1. District Shared Model Perspective Mr S Mofokeng Chairperson Polokwane Municipality Vice President IMFO

2.  Introduction  Background  Legislative Requirements  Challenges facing internal Audit in LG  Benefits  Successes Case study  Challenges  Operational Model of an effective Audit Committee  Relationship between Audit Committee, Council Sec 79 and 80 committees  Recommendations  Conclusion Outline of Presentation

3. INTRODUCTION COULD THIS BE OUR STATE OF BEING?

4. INTRODUCTION A Better Life for ALL ‘It should never be that the anger of the poor should be the fingers of accusation pointed at all of us because we failed to respond to the cries of the people for food, for shelter, for the dignity Of the individual’

5. The IIA defines internal audit as: “ an independent, objective assurance and consulting activity designed to add value and improves municipality ’ s operations. It helps municipalities accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. ” Introduction

6. MFMA Section 165 requires that :  Each municipality and municipal entity must have an internal audit unit,  The internal audit unit of a municipality or municipal entity must-  prepare a risk-based audit plan and internal audit program for each financial year.  Advise the audit committee on the implementation of the internal audit plan and matters related to: Legislative requirements

7. advise the accounting officer and report to the Internal audit, Internal Controls, accounting procedures and practices, risk and risk management, performance management, loss control and compliance with the MFMA, the DORA,Systems Act (regulations) and any other applicable legislation and  perform such other duties as may be assigned to it by the accounting officer Legislative requirements 2/..

8.  Organizational structure and independence  Insufficient management support  Resource Constraints and IA staff retention  Skills and knowledge of IA staff- risk management, strategic and project planning.  Full review of PMS- Performance Information and Value for money  Covering the entire scope of internal audit plan  Support from management and all other stakeholders  Benchmarking  Support from the Audit Committees  Role of IA and Audit Committee in respect of Municipal Oversight Committee. CHALLENGES FACING INTERNAL AUDIT IN LOCAL GOVERNMENT

9. HOW DOES AUDITEES FEEL ABOUT INTERNAL AUDIT?  Internal Auditors are Rule driven * Form Based * Detail oriented * Square Thinkers * Police * Critique YOU COME IN TO AUDIT US,AND TELL US WHAT TO DO.

10. HOW DOES AUDITEES FEEL ABOUT INTERNAL AUDIT? Auditors do not: Understand our business, process and risks. Listen to us See issues differently Tell us something we do already know

11.  Appointment of effective Audit Committee with requisite skill.  Understanding of MFMA and related legislation.  Appointment of the CAE at the senior position preferable as a section 57 employee.  Full capacitated internal department as per section MFMA 62 with all relevant skill and experience.  Annual review of charters-King 111and any changes in legislation or IIA standards.  Performance evaluation of the Audit Committee and Internal Audit department yearly. IDEAL SITUATION

12.  Review the IDP, Budget processes whether they comply with relevant legislation.  Conducting quarterly and annual performance information audits.  Support to audit committee.  Providing an informed opinion on the relationship btw mgt and AG such as management ’ s propensity to give due consideration in implementing AG recommendations-clean audit report.  Direct reporting structure of the internal audit to audit committee- critical advisory position. IDEAL SITUATION Cont2/..

13.  Review the budget adjustment- aligned to the SDBIP targets.  Review performance management system is aligned to IDP/SDBIP targets, Municipal Scorecard, and Section 57 score cards organogram and IDP  Review whether appointments done for section 57 meets the regulation on competency level and aligned to Regulation 805 of MSA.  Sufficient compliance tests on statutory reporting.  Promotion of co operative governance btw National and provincial and local government. IDEAL SITUATION Cont3/..

14. Apply Risk Management cycle 3. Assess risk 2.Identify risk 1. Set Goals 7.Assess performance 6. Monitor risk and control 5.Mitigate risk 4. Assess controls

15. Benefits of Shared model  Increased leverage  Improved compliance with laws, regulations and policies.  Improvement of compliance level in governance issues, risk management and internal controls.  Greater possibility of getting unqualified financials.  Improved service delivery

16.  Improvement of compliance level in governance issues, risk management and internal controls;  Greater possibility of getting unqualified financials;  Improved service delivery.  Cost saving measure  Uniform systems and consistency Benefits of Shared model 2/..

