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By: Daniel J de Lange September 2013

MPAC Practical Guidelines to Promote Good Working Relationships between MPAC, Council and Other Committees (Mayoral Committee, Audit Committee). By: Daniel J de Lange September 2013. INTRODUCTION.

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By: Daniel J de Lange September 2013

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  1. MPAC Practical Guidelines to Promote Good Working Relationships between MPAC, Council and Other Committees (Mayoral Committee, Audit Committee) By: Daniel J de Lange September 2013

  2. INTRODUCTION • Most municipalities are still struggling to define the role and functions and agenda of MPAC. The constitution does not explicitly provide an oversight function to the non-executive component of a municipality to the extent that it provides such a function to parliament and provincial legislature. • There are also many challenges that the institutionalization process is normally faced with, such as the resourcing of new structures such as MPAC that require additional resources, expertise and efficient and effective systems and procedures to ensure good working relationships between committee structures and effective and appropriate agenda setting. • It is important to note that MPAC is subject to the authority of council that will direct what MPAC does in terms of delegated powers and functions. • MPAC has no powers to dispose of any matter and makes recommendations to Council. • This document will endeavor to provide practical guidelines and procedures on how MPAC should perform its oversight role and function.

  3. Performance, Powers and Functions • The Municipal Structures Act makes provision for establishment of Council Committees (Sec 79) and committees to assist the Executive Mayor (Sec 80). • In the case of the section 79 committees the Council determines the duties and powers of these committees. MPAC is a committee of Council and its delegated functions, powers and terms of reference is contained in the Standing Rules and Orders approved on 28 March 2012, attached as Annexure “A”. The question is how will MPAC’s agenda be set (Content and Issues). Issues that will be specifically dealt with include:

  4. COMMITTEES OF COUNCIL AND GOVERNANCE STRUCTURES • It is important to understand the legislative duties and responsibilities of the Executive Mayor, Accounting officer and committees of Council before determining the oversight role of MPAC. The Municipal Systems Act and Municipal Finance Management Act define the role and function and accountability arrangements between the Executive Mayor, Accounting Officer, Council and departmental heads as detailed below. These are the main role-players that ensure that the municipality achieves its development objectives as set out in the IDP and that resources are used efficiently, effectively and economically in the service delivery process. • The political and accountability arrangements are detailed in the diagram on the next slide

  5. Functions The principal function of the committee shall be to perform an oversight function on behalf of the council and, in so doing, hold the municipal executive, municipal entities and agencies accountable for the effective and efficient management of the matters entrusted to them. The committee shall, further, perform the following functions: • To consider any recommendation referred to it by the Audit Committee; • To consider, evaluate and develop the content of the annual report, with due regard to any treasury instruction or guideline, and to make recommendations to the council when adopting an oversight report on the annual report (MFMA); • To assist with the conclusion of matters that may not have been finalized in previous oversightreports and, to this end, the committee shall review recommendations made in such annual reports as well as information contained incurrent in-year reports, including the quarterly, mid-year and thecurrentannual report (MFMA); • To examine and interrogate the financial statements, including compulsory disclosures, as well as the audit reports of the municipality and municipal entities,and in so doing, the committee must consider improvements from previousstatements and reports and evaluate the extent to which the recommendations from the Audit Committee and the Auditor- General have been implemented(MFMA);

  6. Functions(Cont) • To promote good governance, transparency and accountability on the use of municipal resources;  (vi)To recommend or undertake any investigation as resolved by council in its area of responsibility after reviewing any investigation report already undertaken by the municipality or the Audit Committee;   • To interrogate the quarterly report of the mayor on the implementation of the budget and the stateof affairs of the municipality and to make recommendations to the mayor and the council in this regard, including the necessity to amend the SDBIP and the tabling of an adjustments budget; • To consider the mid-year budget review against the Integrated Development Plan and SDBIP targets and measure the implementation of clean audit initiatives; • To ensure that any necessary unforeseen and unavoidable expenditure is appropriated in an adjustments budget and, where an adjustments budget is not prepared, to report same to the council.

