PRINCIPLES ADOPTED TO ACHIEVE A CLEAN AUDIT

OVERSIGHT - AUDIT The Audit Committee has adopted appropriate formal terms of reference as its audit committee charter and consists of three independent, well-skilled and suitably qualified outside members. The Municipality’s system of controls is designed to provide cost effective assurance that assets are safeguarded and that liabilities and working capital are efficiently managed. In line with the Municipal Finance Management Act and the King III Report on Corporate Governance requirements, Internal Audit and the Auditor General’s report provide the Audit Committee and management with assurance that the internal controls of the Municipality are appropriate and effective. This is achieved by means of a risk review process, testing of controls, as well as the identification of corrective actions and suggested enhancements to controls and processes.

OVERSIGHT - MPAC The Committee examines the following: Audit Reports and Financial Statements of the Municipality and its entities; Any reports issued by the Internal Auditors and the Auditor General, on the affairs of the Municipality and its entities; The Annual Reports of the Municipality and/ or any municipal entity under the Municipality’s shared or sole control; The Mayor’s reports on the implementation of the budget and the financial state of affairs of the Municipality; Any other Financial Statements or Reports referred to MPAC by Council; Any information relating to personnel, books of account, records, assets, and liabilities of Council and any other source of information that maybe required for the purpose of fulfilling its mandate; UIFW reports

PERFORMANCE MANAGEMENT In respect of Organisational Performance Measurement, the municipality compiles an Organisational Performance Scorecard accordance to the five National Key Performance Areas and corresponding Key Performance Indicators, as prescribed by CoGTA. This “scorecard” gives an indication of the performance of the municipality as a local government institution and is included in the municipality’s Annual Report as part of the Annual Performance Report. The Municipality has a Performance Audit Committee in place. The Performance Audit Committee is duly constituted in accordance to legislative provision consisting of two external members from the public who are knowledgeable in Performance Measurement and one Councillor. The chairperson of the Audit Committee is co-opted on to the Performance Audit Committee. The Performance Audit Committee meets twice per financial year, half yearly and yearly and considers all matters pertaining to Section 57 Individual Performance Management and Organisational Performance Management, after which such matters are elevated to EXCO and Council.

PERFORMANCE MANAGEMENT The Municipality has a Performance Audit Committee in place. The Performance Audit Committee is duly constituted in accordance to legislative provision consisting of two external members from the public who are knowledgeable in Performance Measurement and one Councillor. The chairperson of the Audit Committee is co-opted on to the Performance Audit Committee. The Performance Audit Committee meets twice per financial year, half yearly and yearly and considers all matters pertaining to Section 57 Individual Performance Management and Organisational Performance Management, after which such matters are elevated to EXCO and Council.

FOUNDATION TO ACHIEVING A CLEAN AUDIT The achievement of clean audit was attained through short, medium and long term planning; Effective leadership culture; Informed and effective finance ,audit & risk committees; Informed and effective MPAC; Dynamic, competent management; Sound internal controls monitored through effective internal audit units, together with appropriate financial systems; The synergising of management goals and directions facilitated through strategic planning sessions, interdepartmental meetings and workshops; Communication of departments measurable objectives to all staff through interactive communication sessions; Training initiatives to ensure that staff are competent in executing tasks in compliance with all relevant prescripts; and Setting the goal of “CLEAN ADMINISTRATION” a priority for all

WHAT IS A CLEAN AUDIT ??? The audit report issued by the Office of the Auditor-General must not contain material findings on the following matters: Financial aspects i.e. misstatements in the Financial Statements and emphasis of matters Performance against predetermined objectives Compliance with laws and regulations Internal controls

MUNICIPALITY’S APPROACH TO THE AUDIT Undertook an assessment of our previous five years internal and external audit reports in order to identify key risk areas; Developed a detailed annual AFS/audit action plan(AAAP) based on the above assessments, which then assigned roles, responsibilities and applicable time frames; The AAAP was work-shopped with all stakeholders(all depts. & Service providers) ensuring completeness and the obtaining of overall consensus and support; Scheduled structured AAAP meetings representative of all relevant stakeholders , in advance for the financial year; The preparation of in-house interim financial statements prepared in accordance with legislative requirements and time frames as required for the annual financial statements were performed. The said financials were audited by our internal auditors and submitted to the audit committee.

MUNICIPALITY’S APPROACH TO THE AUDIT Policies are reviewed annually & amendments work shopped with implementers; Implemented daily, weekly and monthly internal procedures; e.g bank recon done daily Balancing and reviewing of trial balance monthly; Reviewing of general ledger reconciliations with emphasis on clearing recurrent items and ensuring that all recons were reviewed by senior management; Ensuring control accounts are cleared monthly; All registers are in place and reviewed monthly e.g. grants, loans, investments etc; Inclusion of the AG Dashboard and predetermined objectives into the annual internal audit plan as quarterly audits; On going GRAP training initiatives undertaken; GRAP disclosure check list was used as a monitoring tool; and Final AFS submission to internal audit and thereafter to audit committee and Council structures before submission to AG.

INTERACTION WITH THE AUDIT TEAM Emphasis placed on the engagement meeting so to ensure understanding between AG team and municipal team; Foster and maintain good relations with the audit team; Ensure that the audit team is suitably accommodated with all essential auxiliary support during their engagement; Ensure compilation of a concise well referenced audit file in support of the AFS submitted; Identify internal champions to assist the audit team with audit requirement/ information; Ensure that key personnel are available during the audit; Respond to queries quickly and efficiently through the dedicated champion dealing with the audit team; Set up weekly meetings with the AG audit team to track progress and to ensure open communication channels and audit issues are addressed.

Referenced audit file A file is prepared containing the following: 1)Copy of the AFS 2)Index page referenced in sequence to the AFS structure E.G Statement of Financial Position Assets Current assets Inventories Lead schedule for each balance Signed off copy of each ledger vote reconciliation with supporting documents …stores report, movement for the year report, stock counts & internal audit reports MSCOA reconciliation 2017/2018 to the 2018/2019 as prescribed by the 6,2 chart

Lessons learnt It assisted the auditors to have reconciliation between the pre-mSCOA and post-mSCOA balances for the Financial Position and Financial Performance The municipality must gave 1 mSCOA folder on the network where all mSCOA related documents are saved; There must be 2 mSCOA champions, one for IT and one for Finance; If you have mSCOA related issues , report it to the service provider immediately; Allow service provider to work through TeamViewer to resolve the issues above. The service provider must log in on the mSCOA CHAMPIONS computer so that champion can see what they do and skills can then be transferred to champion/ municipality; Delete all invalid UKEYS/VOTES in the Trial Balance to prevent transacting against them which will result in errors during submissions of reports; Scrutinize through the General Ledger on a quarterly basis (or even monthly) to identify misallocations . It is important to correct the root cause of the misallocation; For every AFS journal that is compiled, ensure that you also correct the root cause of the journal. ZF Mgcawu District Municipality

Lessons learnt

Thank You!