1. ROLE OF COUNCILLORS IN FINANCIAL MANAGEMENT IMFO NATIONAL CONFERENCE – CAPE TOWN 12-13 SEPTEMBER 2011 Presenters: Thulani Mandiriza & Conrad Barberton | Directors: Local Government Budget Analysis, National Treasury |

2. Purpose of the Presentation Role of National Treasury in municipal finances Why the MFMA? The municipal accountability cycle Role of Council oversight of financial management Other financial management matters: –Supply chain management –Audit Committee –Municipal Public Accounts Committees (MPAC) –Oversight Committee –Annual Reports

3. In relation to local government, the national legislation referred to in section 216 of the Constitution includes the following: –The Municipal Finance Management Act; –The sections of the annual Division of Revenue Act that set treasury norms and standards; –The Municipal Fiscal Powers and Functions Act –The Preferential Procurement Policy Framework Act National Treasury’s role with regards to municipal budgeting: –Co-ordinate the development of the LG fiscal framework, within the context of the DOR Bill/Act –Manage the development of the Local Government Equitable Share formula –Ensure compliance with the MFMA, including: Adherence to the time-lines for tabling and approval of municipal budgets Implementation of the Municipal Budget and Reporting Regulations, especially the new budget formats Application of the funding compliance assessment Overall evaluation of municipal budgets Publication of consolidated local government budget information –Provide guidance to municipalities through the MFMA Budget Circulars –Provide budget related training to provincial treasuries and municipalities –Exercise direct oversight of the 17 non-delegated municipalities (261 municipalities delegated to the Provincial Treasuries) 3 Roles of National Treasury in relation to LG

4. Modernise local government budgeting and financial management processes and practices Improve financial governance by clarifying and separating roles and responsibilities of councilors vis-à-vis those of municipal officials Maximise municipal capacity to deliver services by attending to issues of efficiency, effectiveness and sustainability, and dealing with corruption Set-up the accountability cycle by ensuring proper linkages between IDPs, budgets, SDBIPs, in-year reports, annual financial statements, annual reports, oversight reports and audit reports 4 Why the MFMA?

5. Municipal accountability cycle

6. Role of Council in oversight of financial management Reviewing policy decisions for cost implications –Setting of tariffs –Debtor management –Cash management –Indigents Reviewing and approving IDP and budgets Reviewing financial management processes –Asset management policy –SCM policy – councillors forbidden to take part in SCM processes Monitoring implementation of policy, plans and budgets, as well as the functioning of all municipal systems –In year monitoring: Section 71/72 reports Evaluating financial statements and annual reports Holding the Mayor/Executive and head of administration accountable 6

7. The Municipal Council is responsible for oversight of all finance and finance management related matter may choose to establish subcommittees, including: –Finance Committee (Budget Steering Committee) Usually considers the tabled budget and adjustments budgets –Municipal Public Accounts Committee (established in terms of Sec 79 of the MStrAct) Consider and evaluate annual reports Considers the annual financial statements and audit reports Promote good governance, transparency & accountability on municipal resources May recommend or undertake any investigation in its area of responsibility –The Oversight Committee Responsible for reviewing the annual report with the purpose of: –Review past performance so as to improve future performance –Hold the Mayor/Executive and senior managers accountable (bonuses?) –Audit Committee (in terms of S166 of MFMA) Independent advisory body to Municipal Council and administration on matters such as risk management, internal audit, accounting policies: Provide Council with authoritative and credible view of financial position Council committees to fulfill financial oversight

8. In-year monitoring 8 Monthly Budget Statements (Section 71 Reports) Role of monthly reports is to check on the status of budget implementation Mayoral Quarterly Reports Report to council on the status of the implementation of the budget and the SDBIP Compares financial and service delivery performance against quarterly targets Councillors should read it and not just note the report Mid-Year Budget & Performance Assessment Report (Section 72 reports) & Budget Adjustments Presents financial and service delivery performance for the fist half of financial year Tabled in council by 25 January and forms the basis for an adjustments budget It takes into account: Monthly Budget Statement, Quarterly Service Delivery Performance, Past Year’s Annual Report, Performance of Entities Approval of a funded, credible and sustainable budget is crucial for effective service delivery

9. Council and officials have a duty to prevent corruption Code of Conduct for Councilors, forbids: –Interfering in municipal administration –Obstructing the implementation of council decisions –Encouraging maladministration Councillors are restricted from using their positions to improperly benefit themselves or others from municipal contracts Councillor may not do business with any municipality A councillor who is full-time may not undertake any other paid work except with the express written approval of council Councillors should lead by example and pay municipal accounts in time 9 Governance and ethics

10. Auditor General acts as external auditor (S188 of Constitution) and operates in terms of the Public Audit Act Audit Opinions –Unqualified – the best –Qualified – good, but with issues that need to be addressed –Adverse – very bad and implies there was an attempt to mislead –Disclaimer – very bad and information is not available at all What is my responsibility as councillor in preparation for External Auditing? –Ensure audit reports comprehensively studied –Ensure municipality has appropriate Performance Management systems, processes and frameworks in place 10 External Auditing

11. Causes of poor financial management in municipalities Inexperienced and unqualified staff Political appointments over merit Stalemate between councils and senior officials esp with regards to SCM Rivalries between mayors and municipal managers Poor morale – those who want to do the right thing are frustrated 11

12. DISCUSSIONS THANK YOU CONTACT Jan Hattingh Chief Director: Local Government Budget Analysis National Treasury Tel: 012-315-5009 E-mail: jan.hattingh@treasury.gov.zajan.hattingh@treasury.gov.za