1. 1 Operational Plan: 2009/10 Audit Outcomes in Municipalities Presentation to Select Committee on Cogta 16 August 2011

2. Outline of Presentation 2  Purpose of presentation  Mechanism for Providing Support to Municipalities  Various Support Measures to Municipalities  Some of the areas to continue concentrating upon during the 2011/12 financial year  Conclusion

3. Purpose of Presentation 3  Rather than regurgitating most of the information already made available to the Committee by either DCoG or the AGSA during earlier interactions during the year, the focus of the presentation will be mainly on progress update in respect of particular initiatives.

4. Mechanism for Providing Support to Municipalities 4  Provincial Coordinating Committees (PCCs) have been established at a provincial level, with key drivers being the provincial departments responsible for LG, provincial treasuries, in some provinces with participation of Premiers’ Offices.  The PCCs meet quarterly and in some provinces monthly meetings take place as well.  The PCCs exchange information such as best practices and deliberate on specific matters requiring input, consider progress made in supporting municipalities. o Municipalities are also invited to present on progress they are making in implementing their audit remedial action plans that respond to qualification issues or matters raised by the Auditor- General in order to provide guidance or assistance where required.

5. Various Support Measures to Municipalities (1/3) 5  The support provision is dictated to by the nature of challenges faced by specific municipalities or municipalities within the province and is varied across provinces.  Some of the assistance appear operational while others appear strategic but given the level in which specific municipalities find themselves, however, assist toward the achievement of improved audit outcomes.

6. Various Support Measures to Municipalities (2/3) 6  The assistance include the following:  Promotion of certain best practices such as the establishment of audit steering committees made up of senior finance officials and other senior officials in municipalities so as inculcate the culture of municipal senior management prioritisation and ownership of audit matters.  Advice to municipalities that Internal Audit Units and Audit Committees be requested to have the audit queries as standing items on their meeting agendas as a means of tracking adequacy of remedial measures and progress made in resolving such queries.  Members of the PCCs attend some of the meetings of Audit Committee meetings.

7. Various Support Measures to Municipalities (3/3) 7 Assistance continued:  Tracing and providing supporting documents and vouchers.  Annual Financial Statements preparation, including bank reconciliations.  Deployment of finance experts by the National Treasury or province on site to give direct assistance to municipalities across a range of their financial management constraints such as: o Addressing the AG’s audit queries, putting financial management systems into place, etc.

8. Some of the areas to continue concentrating upon during the 2011/12 financial year 8  Establishment of Municipal Public Accounts Committees (MPACs) and training.  Supporting municipalities to establish Internal Audit Units and Audit Committees  Monitoring implementation of municipal audit remedial action plans to address the 2009/10 audit outcomes.

9. Municipal Public Accounts Committees (MPACs) (1/3) 9  Background and progress:  Workshops on establishment of (MPACs) were convened in all provinces and 103 MPACs established prior the LG elections.  However, following the LG elections all municipalities, including those that established MPACs have to establish or re-establish them.  The DCoG-National Treasury joint Guide on establishment of MPACs presented to LGMinMEC on 12 August 2011 and will be issued to municipalities during this week, and training initiatives with APAC and SALGA will be embarked upon.

10. Municipal Public Accounts Committees (MPACs) (2/3) 10  MPACs primary functions:  To consider and evaluate the content of the annual report and to make recommendations to Council when adopting an oversight report on the annual report;  In order to assist with the conclusion of matters that may not be finalized, information relating to past recommendations made on the Annual Report, must also be reviewed. This relates to current in-year reports, including the quarterly, mid- year and annual reports;

11. Municipal Public Accounts Committees (MPACs) (2/3) 11  MPACs primary functions (Continued):  To examine the financial statements and audit reports of the municipality and municipal entities, and in doing so, the Committee must consider improvements from previous statements and reports and must evaluate the extent to which the Audit Committee’s and the Auditor General’s recommendations have been implemented.

12. Municipal Public Accounts Committees (MPACs) (1/3) 12  MPACs primary functions (Continued):  To promote good governance, transparency and accountability on the use of municipal resources;  To recommend or undertake any investigation in its area of responsibility, after reviewing any investigation report already undertaken by the municipality or the Audit Committee (emphasis added); and  To perform any other functions assigned to it through a resolution of council within its area of responsibility.

13. Supporting Municipalities to Establish Internal Audit Units and Audit Committees (1/2) 13  Based on the Auditor-General’s 2009/10 municipal audit outcomes, a survey targeting 116 municipalities (including 48 municipalities cited for intervention by the AG) is being conducted with regard to the establishment of Internal Audit Units and Audit Committees. 85 responses have thus been received.  The purpose of the survey is to establish the reasons for either non-establishment of these or poor establishment in order to provide recommendations for addressing the challenges.  Some of the preliminary findings is that some municipalities have outsourced the function relating to internal auditing, some even up to 2014.

14. Supporting Municipalities to Establish Internal Audit Units and Audit Committees (1/2) 14  We are in the process of concluding formal supply chain management process regarding a Memorandum of Understanding (MOU) with one institution with a view to providing a 3-year training to Audit Committees in order to improve their functionality.

15. Status of Municipal Audit Remedial Action Plans to Address the 2009/10 Audit Outcomes 15 PROVINCE TOTAL NO. OF MUNICIPALITIES MUNICS WITH AUDIT REMEDIAL ACTION PLANS Comment EC45 FS245 MEC alerted. GP1211 KZN61 LP3029 *MP2120 Awaiting confirmation. NC3223 Audits outstanding. NW2311 Audits outstanding. WC3025 NATIONAL278230 Information as of 21 July 2011 and * MP still subject to confirmation.

16. Conclusion 16  With all partners, concerted effort is being exerted toward improving municipal audit outcomes.  With the Guide for establishing MPACs having been concluded, the focus will be on municipal establishment of MPACs. Thank You