1. Governance: Challenges & Possible Solutions Audit and Risk Indaba 28 October 2011

2. Challenges Unclear roles and responsibilities between the Audit Committee and MPAC Internal Audit – no space to periodically assess the state of ethical climate in municipalities Municipalities lack capacity to assess the effectiveness of organisation strategies (IDP, SDBIP) tactics, communications and other processes in achieving desired level of legal and ethical compliance No dedicate governance officials and ethics assessor to assess organisation ethic climate in municipality i.e. Ethics advocates (local ombudsman at municipal level) No ethics committees There are serious leadership and governance challenges in municipalities including: – Weak responsiveness and accountability to communities; – No dedicated ethics advocates: » to ensure that codes and conducts and statements of visions, mission and policy are important declarations of the organisation’s values and goals, that aligns with the objectives set out in the IDP and SDBIPs – No consistency and value-add in in-year reports i.e. MFMA Section 71, 72, 121, 129 and MSA 46

3. Possible Solutions Audit Committee responsibility is ito Section 166 and to provide assurance that internal controls are in place Empower MPAC members with skills and competencies to execute their mandate, through training and development (such as workshops, learning from best practices. MPAC Deals with matters referred to it by Council i.e. Section 32 – Fruitless, wasteful and irregular expenditures – can conduct investigation with the Audit Committee and recommend to Council for further action i.e. write-off or recovery – Establish clear terms of reference for MPACs Propose appointment of Ethics Advocates (eg Compliance and Ethical officer/assessor) – Assessment of Ethical Conduct – Essential that municipality assigns responsibilities to Chief Ethics Officers – As counselor of the administration, managers and others and as champion within the organisation “doing the right thing” Establish Ethics Committees with clear terms of reference (Treasury can lead to develop such) Strengthen the governance structures i.e. Internal Audit, Audit Committee, MPAC and Ethics Committees

4. Possible Solutions “Evaluate the effectiveness and enhancement of the following: – Monitor the code of conduct i.e. applicable legislation eg. Constitution, MSA – Ensure frequent communication and demonstration of ethical attitudes and behaviour by influential leadership of the organisation – Explicit Strategies to support and enhance ethical culture, i.e implementing regular programs to update and renew the organisation’s commitment to an ethical culture – Confidentiality report of any transgressions – Embarking of awareness campaigns amongst stakeholders i.e employees, suppliers and community – Clear delegation of responsibilities – Easy access of learning opportunities – Make it easy for the public to report confidentially to violations of ethics – Positive personnel practices that encourage every employee to contribute to the ethical climate in the organisation

5. Possible Solutions – Easy access of learning opportunities – Make it easy for the public to report confidentially to violations of ethics – Positive personnel practices that encourage every employee to contribute to the ethical climate in the organisation – Regular surveys of employees, suppliers and customers to determine the state of the ethical climate in the organisation. – Regular reviews of the formal and informa processes within the organisation that could potential create pressures and biases that woul undermine the ethical culture – Regular reference and background checks as part of the human resource recruitment procedures, including integrity tests, drug screening and similar measures”

6. Possible Solutions Delegate responsibility to ensure ethical consequences are evaluated, confidential counselling is provided, allegation of misconduct are investigated, and case findings are properly reported. Regularly review processes that could potentially create biases that would undermine the ethical culture Ensure background checks as part of the recruitment processes i.e. integrity tests, drug screening etc,.