4/7/2015. Group. Governance and Legislation

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1 Group 3 Governance and Legislation DIPLOMA IN PUBLIC ACCOUNTABILITY MINIMUM MUNICIPAL COMPETENCY PROGRAMME Karel van der Molen Module 2 Intergovernmental Fiscal Relations, Legislation and Policies affecting Municipal Financial Management Unit Standard Interpret SA legislation and policy affecting municipal financial management The full programme US Assessment Plan Group 1. Strategic Management; Budgeting Implementation & Performance Management 2. Municipal Accounting & Risk Management Modules 3. Strategic Planning & Multi Year Income & Expenditure Management 6. Budgeting Principles & Cycles 7. Financial Reports & Performance Management 8. Cash, Investment, Asset, Liability Management 4. Risk Management; Internal Control Framework Design and Audit Planning and Implementation 3. Governance & Legislation 1. Stakeholder Consultation & Ethics in Municipal Finance 4. & 5. Costing & Capital Planning; Municipal IT Support & Project Management 6. Supply Chain Management & Public Private Partnerships 2. Intergovernmental Fiscal Relations, Legislation & Policies affecting Municipal Financial Management 9. Capital Planning & Financing & Costing Principles 5. Managing Information Technology Resources in Municipal Finance 10. Municipal Supply Chain Management 11. Public Private Partnerships 1 Individual assessment Open book case study-based controlled class test 2 Individual workbased assignment 3-hour paper consisting of insight questions relating to all outcomes: it will be expected of the learner to apply the theoretical models/tools to the questions OUTCOME 1: Apply the techniques of sound financial management in local government OUTCOME 2: Identify and describe the key elements in the structure of public policy making in the South Africa and the connections and power relations between them OUTCOME 3: Interpret the elements of initiatives taken through various pieces of legislation to promote sound financial management in local government OUTCOME 4: Demonstrate, through analysis, an understanding of the environment in which policymaking takes place with particular emphasis on factors that significantly impinge on policy making OUTCOME 5: Demonstrate an understanding of the principles of good governance and ethical behaviour within a municipal setting OUTCOME 1: Apply the techniques of sound financial management in local government OUTCOME 2: Identify and describe the key elements in the structure of public policy making in the South Africa and the connections and power relations between them OUTCOME 3: Interpret the elements of initiatives taken through various pieces of legislation to promote sound financial management in local government OUTCOME 4: Demonstrate, through analysis, an understanding of the environment in which policy-making takes place with particular emphasis on factors that significantly impinge on policy making OUTCOME 5: Demonstrate an understanding of the principles of good governance and ethical behaviour within a municipal setting 1

2 Different types of expenditure in local government UNIT 1 Techniques of sound financial management in local government Expenditure - government spending of money or the amount of money spent Constitution (Section 215): Current expenditure Capital expenditure Municipal Finance Management Act: unforeseen and unavoidable expenditure unauthorised, an irregular or a fruitless and wasteful expenditure MFMA unforeseen and unavoidable expenditure MFMA Circular 68 Must be in line with any prescribed framework May not exceed a prescribed percentage of the approved annual budget Must be reported by the Mayor to the Municipal Council at its next meeting Must be appropriated in an adjustment budget Criminal sanctions 13+ 2

3 Register of Unauthorised, Irregular, Fruitless and Wasteful Expenditure MFMA Financial misconduct Name of Municipality No Date of discovery Date Reported to Accounting Officer Date of Payment Payment Number Transaction details Amount Description of Incident Person Liable (Official or Political Office Bearer) Type of Prohibited Expenditure U D I P C C Status TR P WO General comments Section 171 Accounting Officer Section 32 Political office bearer, Accounting Officer or official Abbreviations: UI: Irregular expenditure Under Investigation DP: Disciplinary process initiated against responsible person CC: Criminal charges laid with SAPS TR: Transferred to receivables for recovery P: Paid or in process of paying in installments WO: Written-off by council as irrecoverable 13+ Paths of financial management Role-players involved in deciding levels of expenditure (1) 15 Mayor The Mayor is the principal guide in respect of the expenditure of a municipality and is obliged to oversee the responsibilities of the accounting officer and the chief financial officer in respect of expenditure and other financial matters of the municipality. The Mayor must report to the Council within 30 days at the end of each quarter Municipal Manager As the Accounting Officer, he/she is responsible for the management of the expenditure of the municipality. He or she must take all reasonable steps to ensure inter alia that (Sections of the MFMA 15+ 3

