1. Department of Cooperative Governance & Traditional Affairs OVERVIEW OF OPERATION CLEAN AUDIT (OPCA) 2014 PROGRAMME Minister Sicelo Shiceka 07 October 2009

2.  Primarily: constitutional obligation to account  To brief MP’s and interested parties on progress made up to date  Status update on the programme and its transformational agenda PURPOSE OF THE MEETING

3. To provide an overview of the initiative: “Operation Clean Audit 2014”Programme PURPOSE OF THE PRESENTATION

4. “By 2014, all 283 municipalities and 9 provincial government departments must achieve clean audits on their Annual Financial Statements”. GUIDING VISION

5. To provide assistance to all municipalities and provincial government departments in achieving sustainable improvement systems for maintaining quality financial statements and management of information. PROGRAMME GOAL

6. To address all issues raised by the Auditor General and reduce vulnerability to risks in the provincial departments and municipal financial management and governance processes through targeted projects PROGRAMME PURPOSE

7.  Audit queries: raised by AG recurring and not being addressed  Lessons learned from Project Consolidate  5Year LG Strategic Agenda; and  Gauteng model of Operation Clean Audit  Prioritised municipal and provincial audit outcomes CONTEXT AND BACKGROUND

8. PROGRAMME MILESTONES No municipality and provincial department with Adverse and Disclaimer audit opinion Between 2010 and 2011 60%:provincial departments and 283 municipalities achieving unqualified audit opinion By 2012 75%:provincial departments and municipalities achieving unqualified audit By 2013 100%: All 283 municipalities and provincial departments achieving unqualified audit opinion with no matters By 2014

9.  Conceptualised and packaged the programme  Taking into account inputs from SALGA, Auditor-General and Accountant-General  Consulted strategic partners: private sector and public sector institutions  National Launch on the 16 th July 2009  Provinces are expected to launch and ALL the Launches are expected to be finalized by 30 October 2009 ROAD TO THE LAUNCH

10. PROVINCIAL LAUNCHES: REPORT ProvinceStatusDate NWLaunched11 Sep 2009 LimpopoLaunched23 Sep 2009 NCLaunched01 Oct 2009 WCLaunched20 Aug 2009 KZNNot YetAwaiting for the date F StateExpected to launch30 Oct 2009 MpumalangaExpected to launchAwaiting for the date Eastern CapeExpected to launch13 Oct 2009 GautengExpected to launch15 Oct 2009

11. Provincial Coordinating Committees Led by Ambassadors and supported by COGTA, Auditor General; Accountant General (National Treasury and Provincial Treasuries) DRIVERS OF THE CAMPAIGN

12. Strengthen political oversight; MPACs to be established in ALL municipalities At APAC conference, the proposed date is 15 December 2009 POLITICAL OVERSIGHT

13. All executive authorities from all spheres of government should receive monthly financial statements PACs and MPACs should also receive quarterly financial statements On yearly basis evaluation summits will take place, starting from municipalities, provinces, and National summit Monitoring and Evaluation

14. We need to strengthen our political oversight  Political message on Operation Clean Audit is critical at parliamentary/legislature portfolio committees  Continuous engagement with Auditor General and Accountant General remains critical for our understanding of issues affecting our vision CONCLUSION

15. THANK YOU SIYABONGA REALOBOGA

16. Department of Cooperative Governance & Traditional Affairs STATUS REPORT ON OPERATION CLEAN AUDIT (OPCA) 2014 PROGRAMME Dr. Batandwa Siswana 07 October 2009

17. To provide a contextual analysis and the way forward on “Operation Clean Audit 2014” Programme PURPOSE OF THE PRESENTATION

18.  Situational Analysis and assessment: Provincial and Municipalities  Provincial visits and assessment reports  Data analysis: AG reports and AR’s  Previous projects i.e lessons learnt  Best practices - Gauteng model APPROACH AND STRATEGY

19.  Financial management  Fiscal governance  Quality service to the public THROUGH OPCA, WE AIM TO ACHIEVE

20. CHALLENGES

21.  Financial management and leadership  Weak internal controls  Inadequate financial controls  Low culture of risk management  Lack of performance management  Lack of financial skills  Corruption, Fraud and mismanagement  Political and administrative interface INSTITUTIONAL CHALLENGES

22.  Municipalities and their entities: consistent disclaimers, adverse and qualified audit opinions: Disclaimers decreased from 105 (36%) in 2006/07 to 90 (31%) in 2007/08 Adverse audit opinions decreased from 21 (7%) in 2006/07 to 10 (3%) in 2007/08 Qualified audit opinions regressed from 82 (29%) in 2006/07 to 63 (22%) in 2007/08 Financial unqualified audit opinions (with other matters) increased from 79 (27%) to 122 (42%) in 2007/08 Financial unqualified audit opinions (with NO matters) increased from 3 (1%) to 6 (2%) in 2007/08 MUNICIPAL AUDIT OUTCOMES: Programme Trigger (basis for analysis)

23.  Provincial departments and their entities (119) showing steady improvement with few negative cases: Disclaimers decreased from 4 (3%) in 2006/07 to 3 (3%) in 2007/08 Adverse audit opinions decreased from 3 (2%) in 2006/07 to 2 (1%) in 2007/08 Qualified audits decreased from 56 (47%) in 2006/07 to 38 (32%) in 2007/08 Financially unqualified audits (with matters) increased from 50 (42%) in 2006/07 to 69 (58%) in 2007/08 Financially unqualified audits (with No matters) increased from 6 (6%) in 2006/07 to 7 (6%) in 2007/08 PROVINCIAL AUDIT OUTCOMES: Programme Trigger (basis for analysis)

