CHARTERED INSTITUTE OF GOVERNMENT FINANCE AUDIT AND RISK

CHARTERED INSTITUTE OF GOVERNMENT FINANCE, AUDIT AND RISK OFFICERS (CIGFARO) COMPLEMENTARY ROLE OF OVERSIGHT BODIES 09 October 2018 Presented by Tendani Nevhutalu, CA(SA)

Contents �Definitions; �Committees + Roles; �Differences �Challenges �Conclusion; and �Questions and Answers.

Definitions �Complement Contributing extra features to something else in such a way as to improve or emphasise its quality �Oversight 1. An unintentional failure to notice or do something; 2. The action of overseeing something.

Committees + Roles � Audit Committee � In line with section 166(2) of the Municipal Finance Management Act (MFMA), the roles and responsibilities of the Audit Committee are to advise the municipal council, the political office bearers, the accounting officer (Municipal Manager), and the management of the municipality on: § Internal financial control and internal audits – plans, audit reports and implementation of recommendations; § Risk Management – effectiveness of the Risk Management processes and fraud prevention plans; § Accounting Policies; § The adequacy, reliability and accuracy of financial reporting and information – in year monitoring and annual financial statements; § Performance Management including evaluation – IDP, SDBIP, and alignment to Budget; § Effective governance; § Compliance with rules and regulations – MFMA, Municipal Structures Act, Municipal Systems Act, Division of Revenue Act; § Respond to issues of the Auditor-General of South Africa (AGSA) – Review of Audit Engagement Letter, Audit Strategy, Audit Budget, appropriateness of Audit Reports, and development and implementation of AGSA Action Plans; and § Carry out investigations into the financial affairs of the Municipality – but financial misconducts are now the responsibility of Financial Misconduct/Disciplinary Board.

Committees + Roles Cont � Municipal Public Accounts Committee (MPAC) � Established by Council in terms of section 79 of the Municipal Structures Act to perform an oversight function on behalf of the Council over the executive functionaries of the Council § The MPAC must interrogate the following financial aspects addressed in the Municipal Finance Management Act: § Unforeseen and unavoidable expenditure (Section 29) § Unauthorised, irregular or fruitless and wasteful expenditure (Section 32) § The quarterly report of the mayor on the implementation of the budget and the state of affairs of the municipality / SDBIP (Section 52(d)) § Monthly budget statements (Section 71) § Mid-year budget and performance assessment (Section 72) § Mid-year budget and performance assessment of municipal entities (Section 88) § Disclosures concerning councillors, directors and officials (Section 124) § Submission and auditing of annual financial statements (Section 126) § Submission of the annual report (Section 127) § Oversight report on the annual report (Section 129) § Issues raised by the Auditor-General in audit reports (Section 131) § Audit Committee (Section 166) § Disciplinary action instituted in terms of the MFMA

Differences � MPAC is a Committee made up of Councillors; whilst the Audit Committee is made up of external individuals not in the employ of the Municipality; � MPAC meetings are public, whilst the Audit Committee meetings are only with the MM, and Management with Provincial Treasury; Local Government Department; SALGA and AGSA also invited; � The performance of the Audit Committee has to be assessed annually to ensure efficiency and effectiveness; and � Audit Committee functions through and internal audit activity who also acts as the secretariat; whilst the MPAC would have a researcher, and or a co-ordinator.

Challenges �Lack of Consequence Management – when there’s lack of performance and no reward for excellent performance; �No cascading down of Performance Agreements to lower levels; �High vacancy rates – Especially at MM and CFO levels; �Lack of role clarity of various oversight committees – therefore not giving them the support they would require from Council level to Management; and �PERVASIVE: Lack of implementation of

Conclusion �It is important to understand the role Audit Committees and MPAC bring to the Councils; including areas where they perform similar functions (to avoid duplication); �Their continual support of their activities; and implementation of their findings / recommendations would ensure that Municipalities improve on their audit outcomes, and can secure and maintain public trust.

Questions and Answers