  7. Functions(Cont.) (x) To investigate allegations of irregular, fruitless and wasteful expenditure as resolved by council and to recommend that, subject to the applicable provisions of the Finance Management Act, such expenditure either be recovered, authorized or be written-off; (xi) To report on the institution of criminal or civil proceedings or both relating to irregular, fruitless and wasteful expenditure as well as the success or otherwise of such proceedings; (xii) To consider the extent to which the budget related policies of the municipality are being implemented and to make recommendations in this regard; (xii) To determine the extent of implementation of national treasury guidelines, directives and recommendations relating to financial and asset management in the municipality. The committee shall not be responsible for nor shall it concern itself with policy formulation. It shall, however, determine the extent of implementation of new policy adopted by the council with due regard to the principles of sound financial management, the adherence of probity, the regularity, efficiency and effectiveness of the collection of revenue and the need to maintain and enhance legislative accountability.

  8. Powers The committee shall be entitled: (a) to call upon the accounting officer or the chairperson of a municipal entity’s board of directors to appear before it to provide information or clarity on any matter being considered by or investigated by thecommittee; (b) to engage directly with the public and consider public comments on matters falling within the functions of the committee; (c) to request documents, including personnel records, books of account, records, asset and liability registers and other evidence from the accountingofficer of the municipality or a municipal entity to enable it to perform its duties and/or attend to any matter referred to or being investigated by the committee; (d) to request the support of both the internal and external auditors of the municipality when necessary on an advisory basis;

  9. Powers(Cont.) The committee shall, purposes of the oversight process, have permanent referral of documents as they become available relating to: • in-year reports of the municipality and municipal entities; • annual financial statements of the municipality and municipal entities; • the audit program; • the risk based audit plan: • any audit opinion as well as agendas, minutes, reports and recommendations from the Audit Committee; • all formal recommendations made by the Audit Committee; • the report(s) by the Auditor-General; (h) information relating to compliance with sections 128 and 133 of the Finance Management Act;

  10. Powers(Cont.) (i) the risk register of the municipality; (j) information in respect of any disciplinary action taken in terms of the Finance Management Act where it relates to an item that is currently serving or has served before the committee; (k) any other audit report from the municipality or its entities; and (l) performance information on the municipality and municipal entities including the performance management system(s); (m) the annual performance evaluation of the municipality, the municipal manager and senior managers; (n) the annual report on loss control in the municipality.

  11. Meetings of the committee (1) The chairperson shall be responsible for convening meetings of the committee. (2) The committee must meet at least quarterly and at such intervals as are necessary to complete its approved work programme. (3) These Rules and Ordersby-laws, with the necessary changes to suit the nature, obligations and powers of the committee, shall apply in respect of its meetings. In particular, the municipal manager and department managers shall attend meetings of the committee unless exempted or excused from attendance in terms of rule 17(7) of these by-laws. (4) Meetings of the committee shall be held in open session unless a matter under consideration is a matter identified in these by-laws for consideration by the council in closed session.

  12. The hard questions Duplication of effort across Committees? Audit vs Risk vs MPAC? Skills and expertise on Committees? Are Councils and management ready for increased oversight and governance? What are the real KPI’s for good governance? Damned if you do, damned if you don’t? Define what is required by Committees? Does MPAC and Audit Committees have “teeth”?

  13. ex post facto-Oversight role of MPAC • The oversight role of MPAC is to consider decisions and actions or inactions of the Mayoral Committee/Executive Committee based on reports submitted to it. It can be argued that the MPAC oversight role is an (ex post facto) role meaning a review and interrogation of the facts after the decision is made or action is taken. As stated MPAC does not have a decision making role or an executive function and should therefore not interact with reports that have not been dealt with by the Executive Authority (Mayoral Committee).