4 Role-players involved in deciding levels of expenditure (2) Councillors Roles and responsibilities of the councillors are articulated in section 53 of the Municipal Systems Act, 2000 Councillors have a number of policy setting and oversight responsibilities Community Should make their recommendations as specific as possible if they want to influence the spending priorities of their municipalities Section 74 of the Municipal Structures Act, a Ward Committee may make any recommendations on any matter affecting its ward 15+ Mechanisms and processes for deciding overall levels of expenditure (1) The Mayor of a municipality must table the annual budget at a Council meeting at least 90 days before the start of a financial year Section 18 of the Municipal Finance Management Act, an annual budget must: set out realistic anticipated revenue appropriate expenditure for the budget set out projected expenditure by vote set out estimated revenue and expenditure for the current year set out actual revenue and expenditure for the previous year 19 Mechanisms and processes for deciding overall levels of expenditure (2) The Minister of Finance is: responsible for local government must prescribe the form of the annual budget obliged to take steps to ensure that a municipality does not materially and unreasonably prejudice: national economic policy on inflation and administered pricing and equity economic activities across the municipal development the national mobility of goods, services, capital or labour 20 Sound financial management (1) Challenges: Poor financial management Lack of sufficiently trained and capacitated officials and councillors Lack of use of efficient and effective administrative and technological systems Lack of sufficient revenue collection Poor financial planning and inappropriate budget methods Other challenges: corruption and nepotism Inadequate financial controls and lack of oversight on expenditures by municipal officials Lack of transparent procurement processes Lack of openness about processes for procuring services Abuse of municipal assets 21+ 4

5 Sound financial management (2) Techniques: Strategic infrastructure plan - IDP Adherence to good budgeting principles Team work MM, Mayor and Council Budget office - budget reform process Good management and accounting Good asset management strategy Revenue collection techniques Formal debt collection procedure Effective management of expenditure Expenditure on staff benefits, salaries, etc. Effective credit control Procurement policy techniques 22+ Sound financial management (2) MFMA Section 64: Accounting Officer is responsible for the management of the revenue in a municipality A municipality must maintain a management, accounting and information system, which recognises revenue when it is earned accounts for debtors accounts for receipts of revenue a system of internal control in respect of debtors and revenue charges of interest on arrears except where the Council has granted exemptions all revenue received to be reconciled at least on a weekly basis payments due by an organ of state for more than 30 days to be brought to the attention of the National Treasury 22+ ACTIVITY/CLASS DISCUSSION Page 28+ UNIT 2 Key elements in the structure of public-policy making in South Africa 32 5

6 Different models of constitutional forms Written and unwritten The Constitution as the supreme law an ordinary piece of legislation as statutory source of constitutional law The Constitution of the Republic of South Africa Rights & Obligations The Bill of Rights The Chapters and the Sections The Constitution of the Republic of South Africa Written and unwritten The Constitution as the supreme law an ordinary piece of legislation - not Act 108 of 1996 as statutory source of constitutional law The Constitution of the Republic of South Africa Constitutional supremacy Separation of powers Bill of Rights Judicial review Financial provisions

7 Different stakeholders in public-policy making Public or community Municipal Council: passing by-laws and taking decisions adopting policies on promoting and undertaking development doing anything else within its legislative and executive competence Provincial legislature Cabinet Parliament: House of Assembly and the NCOP Minmec Departmental clusters 38+ Different stakeholders in public policy-making 44 Role played by courts in contractual law matters public policy Structure and workings of government outside central government Enforce the terms and obligations imposed by the social contract between the government (including the municipalities) and the people Protect and enforce legal duties or human rights of the people The municipalities The provincial government: Premier s Forum Other institutions: Forum for South African Directors-General (FOSAD) South African Local Government Association (SALGA)

