Bojanala platinum district municipality SCOPA meeting SEPTEMBER 2019 PARLIAMENT – RSA 08h30am

1. Bojanala platinum district municipality SCOPA meeting SEPTEMBER 2019 PARLIAMENT – RSA 08h30am

2. Outline • BACKGROUND of the municipality • GEOGRAPHICAL LOCATION OF THE DISTRICT • POWERS AND FUNCTIONS • LEADERSHIP & GOVERNANCE • BUDGET FOR THE LAST FIVE YEARS • AUDIT OUTCOMES FOR THE LAST FIVES YEARS (2013/2014– 2017/2018) • TOP FIVE ISSUES RAISED BY ag FOR THE LAST FIVE YEARS • KEY CHALLENGES FOR POOR PEFORMANCE AND STRATEGIES DEPLOYED TO ADRESS • OVERSIGHT STRUCTURES • REQUIRED SUPPORT AS PER SECTION 154 OF THE MFMA • CONSEQUENCES MANAGEMENT APPROACH • SUGGESTED WAYFORWARD

3. DISTRICT BACKGROUND • Bojanala platinum district municipality is a category c municipality comprising five local municipalities (I.E. Rustenburg, moses Kotane, Kgetleng Rivier, Moretele & Madibeng) • Population is estimated at 1657 148 • Majority of areas are classified as rural with very low densities while there are also urban areas which are vibrant economic nodes • As a category C municipality, we do not provide services directly to communities but provide support to our local municipalities • The district municipality derives ITS mandate from Section 152 of the Constitution of South Africa, Act 108 of 1996

4. Almost all Depts in Bojanala have some workers employed full time– a high number of full time staff is mainly in Finance, Public Safety & Environmental

5. Geographical location of the district

6. powers & functions Section 84 of the municipal Structures act: • (a) Integrated development planning for the district municipality as a whole including a framework for integrated development plans for the local municipalities within the area of the district municipality. taking into account the integrated development plans of those local municipalities. • (b) Bulk supply of water that affects a significant proportion of municipalities in the district. • (c) Bulk supply of electricity that affects a significant proportion of municipalities in the district. • (d) Bulk sewage purification works and main sewage disposal that affects a significant proportion of municipalities in the district. • (e) Solid waste disposal sites serving the area of the district municipality as a whole. • (f) Municipal roads which form an integral part of a road transport system for the area of the district municipality as a whole. • (g) Regulation of passenger transport services. • (h) Municipal airports serving the area of the district municipality as a whole.

7. Overview - powers & functions Section 84 of the municipal Structures act: • (i) Municipal health services serving the area of the district municipality as a whole. • (j) Fire fighting services serving the area of the district municipality as a whole. • (k) The establishment, conduct and control of fresh produce markets and abattoirs serving the area of the district municipality as a whole. • (L) The establishment, conduct and control of cemeteries and crematoria serving the district as a whole. • (m) Promotion of local tourism for the area of the district municipality. • (n) Municipal public works relating to any of the above functions or any other functions assigned to the district municipality. • (o) The receipt. allocation and. if applicable. the distribution of grants made to the district municipality. • (p) The imposition and collection of taxes. levies and duties as related to the above functions or as may be assigned to the district municipality in terms of national legislation

8. BUDGET FOR THE LAST FIVE YEARS Allocation for the past five years: • 2013/2014 –R263 398 • 2014/2015 – R272 308 • 2015/2016 – R298 978 • 2016/2017 – R319 046 • 2017/2018 – R322 202 • 2018/2019 – R327 374 With the above allocation the wage bill has always been above 50% MAKING IT SLIGHT DIFFICULT TO SUPPORT OUR LOCALS

9. LEADERSHIP & GOVERNANCE • COUNCIL IS MADE UP OF 70 COUNCILLORS (REPRESENTATIVES FROM anc, eff, DA, F4SD, AIC • THERE ARE 10 PORTFOLIO COMMITTEES THAT PLAY OVERSIGHT ROLE • There is stability in council and necessary council matters are carried out as legislated • SECTION 79 COMMITTEES ARE ESTABLISHED BY COUNCIL – MPAC, AUDIT COMMITTEE.

