1. Module 4: Governance Structures and their responsibilities under the MFMA1

2. 1. Introduction
The local government system is faced with enormous challenges in its pursuit to live up to its increasingly complex and widening role in service delivery
Municipalities are increasingly challenged by ineffective municipal governance structures.
Poor financial management is one of the major concerns
Lack of ethical leadership is increasing polluting the local government environment
Lack of consequences for non adherence or lack of accountability

3. 2. Accountability and Oversight
What is accountability?
‘accountability is an obligation to answer to someone with authority for the execution of one’s assigned responsibilities’
What is oversight?
‘oversight is the means by which accountable persons are called to account’
Elements of oversight
A principal and An Agent
4.6.1 Elements of accountability
A principal
with authority, means and clear objectives
who appoints an agent to achieve objectives
An agent
who is appointed to achieve the principal’s objectives
who is given the authority and means to do so
Agree on:
Standards by which to measure performance
Systems to gather and report on performance
Review and oversight processes
Sanctions for poor performance

4. 3. MFMA and Accountability
Object of Act
2. The object of this Act is to secure sound and sustainable management of the fiscal and financial affairs of municipalities and municipal entities by establishing norms and standards and other requirements for—
(a) ensuring transparency, accountability and appropriate lines of responsibility in the fiscal and financial affairs of municipalities and municipal entities;
Level of accountability substantiated & best illustrated in section 79(3)(e) of MFMA.
4.6.1 Elements of accountability
A principal
with authority, means and clear objectives
who appoints an agent to achieve objectives
An agent
who is appointed to achieve the principal’s objectives
who is given the authority and means to do so
Agree on:
Standards by which to measure performance
Systems to gather and report on performance
Review and oversight processes
Sanctions for poor performance

5. 4. MFMA and protecting the public purse
Protecting the public purse requires the right
Policies
Processes
People
Practices
MFMA regulates the first three of these aspects
The greatest challenge in local government is implementation
translating policy into practice through the processes implemented by people

6. 5. Importance of Oversight
To detect and prevent abuse, arbitrary behavior or illegal and unconstitutional conduct on the part of the government and public agencies.
To hold the government to account in respect of how the tax payers money is used.
To ensure that policies announced by government and authorised by Parliament are actually delivered.
To improve the transparency of government operations and enhance public trust in the government, which is itself a condition of effective policy delivery.

7. 6. Oversight process
Is about enforcing the implementation of agreed policy
It is exercised through out the year
Legislative Frameworks also allows the Provincial Executive to dissolve council if it fails to fulfill its oversight role
In simple terms, it is about
Identify problems
Provide remedies (timeously reacting to situations to mitigate risks and taking the necessary corrective actions to address non-performance)
create an environment that is conducive to good financial management and service delivery
strengthen the accountability and responsibility of management

8. 7. Principals and agents – role-players in protecting the public purse
Within the municipality:
Citizens
voters, ratepayers, community groups, political parties
Customers
households, businesses, institutions
Councilors
Municipal council
Committees of council
MPAC
Auditor-General
Mayor
Mayor’s executive committee
Municipal manager – accounting officer
Chief financial officer
S57 managers
Other municipal officials
External to municipalities
Provincial executive
Dept of local government
Provincial treasury
National executive
Dept of Co-operative Governance
National Treasury
Water, transport, housing
NERSA
Provincial legislatures
Parliament
SALGA

9. 8. Role players legislative mandates
All responsibilities are spelt out in legislation
Mayors – ss of the MFMA
Accounting Officers – ss of the MFMA
Other officials – ss of the MFMA
CFO, Budget and Treasury Office – ss of the MFMA
Oversight – MFMA section 129
Councils – Constitution and LG legislation
Councilors – Code of Conduct in the Structures Act

10. 9. Financial Governance
Promote transparency, accountability and oversight
Effective management of Revenue, Expenditure, Asset mgt. and Liabilities
Proper budgeting and planning
Ensuring a procurement process that is:
Fair;
Equitable;
Transparent;
Competitive; and
Cost effective.
Meeting the service delivery imperatives

11. 10. Financial Governance Framework in LG
The separation of roles between the council and administration is intended to strengthen the oversight function of councillors.
Good governance and effective oversight and accountability are predicated on there being this separation of functions.
It is fundamental for the achievement of the objects for local government in the Constitution relating to a democratic and accountable system of local government.
Council oversees the performance of the administration through council and committee meetings.
The mayor provides the link between the council and administration and is responsible for regular monitoring and for tabling reports before the council.
Therefore, the administration is responsible for the day-to-day operations.
This separation avoids conflict of interest and a "referee/player" situation arising.
The MFMA further assumes a separation between councillors serving on the executive (i.e. mayor or executive committee) and non-executive councillors.
This separation is vital to ensure council maintains oversight for the performance of specific responsibilities and delegated powers to the mayor or executive committee.
The MFMA gives council a number of financial management tasks to fulfil its oversight role. The adoption of an "Oversight Report" is one such task. The diagram on the following page illustrates the various oversight intervention points from the adoption of the Integrated Development plan (IDP), Budget, Annual Report and Oversight Report.

12. 11. Accountability Framework in LG

13. 12. Accountability relationships
Council
Auditor-General
Executive
Independent,
objective information
Transparency
Audit
Audit Reporting
Constitutionally empowers
Conferred Responsibility
Accountability reporting
Political
Operational
Policy Direction and Oversight 13

14. 13. The accountability cycle
IDP
Budget
SDBIP
In-year reporting
Annual financial statements
Annual report
Five-year strategy
Three-year budget
Annual implementation plan
Implementation monitoring
Accountability reporting
Oversight report
Organisational structure aligned to services
Sound municipal policies, processes and procedures
Performance information

15. Thank You