8 Structure and working of government outside central government Structure and working of Parliament, Cabinet and national departments Parliament: National Assembly National Council of Provinces Cabinet National departments Organisational structure of the national sphere of government ACTIVITY/CLASS DISCUSSION Page

9 The notion of developmental government in South Africa UNIT 3 Initiatives taken through pieces of legislation intended to promote sound financial management in local government Constitution (Chapter 10) calls for the public administration, including the municipalities to be development-oriented One of the critical constitutional features of local government in South Africa is its developmental orientation - developmental local government requires public participation in the decision-making of local authorities White Paper on Local Government (1998) Local government - committed to working with citizens and groups within the community to find sustainable ways to meet the social, economic and material needs and improve the quality of their lives Four inter-related characteristics: maximising social development and economic development integrating and co-ordinating democratising development leading and learning Developmental local government A municipality should be cost effective A municipality should not tolerate mediocrity in respect of service delivery Corruption and nepotism must not be tolerated A municipality must avoid a flawed tendering process A municipality must promote sound procurement processes

10 Link between inputs, outputs, outcomes and measurable objectives P R O C INPUTS E OUTPUTS OUTCOMES S S E S MFMA Section 69 Service Delivery and Budget Implementation Plan (SDBIP) Performance model: Efficiency, economy, effectiveness Connection between productivity and efficiency Maintenance of efficiency Economy and effectiveness Good quality and timely information Good quality: sustainability reliability cost-effectiveness affordability Timely information: creation of effective communication structures appropriate channels and protocols among the role players and means timeous flow of material, information, perceptions and understanding between various parts and members of the organisation

11 Role of performance-based financial management (1) Policies and legislative framework for performance management: The Constitution Batho Pele White Paper White Paper on Local Government Municipal Planning and Performance Management Resolutions Regulations for Municipal Managers and Managers Reporting Directly to Municipal Managers Local Government: Municipal Structures Act, 1998 Local Government: Municipal Finance Management Act, 2003 Role of performance-based financial management (2) Strategies for improvement of performance: training and knowledge enhancement revenue raising strategies effective monitoring mechanisms and credit ratings information technology and zero-based budgeting valuation roll capital investment framework for development programme Capacity requirements of municipalities - compliance Apply Constitution and legislation IDP s and LEDP s Capacity of municipalities Human resource and career development Funding national and provincial Code of Conduct ACTIVITY/CLASS DISCUSSION Page

12 The impact of macro-economic principles on public-policy making UNIT 4 Factors impinging on policy-making environment Full employment Economic growth Price stability Balance of payments (or external stability) Equitable distribution of resources Macro-economic policies and strategies ACTIVITY/CLASS DISCUSSION Page 98 National Development Plan

13 Political accountability UNIT 5 Policy governance and ethical behaviour within a municipal environment Individually, collectively and directly accountable to the public Explicitly accountable for municipal funds: knowledgeable about the local government personally aware of the objectives endowed with the authority to take final and binding decisions on financial matters Managerial accountability Expectations of fairness, responsiveness and honesty Flexibility and independence, but holding accountable 104+ Separation of responsibilities within a municipal environment Separation between legislative and executive powers and administrative functions Clear distinction between the Council, the Mayor and the municipal officials Clear distinction of rules between policy-makers and policy implementers Appropriate delegation, authority and responsibility for efficient and effective municipal administration Clear and unambiguous accountability Codes of conduct for political office bearers and officials

14 The notions of The paths of accountability Accountability explain and justify their decisions Transparency comprehensive, accurate, timely and useful information Integrity democratic values and principles: Constitution (Section 195) Participatory governance Stakeholders: the community the relevant district and all other local municipalities within the area of district the relevant provincial treasury and local government department national treasury national and provincial sector departments provider s of bulk resources ACTIVITY/CLASS DISCUSSION Page

15 SCHOOL OF PUBLIC LEADERSHIP Thank you Karel van der Molen 15