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Department of Co-operative Governance, Human Settlement and

Traditional Affairs.

LIMPOPO PROVINCE

OPERATION CLEAN AUDIT

2011/12 Departmental Action PlanAudit Outcomes

TABLE OF CONTENTS1. Purpose2. Comparative Overview of the audit outcomes3. Comparative audit outcomes4. Root causes on audit findings5. Additional key common audit findings6. Current status of filling of MMs and CFOs positions7. MMs vacancy rate8. CFOs vacancy rate9. 2011/12 audit remedial plans10. Resident Accountants appointed11. Impact of the Resident Accountants interventions12. Scope of work for Resident Accountants13. Project implementation and Monitoring14. Municipal governance Structures15. Challenges with regard to the Project16. Interventions17. Strategic Interventions

Purpose

Briefing of the committee on departmental action plans in response to the 2010/11 and 2011/12 consolidated general report on the audit outcomes of Local Government

Comparative Overview of the audit outcomes

Audit Opinion

2011/12 2010/11 2009/10 2008/09

Disclaimer 10 10 9 19Adverse 0 3 0 0Qualified 15 12 11 9Unqualified 1 3 9 8Clean Audit 1 2 1 0Outstanding 3 0 0 0Total 30 30 30 30

Comparative audit outcomes for four consecutive financial years

U= UNQUALIFIED; D=DISCLAIMER; Q=QUALIFIED, A=ADVERSE, C= CLEAN AUDIT, P=PENDING

Root Causes on audit findings

• PeopleLack of Shared visionDelay implementing corrective measures• AccountabilityLack of consequences for inappropriate behavior• SustainabilityThe discipline of credible monthly reporting not

transversally in place

Additional key common audit findings

• Non-compliance with Supply Chain Management• An increase in unauthorised, fruitless and wasteful expenditure: Unauthorized expenditure: ( 2010/11)R 546m and (2011/12) R

738m. Irregular expenditure: ( 2010/11) R 945m and (2011/12) R 1

157m Fruitless and wasteful expenditure: (2010/11) R 40m and

(2011/12) R 22m• Assets Management- assets registers not compliant with GRAP• Lack of supporting documents • Completeness of revenue• Ineffectiveness of governance structures• Lack of application skills and knowledge of financial systems

The current status on filling of MMs and CFOs positions

• 24 MMs’s positions filled except for Modimolle; Bela-Bela; Aganang; Mookgophong; Ephraim Mogale and Mutale

• 21 CFOs’s positions filled except for Mutale; Mopani DM; Tubatse; Aganang; Polokwane; Maruleng; Vhembe DM; Ephraim Mogale and Thabazimbi.

Municipal Managers vacancy rate

Municipal Manager

Contract expired

November 2012

Advertised

Modimolle Resigned June 2012 Advertised

Bela-Bela Contract expired December 2012 Advertised

Aganang Resigned April 2012 Advertised

Mookgophong Resigned September 2010 Advertised

Ephraim Mogale Contract expired April 2012 Interviewed

Mutale Contract expired November 2012 Advertised

CFOs Vacancy Rate

NAME OF MUNICIPALITY

POSITION STATUS

PERIOD PROGRESS

Mutale Resigned November 2012 Advertised

Mopani District Resigned February 2013 Advertised

Tubatse Contract expired November 2012 Interviewed

Aganang Restructuring April 2012 Advertised

Polokwane Resigned July 2012 Interviewed

Maruleng Resigned February 2013

Vhembe District Resigned December 2012 Advertised

Ephraim-Mogale Resigned April 2012 Re-advertised

Thabazimbi Resigned November 2012 Interviewed

2011/12 Audit Remedial Plans

• Municipalities have develop and submitted audit remedial plans to the Department.

• Department has assessed audit remedial plans and provided feedback to Municipalities.

• Monitor the implementation of audit remedial plans and ensure supporting documents on issues resolved.

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Residents Accountants appointedThe Department is currently assisting municipalities under “Resident Accountant” project.•Allocations of municipalities are as follows:1.CorpMD(Makhuduthamaga; Sekhukhune DM; Greater Giyani and Musina)2.Ngubane/Kgorong Consultants(Bela-Bela; Makhado; Ba-Phalaborwa and Modimolle) and started June 2012.

3. Advertised for additional Service Providers for six municipalities, i.e. Tubatse, Mogalakwena, Maruleng, Greater Tzaneen, Greater Letaba and Mookgophong and briefing session held.

Scope of Work for Resident Accountants

• To provide hands on support on technical financial management with regard to the closure of the financial year with specific emphasis that the municipality’s financial records for that financial year are in order and ensure skills transfer.

• To prepare the financial statements • To ensure that working papers are available before

preparing the financial statements as evidence for auditing purposes.

• To assess the state of financial management in the municipality and provide recommendation on areas of improvement; and

Impact of the Resident Accountants Interventions

The audit opinion has not largely improved however the resident accountants have managed to assist municipalities in performing the following duties:a) Preparations of audit fileb) Stock take count procedures and countingc) Clearing the 2010/11 audit queriesd) Hands on support traininge) Preparations of reconciliations f) Responding to audit finding raised during the current audit in the year under review.

Project implementation and monitoring

The Project is monitored through the following structures:•MEC/Mayors forum, co-chaired by MEC for Coghsta and Provincial Treasury. Comprises of Executive Mayors/Mayors, Municipal Managers, Office of the Auditor General and SALGA , it meets on quarterly basis•Monthly reports of Resident Accountants are signed off by respective Municipal Managers and Chief Financial Officers and submitted to COGHSTA

Municipal Governance Structures

• Provincial MPAC Forum has been established and the Provincial Executive MPAC committees is established.

• Conducted MPAC district-based training sessions in-collaboration with Provincial Treasury, Provincial Treasury, Provincial Legislature and SALGA.

• All municipalities have established Internal Audit Unit and appointed Audit Committees.

• Establishment of Risk Management Committees.• Monitor implementation of internal audit and

audit committee recommendations.

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Challenges with regard to the Project• Limited skills base in terms of financial management• High vacancy rate in Budget and Treasury Unit• Lack of knowledge and skills in respect of migration and

support from financial systems providers.• Lack and unavailability of supporting documents.• Lack of proper internal controls such as adhering to

management policies and treasury regulations, safe guarding of assets,

• Non-implementation of recommendations made by the internal audit and audit committee

• Non-implementation of audit remedial plans• Lack of skills in respect of municipal accounting procedures

and standards.

Interventions• Assist municipalities to develop performance indicators.• Continuous monitoring of functionality of Audit

Committees and Performance Committees functionalities.

• Strengthen Oversight Committees.• Review and implement Operation Clean Audit Plan. • Monitor implementation of audit remedial plans.• Monitor and assist municipalities with implementation

of MPRA- Utilization of Valuation Appeal Board• Assist municipalities with recruitment of section 56

positions. • Implementation of the Provincial Capacity Building

Strategy focusing on financial management training for Councilors and officials

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Strategic intervention

• The recent ANC Lekgotla and EXCO Lekgotla resolved that Municipal Mayors and Senior Management should take responsibility for non-improvement on the financial management issues.

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THANK YOU

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