24. SITUATIONAL ANALYSIS: GOVERNANCE AND LEADERSHIP IN MUNICIPALITIES

25. NATIONAL TREND ANALYSIS: MUNICIPALITIES

26. Appointment of CFOs: Sep 2009 ProvinceFilledVacant EC423 FS169 Gauteng140 KZN529 Limpopo228 Mpumalanga201 NW196 NC2210

27. Appointment of CFOs: Sep 2009 ProvinceFilledVacant WC273

28. Audit Committees and Internal Audit Units Audit Committee 206 (73%)Status: Established 46 (16%)Shared 31(11%)Not established Internal Audit221(78%)Established 21 (7%)Shared 41 (14%)Not established

29.  Out of 283 Municipalities, 58 have not submitted the AFS, or submitted late. SUBMISSION OF AFS: 30 AUGUST 2009

30. WHAT IS THE NEXT STEP?

31.  Development of a logframe: Operation Clean Audit  Analysis of Municipal finance, stellenbocsh agreement on plan of action and agreed on PoA  Situational Analysis and assessment: Provincial and Municipalities: Audit opinions  Integrated logframe developed: Provincial and Municipalities  Consultative process: Provincial visits PROGRAMME DEVELOPMENT (1)

32.  Integrated logframe developed: Provincial and Municipalities  Provincial consultative process:provincial visits i.e PT, COGTA and OTP; including the OAG (in provinces) PROGRAMME DEVELOPMENT (2)

33.  Clear trail of supporting documentation that is easily available and provided timely  Quality of financial statements and management information  Timeliness of financial statement and management information PROGRAMME PILLARS: AG Identified Best Practices for clean audits

34.  Availability of key officials during audits  Development and compliance with risk management and good internal control and governance practices  Supervision / monitoring PROGRAMME PILLARS: AG Identified Best Practices for clean audits

35. IMPLEMENTATION STRATEGY: OPERATION CLEAN AUDIT

36.  To implement the project in all provinces – provinces expected to establish coordinating committees to implement “Operation Clean Audit 2014” campaign.  Committees with representation from National and provincial departments of Cooperative Governance and Traditional Affairs, Premiers’ offices, National Treasury and Provincial Treasuries and Business Executives (Auditor-General-provincial) and provincial SALGA. PROVINCIAL CO-ORDINATION PROGRAMME

37.  Coordinating committees to embark on or consolidate a situation analysis of provinces, by focusing on three areas: - Leadership - Governance - Political oversight PROPOSED APPROACH FOR PCC

38.  Drive the implementation of the Province specific Operation Clean Audit 2014 for municipalities and provincial government departments  Provide regular feedback to the Premiers and MECs on the programme activities and progress  Develop a programme for provincial support on Clean Audits for provincial departments SCOPE OF REFERENCE FOR PCC

39.  Manage the deliverables of Operation Clean Audit for Municipalities and Provincial departments  Work closely with national department (cgta) to encourage collaboration of programmes and ensure effectively integrated implementation and reporting  Create Provincial platform for Municipalities, Provincial departments and partners’ interactions for knowledge sharing SCOPE OF REFERENCE FOR PCC

40.  Annual Comprehensive Analysis of issues contributing to negative audit outcomes  Development of Province Wide and District Wide Audit Remedial Plans  No of municipalities and provincial departments implementing Quarterly Financial Statements  Quality of financial statements and timeous submission of financial statements to Auditor General  Establishment and functionality of internal units, audit committees, risk management committees and Audit Committee  Assessment of capacity of budget and treasury offices  Capacity building and partnerships REPORTING PARAMETERS (Central tenets of the Coordinating Commettee reports)

41.  Joint efforts key to Operation Clean Audit – Auditor General, Acc General, Oversight Committees: working together.  The situation is conducive for a turn-around especially with progressive increase in the provincial departments achieving unqualified and clean audits  Financial management is critical to service delivery.  The quality of financial statements must improve drastically.  Capacity of departments and officials as well as partnering service providers must also be scrutinized for continuous improvement. OPERATIONAL CONSIDERATIONS

42.  Strengthening of Provincial coordinating committees as from November 2009  Provincial visits to discuss turn around strategies with clear milestones, starting in November  Focus on Disclaimers and Adverse audit opinions,as a matter of urgency Way forward

43.  Development of Capacity Strategies: COGTA, DBSA & NT, especially at local government level  Very close monitoring of implementation of provincial action plans with ‘quarterly meetings’  Conference on corporate governance for local government, June/July 2010 Way forward

44.  Robust campaign against corruption and fraud through Ayihlome (parallel project)  Ayihlome, aims to promote ethics and fight corruption at the same time, working with DPSA and PSC, especially on conflict of interest  Will work with SAPS, the HAWKES Way forward

45.  Operational Clean Audit 2014 creates single national, provincial and local government agenda  Sustainability of positive audit outcomes beyond 2014  Leadership and governance-paramount  Service delivery and clean audits-critical “Lets work together to realise the vision, it is possible!” CONCLUSION

46. ENKOSI