17.  Established shared service – 01 July 2004  Council Resolution  Logo  Profile  Staff employment  Learnership  Service level agreement  Financial Contributions Case Study Central District Municiplality Successes

18.  Approved strategic plan- 2005/08 approved at council level  Risk based audit plan- 2005/06  Establishment report was presented at Council level  Finalization of audit report of 2005/06  Successful coordination between Office of the Auditor General and DDLG&H  Establishment of DAC Success cont.

19.  Perceptions in respect of Internal Audit  Capacity constraints  Resource Constraints ( Financial Contribution)  Implementation of Internal Audit recommendations  Presentation – Audit activity at council  PMS -auditing  Conforming to Standards  Commitment by Management  Role of the PMT not Clarified  Councils did not set tone at the top. Challenges

20.  Recruitment of Competent and knowledgeable practitioners in ;  Risk management  Internal Audit  Financial Management & Accounting  Risk and Performance Management  IT, Legal and Corporate Governance & HR Operational Model of and Effective Audit Committee

21. An operational model of an effective Audit requires a hybrid approach in executing the AC responsibility.  Council must establish a single audit committee to inter Alia act as Performance Audit Committee(PaC)  in terms of the Systems Act and MFMA  Members of the Single Audit Committee must be appointed in to the single PaC  The Chairperson of AC must designate one member of the AC who is a Specialist in Risk to oversight Risk management and Assist management and the Accounting Officer on matters of Risk management Operational Model of and Effective Audit Committee 2/..

22.  The Chairperson of AC must designate one member of the AC who is a Specialist in ICT to oversight ICT and advise management on matters of ICT  The Chairperson of AC must designate one member of the AC who is a Specialist in Performance to oversight performance management and Assist the Chairperson and management on Issues of Performance.  Other transversal (review of AFS) functions of the AC may be designated to a members where appropriate. Operational Model of and Effective Audit Committee 3/..

23.  The members designated will ensure that the responsibilities allocated to them are executed in terms of a plan management committee itself to.  The AC will develop its own operational plan depend on the scope of its responsibilities as per the AC Charter  The AC must be allocated adequate resources to effectively discharge its responsibilities.  The Audit Committee must avoid convene additional meetings outside of its work-plan unless necessary  A well resourced IA will assist to operate effectively Operational Model of and Effective Audit Committee 4/..

24. The Audit Committee must develop a combined Assurance framework. The Framework must address the working relationship with committees of the  Accounting Officer(Risk Management, ICT Committee, Loss Control Committee)  The Committee of Council Sec 79( MPAC, other Oversight Committees)  Sec 80 Committees as per the Executive / Executive Mayor Relationship between Audit Committee, Council Sec 79 and 80 committees

25. The AC matter may developer a combined a Combined Assurance Charter to formalise the operational relationship  Review minutes of the committees of Council including those of management  At least twice a year attend MPAC meetings and other committees on invitation (MPAC will leverage on AC)  Develop a control self assessment mechanism to ensure that there are maturity levels to ensure good Governance  Develop KPI jointly agreed with the PMT and Executive to assist the Political office to measure its own performance (EMFULENI/SEDIBENG Model GP ) Relationship between Audit Committee, Council Sec 79 and 80 committees 2/..

26.  Marketing internal  Capacity building program  Effective utilisation of learners after completion  Full implementation of IA recommendations by management- Action Plan  Council to accord DIAC opportunity to present IA report at council level and report regularly  Implementation of PMS – by management  IA staff to attend relevant training  Management Commitment  Setting the tone from the TOP by MM and Council Recommendations

27. In conclusion we must be committed to excellence, By … removing “ the word ‘ impossible ’ from our vocabulary, anyone who doesn ’ t believe in miracles is not a realist ” – David Ben-Gurion “ Demand the best from yourself because others will demand the best from you…. Successful people don ’ t simply give a project hard work, they give it their best work ’’. - Win Borden Conclusion

28. THANK YOU VERY MUCH FOR LISTENING