PROVINCIAL SUPPORT
MUNICIPAL FINANCE
PRESENTATION TO THE SALGA LIMPOPO
FINANCE WEEK
7-8 February 2013
General Manager: Municipal Finance
Mrs Joey Krishnan
CONTENT
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Mandate
Stakeholders
Principles and Approach
Support Initiatives
Institutional Arrangements and Municipal
Engagements
• Audit Outcomes and Financial Results
• Challenges
• Recommendations
MANDATE
• Constitution – Sections 155 and 139
– Monitoring
– Support
– Capacity Development
– Intervention
MANDATE
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Municipal Finance Management Act, 2003
– Supervision over local government finance management – Chapter 2
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Monitor and assess
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Budget preparation and implementation, including expenditure; revenue collection and borrowing
Compliance
– Capacity Building – Chapter 5
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By agreement assist in building capacity
Support efforts by municipalities to identify and resolve financial problems
Monitor and share results
Inter-governmental relations in fiscal and financial relations
– Intervention – Chapter 13
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Discretionary
Mandatory
– Various executive obligations of the MECs for Finance and Local Government
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In-year monitoring and reporting to the Provincial Legislature
Budget intervention – section 26 read with section 55
Unauthorised, irregular, fruitless and wasteful expenditure – section 32(4)
Councillor’s Remuneration – section 167
Annual Reporting – section 131
MANDATE
• Municipal Systems Act, 2000
– Co-operative government – section 3
• Principles of co-operative government – section 141 of the Constitution
• Must within the constitutional system of co-operative government, exercise
executive and legislative authority in a manner that does not impede a
municipality’s ability or right to exercise its legislative and executive authority
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Develop common approaches
Enhance co-operation, mutual assistance and sharing of resources among municipalities
Find solutions for problems relating to Local Government generally
Facilitate compliance with the principles of co-operative government and
intergovernmental relations
– Various executive obligations of the MECs for Local Government
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IDPs
Appointment of section 57 managers
Municipal Performance Management
Monitoring – section 105
Investigation – section 106
Councillor discipline
MANDATE
• Municipal Structures Act, 1998
– Powers and functions
– Full time councillors
– Participation by Traditional Leaders in municipal councils
• Municipal Property Rates Act, 2004
– Establishment of Valuation Appeal Boards
– Provincial monitoring and intervention – section 81
• Intergovernmental Relations Framework Act,
• Disaster Management Act
• Various other legislation pertaining to Local
Government
STAKEHOLDERS
• Municipalities
– Locals and Districts
– Metros
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Mec for Local Government
Mec for Finance
Organised Local Government – SALGA
National and Provincial Sector Departments
Community
Legislature
Professional Bodies
PRINCIPLES AND APPROACH
• Principles
– Primary responsibility to avoid, identify and resolve financial problems in a
municipality rests with the municipality itself – MFMA section 135
– Accountability is critical
• Department is accountable to the Provincial Executive, Legislature, National Minister and
Legislature
• Municipal officials and councils are accountable within the municipality, to the MEC for
Local Government and to the community
– Respect for mandates
• Approach
– COGTA to perform its monitoring, capacity building, support and intervention
role
• Support does not entail doing the work of officials employed in municipalities
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COGTA to promote a single window of co-ordination
Continuous engagement and dialogue
Good working relations amongst provincial and municipal officials
Politics managed
SUPPORT INITIATIVES
• Operation Clean Audit
– Preparation of Annual Financial Statements
– Audit response plans and eliminating audit queries
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Reconciliations
Clearing of Suspense accounts
Grants
Fixed asset registers/loan registers/investment registers
Cashflow analysis and projections
Internal controls
– Annual reports
– Oversight reports
– Training of MPACs
• 865 Councillors and officials trained in 61 municipalities in collaboration with
Provincial Treasury, SALGA KZN, Auditor-General and the Provincial Legislature
APAC members
SUPPORT INITIATIVES
• Operation Clean Audit
– Programmatic support
