1. Department of local Government and Housing Action plan in response to the Auditor General’s Report for the financial year 2010/11
4th September 2012
Cape Town
2018/05/23

2. Overview
Background
Mandate, Key Outputs, Achievements, Challenges, Possible Solutions, Key Delivery Agents
Departmental Plan
Overview of Qualified Municipalities
Key Issues of Concern
Support provided by the DLGH
Joint Programmes with Gauteng Treasury
Way Forward
Challenges
2018/05/23

3. BACKGROUND Core Functions of the Department include the following:-
Support and Strengthen the capacity of municipalities to manage their own affairs; exercise their powers and perform their functions;
Draft Provincial Legislation that affects the status, institutions, powers or functions of Local Government;
Monitor, support and promote the development of local government and see to the effective performance by municipalities of their functions as per Schedule 4 and 5

4. MANDATE Constitutional Mandate:-
Section 154(1):- Support and Strengthen the capacity of municipalities to:-
Manage their own affairs,
Exercise their powers and
Perform their functions

5. LEGISLATIVE MANDATE Act Purpose
Act
Purpose
Municipal Structures Act (No. 117 of 1998)
The Act provides for the establishment of municipalities in accordance with the requirements relating to categories and types of municipalities.
Municipal Systems Act (No. 32 of 2000)
The Act provides a framework for the provision of services, service delivery agreements and municipal service districts to provide for credit control and debt collection
Municipal Finance Management Act (No. 56 of 2003)
The Act establishes norms and standards for the management of the revenue, expenditure, assets and liabilities, and financial dealings of municipalities and municipal entities.
Gauteng Traditional Leadership and Governance Act (No. 4of 2010)
Provides for the establishment and recognition of traditional communities in the Province

6. POLICY MANDATE Some of the key policy mandates are outlined below:
Policy
Purpose
Local Government Turn-around Strategy (LGTAS)
The LGTAS seeks to implement a comprehensive but differentiated programme of action to achieve the objective of enabling municipalities to meet the basic service needs of communities
The Global City Region (GCR) Perspective
The key objective is to reduce unemployment and poverty by promoting economic growth, integrated strategies and joint planning between the different spheres of government.
Funding model for ward committees
Provides for and guides the implementation of support of functionality of ward committees through budgeting for stipend and other resources required for ward committee operations.
Revised National Capacity Building Framework Draft 4
The policy recognises three elements of capacity which impacts on the ability of municipalities to provide services and they are the individual, institutional and environmental capacity

7. OUTCOME AND OUTPUTS
Responsive, accountable, effective and efficient local government system:-
Differentiated approach to municipal financing, planning and support
Improving access to basic services
Implementation of the Community Work Programme (Responsibility of DED)
Actions supportive of the human settlement outcomes
Deepen democracy through a refined ward committee model
Administrative and financial capability
Improved coordination of interventions impacting on Local Government

8. KEY DELIVERY AGENTS
Revenue Enhancement and Debtor management: Department of Finance
Operation Clean Audit: Department of Finance
National Department of Traditional Affairs
National Department of Cooperative Governance

9. Background – Audit Outcomes
Of the 15 audited municipalities,
9 Unqualified:- COT, Ekurhuleni, Metsweding, Westrand, Sedibeng, Midvaal, Lesedi, Westonaria and Merafong
6 were qualified:- Mogale City, Emfuleni, COJ, Nokeng, Randfontein and Kungwini
0 disclaimers or adverse
2018/05/23

10. Background – Audit Outcomes
2 Regressions:
Randfontein and Nokeng Local municipalities regressed from financially unqualified to qualified.
There has been a general regression in Gauteng as can be seen in the table below
However, Gauteng municipalities have met the target of achieving no disclaimers and adverse opinions
2018/05/23

11. Background – Audit Outcomes
Status Quo of audit Outcomes
FINANCIAL YEAR
MUNICIPALITY
2007/8
2008/9
2009/10
2010/11
CITY OF JOHANNESBURG
UNQUALIFIED
CLEAN AUDIT
QUALIFIED
CITY OF TSHWANE
EKURHULENI
METSWEDING DISTRICT
NOKENG TSA TAEMANE
DISCLAIMER
KUNGWINI
SEDIBENG DISTRICT
EMFULENI
MIDVAAL
LESEDI
WEST RAND DISTRICT
MOGALE CITY
RANDFONTEIN
QULAIFIED
WESTONARIA
MERAFONG

12. Overview of Qualified Municipalities
The City of Johannesburg (COJ) obtained a qualified audit opinion on
revenue and receivables with other matters.
leave liability was also raised at COJ.
Kungwini was qualified on
revenue and consumer debtors.
Nokeng was qualified on
lack of monthly reconciliations resulting in unreconciled differences between the cash book and the financial statements.

