MFMA. Audit outcomes of municipalities

Transcription

1 0- Audit outcomes of municipalities

2 0- Reputation promise The Auditor-General of South Africa (AGSA) has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

3 0- Overall audit outcomes

4 Improvement in audit outcomes over years slight improvement over 0-9% () % (0) % () % (9) % () 0-0% (09) 9% (09) % (9) 9% (07) % (7) no 0% () % () 0% () % (7) % () % (9) % (7) % (9) % () % (90) 0% () % () 0% () % () 0% (9) % () municipalities Qualified with Adverse with Disclaimed with Audits outstanding The MTSF set new targets for improving the audit outcomes in pursuit of sound financial and administrative management by 07-: No municipalities with disclaimed or adverse opinions. A maximum of % of municipalities with qualified opinions. At least 7% of municipalities with unqualified opinions.

5 Audit outcomes vs budget allocations 0-9% () Total budget: R7 billion 9% (R billion) no 0% (09) Convert audit outcomes to the expenditure (budget) they represent % (R billion) Qualified with Adverse with Disclaimed with Audits outstanding % (7) % () 0% (9) % () Audit outcomes % (R billion) <% (R billion) % (R9 billion) % (R billion) Budget - rand value

6 Western Cape Eastern Cape Northern Cape KwaZulu-Natal North West Mpumalanga Gauteng Provincial outcomes over years (00- vs 0-) on municipalities Improvement in all provinces Free State Limpopo no Qualified with Adverse with Disclaimed with Audits outstanding

7 Western Cape Free State Limpopo Eastern Cape Northern Cape KwaZulu-Natal North West Mpumalanga Gauteng Provincial outcomes over years (00- vs 0-) on all auditees Improvement in all provinces no Qualified with Adverse with Disclaimed with Audits outstanding

8 instances 7 00 instances instances 0- irregular expenditure R 70 million (0 auditees [%]) R 79 million (%) R0 7 million (9%) R 7million ( auditees [%]) R 7 million (%) R million (7%) R 0 million ( auditees [9%]) R7 million (0%) R million (0%) Included in 0- is R 9 million disclosed to address prior year qualifications At municipalities (%), irregular expenditure of previous years was not investigated by management to determine if anyone was liable for the expenditure Nature 97% of occurrences caused by noncompliance with SCM legislation Main areas of non-compliance within SCM that caused irregular expenditure: - Procurement without competitive bidding or quotation process (%) - Non-compliance with procurement process requirements (70%) - Non-compliance with legislation on contract management (%) Highest contributors Rustenburg Local Municipality (NW) R 0 million (0-: R9 million) Nelson Mandela Bay Metropolitan Municipality (EC) R million (0-: R 0 million) City of Tshwane (GP) R 00 million (0-: R0 million) Buffalo City Metropolitan municipality (EC) R79 million (0-: R09 million) uthukela District Municipality (KZN) R million (0-: R07 million) 0- Identified by auditees Identified during audit

9 0- fruitless and wasteful expenditure R million (7 auditees [%]) R million (%) R9 million (%) R million ( auditees [%]) R9 million (%) R million (9 auditees [7%]) R0 million (9%) R90 million (7%) R0 million (%) At 0 municipalities (%), the fruitless and wasteful expenditure of previous years was not investigated by management to determine if any person was liable for the expenditure Nature Interest on overdue accounts and late payments caused % of the fruitless and wasteful expenditure Highest contributors Nelson Mandela Bay Metropolitan Municipality (EC) R million (0-: R million) Matjhabeng Local Municipality (FS) R million (0-: R0 million) Emalahleni Municipality (MP) R9 million (0-: R million) Maluti-A-Phofung Local Municipality (FS) R7 million (0-: R million) Thaba Chweu Municipality(MP) R million (0-: R9 million) 0- Identified by auditees Identified during audit 9

