Chairpersons for Finance Portfolio committees The role of Council in Supply Chain Management (SCM) 29 May

Contents Legislative Framework Objectives of SCM Policy Roles & responsibilities Elements of SCM SCM and Risk Management SCM and Budget SCM and Expenditure Management Irregular, unauthorised and fruitless and wasteful expenditure Council oversight 2

Legislative Framework Legislative framework for procurement of goods and services are: – Section 217 of the Constitution (Act – Section 111 of the Municipal Finance Management Act and Regulations – Preferential Procurement Policy Framework Act and Regulations –Broad Based Black Economic Empowerment Act 3

Objectives of SCM policy To give effect to the provisions of the Constitution,1996 as amended, the MFMA, the PPPFA and related Regulations Transform the procurement and provisioning functions in government into an integrated SCM function Introduce a system for the appointment of consultants Create common understanding and interpretation of government Preferential Procurement Policy Framework (PPPF) Promote consistency in respect of SCM policy across all spheres of government 4

Role players National Treasury Provincial Treasury Municipal Council (focus of presentation) Accounting Officer 5

Role Players - Council Has primary responsibility for approving SCM policy of municipality SCM regulation 4 – Council must delegate additional SCM powers and duties to the accounting officer (it is important to note that some powers are assigned to the AO by law – see Reg 5) Ensure that accounting officer executes council’s policy Consider the report of accounting officer Council cannot reverse or override a decision regarding a bid once it has been awarded May not serve on, or attend any bid committee meetings or even serve as observers 6

Role Players – Council cont… Role of council is: –Approving SCM policy –Approving Risk Management Policy –Reviewing SCM policy decisions for cost implications –Monitoring implementation of policy, SCM plans and budgets as well as functioning of SCM systems & processes –Holding Mayor and AO accountable 7

Role players – Accounting Officer Establishes SCM unit where possible, with assistance of the CFO Implements SCM policy and adhere to guidelines Develops internal procedures and processes Reports to council on progress regarding implementation of SCM policy Complies with highest ethical standards Ensures that officials are trained May sub delegate powers and duties to committees and officials (SCM Reg 5) 8

Role players – Accounting Officer Establishes SCM unit where possible, with assistance of the CFO Implements SCM policy and adhere to guidelines Develops internal procedures and processes Reports to council on progress regarding implementation of SCM policy Complies with highest ethical standards Ensures that officials are trained May sub delegate powers and duties to committees and officials (SCM Reg 5) 9

Elements of SCM 10 Database/s Infrastructure (Systems) Logistics Supply chain performance Government’s preferentialprocurement policy objectives Disposal Risk Management Acquisition Demand Supply chain management

Elements of SCM cont… It is important to note that: –All the elements of SCM are an integral part of the SCM Policy approved by Council; –This includes weights on the allocation of preferential points in line with Council objectives & the PPPFA Regulations 11

SCM & Risk management Council is responsible for approving the Risk Management Policy and strategy of the municipality Risk management is an integral part of SCM and strategic planning –Many projects emanate from the strategic planning (e.g. township development, infrastructure acquisition & development, job creation etc) 12

SCM & Risk management SCM policy must provide for an effective system of risk management (RM) including: –Identification of risks on a case by case study –Allocation of risks to the party best suited to manage risks –Acceptance of cost of risk where cost of transferring risk is greater than that of retaining it –Management of risks in a pro-active manner and provision of cover for residual risks –The assignment of relative risks to contracting parties through clear and unambiguous contract documentation 13

SCM & Budget 14 Council should: Have a multi-year budget – so as to ensure capital projects can go out to tender as soon as the budget is approved – so as not to delay spending Ensure honesty and integrity in the use of municipal funds –Municipality may not procure goods and services from persons in service of the state (this includes both councillors and officials) –Ensure conflicts of interest are properly recorded and managed –Councillors forbidden from interfering with tender processes (criminal offence) but may report irregularities to the Auditor-General

SCM & Budget 15 Council should: Ensure proper implementation of government’s BEE and SMME objectives –System prescribed in Preferential Procurement Policy Framework Act

SCM & Expenditure management 16 All expenditure must be in terms of an approved budget –If annual budget is not approved before start of the municipal financial year, –SCM processes may not be undertaken resulting in unspent conditional grants and poor service delivery. Mayors and councillors may only instruct expenditures to be made through the budget and SDBIP or the revised Mayors may approve unforeseen and unavoidable expenditure within the framework prescribed by regulation 73 of the Municipal Budget and Reporting Regulations

Fruitless & wasteful, irregular & unauthorised expenditure 17 Fruitless & Wasteful expenditure Expenditure that was made in vain and would have been avoided had reasonable care been exercised Example: ―Paying for goods or services that are not used or consumed Irregular expenditure Expenditure that contravenes the MFMA, the Systems Act, Public Office-Bearers Act, or any of the municipality’s policies or By-laws Examples –Awarding a contract that was not subjected to tender procedures –Benefits not provided for in the Public Office Bearers Act

Fruitless & wasteful, irregular & unauthorised expenditure cont… Unauthorised expenditure 18 Unauthorised expenditure means any expenditure that was not budgeted for or that is unrelated to the municipal department’s function, e.g. –Overspending of budget of a vote –Using municipal funds to pay for unbudgeted projects A council committee (e.g. MPAC) must investigate the expenditure and may recommend to council that it: –Be authorised in an adjustments budget –Or recovered from the person responsible for making or approving the expenditure Same process as for irregular expenditure, if it is irrecoverable

Recovery of irregular, fruitless & wasteful expenditure 19 Council does not have the authority in law to authorise irregular expenditure fruitless and wasteful expenditure The municipality must recover such expenditure from the person responsible for making it or approving it A council committee must investigate the recoverability of expenditure taking into consideration regulation 74 of the Municipal Budget and Reporting Regulations If found to be irrecoverable, the committee may recommend that council writes it off

Council Oversight Council should: –Monitor implementation of capital projects –Assess performance of contractors –Municipal contribution to the local economy Adherence to SCM processes ensure efficient and effective financial management and service delivery 20

Conclusion Adherence to SCM processes ensures efficient and effective financial management, service delivery and contributes toward clean audit Thank you 21