10. AUDIT OUTCOMES FOR THE LAST FIVE YEARS 2013/2014 – 2017/2018 • 2013/2014 – UNQUALIFIED • 2014/2015 – DISCLAIMER • 2015/2016 – DISCLAIMER • 2016/2017 – DISCLAIMER • 2017/2018 – DISCLAIMER

11. TOP 5 ISSUES RAISED BY ag OVER THE LAST FIVE YEARS • cash & cash equivalences – cashbook balances DISCLOSED IN THE AFS FOR PRIOR YEARS HAVE BEEN overstated • Property plant equipment – incorrect APPLICATION OF GRAP 17 RESULTING IN UNDERSTATEMENT OF ASSETS AND overstatement of EXPENDITURE EG IMPAIRED ASSETS STILL IN USE • Employee related cost and Provision– major variances between payroll & financial system used for reporting (INTEGRATION BETWEEN PAYROLL AND FINANCIAL REPORTING SYSTEM NOT WORKING), -and there were VARIANCES BETWEEN LEAVE report FROM THE PAYROLL SYSTEM AND THE SOURCE DOCUMENT AND SUPPORTING EVIDENCE RESULTING IN INCORRECT LEAVE COMPUTATION

12. TOP 5 ISSUES RAISED BY ag OVER THE LAST FIVE YEARS 4. Statement of budget & actual amounts – budget amounts included in the statement of comparison between budget and actual amount did not agree to the approved budget BY council & reasons for variances were not disclosed 5. Unauthorised, irregular, fruitless & Wasteful expenditure – incompleteness of registers, failure to implement consequence management, failure to disclosed deviations in the financial statements NB: MOST OF THE ISSUES RAISED IN THE AUDIT REPORT FOR 2017/18 HAVE BEEN ADRESSED AWAITING TECHNICAL REVIEW REPORT FOR CORRECTIONS WITH EXCEPTION OF IMPLEMENTATION OF THE CONSEQUENCE MANAGEMENT ON THE FRUITLESS &WASTEFUL EXPENDITURE, IRREGULAR AND UNATHORIZED EXPENDITURES

13. KEY CHALLENGES FOR POOR PEFORMANCE AND STRATEGIES DEPLOYED TO ADRESS THEM key challenges noted FOR POOR PERFOMANCE • Audit evidence to support balances in the annual financial statements due to poor internal control system amongst others records management system not in place • Lack of technical capacity specifically in Budget AND TREASURY OFFICE AS WELL AS TECHNICAL KNOWHOW TO OPERATE FINANCIAL SYSTEMS DEPLOYED • Lack of appropriate instruments to implement consequence management • consequence management policies WERE NOT IN PLACE, • disciplinary board FULLY ESTABLISHED • High turnover in the internal audit unit • Appropriate employment contracts and job profiling 4. Quality of the submitted annual financial statements CAUSED BY POOR PLANNING

14. KEY CHALLENGES FOR POOR PEFORMANCE AND STRATEGIES DEPLOYED TO ADRESS Audit evidence to support balances IN THE AFS the Municipality has deployed system with the following functionalities; - • It provides electronic documents for all the payment vouchers incurred during the year • All bids with losing bidders have been scanned for the purpose of the audit • All contracts incurred during the year have been scanned and referenced accordingly during the year • All council minutes for all council committees have been kept electronically • All journals incurred during the year as well as adjusting journals have been kept electronically for easy reference • In the year 2019/20 all payments will be scanned prior processing as part of maintenance and all bids will be produced directly on the system • All SCM officials to undergo MFMA training

15. KEY CHALLENGES FOR POOR PEFORMANCE AND STRATEGIES DEPLOYED TO ADRESS In order to address the capacity within the BTO: • The municipality started by subjecting all the BTO officials with the ON GOING TRAINING ON basic financial system WHICH Covers advanced procurement, linking of general ledger accounts, review of database forms to include sectors, accounts payable & expenditure, fixed assets & section 71 reporting) • SCM TEAM IS ALSO ATTENDING THE PROGRAMM ARRANGED BY NORTH WEST PROVINCIAL TREASURY. • PROVINCIAL TREASURY IS ALSO ASSISTING IN TERMS WITH A HANDS ON APPROCH SYSTEMS TO CAPACITATE BTO STAFF UNTIL THE ENVIROMENT IS STABLE

16. KEY CHALLENGES FOR POOR PEFORMANCE AND STRATEGIES DEPLOYED TO ADRESS Lack of appropriate instruments to implement of consequence management • consequence management policies DEVELOPED AND APPROVED IN MAY 2019 • disciplinary board HAS BEEN ESTABLISHED RECENTLY • High turnover in the internal audit unit, THE MANAGER HAS BEEN APPOINTED AWAITING TO RESUME RESPONSIBILITIES • THE MUNICIPALITY IS IN THE PROSESS OF CONDUCTING SKILLS AUDIT, JOB PROFILLING AND REVIEW OF EMPLOYEMENT CONTRACT TO BE ALIGNED TO THE MUNICIPAL ORGONOGRAM FOR EASY REFERENCES BY DISCIPLINARY BOARD

17. KEY CHALLENGES FOR POOR PEFORMANCE AND STRATEGIES DEPLOYED TO ADRESS Quality of the submitted annual financial statements CAUSED BY POOR PLANNING • A plan for the preparation of the AFS was developed with key timelines and responsible officials to avoid submission of the set without being reviewed • The Municipality also took an initiative to prepare its own set in order to provide accountability and ownership during the auditand enforce performance by the staff.

