1. IMFO Conference – Cape Town “Implementing Financial Best Practice” Presented by: Mike Richardson Chief Financial Officer September 2011

2. What is “Best Practice?”- Wikipedia Generally-accepted techniques, methods or processes Often based upon common sense Used where no specific formal methodology exists Used as an alternative to mandatory legislated standards Featured as part of accredited management standards – ISO 9000 Not always appropriate to an organization’s needs Key strategic talent is needed when applying best practice to identify an organization’s unique qualities with the practices that it has in common with others One size may not fit all

3. Objectives of “Financial Best Practices” in Municipalities Financial viability Basis for clean audits Sound credit rating Investor confidence Ability to borrow for capital investment Economic growth and development Business approval Community confidence Sustainability

4. City of Cape Town – Financial Background Unqualified audit reports for 7 years “Clean audit “ reports for past 2 years Stable international credit rating for 3 years ( Moodys Aa2 ) Strong cash flow Bond issues at competitive interest rates Inflation linked rates increases Improving community perception surveys Improving staff perception surveys

5. One Size Fits All? City of Cape Town ● Population 3,7 million ● Area 2500 square kilometres ● 300kms of Coastline ● Operating Budget R22,1 billion ● Capital Budget R5,1 billion ● One ME ( CTICC ) ● Staff complement 27 000 ● Geographical constraints

6. City of Cape Town – Growth and Development Challenges Growing urbanisation Widespread poverty Land availability for low cost housing scarce Climate change demands Basic service provision for the poor Biodiversity protection Public transport systems out-dated Financial viability is the key to addressing these challenges

7. Financial Viability – Conditions Precedent ● Political stability ● Political commitment to sound management ● Adequate revenue streams ● Supporting strategies and policies ● Appropriate financial systems ● Dynamic and competent management leadership ● Sound governance structures

8. Governance Structures – Oversight and Compliance ●Informed and effective Finance Committee ●Independent and qualified Audit Committee ●Risk Management Committee ●SCOPA ●Open and transparent reporting mechanisms

9. Tools to Deliver Strong Revenue Streams - Policies ●Debt Management Policy ●Indigent Policy ●Rating Policy ●Tariff Policies ●System of delegations ●Performance management

10. Processes to Support Clean Audit Reports ●Integrated financial accounting ●Management information systems ●Accurate billing system ●Data management controls ●Supply chain management ●Internal control processes

11. Clean Audit Reports - Approach to Annual Audit ● Coordination of audit process by CFO ● Constructive interaction with the auditors and appropriate committee structures to deal with audit issues ● Keeping Executive Management informed of audit progress ● Detailed file of audit working papers in support of the compilation of the annual financial statements ● Availability of key personnel during the audit process ● Early resolution of issues and audit queries ● Challenge to unreasonable demands and findings

12. Financial Best Practices Conclusions ● Discipline based upon good management principles ● Involves all stakeholders - inclusivity ● Package aligned to the needs of the organisation ● Provides the foundation for financial sustainability ● Basis for service delivery ……… How this achieved is another story……

13. Thank you Email address: Mike.richardson@capetown.gov.za Contact details: 021 400 3265 (Office) 021 400 5660 (Fax) 083 629 1236