Striving towards clean audit: a case
study of eThekwini Municipality
Presentation to IMFO Conference,
30 September 2013
What is covered
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The origins of operation clean audit
Audit outcomes over the last three years
Problem statement in the context of eThekwini
Our understanding of clean audit
Where we come from and what has been achieved to date
What changes have been introduced and pillars of new
strategy
Oversight structures and roles
Critical success factors
Future prognosis
Conclusion
Genesis of clean audit operation
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The Clean audit operation was born on 16 July
2009
• Vision - By 2014, all the 283 municipalities
and 9 provinces’ departments in
South Africa will have achieved clean
audits on their Annual Financial
Statements and maintaining systems
for sustaining quality financial statements
and management information
The late Minister Sicelo Shiceka
Department of Co-operative Governance and
Traditional Affairs
Audit outcomes over the past three years
• 33 (12%) audits outstanding • Net regression over 2010-11
4% (9)
5% (12)
2% (5)
41% (101)
46% (113)
49% (119)
21% (52)
21% (52)
28% (68)
28% (68)
25% (62)
30% (73)
Problem statement
• Although eThekwini Municipality has
received Unqualified audit outcomes with
other matters of emphasis, clean audit has
been eluding us
• We have been suffered huge reputational
risks lately due to Manase Report on
irregularities especially within supply chain
management and human settlements units
But our goal is that we must receive an unqualified
audit outcome with no findings in the 2013/3014
Financial Year
How do we conceptualise clean audit?
• Operation clean audit
– must not be conceptualised as a discreet and
isolated event but be viewed as part of our overall
strategic vision of making Durban the most caring
and liveable city in the African Continent
– part of the whole process of good governance and
service delivery
– Clean audit is everybody’s business
– Clean audit is a daily business – what we do on a
daily basis contributes immensely to make our goal
possible
Our mantra?
• Clean audit must be
accompanied by
tangible achievement of
performance and
service delivery targets
• There can be no
genuine clean audit
without service delivery
Where do we come from?
ISSUE
2010/2011
(R’000)
7 awards made to entities whose directors/ members/ principal
shareholders/ stakeholders were in the service of eThekwini
municipality as Councillors
1 658
Awards made to entities whose directors/ members/ principal
shareholders/ stakeholders were in the service of eThekwini
municipality
37 546
123 awards made to 109 entities whose directors/ members/
principal shareholders/ stakeholders were in the service of
other state institutions
84 650
Non Compliance of S116(3) of the MFMA
711 291
Non Compliance with other SCM regulations
493 654
TOTAL IRREGULAR EXPENDITURE FOR THE YEAR
1 328 799
Progress to date
2010/2011
2011/2012
2012/2013
Audit outcomes
Unqualified with
findings
Unqualified with
findings
????
Irregular spending
R1,3 billion
R782, 5 million
R324,9 million
It is significant to note that the City is proactively identifying these
irregularities and taking steps to have them condoned after
investigation have been finalised
Municipal entities with clean audit
• Durban Marine Theme Park
• Inkosi Albert Luthuli International Convention
Centre, Durban
Pillars of our strategy
Internal
control
environment
Implementation
of Cobit
Framework for
IT Governance
City integrity
&
investigations
Human
capital
development
Compliance
Performance
Management
& Monitoring
What are doing differently
• We have invested a lot of time in developing
and implementing systems of clean
governance
– Weekly on Monday at 7-9 am we convene
Operations meetings where we review all the
cleaning and maintenance issues affecting the City
– Weekly review of procurement planning and
performance of capital projects are also convened
on Wednesday between 7-9 am to accelerate
spending to 100% levels
What systems have been put in place?
• A major drive has been implemented to ensure that
Declaration of Interest forms are signed by all 24 000
municipal employees and over 21 000 achieved
• SCM has access to DRL to immediately isolate companies
linked with Councillors and municipal employees
• Prior to tender awards screening of tender documents in
respect of compliance issues in terms of SCM Regulations is
undertaken
• Pre budget checks by accounting staff are implemented
• Investigations are carried out in respect of all cases where
staff have been identified to be doing business with the
municipality and disciplinary actions are taken against
employees found to be in breach
• Compliance Officer position established within the Legal and
Compliance Unit to drive compliance issues
What system have been put in place?
• Blacklisting policy has been approved and flowing from that a
Blacklisting Committee has been set up to immediately blacklist
companies where staff, Councillors and other employees in the
service of the state have shareholding and found to be doing
business with the municipality
• Non-compliance with section 116(3) of MFMA dealing with
amendment to contract is now monitored closely
• Integrated reporting is now being introduced to report on financial
performance, service delivery, action plans to address internal and
external audit findings, actions to mitigate risks identified in the
enterprise risk management of the municipality
• Steering Committee on Cobit Framework implementation has been
set up
SCM changes that have been introduced
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Changes of leadership were effected
Introduced new members of Bid Committees - rotation
Comprehensive review of SCM Policy and Procedures has been
undertaken
Capacity training workshop convened for SCM practitioners
and line departments
We have commenced with the implementation of ISO 9001
(Quality Management Framework)
Procurement Planning and scheduling has also been
introduced to streamline processes of procurement to track
performance and address bottlenecks on a weekly basis with
all affected stakeholders
Contract management system has also been introduced and
linked to the financial management system
Organisational structure is in the processes of being amended
Oversight structures
Council
Executive
Committee
Municipal Public
Accounts
Committee
Audit & Risk
Committee
Enterprise Risk
Management
Committee
Ethics
Committee
Critical success factors
• Leadership setting the tone at the top and disciplined execution
• Applying 8 steps for transforming organisations as cited by Johan
P. Kotter has been found extremely useful:
– Establishing a sense of urgency – “burning platform scenario”
– Forming a Powerful Guiding Coalition
– Creating a vision
– Communicating the vision
– Empowering others to act on the vision
– Planning for and creating short term wins – identify low
hanging fruits to build momentum for sustainable change
– Consolidating improvements and producing still more
changes
– Institutionalising new approaches
Prognosis for the parent municipality
• Based on all steps that have been taken by the
municipality, indications are that eThekwini
Municipality will achieve clean audit status
during the 2013/2014 Financial Year
• There is also a glimmer of hope that this could
be earlier depending on progress with regards
to current audits processes for 2012/2013
Financial Year
Conclusion
• Lesson that can be drawn from our case study is that clean
audit is achievable but once you have achieved it, you have
to sustain it
• We have got to seize every moment to make a difference
no matter how small that may be for: “Leadership is in the
moment. There are many moments each day when you can
choose to lead and many moments each day you can
choose to make a difference. Each of these moments serves
up the prospect of contributing to a lasting legacy.” James
Kouzes and Barry Posner (2012) The Leadership Challenge:
How to Make Extraordinary Things Happen in
Organisations
• The time for us to make that difference is now!
Thank You