entities. COT managed to address their AOPO findings. IT controls – same findings have been reported and not adequately addressed. AFS subject to material adjustments. Lack of consequence for non-adherence/ lack of accountability to achieve clean audits as opposed to financially unqualified with findings City of Tshwane Metropolitan Municipality remained unchanged. Compliance with laws and regulations were not adequately reviewed and monitored, financial statements were subject to material amendments and AOPO findings on entities prevented a clean audit opinion.

Status of key focus areas for oversight and governance structures - City of Tshwane Metropolitan Municipality Supply chain management Some Improvement Awards were made to providers who are persons in service of the municipality (41 employees) or other state institutions (127 instances) Irregular expenditure incurred as results of non-compliance with section 36(1) of SCM policy Predetermined objectives Some improvement AoPO findings were raised at Housing Company and Sandspruit works, on presentation and usefulness of planned and reported targets (70% of targets were not measurable and time bound) as well as the reliability of actual reported performance (29% were not valid and accurate when compared to source information. HR No material findings IT controls No improvement At Tshwane the general control environment has shortcomings relating to security management, user access controls, IT service continuity (i.e. the Disaster Recovery Plan for IT department) and network review process. Material errors in AFS submitted for audit No improvement Material corrections to the annual financial statements included: Incorrect classification of investment property Unrecorded liabilities Unrecorded intangible assets

Progress towards clean audits – City of Tshwane Metropolitan Municipality Leadership Mayor continues to chair the OPCA committee and OPCA officials have been appointed in the city. Implement effective oversight over municipal entities through internal audit function and internal audit is involved in preparation of quarterly key controls. Financial and performance management Training on Audit of Predetermined Objectives was provided by Auditor-General to internal auditors of Tshwane Monthly financial statements are tabled at the audit committee and Mayoral committee Monthly reporting on unauthorised, irregular and fruitless and wasteful expenditure and deviations to council.  Training for municipal officials was provided to raise awareness about compliance with SCM legislation. SCM has drafted an action plan to address prior year findings. CAAT’s procedures used by Tshwane to identify possible conflict of interests for employees in service of the municipality.

Concerns from latest key control assessment Leadership Performance reporting is not being done on a timely basis by all departments within the city. IT findings are still in process of being addressed. Financial and Performance Management Revenue reconciliations on assessment rates are not done on a regular basis. IT access controls to SAP systems remains a problem. Governance Fraud prevention plan have not yet been communicated to employees to create awareness

End of presentation Thank you