ATC160330: Report of the Standing Committee on the Auditor-General on the oversight visit to the Gauteng Provincial Office of the Auditor-General of South Africa, dated 16 March 2016
Report of the Standing Committee on the Auditor-General on the oversight visit to the Gauteng Provincial Office of the Auditor-General of South Africa, dated 16 March 2016.
The Standing Committee on the Auditor-General (the Committee), undertook an oversight visit to the Gauteng Provincial Office of the Auditor-General of South Africa (AGSA) from 15 – 18 September 2015. The visit also included meetings with the Municipal Public Accounts Committees of both Johannesburg and Ekurhuleni Metros. The purpose of the oversight visit was to familiarise the Committee with the operations of the AGSA Provincial Office in relation to the support from the AGSA Head Office. The visits to the MPAC’s of the two metros, was to determine challenges they faced in achieving clean audit.
- COMPOSITION OF THE DELEGATION
The multiparty delegation consisted of the following Members:
- Mr V Smith ( Chairperson and Leader of Delegation)
- Ms Z S Dlamini-Dubazana (ANC)
- Mr M L Ntombela (ANC)
- Ms N P Khunou (ANC)
- Mr M J Maswanganyi (ANC)
- Mr A R Mcloughlin (DA)
- Mr N Singh (IFP)
Committee Support Staff:
- Mr Johnny Ramrock: Committee Secretary
- Mr Mbuyselo Hlekiso : Researcher
- Mr Xolisile Mqxaji : Content Advisor
- Mr K Lobi : Committee Assistant.
- AGSA Gauteng Provincial Office
The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.
Each year, the AGSA conducts mandatory audits of government departments, certain public entities, municipalities and municipal entities.
The AGSA furthermore conducts discretionary audits, special audits, such as performance audits and investigations.
For each audit a report is prepared. These reports are made public and are tabled in the legislatures or bodies with a direct interest in the particular audit, such as Parliament, provincial legislatures and municipal councils.
In addition, audit reports may be provided to any other legislature or organ of state if the AGSA considers it in the public interest to do so.
In addition to these audit-specific reports, the AGSA publishes two general AGSA has branches in all the nine provinces and its Head Office is in Pretoria, Gauteng.
The Gauteng Office has a complement of 244 staff members, which audits 3 metros and 20 provincial entities. It should be noted that there were no unauthorised expenditure findings against any of the provincial entities. AGSA also audits 12 municipalities and 21 municipal entities in the province.
The AGSA Provincial Office (Gauteng) audit clients from the following two spheres of government: Provincial Government –these audits are governed by the Public Finance Management Act (PFMA)
- Gauteng Provincial Legislature
- Office of the Premier
- Department of Finance
- Department of Economic Development
- Gauteng Growth Development Agency
- Department of Health
- Department of Education
- Department of Housing and;
- Department of Social Development
Local Government – these audits are governed by the Municipal Finance Management Act (MFMA):
- City of Johannesburg Metropolitan Municipality
- Ekurhuleni Metropolitan Municipality
- City of Tshwane Metropolitan Municipality
- Johannesburg City Power
- Johannesburg Water
- Randfontein Local Municipality
- Westonaria Local Municipality and;
- Mogale Local Municipality.
4. PFMA 13/14: Gauteng
AGSA pointed out that, according to the PFMA 13/14 provincial audit outcomes, Gauteng retained eight clean audits, which included the Office of the Premier and the Provincial Legislature. Ten public entities improved to clean audit.
Although there has been a significant improvement in the overall audit outcomes, when compared to the previous year, 34% of the auditees remained financial unqualified with the majority of the findings relating to non-compliance with legislation. One public entity regressed from a financially unqualified audit opinion with findings to an adverse audit opinion.
There was an improvement in the audit outcomes of local government in the province, with 96% of the auditees obtaining financially unqualified audit opinions.
AGSA has regular meetings with the Premier and provides him with up to date information to assist with possible intervention.
As much as there are signs that auditees are paying attention to Supply Chain Management (SCM) regulations, it is still of great concern almost half of the departments and a third of public entities materially did not comply with SCM legislation.
- MFMA 13/14
4.1 Gauteng: City of Johannesburg Metro
There has been an overall improvement in the audit outcomes for Gauteng province. The MFMA 13/13 audit outcome showed that 13 clean audits (39%) were achieved compared to only three (9%) in the previous year.
AGSA mentioned that these positive audit outcomes were due to the leadership provided by the key officials and political heads of auditees, which ensured that action plans were devised to deal with audit concerns and were effectively monitored by various oversight structures.
Some of the challenges that remained of concern were that some of the Municipal Public Accounts Committees (MPACs) in the province were not well capacitated. MPAC’s does not have power to instruct management to comply, but they do take reports to council. One of the other complaints against some councils is that recommendations from structures like MPAC, is ignored and not adopted.
