Module 4: Governance Structures and their responsibilities under the MFMA 1

1. Introduction The local government system is faced with enormous challenges in its pursuit to live up to its increasingly complex and widening role in service delivery Municipalities are increasingly challenged by ineffective municipal governance structures. Poor financial management is one of the major concerns Lack of ethical leadership is increasing polluting the local government environment Lack of consequences for non adherence or lack of accountability

2. Accountability and Oversight What is accountability? ‘accountability is an obligation to answer to someone with authority for the execution of one’s assigned responsibilities’ What is oversight? ‘oversight is the means by which accountable persons are called to account’ Elements of oversight A principal and An Agent 4.6.1 Elements of accountability A principal with authority, means and clear objectives who appoints an agent to achieve objectives An agent who is appointed to achieve the principal’s objectives who is given the authority and means to do so Agree on: Standards by which to measure performance Systems to gather and report on performance Review and oversight processes Sanctions for poor performance

3. MFMA and Accountability Object of Act 2. The object of this Act is to secure sound and sustainable management of the fiscal and financial affairs of municipalities and municipal entities by establishing norms and standards and other requirements for— (a) ensuring transparency, accountability and appropriate lines of responsibility in the fiscal and financial affairs of municipalities and municipal entities; Level of accountability substantiated & best illustrated in section 79(3)(e) of MFMA. 4.6.1 Elements of accountability A principal with authority, means and clear objectives who appoints an agent to achieve objectives An agent who is appointed to achieve the principal’s objectives who is given the authority and means to do so Agree on: Standards by which to measure performance Systems to gather and report on performance Review and oversight processes Sanctions for poor performance

4. MFMA and protecting the public purse Protecting the public purse requires the right Policies Processes People Practices MFMA regulates the first three of these aspects The greatest challenge in local government is implementation translating policy into practice through the processes implemented by people

5. Importance of Oversight To detect and prevent abuse, arbitrary behavior or illegal and unconstitutional conduct on the part of the government and public agencies. To hold the government to account in respect of how the tax payers money is used. To ensure that policies announced by government and authorised by Parliament are actually delivered. To improve the transparency of government operations and enhance public trust in the government, which is itself a condition of effective policy delivery.

6. Oversight process Is about enforcing the implementation of agreed policy It is exercised through out the year Legislative Frameworks also allows the Provincial Executive to dissolve council if it fails to fulfill its oversight role In simple terms, it is about Identify problems Provide remedies (timeously reacting to situations to mitigate risks and taking the necessary corrective actions to address non-performance) create an environment that is conducive to good financial management and service delivery strengthen the accountability and responsibility of management

7. Principals and agents – role-players in protecting the public purse Within the municipality: Citizens voters, ratepayers, community groups, political parties Customers households, businesses, institutions Councilors Municipal council Committees of council MPAC Auditor-General Mayor Mayor’s executive committee Municipal manager – accounting officer Chief financial officer S57 managers Other municipal officials External to municipalities Provincial executive Dept of local government Provincial treasury National executive Dept of Co-operative Governance National Treasury Water, transport, housing NERSA Provincial legislatures Parliament SALGA

8. Role players legislative mandates All responsibilities are spelt out in legislation Mayors – ss.52-59 of the MFMA Accounting Officers – ss.60-76 of the MFMA Other officials – ss.77-79 of the MFMA CFO, Budget and Treasury Office – ss.80-83 of the MFMA Oversight – MFMA section 129 Councils – Constitution and LG legislation Councilors – Code of Conduct in the Structures Act

9. Financial Governance Promote transparency, accountability and oversight Effective management of Revenue, Expenditure, Asset mgt. and Liabilities Proper budgeting and planning Ensuring a procurement process that is: Fair; Equitable; Transparent; Competitive; and Cost effective. Meeting the service delivery imperatives

10. Financial Governance Framework in LG The separation of roles between the council and administration is intended to strengthen the oversight function of councillors. Good governance and effective oversight and accountability are predicated on there being this separation of functions. It is fundamental for the achievement of the objects for local government in the Constitution relating to a democratic and accountable system of local government. Council oversees the performance of the administration through council and committee meetings. The mayor provides the link between the council and administration and is responsible for regular monitoring and for tabling reports before the council. Therefore, the administration is responsible for the day-to-day operations. This separation avoids conflict of interest and a "referee/player" situation arising. The MFMA further assumes a separation between councillors serving on the executive (i.e. mayor or executive committee) and non-executive councillors. This separation is vital to ensure council maintains oversight for the performance of specific responsibilities and delegated powers to the mayor or executive committee. The MFMA gives council a number of financial management tasks to fulfil its oversight role. The adoption of an "Oversight Report" is one such task. The diagram on the following page illustrates the various oversight intervention points from the adoption of the Integrated Development plan (IDP), Budget, Annual Report and Oversight Report.

11. Accountability Framework in LG

12. Accountability relationships Council Auditor-General Executive Independent, objective information Transparency Audit Audit Reporting Constitutionally empowers Conferred Responsibility Accountability reporting Political Operational Policy Direction and Oversight 13

13. The accountability cycle IDP Budget SDBIP In-year reporting Annual financial statements Annual report Five-year strategy Three-year budget Annual implementation plan Implementation monitoring Accountability reporting Oversight report Organisational structure aligned to services Sound municipal policies, processes and procedures Performance information

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