  14. SO HOW DOES MPAC PERFORM ITS OVERSIGHT ROLE? • MPAC receives the tabled Annual Report, Audit Committee Minutes or any other financial in -year reports for consideration and interrogation. • Reports are studied and questions are then formulated either individually or as a committee which can be distributed to the relevant department through the office of the Municipal Manager or Speaker for a response. Questions will of course also be raised during the MPAC meeting. Usually during the meeting follow up questions or responses are posed by members of the committee. • The decision and recommendations to Council by MPAC are included in minutes which are tabled in Council for consideration. MPAC will have a tracking mechanism (Action Sheet) to ensure implementation of its resolutions tabled in Council for debate and adoption.

  15. RELATIONSHIP BETWEEN MPAC AND AUDIT COMMITTEE • The Audit Committee (AC) can refer matters to MPAC via Council for further investigation. The Chairperson of MPAC can on invitation by the Chairperson of the Audit Committee attend meetings of the AC as an observer to ensure that MPAC has a good background on specific issues in the AC agenda. • To promote good communication between these governance structures it is suggested that the minutes of the AC be tabled in the MPAC meeting for interrogation (to examine by questioning formally or officially). MPAC does not have the responsibility to investigate in detail the accuracy or otherwise of any document. • It must be stressed that the Audit Committee and MPAC report directly to Council. It has become standard practice to also include the minutes of the Audit Committee (AC) in the Mayoral Committee (MC) agenda for information.

  16. Audit Committee Is independent advisory body, advises council, office bearers, accounting officer, board and staff of entity on • internal financial control and internal audits; • risk management; • accounting policies; • the adequacy, reliability and accuracy of financial reporting and information; • performance management; • effective governance; • compliance with the MFMA, the annual Division of Revenue Act and any other applicable legislation; • performance evaluation; and • any other issues referred to it by the municipality or municipal entity;

  17. Audit committee (Cont.) • Audit committee must interrogate the following governance and financial aspects in the municipality • internal financial controls in the municipality • identification of strategic risks in the municipality • the establishment and updating of a municipal risk register • management and mitigation of risks contained in the risk register • accounting policies in the municipality • the frequency, accuracy and reliability of financial reporting by the municipality and where applicable, municipal entities • the performance management system of the municipality • the implementation and effectiveness of the performance management system • evaluation of the actual performance of the municipality • compliance with legislation

  18. Audit committee (Cont.) • effective governance in the municipality • review of the annual financial statements • financial position of the municipality • the municipal response to the A-G report • loss control • the implementation of the King III principles • The development of strategies to address the above rests with the internal audit unit. • The audit committee therefore casts an expert eye on strategies developed by internal audit and the implementation thereof by the municipality

  19. Skills required of an Audit Committee • Audit committees collectively need to have understanding of: Integrated reporting Risk management Internal financial controls Sustainability reporting Internal and external audit process IT Governance relating to integrated reporting Corporate law Governance processes Assess effectiveness of Combined Assurance

  20. Lines of reporting, tabling of reports and consideration thereof by the council. (1) The committee will report directly to the council through the speaker and may, where necessary, interface with the other committee of the council through the speaker. (2) The committee must submit a quarterly report to the council at least 14 days before the council meeting at which it will be tabled. (3) The report referred to in sub-rule (2) must detail the activities of the committee during the preceding quarter and provide details of the number of meetings held, the membership attendance at committee meetings and the recommendations to be considered by the council. (4) The council should deliberate on the recommendations from the committee and reach finality in the shortest possible time. • Every resolution adopted by the council in response to a recommendation from the committee shall be conveyed to the chairperson of the committee within a period of 14 days from the date of adoption.

  21. Trends Better Audit Committees Financial and non-financial focus Overlaps/ duplication Many bosses/ masters Audit and Oversight fatigue Combined assurance Operation Clean Audit (2014) Combined assurance

  22. In conclusion Internal management controls are crucial in order to deliver services effectively and efficiently Internal audit and audit committee centres mainly on internal management controls MPAC is centred on oversight over executive obligations of council MPAC Is a body created by the municipal council, to hold the executive accountable for the execution of its mandate in terms of IDP, budget, and SDBIP.

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