ATC110607: Report on Joint Workshop with Auditor–General on Consolidated Local Government 2009/10 Audit Outcomes in Municipalities & Municipal Entities

NCOP Economic and Business Development

REPORT OF SELECT COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS ON JOINT WOKSHOP WITH AUDITOR–GENERAL ON CONSOLIDATED LOCAL GOVERNMENT 2009/10 AUDIT OUTCOMES IN MUNICIPALITIES AND MUNICIPAL ENTITIES

 

1.         Introduction

 

1.1.       On 13 April 2011, the Select Committee on Co-operative Governance and Traditional Affairs, in collaboration and co-operation with the Auditor–General and the House Chairperson of Committees and Oversight (NCOP), held a workshop at the National Parliament on the consolidated 2009/10 Local Government audit outcomes in municipalities and municipal entities as at 31 January 2011.   

 

2.         Purpose and Objectives

2.1.       The primary purpose of the workshop was to provide a platform for the Auditor- General to describe how the audit outcomes could contribute to the oversight responsibility of the legislatures (national and provincial); for the legislatures to interact with the Auditor-General on the type of information required to effectively conduct their oversight, and for establishing a mutually beneficial working relationship amongst provincial and national legislatures.

 

2.2.       In line with the legislative and constitutional principles of co-operative government and inter-governmental relations, the main objective of the workshop was to promote a co-ordinated oversight approach with the standing committees in the provincial legislatures on matters related to financial management, good governance, service delivery and accountability in South African municipalities and municipal entities.          

 

3.         Participants

 

3.1.       The main participants during the proceedings of the workshop composed of members of the Portfolio and Select Committees on Co-operative Governance and Traditional Affairs, NCOP House Chairperson for Committees and Oversight, NCOP House Chairperson for Co-operative Governance, chairpersons of the Standing Committees on Co-operative Governance and Traditional Affairs and Public Accounts Committees in provincial legislatures, the  Auditor-General, and officials from the Department of Co-operative Governance and Traditional Affairs, South African Local Government Association, National Parliament and provincial legislatures.             

4.         General Overview

 

4.1.       The Auditor-General presented the consolidated local government 2009-10 audit outcomes in municipalities and municipal entities as at 31 January 2011.The presentation focused on a provincial analysis of audit outcomes in municipalities and municipal entities; movements in financial-statement-qualification findings; predetermined objectives with respect to findings in the report; findings on compliance with laws and regulations; unauthorised, irregular, fruitless and wasteful expenditure; the impact on audit outcomes of management; assistance provided by consultants; findings on information systems audits; municipalities and municipal entities with funding concerns; an analysis of drivers of improved audit outcomes; an assessment of commitments from key role-players, and areas of focus needed from national key role-players to address audit outcomes at the time of the audit.

 

 

4.2.       The provincial analysis of audit in municipalities and municipal entities, as at 31 January 2011, had discovered 10% improvement in Eastern Cape, 8% in Free State, 11% in Gauteng, 12%  KwaZulu-Natal, 10% in Limpopo, 5% in Mpumalanga, 6% in the Northern Cape, 2% in the North West, and 5% in Western Cape. Despite the progress reported, unchanged audit findings were also reported. These included 32% in Eastern Cape, 16% in Free State, 22% in Gauteng, 54% in KwaZulu-Natal, 16% in Limpopo, 11% in Mpumalanga, 14% in Northern Cape, 8% in North West, and 23% in Western Cape. On regressed audit outcomes, 5% was reported in Eastern Cape, 1% in Free State, 3% in Gauteng, 1% in Limpopo, 3% in Mpumalanga, 2% in Northern Cape, and 3% in Western Cape.                                                                                             

 

 

4.3.             The audit in 219 municipalities on predetermined objectives reporting has found  that 25% composed of late/non-submission; 88% of non-compliance with the Municipal Finance Management Act, the Municipal Systems Act, and the Municipal Planning and Performance Management Regulations; 68% of information was not consistent or relevant in terms of planned performance information: and 47% of reported information was not accurate, complete and consistent in relation to source data, evidence or documentation.                                                                                           

 

 

 

 

4.4.             The audit findings on compliance with laws and regulations in both the municipalities have revealed that expenditure was not paid within the parameters set by the applicable legislation, the Mayors/ Accounting Officers/ Officials did not adhere to their statutory responsibilities, the Audit Committee and Internal Audit Unit were not properly established or functioning properly.         

