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Welcome…

Engagement with Gauteng Municipalities

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Table of Content

• Introduction

• Support on Revenue Management• Audit Results• Interventions Made

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Introduction

One of the main problems experience by municipality as addressed in the LGTAS is Financial Management, in particular :

• Municipal budget and income management

• Intergovernmental Fiscal System (including the Equitable Share (ES) and the Municipal Infrastructure Grant (MIG))

• Serious leadership and governance challenges in municipalities including weak responsiveness and accountability to communities

•The following actions were expected from municipalities, but no additional funding or other resources was provided to municipalities to ensure compliance:

• Optimised revenue collection and improved billing, customer care, indigent and credit control policies

• Work towards sustaining clean audit outcomes by 2014. Those that can achieve the target earlier must do so.

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Support on Revenue Management

• SALGA established revenue peer learning forums with municipalities aiming at:

• Improving revenue collection and improved billing systems, customer care, indigent and credit control policies

• NERSA Tariff to municipalities was done late while municipalities have already completed their budgets

• Limited capacity to implement internal controls in terms of managing indigents

• High distribution loses which impact negatively on revenue collection due leakages and replacement of pipes.

• Community uprisings on cutting of services.

• Decreasing average income per household

• Potential revenue decreases from Green initiatives

• Submission at the provincial legislature on government debt4

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Key messages

• Need for more examination and less exaggeration in interpreting and communicating municipal audit results

• Is the system really collapsing as indicated in popular debate?

• Note modest progress over past 7 years

• We all need clear definitions and interpretations of standards & results in order to reach effective interventions

• Must collectively build capacity of local government in critical areas including financial governance and management

• The collective in respect of audit improvements includes SALGA, Provincial Treasury, DLG&H and AG

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Key messages

• Must improve leadership, governance and oversight:• Includes effective functioning of MPACs and Audit Committees

• Must improve political management:• Maintain a healthy interface between political parties and

municipalities to allow political leadership while avoiding interference and micromanagement

• Acknowledgement that our regulatory environment is complex and undergoing continuous reform

• Consider differentiation • in interpretation of results, interventions and support, management of

finances and regulatory environment

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Environment

•Transition of Local Government (Pre-interimInterimEstablishment Consolidation)•Introduction of World Class Municipal Finance Regulatory System (MFMA)•Transition to a new system of Accounting Standards (GRAP) coupled with continuous reform•Continuous Budget reforms since 2002•More Stringent and Transparent Auditing Standards and Procedures

Understanding the Definitions ie. UQ Audit vs Clean Audits

“Financially unqualified audit opinion: financial statements contain no material misstatements”. ie. Some findings but infringements are non-material.

“Clean audit outcome: financial statements of institution are free from material errors or omissions (financially unqualified audit opinion) & there are no material findings on reporting by them on their performance objectives or compliance with laws and regulations”.

More examination and less exaggeration on municipal

audit results

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Key areas of intervention

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AREAS

Capacity (Competency, Vacancies & Training)

Financial Governance & Leadership

Annual Financial Statements

Challenge with existing Laws and those in the pipeline

Audit Process

Support to municipalities

Manage Perceptions and need for consequences

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Capacity: Vacancies

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Capacity:Training

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Interventions made to date

•  Training of all councillors in general financial management with focus on – Budgeting and budget processes,

– Financial management and internal controls,

– Monitoring , reporting and accountability

• Advanced training of MMCs, executive mayors and finance committee members focusing on:– Reviewing of policies, supply chain management, expenditure

management, budgeting, municipal assets, revenue management, investment management and borrowing

• Advised members on competency regulations on officials11

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Interventions made to date

• Training of MPACs members

– Terms of references

– Delegation

– The role of audit committee

– The role of internal audit

• SCM Workshop planned for councilors and officials

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Identifying municipalities that need intervention

• Persistent negative audit outcomes • Regressions in the audit results• Partnering with stakeholders to support municipalities

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Urgent Interventions

•Identify continuous and persistent non-performing municipalities

•SALGA to facilitate an urgent direct engagement with Mayors and managers of the poorly performing municipalities

•Treasury deployment of financial advisors to each municipality, but should focus on municipalities in distress, SALGA should work with stakeholders to cordinate hands-on support in such municipalities

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Financial Governance and Leadership (3)

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Internal Issue: Financial Governance and Leadership (2)

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Improving Municipal Governance

RECOMMENDATIONS:

• The reporting burden and complexity of requirements on municipalities imposed by legislation must be reduced.

• To improve oversight at local level councillors who serve on Section 79 committees must be capacitated to play their oversight role and receive appropriate administrative support to carry out their oversight function.

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Annual Financial Statements

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Challenges with existing laws and those in pipeline

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Consequences of changes to legislation

and policies

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Audit Process

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Support to Municipalities

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Support to Municipalities Financial Viability

Recommendations:

• Other sphere of government are called upon to ensure sustainability and security of municipal revenues by:

– Improving the legal and policy framework to collect municipal revenues;

– Implementing a comprehensive programme to support municipalities to improve revenue collection; and

– Urgently slowing down the generation of new budget reforms and accounting standards for municipalities.

• The need for differentiated approach is required by:

– addressing the complexity of LG Financial Regulatory Framework and improving financial management and governance;

– Ensure a less onerous regulatory framework for smaller municipalities (while retaining accountability);

– Introducing a Deployment strategy to ensure greater continuity and improve capacity of political leadership in managing municipal finances.

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Achievements

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Municipality 2010/11 2009/10 2008/09City of Joburg Qualified Qualified Unqualified without findings

Ekurhuleni Metro Unqualified with findings Unqualified with findings Unqualified with findingsCity Tshwane Unqualified with findings Unqualified with findings QualifiedMetsweding District Municipality

Unqualified with findings Unqualified without findings Unqualified with findings

Sedibeng District Municipality

Unqualified with findings Unqualified with findings Unqualified with findings

West Rand District Municipality

Unqualified with findings Unqualified with findings Unqualified with findings

Emfuleni Local Municipality Qualified Qualified Qualified

Kungwini Local Municipality Qualified Qualified Diclaimer

Lesedi Local Municipality Unqualified with findings Unqualified with findings Unqualified with findingsMerafong Local Municipality Unqualified with findings Unqualified with findings Unqualified with findings

Midvaal Local Municipality Unqualified with findings Unqualified with findings Unqualified with findingsMogale City Local Municipality

Qualified Qualified Unqualified with findings

Nokeng tsa Taemane Qualified Unqualified with findings QualifiedRandfontein Local Municipality

Qualified Unqualified with findings Unqualified with findings

Westonaria Local Municipality

Unqualified with findings Unqualified with findings Unqualified with findings

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Interventions made to date

•  Training of all councillors in general financial management with focus on – Budgeting and budget processes,

– Financial management and internal controls,

– Monitoring , reporting and accountability

• Advanced training of MMCs, executive mayors and finance committee members focusing on:– Reviewing of policies, supply chain management, expenditure

management, budgeting, municipal assets, revenue management, investment management and borrowing

• Advised members on competency regulations on officials24

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Manage Perceptions and need for consequences

(1)

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Manage Perceptions and need for consequences

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Thank you

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