1. www.salga.org.za 1 Welcome… Administrative and Political Oversight towards 2014 and beyond Lungelwa Dlulisa

2. www.salga.org.za 2 CONTENTS Introduction Legislative framework Overview of oversight structures Powers, roles and responsibilities Role of Council in financial oversight Oversight structures in detail Status of the audit committees Conclusion

3. www.salga.org.za 3 INTRODUCTION Local government sphere has emerged from its third democratic elections (2011) –many new councillors assuming office Leading up to the 2011 elections, Cabinet approved the (LGTAS) in 2009 –Aimed to address constraints that undermine the effectiveness of the LG system. –Clean, effective, efficient, responsive and accountable LG internal municipal structures need to be effective and efficient oversight = reviewing and monitoring that each structure within the municipality performs its statutory and delegated functions Senior management of municipality prohibited from certain political involvement Effective oversight and accountability helps ensure that the administration and executive implements programmes and plans in a way consistent with the IDP, budget, municipal policy as well as the Constitution and related legislation. –effective oversight strengthens the municipality –effective oversight improves efficiency of municipality and contributes to more focused service delivery

4. www.salga.org.za 4 LEGISLATIVE FRAMEWORK Constitution MFPFA MSA MSyA MFMA DORA IGRF PAA

5. www.salga.org.za 5 OVERVIEW OF OVERSIGHT STRUCTURES In the main, overall financial oversight in a municipality is fulfilled by: –……………………----------------------- Council Oversight Committees MPAC Audit Committees Council Oversight Committees MPAC Audit Committees External Audit Independent assessment of financial & non financial performance to issue an opinion Internal Audit Independent objective assusrance Major source of info to the AC

6. www.salga.org.za 6 PURPOSE OF THE MFMA 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

7. www.salga.org.za Political Council and Mayors providing political guidance define outcomes approve and evaluates policies allocate resources hold managers accountable Management Senior management exercise fiduciary responsibilities decide on methods implement the policies control over use of resources accountable for outputs 7 POWERS, ROLES & RESPONSIBILITIES Council has a duty to prevent corruption and Senior Management should collect information to measure performance which begins with a performance contract

8. www.salga.org.za 8 FINANCIAL OVERSIGHT: ROLE OF COUNCIL Finance Committees : Usually considers the tabled budget and adjustments budgets Municipal Public Accounts Committee (where they are established) Usually considers the AFS & may also consider unauthorised expenditure The Oversight Committees (where there is no MPAC) Responsible for reviewing the annual report (accept/reject) 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 expressed written approval of council

9. www.salga.org.za 9 OVERSIGHT STRUCTURES IN DETAIL Sect 165 of MFMA requires IAU –Internal audit must prepare risk based audit plan and internal audit programme for each year –Internal Audit report to accounting officer (MM) and audit committee on implementation of internal audit plan. Effective Internal Audit Unit is the one that: –Evaluates control systems and ensure strategies for Risk Management are in place –Independent, reporting to the MM (administratively) –Reports quarterly to audit committee (functionally) –External audit & Audit Committees must be able to (some extent) rely on work IAU Benefits of Internal Audit Unit –Improve transparency, accountability & efficiency –Detect fraud & corruption –Enhance service delivery

10. www.salga.org.za 10 OVERSIGHT STRUCTURES IN DETAIL Section 166 of the MFMA requires Audit Committees –Independent advisory body appointed by the council based on expertise –At least three persons, with majority not employed by municipality –No councillor may serve on audit committee –Reports directly to the council –Advise the council, accounting officer and staff on matters listed in the MFMA AG acts as external auditor (S188 of Constitution) & operates in terms of PA Act Issues various audit opinions Council responsible for preparing for External Auditing by: –comprehensively studying audit reports as reported by Audit Committees –ensure municipality has appropriate PMS systems, processes and frameworks in place e.g SBDIP

11. www.salga.org.za OVERSIGHT STRUCTURES IN DETAIL MPAC (established by council by way of council resolution by 31 November) (S79) Main function is to perform oversight over executive functionaries and good governance, other as determined by council –Section 53 of the Systems Act requires the municipality to define the specific role and area of responsibility of each political structure of the municipality –Section 129 of the MFMA requires council to consider annual report and adopt an oversight report containing council’s comments on the annual report; National Treasury has issued guidelines on: –the manner in which councils should consider annual reports and conduct public hearings –the functioning and composition of any public accounts committees established by the council to assist it to consider the oversight report; –guidelines only applicable to municipality if adopted by the council 11

12. www.salga.org.za ROLE & RESPONSIBILITIES OF ADMINISTRATION Fiduciary responsibilities –Compliance with the rules and regulations –Exercise fidelity, honesty, integrity and in the best interest of the municipality Treasury functions –Utilizing resources effectively, efficiently, economically and transparently Asset and liability management –Safeguarding and maintenance –Develop proper assets and liabilities of the management systems Revenue management –Collect all revenue due and recognized when earned Expenditure management –Maintain effective system of expenditure control & manage working capital effectively Provide regular reports to relevant stakeholders Establishment of effective and efficient internal audit 12

13. www.salga.org.za CHALLENGES 13

14. www.salga.org.za PROPOSAL Ensuring oversight structures are functional and effective is beneficial for service delivery. SALGA to conduct an assessment report of audit committees to fully gauge the effectiveness of the audit committees and the challenges they face. Must be focussed on the areas /municipalities identified in the AG report as battling Should clearly outline the root causes and the challenges a sample of municipalities face Measure the relationship with other oversight structures Assist in identifying support areas Assist with developing generic terms of reference for Audit Committees which should: –Deal adequately with its membership, authority and responsibilities –Provide as basis for evaluating the performance of audit committees 14

15. www.salga.org.za CONCLUSION 15 Council Auditor-General Executive Independent, objective information Transparency Aud it Audit r eporting Constitutionally empowered Conferred Responsibility Accountability reporting Political Administrative Policy Direction and Oversight