 

4.5.             The audit findings have revealed that, in 110 municipalities and two municipal entities,   unauthorised expenditure was incurred; in 168 municipalities and 22 municipal entities, irregular expenditure was incurred; and in 105 municipalities and 16 municipal entities, fruitless and wasteful expenditure was incurred during the period under review.   

 

4.6.             The audit outcomes indicated leadership, financial and performance management, and an IT governance framework as institutional drivers required to improve audit outcomes at the municipality and municipal entity’ levels.

 

6.7.       The audit outcomes demonstrated that leadership was particularly weak at exercising oversight of financial and performance reporting, compliance, and IT governance matters. Regarding the establishment of an IT governance framework supporting the business of municipalities, 7% were identified as good, 15% as work in progress, and 78% as requiring intervention. In terms of financial and performance management pertaining to application systems susceptible to compromised data integrity in the municipalities, 7% were reported as good, 10% as work in progress, and 68% as requiring intervention.                 

 

4.7.             The Auditor-General’s consolidated report has identified and assessed the commitment of the key players who could help in addressing the audit outcomes at municipality and municipal entity levels. The key players identified include the National Assembly, the National Council of Provinces, the National Treasury, and the South African Local Government Association.             

 

4.8.             Some of the areas of focus in which the Auditor-General suggested that the national key role-players could assist in addressing the audit outcomes, were supply chain management, predetermined objectives, financial management, turnaround plans, IT controls, human resource management, and the municipalities under administration.  

 

 

 

5.                   Conclusion

 

5.1.       The workshop participants observed that the audit findings had identified the National Council of Provinces, the National Assembly, the South African Local Government Association and National Treasury as key players in working towards clean audits in the municipalities.     

 

5.2.       The consolidated audit outcomes have indicated the need for the National Council of Provinces and the National Assembly to develop an action plan for overseeing the role of municipalities and municipal entities in areas such supply chain management, predetermined objectives, financial management, turnaround plans, IT controls, human resource management, use of consultants, municipalities under administration, and governance structures.                 

 

5.3.             The consolidated report of the Auditor–General has identified institutional drivers needed to improve audit outcomes at the level of municipalities and municipal entities. The identified drivers include leadership, financial and performance management, and governance.

   

5.4.             The workshop raised concerns with regard to the role of the South African Local Government Association during provincial oversights and the need for the association to develop an operational plan in response to issues raised by the Auditor-General.   

           

6.                   Recommendations

 

6.1.       The Select Committee on Co-operative Governance and Traditional Affairs, in collaboration with the standing committees in provincial legislatures should, after the 201l Local Government Elections, develop co-ordinated oversight action plans to address areas which require interventions in the municipalities and municipal entities.      

 

6.2.       The oversight action plans should focus on areas such as supply chain management, predetermined objectives, financial management, turnaround plans, IT controls, human resource management, municipalities under administration, use of consultants and governance structures.  These were identified in the audit outcomes as areas needing intervention.

 

7.         Resolutions

 

7.1   The Select Committee on Co-operative Governance and Traditional Affairs should, during mid-June 2011, co-ordinate, in collaboration with standing committees in the provincial legislatures, a follow-up workshop on the final consolidated report on 2009/10 audit outcomes in municipalities with the Auditor-General   

 

7.2    The Select Committee on Co-operative Governance and Traditional Affairs should, after the mid-June workshop on final audit outcomes, call on the Department of Co-operative Governance and Traditional Affairs, the National Treasury and the South African Local Government Association to table their operational plans in response to Auditor–General’s audit outcomes.    

 

 

The report to be considered