13. Overview of Qualified Municipalities
Emfuleni, Randfontein, Mogale were qualified on Capital assets (Property, plant and equipment)
Randfontein municipality was unable to fulfill the requirements of GRAP 17 due to lack of adequate skills to interpret GRAP standards .
In Emfuleni and Mogale City the qualification on GRAP 17 compliance related to lack of documentation to support balances and adjustments of property plant and equipment.
2018/05/23

14. Overview of Qualified Municipalities
Material adjustment to financial statements
Reporting on pre-determined objectives (Performance information)
Distribution losses: an estimated R3 billion in lost revenue for all Gauteng municipalities
Human Resource management: vacancies at some of the municipalities in key finance units positions
2018/05/23

15. Key Issues of concern
Information Technology: The general control environment across all municipalities has shortcomings relating to:
Security management
Access controls
IT services continuity ( i.e. the disaster recovery plan) and
IT governance.
2018/05/23

16. Key Issues of concern
Supply Chain Management (SCM) findings identified were as follows:
Reasons for deviation that do not meet the requirements of SCM regulation 36,
Advertisement for tenders less than minimum period
No competitive bidding process for other awards
Three quotations not obtained
Tender process not followed for awards that are required by the legislation
Inadequate contract management resulting in deviations to SCM as contracts are not managed properly towards the end of their terms.
2018/05/23

17. Operation Clean Audit (OPCA) Hands on Support
2018/05/23

18. OPCA Hands on Support
OPCA targeted Hands on support to address AG issues is being implemented across Gauteng Local Municipalities. Particular focus was give to, Randfontein, Westonaria, Mogale City, City of Tshwane and Emfuleni municipalities
Primary focus areas of support are:-
Internal Controls
Assets
Oversight
Revenue Management
Capacity Building – Scarce and Critical Skills
Performance Information and;
Annual Financial Statements
Integration of the Financial system data- City of Tshwane
2018/05/23

19. Progress on OPCA Hands on Support
Randfontein local municipality:
The Municipality has identified capacity needs in various areas
where resources were made available to provide hands on support. To
date, support was provided in the following areas:
Capitalization of Moveable Assets
Debtors data clean up and Revenue Analysis
Audit of Action Plans
Revenue Data Capturing
Data clean up and inactive debtors’ analysis and write offs
Capturing of backlog traffic fines into the system to ensure completeness of revenue
2018/05/23

20. Progress on OPCA Hands on Support
Tshwane Metro Municipality (CoT):
The Municipality identified capacity needs in various areas where resources were
made available to provide hands on support. To date, support was provided in the
following areas:
Analysing revenue exception reports generated by Computer Assisted Auditing Techniques program
Development of a Compliance checklist
Creditor’s Reconciliations
Asset verification on movable assets and operational leases
15 deployees were allocated to assist with verification of over movable assets for the city of Tshwane at different locations in the period June / July 2012

21. OPCA Provincial Coordinating Committee
2018/05/23

22. OPCA Provincial Coordinating Committee (OPCC)
The OPCA PCC was established by the premier within the IGR framework act.
It was established to monitor the implementation of OPCA within municipalities as well as provincial departments within the province.
All Gauteng Municipalities are required to present to the OPCA PCC on the progress made in addressing AG issues as well as progress towards achieving clean audits.

23. OPCA Provincial Coordinating Committee (OPCC)
The OPCA PCC also serves to streamline the support from various stakeholders to municipalities.
The stakeholders that sit in the OPCA PCC are
Local Government and Housing,
Gauteng Treasury,
National COGTA and;
SALGA
The stakeholders also present the progress made in supporting municipalities to achieve clean audits

24. Internal Audit and Audit Committee Shared Services – Progress to date
2018/05/23

25. Shared Services – Progress to date
Purpose of project.
To establish the feasibility and viability of implementing shared services for internal audit units and audit committee within the West Rand Region.

26. Shared Services – Progress to date
The study concluded that it is feasible and cost effective to establish a shared services model in the Westrand.
The outcomes of the study were then presented to the municipal managers and mayors within the West Rand Region.
The findings were also presented to the regional transformation committee, which is made up of mayors, MMCs finance, and municipal managers of all the municipalities in the Westrand.
The transformation committee approved that the shared services be established, however the individual municipalities need to take council resolutions to implement .

