Chairpersons for Finance
Portfolio committees
The role of Council in Supply Chain
Management (SCM)
29 May 2012
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Contents
•Legislative Framework
• Objectives of SCM Policy
• Roles & responsibilities
• Elements of SCM
• SCM and Risk Management
•SCM and Budget
• SCM and Expenditure Management
• Irregular, unauthorised and fruitless and
wasteful expenditure
• Council oversight
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Legislative Framework
•Legislative framework for procurement of
goods and services are:
– Section 217 of the Constitution (Act
– Section 111 of the Municipal Finance
Management Act and Regulations
– Preferential Procurement Policy Framework
Act and Regulations
–Broad
Based
Black
Economic
Empowerment Act
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Objectives of SCM policy
• To give effect to the provisions of the
Constitution,1996 as amended, the MFMA, the
PPPFA and related Regulations
• Transform the procurement and provisioning
functions in government into an integrated SCM
function
• Introduce a system for the appointment of
consultants
• Create common understanding and interpretation of
government Preferential Procurement
Policy
Framework (PPPF)
• Promote consistency in respect of SCM policy
across all spheres of government
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Role players
•
•
•
•
National Treasury
Provincial Treasury
Municipal Council (focus of presentation)
Accounting Officer
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Role Players - Council
• Has primary responsibility for approving SCM policy of
municipality
• SCM regulation 4 – Council must delegate additional
SCM powers and duties to the accounting officer (it is
important to note that some powers are assigned to the
AO by law – see Reg 5)
• Ensure that accounting officer executes council’s policy
• Consider the report of accounting officer
• Council cannot reverse or override a decision regarding
a bid once it has been awarded
• May not serve on, or attend any bid committee meetings
or even serve as observers
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Role Players – Council cont…
• Role of council is:
– Approving SCM policy
– Approving Risk Management Policy
– Reviewing SCM policy decisions for cost
implications
– Monitoring implementation of policy, SCM
plans and budgets as well as functioning of
SCM systems & processes
– Holding Mayor and AO accountable
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Role players – Accounting Officer
• Establishes SCM unit where possible, with assistance
of the CFO
• Implements SCM policy and adhere to guidelines
• Develops internal procedures and processes
• Reports to council on progress regarding
implementation of SCM policy
• Complies with highest ethical standards
• Ensures that officials are trained
• May sub delegate powers and duties to committees
and officials (SCM Reg 5)
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Role players – Accounting Officer
• Establishes SCM unit where possible, with assistance
of the CFO
• Implements SCM policy and adhere to guidelines
• Develops internal procedures and processes
• Reports to council on progress regarding
implementation of SCM policy
• Complies with highest ethical standards
• Ensures that officials are trained
• May sub delegate powers and duties to committees
and officials (SCM Reg 5)
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Elements of SCM
Supply chain management
Infrastructure (Systems)
Acquisition
Logistics
Disposal
Government’s preferential
procurement policy objectives
Demand
Risk Management
Supply chain performance
Database/s
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Elements of SCM cont…
• It is important to note that:
– All the elements of SCM are an integral part of the
SCM Policy approved by Council;
– This includes weights on the allocation of preferential
points in line with Council objectives & the PPPFA
Regulations
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SCM & Risk management
• Council is responsible for approving the Risk
Management Policy and strategy of the
municipality
• Risk management is an integral part of SCM
and strategic planning
– Many projects emanate from the strategic
planning (e.g. township development,
infrastructure acquisition & development, job
creation etc)
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SCM & Risk management
• SCM policy must provide for an effective system of
risk management (RM) including:
– Identification of risks on a case by case study
– Allocation of risks to the party best suited to
manage risks
– Acceptance of cost of risk where cost of
transferring risk is greater than that of retaining it
– Management of risks in a pro-active manner and
provision of cover for residual risks
– The assignment of relative risks to contracting
parties through clear and unambiguous contract
documentation
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SCM & Budget
Council should:
• Have a multi-year budget – so as to ensure capital
projects can go out to tender as soon as the budget is
approved – so as not to delay spending
• Ensure honesty and integrity in the use of municipal
funds
– Municipality may not procure goods and services from
persons in service of the state (this includes both
councillors and officials)
– Ensure conflicts of interest are properly recorded and
managed
– Councillors forbidden from interfering with tender
processes (criminal offence) but may report irregularities
to the Auditor-General
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SCM & Budget
Council should:
• Ensure proper implementation of government’s
BEE and SMME objectives
– System prescribed in Preferential Procurement
Policy Framework Act
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SCM & Expenditure management
• All expenditure must be in terms of an approved budget
– If annual budget is not approved before start of the
municipal financial year,
– SCM processes may not be undertaken resulting in
unspent conditional grants and poor service delivery.
• Mayors and councillors may only instruct expenditures
to be made through the budget and SDBIP or the
revised
• Mayors may approve unforeseen and unavoidable
expenditure within the framework prescribed by
regulation 73 of the Municipal Budget and Reporting
Regulations
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Fruitless & wasteful, irregular &
unauthorised expenditure
Fruitless & Wasteful expenditure
• Expenditure that was made in vain and would have been avoided
had reasonable care been exercised
• Example:
― Paying for goods or services that are not used or consumed
Irregular expenditure
• Expenditure that contravenes the MFMA, the Systems Act, Public
Office-Bearers Act, or any of the municipality’s policies or By-laws
• Examples
– Awarding a contract that was not subjected to tender procedures
– Benefits not provided for in the Public Office Bearers Act
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Fruitless & wasteful, irregular &
unauthorised expenditure cont…
Unauthorised expenditure
• Unauthorised expenditure means any expenditure that
was not budgeted for or that is unrelated to the municipal
department’s function, e.g.
– Overspending of budget of a vote
– Using municipal funds to pay for unbudgeted projects
• A council committee (e.g. MPAC) must investigate the
expenditure and may recommend to council that it:
– Be authorised in an adjustments budget
– Or recovered from the person responsible for making or approving
the expenditure
• Same process as for irregular expenditure, if it is
irrecoverable
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Recovery of irregular, fruitless &
wasteful expenditure
• Council does not have the authority in law to authorise
• irregular expenditure
• fruitless and wasteful expenditure
• The municipality must recover such expenditure from the
person responsible for making it or approving it
• A council committee must investigate the recoverability
of expenditure taking into consideration regulation 74 of
the Municipal Budget and Reporting Regulations
• If found to be irrecoverable, the committee may
recommend that council writes it off
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Council Oversight
• Council should:
– Monitor implementation of capital projects
– Assess performance of contractors
– Municipal contribution to the local economy
Adherence to SCM processes ensure efficient
and effective financial management and
service delivery
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Conclusion
Adherence to SCM processes ensures efficient
and effective financial management, service
delivery and contributes toward clean audit
Thank you
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