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Simplified Revenue Plans
Expenditure Management
Unauthorised, irregular, fruitless and wasteful expenditure
Economic Viability assessment
Legislative Compliance
Proactive Anti-corruption programmes
Investigations
– Ad hoc municipal assessments
SUPPORT INITIATIVES
• Other Support Activities and Programmes
– Filling of CFO posts in particular as well as other section 57
managers
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Interview questionnaires
Technical assessments
Advisor at interviews
Interim deployments including payment where necessary
– MPRA
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SCM
Condonations and extensions of GVs
Data Management
Valuation Appeal Boards
– Standard Operations Manual
– Compliance Monitoring
INSTITUTIONAL ARRANGEMENTS
AND MUNICIPAL ENGAGEMENTS
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Audit Committees
AG Engagements
District Area Finance Forums
Provincial CFO Forums
MPACs
EXCO and Council meetings
MEC engagement with non-compliant and poor
performing municipalities
• MUNIMEC
• Mediation
• Community facilitation on financial matters
AUDIT OUTCOMES
Type of Opinion
2010/2011
2009/2010 2008/2009
Number
%
Number
%
Number
%
5
8%
0
0%
0
0%
46
75%
53
86%
44
72%
Qualified
8
13%
6
10%
8
13%
Adverse
1
2%
1
2%
0
0%
Disclaimer
1
2%
1
2%
9
15%
TOTAL
61
100%
61
100%
61
100%
Financially unqualified (with no other
matters)
Financially unqualified (with other
matters)
AUDIT OUTCOMES
MATTERS OF EMPHASIS
AUDIT OUTCOMES – MAIN ISSUES
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Ethical discipline resulting in irregular expenditure
Financial discipline with monthly and daily reconciliation activities not performed
Lack of dedicated resources and interpretation of GRAP
Governance structures not in place including the following:
– MM and CFO (not same persons)
– Availability of key officials during the audit
– Inadequate oversight on financials and predetermined objectives
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Lack of supporting documents (proper filing of information)
Low capacity municipalities – full GRAP compliance
Adoption of GRAP 17 – fixed assets
Misinterpretation and application of standards
Lack of understanding of requirements for previously determined objectives
Consultants did not achieve objectives and lack of monitoring
Lack of adequately skilled resources on financial and performance information
TRACKING FINANCIAL RESULTS
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Revenue
Grant Dependency
Conditional Grants
Cash and Cash Equivalents
Short Term Debt
Bank Overdraft
Creditors
Debtors
Repairs and Maintenance
Councillor Arrears
Employee Related Costs
CHALLENGES – 2011/2012
• The following factors either independently or in combination led to
challenges in municipalities and the overall regression in the province;
– Local Government elections – 80% of councilors totally new, impacting on the
reduced ability of councils to exercise effective oversight on financial and
predetermined objectives.
– Section 57 management contracts expiring or terminated leading to
administrative instability, impacting on availability of officials during the audit.
Lack of commitment by officials whose contracts were extended on a month
to month basis. Statistics that are significant:
• 19 municipalities had acting, consulting or month to month CFOs and vacancies
• Five municipalities did not have audit committees
• Two municipalities internal audit units were not functional or in place
– Political instability in mainly coalition led municipalities as well as a few others
created governance instability, poor decision making and indecisiveness
impacting on the filling of key positions of section 56 managers including MMs
and CFOs.
– The lack of dedicated staff to deal with predetermined objectives and
performance management and limited knowledge and skills in this area.
RECOMMENDATIONS
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Political Leadership
Administrative Leadership
The right skills in the right place
Effective municipal oversight
Effective provincial monitoring
Sharing of results of provincial monitoring and continuous engagement
with municipalities
Institutionalising provincial support and being relevant to municipal needs
Accountability and the right Attitude
Collaborative and holistic approach
Respect for statutory obligations
Good Relations and trust amongst provincial and municipal officials
Complementing and supplementing municipal gaps
Reducing dependency on consultants and effective management of
service providers
General Manager: Municipal Finance
6th Floor Southern Life Plaza
271 Church Street
Pietermaritzburg, 3200
Tel: +27(0) 33 355 6562
Fax: +27(0) 33 355 6292
E-mail: joey.krishnan@kzncogtal.gov.za
hodenquiries@kzncogta.gov.za
Website: www.kzncogta.gov.za