10 0- unauthorised expenditure R million (9 auditees [7%]) R 7 million (%) R 07 million (7%) R 7 million (9 auditees [7%]) R 9 million (%) R 0 million (77 auditees [%]) R 7 million (%) R7 0 million (%) R million (7%) At 00 auditees (7%), unauthorised expenditure of previous years was not investigated by management to determine if anyone was liable for the expenditure Nature 97% of occurrences caused by overspending of budget / main sections in budget Reasons include poorly prepared budgets, inadequate budget control, and lack of monitoring and oversight Municipal budgets include items such as impairments and provisions accounting estimates and not actual expenditure; % of the unauthorised expenditure was due to the incorrect budgeting of these non-cash items Highest contributors Madibeng Local Municipality (NW) R million (0-: R million) Mangaung Metropolitan Municipality (FS) R 00 million (0-: R7 million) City of Johannesburg (GP) R99 million (0-: R0 million) Maluti-A-Phofung Local Municipality (FS) R9 million (0-: R million) City of Tshwane(GP) R7 million (0-: R 9 million) 0- Identified by auditees Identified during audit 0

11 Slight regression in financial viability of municipalities Material uncertainty exists whether from 0% in 0-) % can continue to operate in future (up 0-0- % () % () % () 0-9% () 9% (9) % () Two or less unfavourable indicators Financial position of auditees (going concern) A net current liability position was realised 9% (0) % () A deficit for the year was realised % (9) % (97) The year-end bank balance was in overdraft % () 7% (0) Revenue collection to ensure a steady stream of income to finance service delivery More than 0% of debt irrecoverable Debt-collection period more than 90 days 0% (7) % () 9% () 9% (9) More than two unfavourable indicators Significant doubt that operations can continue in future and/or auditee received a disclaimed or adverse opinion, which meant that the financial statements were not reliable enough for analyses Improved Stagnant or little progress Regressed Management of creditors (meeting financial obligations) Creditor-payment period of more than 90 days 9% () % ()

12 Effective use of consultants Auditees assisted by consultants with financial reporting 7 (%) Cost of consultants 0- R million R 99 million Financial reporting Paid by other institutions 9% (0) % (9) 0-0- % Reasons for use of consultants % R7 million R million 0-0- Audit outcomes of auditees assisted by consultants financial reporting % () % (9) % () out of 0 (0-: out of 9) no Qualified with Adverse with Disclaimed with Auditee ineffectiveness Officials lack required skills % Positions vacant Combination of skills and vacancies 0% (0) 0% () 9% (0) 7% () % () 9% (7) 0 % (0) Main reasons for financial reporting consultants being ineffective at municipalities Lack of records and documents Poor project management Poor delivery by consultants Consultants appointed too late

13 Key recommendations for improvement Leadership Deliver on commitments to fill key positions with competent people. Stabilise administration (i.e. low turnover in key positions). Provide officials opportunity to obtain minimum competency requirements. Deal with transgressions and poor performance. Insist on credible in-year reporting by officials to improve year-end processes and enable improved decision-making. Support and participate in initiatives to improve audit outcomes, such as operation clean audit. Use forums and working relationships between municipalities and with provincial government to strengthen administration of municipalities PFMA 0-0- PFMA Financial and performance management Implement audit action plans to address audit as well as root causes of the audit. Improve record keeping of municipalities - ensure basic controls around transactions and reconciliations are in place. Enable monitoring and oversight through regular and credible reporting on important matters such as SCM and contract management. Governance Governance to be enhanced by well-functioning audit committees and support of internal audit units. Councils and municipal management to implement recommendations of audit committees. Internal audit units to identify risks and controls that can be implemented to mitigate risks.

14 Role of the municipal manager Robust financial and performance management systems Oversight and accountability Commitment and ethical behaviour Full and proper records of financial affairs Effective, efficient and transparent systems for financial and risk management and internal control System of internal audit Develop and implement policies tariffs, rates, credit control, debt collection and SCM Appropriate management, accounting and information systems assets, liabilities, revenue and expenditure Effective, efficient, economic and transparent use of resources Prevention of unauthorised, irregular and fruitless and wasteful expenditure as well as other losses Act with fidelity, honesty, integrity and in the best interest of the municipality Manage and safeguard assets and liabilities Take appropriate disciplinary steps against any official who commits an act of financial misconduct or an offence Disclose all material facts to the council or mayor The role of the municipal manager is critical to ensure: timely, credible information + accountability + transparency + service delivery