1. SA Fakie Auditor-General
Presentation to Select Committee on Finance
9 June 2006
SA Fakie
Auditor-General

2. Municipalities & Municipal Entities
Background
Municipalities & Municipal Entities
Municipalities
- 77 Municipal Entities
must prepare Consolidated FS

3. Provincial Spread of Municipalities
Eastern Cape 45
Free State 25
Gauteng 15
KwaZulu-Natal 61
Limpopo 31
Mpumalanga 21
Northern Cape 31
North West 25
Western Cape 30
TOTAL
Potentially the most important tool
Information over and above that which would rest easily in audit reports
A chance to show information holistically by portfolio. Something that isn’t
currently available
represents a opportunity to show comparative information over time
Feedback from SCOPA and Other Groups
Already generated improvements through taking coignaisance of stakeholders
Discuss the hearing and types of questions
Note to the AG
Consistency
This approach is trying to ensure similar reporting at the same time. This will
enable the weaker provinces to be assisted.

4. 3. Legislative reforms & Transformation
L.G. Municipal Demarcation Act
L.G. Municipal Structures Act
L.G. Municipal Systems Act
L.G. Municipal Property Act
MFMA
3 sets of Accounting standards
- IMFO
- GAMAP (Old & New)
- GRAP
Ordinances & Treasury regulations
Challenge – repeal absolute ordinances to enable coherent legal framework

5. 4. Macro Challenges
Legislation does not automatically mean better service delivery – means to an end
Rapid ratio of urbanisation
Rapid development & growth
Inadequate and deteriorating infrastructure
Audit Flavours have been requested for the purposes of planning by
the 14 May. To date only Guateng, Northern Cape and North West provinces
have responded.
Note to the AG
Urging them to respond for the purposes of their inputs into the areas we focus
on would be extremely valuable and beneficial.

6. 5. Audit Outcomes 2004 - Medium Capacity Municipalities 107
National Treasury Classification
- High Capacity Municipalities 50
- Medium Capacity Municipalities 107
- Low Capacity Municipalities 127
Audit Flavours have been requested for the purposes of planning by
the 14 May. To date only Guateng, Northern Cape and North West provinces
have responded.
Note to the AG
Urging them to respond for the purposes of their inputs into the areas we focus
on would be extremely valuable and beneficial.

7. 6. Submission of Financial Statements
2004
17 (6%) end of August
83 (29%) end of September
144 (51) after September
40 (14%) Not submitted by end April 2005
Top 50 Municipalities
25 (50%) end of September
23 (46%) end of April
2 (4%) Not submitted by end April 2005
Audit Flavours have been requested for the purposes of planning by
the 14 May. To date only Guateng, Northern Cape and North West provinces
have responded.
Note to the AG
Urging them to respond for the purposes of their inputs into the areas we focus
on would be extremely valuable and beneficial.

8. 7. Submission of Financial Statements as at 30 June 2005
133 (47%) submitted by end of August
124 (44%) submitted between April and March 2006
27 (9%) outstanding at March 2006
Effectiveness of General Report
The benefits of an effective report will be to improve the profile of the Office
and this in turn could attract staff with an interest in government as well as
auditing.
The report will also raise the profile of the Provincial Offices and as stated
earlier improve the role we play in respect of the provincial legislature.
TSS Support
Wessel and Khalid are currently working on developing a workshop that will
encapsulate all the ideas as well as give an indication where further on the
job training may be required. They will also support provinces experiencing a
capacity problem.

9. 8. Audit Opinions
Only 95 of 284 audit finalised by end April 2005
Only 23 of Top 50 audit finalised by end April 2005
58 (61%) where qualified
3 (3%) Disclaimers
10 (11%) Adverse Opinions
Effectiveness of General Report
The benefits of an effective report will be to improve the profile of the Office
and this in turn could attract staff with an interest in government as well as
auditing.
The report will also raise the profile of the Provincial Offices and as stated
earlier improve the role we play in respect of the provincial legislature.
TSS Support
Wessel and Khalid are currently working on developing a workshop that will
encapsulate all the ideas as well as give an indication where further on the
job training may be required. They will also support provinces experiencing a
capacity problem.

10. 9. Transversal Issues Reported on (Top 50)
Asset Management (24)
Debtors (33)
Personal Expenditure (31)
Internal Audit (13)
Unauthorised Expenditure (5)
ICT (29)
Other Internal Control Issues (28)
Effectiveness of General Report
The benefits of an effective report will be to improve the profile of the Office
and this in turn could attract staff with an interest in government as well as
auditing.
The report will also raise the profile of the Provincial Offices and as stated
earlier improve the role we play in respect of the provincial legislature.
TSS Support
Wessel and Khalid are currently working on developing a workshop that will
encapsulate all the ideas as well as give an indication where further on the
job training may be required. They will also support provinces experiencing a
capacity problem.

11. 10. Financial Performance (Top 50)
Debt Collection period
Provision for Bad debt
Liquidity

12. 11. Debt Collection
For 23 of the top 50 municipalities – average is 136 days
Total debtors – R19.2 billion
9 collect within 100 days
14 collect longer than 100 days

13. 12. Provision for Bad Debt Average provision 59%
Total provision R11,4 billion
City of JHB R7,2 billion

14. 13. Liquidity Benchmark 2:1 Average 1,2:1
Whilst below norm = acceptable

15. 14. Performance Management
Only 22 of top 50 Performance Audit been done
Report format
Number of municipalities
Number of municipalities
Sufficient progress made - 3
Some progress made 21 20
Fully-fledged PMS audit * 1
Not yet audited 28 26
TOTAL 50
* Although a fully fledged PMS report had been issued, only compliance issues were addressed during the audit and not the effectiveness and efficiency of the inputs, processes, outputs and outcomes.

16. 15. Service Delivery Initiatives
Improve accountability arrangements (IDP)
Project Consolidate (136 municipalities identified)
- Develop capacity
- Improve financial position
- Improve service delivery

17. Thank you.
Any questions?