27. Asset management support

28. Asset management support – Progress to date
The Department identified assets management (with focus on GRAP 17 compliance) as a high risk area in Emfuleni and Westonaria.
Financial support was provided to the municipalities in this regard.
Service providers were contracted by the respective municipalities to compile a GRAP 17 asset registers for both infrastructure and movable assets. Both the asset registers were completed in 2011.

29. Asset management support – Progress to date
In Emfuleni there were still areas that needed to be resolved regarding the calculation methodologies as well as supporting documentation for opening balances. As a result the municipality was qualified in the area of asset management
Consequently, the Price Water Coopers contract was extended to address the issues of qualification as well as to update the asset register with new assets that the municipality procured post the compilation as well as library books.
Significant progress has been made in this regard
The Westonaria project fully achieved its objective and the municipal audit outcome was positive.

30. Implementation of the Scarce and Critical Skills Strategy

31. Implementation of the Scarce and Critical Skills Strategy – Progress to date
The training embarked on in partnership with AAT and SAICA resulted in approximately 550 financial professionals being trained in basic finance
Training and mentoring in the areas of municipal officials and politicians in auditing, supply chain management, finance for oversight committees, Integrated Development Planning with focus on linking budget to the IDP
Fully established and trained MPAC members. The format of the training was workshops with the AG and Provincial SCOPA and a formal accredited training with Regennesys.
2018/05/23

32. Human Resource and Performance Management
2018/05/23

33. Human Resource and Performance Management – Progress to Date
Hands on support was provided to implement the Human Resource Development and Management strategy in the Westrand region and the City of Tshwane.
Hands on support to implement Performance management systems in identified municipalities
The department is monitoring of the filling of critical posts with special focus on the top six posts (MM, CFO and Executive Directors)

34. Joint Department of local Government and Housing and Gauteng Treasury initiatives
2018/05/23

35. Joint DLGH and GDF Support
Coordinate CFO and MEC/MMC forum meetings which are aimed at:-
strengthening the oversight capability of the MMCs for Finance, as well as;
providing a platform for sharing of better practice between Gauteng municipalities.
Monitor the implementation of the Gauteng approach to achieving clean audits to ensure that Operation Clean audit is driven from the top through the office of the mayor, MMC finance, Municipal manager and CFO
2018/05/23

36. Joint DLGH and GDF Support
The establishment of Operation Clean Audit steering committees at individual municipal level.
The committees are attended by Heads of Departments as per functional units in the municipalities and chaired by the CFO,
The committees are established to monitor and ensure that all responsible heads of departments address issues raised by the AG in their respective areas.
OPCA hearings are also held in some municipalities to address those HODs that are not performing in terms of addressing the AG issues in their respective areas.
2018/05/23

37. Way Forward
2018/05/23

38. Way Forward
The Department will continue to implement the support highlighted above.
2018/05/23

39. Way Forward
Improve the quality of financial statements and facilitate a more efficient and effective interim audit by:
Ensuring that municipalities prepare Monthly/quarterly financial statements with supporting notes and disclosure (including reconciliations).
Ensure an independent review of Financial statements by internal audit before submission to external audit.
2018/05/23

40. Way Forward Hands on Support towards improving the Information
technology controls:-
Assist municipalities in establishing a Chief Information Officers’ forum
Assist with ensuring that municipalities monitor the development and implementation of  IT policies and procedures e.g. user account management, change management, security management, service continuity, etc.
Ensure ownership within municipalities of these policies.
2018/05/23

41. Way Forward
Assist with following up on IT issues raised on the previous reports to ensure that they have been adequately addressed.
Assist with reviewing the IT organizational structures and provide advice to the municipalities on to which IT positions are critical and should be filled as soon as possible.
2018/05/23

42. Way Forward
Assist with ensuring that adequate service level agreements are drafted and signed as municipalities mostly use vendors/consultant for IT services.
Develop best practice guidance for initiating a compliance process among all municipalities and thereby standardizing the approach.
2018/05/23

43. Way Forward Provide enterprise Risk management support
Strengthening the implementation of M&E and assessment of Key controls recommendations
Internal controls with special focus on HR and Supply Chain Management
Support to improve reporting on Performance information
2018/05/23

44. Way Forward
Support to reduce Distribution losses (Water and Electricity)
Provide additional support regarding revenue enhancement with a particular focus on the revenue value chain (integrity of data, metering, billing etc)
Embed the successes and impact of support and achievements
Strengthen the Provincial Departmental Capacity to support Municipalities
2018/05/23

45. Challenges
Resources to roll-out support to reduce water and electricity losses.
Sustaining the achievements within the respective municipalities (turnover of staff and leadership)
Consistent leadership and oversight.
Skills and capacity in municipalities and at a support level
2018/05/23

46. THANK YOU
2018/05/23