1 Department of Co-operative Governance, Human Settlement and Traditional Affairs. LIMPOPO PROVINCE

OPERATION CLEAN AUDIT 2011/12 Departmental Action Plan Audit Outcomes

TABLE OF CONTENTS 1.Purpose 2.Comparative Overview of the audit outcomes 3.Comparative audit outcomes 4.Root causes on audit findings 5.Additional key common audit findings 6.Current status of filling of MMs and CFOs positions 7.MMs vacancy rate 8.CFOs vacancy rate /12 audit remedial plans 10.Resident Accountants appointed 11.Impact of the Resident Accountants interventions 12.Scope of work for Resident Accountants 13.Project implementation and Monitoring 14.Municipal governance Structures 15.Challenges with regard to the Project 16.Interventions 17.Strategic Interventions

Purpose Briefing of the committee on departmental action plans in response to the 2010/11 and 2011/12 consolidated general report on the audit outcomes of Local Government

Comparative Overview of the audit outcomes Audit Opinion 2011/122010/112009/102008/0 9 Disclaimer Adverse0300 Qualified Unqualified1398 Clean Audit1210 Outstanding3000 Total30

Comparative audit outcomes for four consecutive financial years U= UNQUALIFIED; D=DISCLAIMER; Q=QUALIFIED, A=ADVERSE, C= CLEAN AUDIT, P=PENDING

Root Causes on audit findings People Lack of Shared vision Delay implementing corrective measures Accountability Lack of consequences for inappropriate behavior Sustainability The discipline of credible monthly reporting not transversally in place

Additional key common audit findings Non-compliance with Supply Chain Management An increase in unauthorised, fruitless and wasteful expenditure: Unauthorized expenditure: ( 2010/11)R 546m and (2011/12) R 738m. Irregular expenditure: ( 2010/11) R 945m and (2011/12) R 1 157m Fruitless and wasteful expenditure: (2010/11) R 40m and (2011/12) R 22m Assets Management- assets registers not compliant with GRAP Lack of supporting documents Completeness of revenue Ineffectiveness of governance structures Lack of application skills and knowledge of financial systems

The current status on filling of MMs and CFOs positions 24 MMs’s positions filled except for Modimolle; Bela-Bela; Aganang; Mookgophong; Ephraim Mogale and Mutale 21 CFOs’s positions filled except for Mutale; Mopani DM; Tubatse; Aganang; Polokwane; Maruleng; Vhembe DM; Ephraim Mogale and Thabazimbi.

Municipal Managers vacancy rate Municipal Manager Contract expired Novembe r 2012 Advertised ModimolleResigned June 2012Advertised Bela-BelaContract expiredDecember 2012Advertised AganangResignedApril 2012Advertised MookgophongResignedSeptember 2010Advertised Ephraim MogaleContract expiredApril 2012Interviewed MutaleContract expired November 2012Advertised

CFOs Vacancy Rate NAME OF MUNICIPALITY POSITION STATUSPERIODPROGRESS MutaleResigned November 2012Advertised Mopani DistrictResigned February 2013Advertised TubatseContract expiredNovember 2012Interviewed AganangRestructuringApril 2012Advertised PolokwaneResigned July 2012Interviewed MarulengResignedFebruary 2013 Vhembe DistrictResignedDecember 2012Advertised Ephraim-MogaleResignedApril 2012Re-advertised ThabazimbiResignedNovember 2012Interviewed

2011/12 Audit Remedial Plans Municipalities have develop and submitted audit remedial plans to the Department. Department has assessed audit remedial plans and provided feedback to Municipalities. Monitor the implementation of audit remedial plans and ensure supporting documents on issues resolved. 12

Residents Accountants appointed The Department is currently assisting municipalities under “Resident Accountant ” project. Allocations of municipalities are as follows: 1.CorpMD(Makhuduthamaga; Sekhukhune DM; Greater Giyani and Musina) 2.Ngubane/Kgorong Consultants(Bela-Bela; Makhado; Ba-Phalaborwa and Modimolle) and started June Advertised for additional Service Providers for six municipalities, i.e. Tubatse, Mogalakwena, Maruleng, Greater Tzaneen, Greater Letaba and Mookgophong and briefing session held.

Scope of Work for Resident Accountants To provide hands on support on technical financial management with regard to the closure of the financial year with specific emphasis that the municipality’s financial records for that financial year are in order and ensure skills transfer. To prepare the financial statements To ensure that working papers are available before preparing the financial statements as evidence for auditing purposes. To assess the state of financial management in the municipality and provide recommendation on areas of improvement; and

Impact of the Resident Accountants Interventions The audit opinion has not largely improved however the resident accountants have managed to assist municipalities in performing the following duties: a) Preparations of audit file b) Stock take count procedures and counting c) Clearing the 2010/11 audit queries d) Hands on support training e) Preparations of reconciliations f) Responding to audit finding raised during the current audit in the year under review.

Project implementation and monitoring The Project is monitored through the following structures: MEC/Mayors forum, co-chaired by MEC for Coghsta and Provincial Treasury. Comprises of Executive Mayors/Mayors, Municipal Managers, Office of the Auditor General and SALGA, it meets on quarterly basis Monthly reports of Resident Accountants are signed off by respective Municipal Managers and Chief Financial Officers and submitted to COGHSTA

Municipal Governance Structures Provincial MPAC Forum has been established and the Provincial Executive MPAC committees is established. Conducted MPAC district-based training sessions in-collaboration with Provincial Treasury, Provincial Treasury, Provincial Legislature and SALGA. All municipalities have established Internal Audit Unit and appointed Audit Committees. Establishment of Risk Management Committees. Monitor implementation of internal audit and audit committee recommendations. 17

Challenges with regard to the Project Limited skills base in terms of financial management High vacancy rate in Budget and Treasury Unit Lack of knowledge and skills in respect of migration and support from financial systems providers. Lack and unavailability of supporting documents. Lack of proper internal controls such as adhering to management policies and treasury regulations, safe guarding of assets, Non-implementation of recommendations made by the internal audit and audit committee Non-implementation of audit remedial plans Lack of skills in respect of municipal accounting procedures and standards.

Interventions Assist municipalities to develop performance indicators. Continuous monitoring of functionality of Audit Committees and Performance Committees functionalities. Strengthen Oversight Committees. Review and implement Operation Clean Audit Plan. Monitor implementation of audit remedial plans. Monitor and assist municipalities with implementation of MPRA- Utilization of Valuation Appeal Board Assist municipalities with recruitment of section 56 positions. Implementation of the Provincial Capacity Building Strategy focusing on financial management training for Councilors and officials 19

Strategic intervention The recent ANC Lekgotla and EXCO Lekgotla resolved that Municipal Mayors and Senior Management should take responsibility for non-improvement on the financial management issues. 20

THANK YOU 21