Gauteng is strong financially, but some of the municipalities have a weak tax base. The City of Johannesburg (COJ) Metro did reasonably well, and would have achieved a clean audit report if their financial statements were in order. The Audit Committee was also recently revamped and is well balanced. Adhering to Supply Chain Management regulations and deviations remains a big challenge, with poor planning being the major culprit.
Some of the root causes that, according to AGSA, needed attention, include the following:
- Slow response by the oversight mechanism (MPAC’s)
- Slow response by management in implementing internal control disciplines
- Lack of consequences for poor performance and transgressions
- Instabilities or vacancies in key positions.
The Mayor of COJ made certain key commitments in response to the challenging audit outcomes for the city:
- Monitoring on a quarterly basis the progress made in attaining clean audits as set out in the Integrated Development Plan (IDP) and performance plan. (The progress is noted as the respective heads of department as well as the relevant Member of Mayoral Council (MMC’s) are held to account through Executive and Mayoral committee’s monthly meetings).
- Strengthen the tone at the top and hold accounting officer accountable for strengthening document management processes to prevent and detect non-compliance with laws and regulations. (There is some progress noted however there is minimal improvement).
- Enhancement of risk management and internal control processes regarding the preparation of financial statements, compliance with laws and regulations and performance reporting. (However there has been minimal change from prior year. The internal control environment has not improved. Internal audit processes and plans are still not adequate as they do not address risky areas such as AOPO and IT)
The AGSA proposed that the COJ Council considers the following in order to improve future audit outcomes:
- Continued support and strengthening of MPAC’s and key committees such as audit committees.
- Formal structures to monitor the implementation of recommendations by the audit committee and internal audit units with a view to remedial action.
- Deal with transgressions and poor performance in a consistent and decisive manner
AGSA also proposed that the COJ MPAC’s consider:
- Formal structure to track progress on implementation of their resolutions.
- Adequacy of MPAC’s process of dealing with unauthorised, irregular, fruitless and wasteful expenditure.
- Robustness and ability to insist on credible information to ensure reliable base for key decisions.
AGSA proposed that the Administrative leadership give consideration to the following:
- Ensure that issues raised by internal auditors are followed up and resolved in time.
- Solid understanding of the audit findings to ensure they are addressed adequately and in a holistic manner.
- Address all risks that lie within their control systematically and in a holistically manner.
- City of Ekurhuleni Metro
The Ekurhuleni Metro, in spite of a drop in the highly depended manufacturing industry, achieved a clean audit, for the 2013/14 financial year. A key ingredient for obtaining a clean audit and delivering services is the presence of strong governance structures and systems, which would easily detect and timeously correct the breakdown of controls in municipalities. Such environments are characterised by readily available documents. Most importantly, they have accountable managers and leaders who are able to provide explanations and additional evidence in support of the transactions they are reporting on. They also have the support of strong oversight by mayors and councils that back the efforts of municipal managers and Chief Financial Officers (CFO’s).
These attributes are in place at the Ekurhuleni Metro. Some of the best practices and root causes in place in the metro, include the following:
- Action plans to address internal control deficiencies identified in the previous years were adequately implemented.
- Actions were taken against officials guilty of transgressing the SCM regulations and compliance with laws and regulations was reviewed and monitored.
- Senior management ensured controls are in place for robust financial and performance management reporting systems
- There is a focus on governance through risk management activities and effective audit committee
- Leadership established a culture of ethical behaviour, commitment and good governance
- Audit action plans used to address internal control weaknesses
- Basic disciplines and controls are in place for daily and monthly processing and reconciling of transactions;
- Their political leadership provides a strong monitoring and oversight role and holds the administration to account
- The competencies of all key officials were assessed and the majority have already achieved the minimum competencies requirements.
In addition, the MPAC’s are doing well, they attend Audit Committee meetings and work very closely with them.
5.0 Johannesburg Metro MPAC and the
5.1 Ekurhuleni MPAC
The Delegation met with and had interactions with the Johannesburg Mero MPAC and the Ekurhuleni Metro MPAC. Both MPAC’s expressed positive sentiments on the advised and support they received from the AGSA.
Another common thread that ran through, was the strong concerned raised on the part-time positions of councillors and the constant changes made on membership. Councillors believed that if they were employed on a full time basis, some of the challenges that needed attention, would have been eliminated. It was also argued that the service delivery protest was as an indication that the wrong people were being deployed at various municipalities thereby contributing towards the unrest.
Municipalities are at the forefront of service delivery, as they have a direct impact on the experiences and lives of South Africans. It is therefore important for municipalities to have sound systems and governance structures that will enable them to continue to achieve high levels of efficiencies and find innovative ways to deliver services. The municipalities that achieved clean audits have demonstrated that they are better placed to continuously improve the delivery of services.
7.0 Committee recommendations
- The Committee recommends that the AGSA continues in assisting and strengthening the capacity of municipalities to achieve clean audits;
- That AGSA should consider providing training on Supply Chain Management (SCM) to departments and public entities to comply with SCM legislation;
- That COGTA consider penalising councils that ignores recommendations and reports of structures like Municipal Public Accounts Committees (MPAC’s);
Report to be considered.
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