18. Oversight structures & functionality Functionality of Oversight Structures, s79 Committees, Audit committees and District IGR Forums: • Portfolio committees sit regularly • We have resuscitated the District IGR with our five Local Municipalities, Traditional Leaders and Sector Departments. Technical IGR Forums have been established and sit quarterly. They are chaired by MMCs for various portfolio committees • Shared Audit Committee sits quarterly. It is a shared service for Moses Kotane & Kgetleng Rivier LMs. Audit committee reports to council regularly • MPAC is functional with an approved annual work plan • Disciplinary board – council resolved on establishment of the board, FORMAL appointments HAVE been RECENTLY AWAITING PROVINCIAL TREASURY TO SECOND THE REPRESENTATIVE

19. required section 154 support • REQUIRED INTERVENTION: • WE PLEAD SUPPORT BY TREASURY AND SALGA ON ISSUES OF FINANCIAL MANAGEMENT & AUDIT TO BE EXTENDED UNTIL THE MUNICIPALITY IS FINANCIALLY STABLE • SUPPORT OF NATIONAL GOVERNMENT TO ASSIST THE DISTRICT WITH ITS PLAN TO ESTABLISH REGIONAL BULK INFRASTRUCTURE – DISTRICT WASTE DISPOSAL SITE THROUGH PPP • SUPPORT OF NATIONAL GOVERNMENT TO ASSIST THE DISTRICT WITH BULK SCOPING OF REGIONAL WATER • SUPPORT FROM SALGA WITH REGARD IMPLEMENTATION OF SECTION 84(P) OF THE MUNICIPAL STRUCTURES ACT TO IMPROVE COMPLIANCE THEREBY RAISING REVENUE FOR THE DISTRICT

20. Consequence management approach • AS MUCH AS THE MUNICIPALITY ACKNOWLEDGES THAT THERE HAS BEEN LACK OF AN APPROPRIATE INTRUMENT TO EFFECTIVELY IMPLEMENT THE CONSEQUENCE MANAGEMENT SUCH AS UIF & W POLICY AND THE DISCIPLINARY BOARD, MOST OF THE INVESTIGATIONS HAVE BEEN CONCLUDED AND ANTICIPATE OVERSIGHT WITHIN THIS 1ST QUORTER OF 2019: • IRREGULAR EXPENDITURE • THE MUNICIPALITY HAS PREPARED A REPORT SEEKING ADVISE FROM TREASURY ON HOW TO DEAL WITH THE FOLLOWING CATEGORIES TO ENSURE THAT THEY ARE DEALT WITHIN THE PRESCIRPTS OF THE LAW. BELOW ARE CATEGORIES OF DIFFERENT CASES;- • INHERITED FINANCIAL SYSTEMS, • RENTAL BUILDING CONTRACTS • REGULATION 32 CONTRACTS, • CESSIONARY AGREEMENT, • LACK OF DOCUMENTATION RESULTING IN SUCH EXPENDITURE BEING CLASSIFIED AS IRREGULAR, • PANEL APPOINTMENTS WHERE THERE HAS BEEN ONE SERVICE PROVIDER BEING PREFFRED AND SUCH WAS DECLARED IRREGULAR • FAILURE TO FOLLOW SCM PROCESS WHICH MAJORITY WERE DEVIATION NOT CONSIDERED BY COUNCIL AS PER SCM REGULATION 36-

21. Consequence management approach • FRUITLESS AND WASTFULE EXPENDITURE • THE INVESTIGATION HAS BEEN CONCULDED AND WILL BE SUBMITTED FOR OVERIGHT STRUCTURE FOR IMPLEMENTATION • UNATHORIZED EXPENDITURE • THE MAIN CHALLENGE WAS THAT THE APPROVED BUDGET THROUGH OUT THE PAST FOUR YEARS HAS ALWAYS DIFFERED WITH THE BUDGET CAPTURED ON THE FINANCIAL SYSTEM MAKING IT DIFFICULT MAKE FORMAL COMPARISION OF BUDGET VS ACTUAL TO DETERMINE THE UNAUTHORIZED • DUE TO SYSTEM CHALLENGES AND RESPECTING MFMA DEADLINES MUNICIPALITY HAS ALWAYS RESORTED TO AN OLD WAYS OF PREPARING THE BUDGET WHICH WHEN CAPTURED THE OUTPUT ALWAYS DIFFERED WITH THE APPROVED • THE SERVICE PROVIDER HAS JUST COMPLETED TO WORK ON THE YEAR UNDER AUDIT WHICH WE BEALIVE THE PROCESS WILL KICK START ONCE ACCEPTED BY AG

22. JOURNEYTOWARDS A BETTER AUDIT OUTCOMES BY 2021 BETTER AUDIT OUTCOMES AUDIT ACTION PLANS Focus areas Monitoring of PAAP PEER LEARNING Focus areas Best Practices within and outside of the Province Nkangala District Municipality Focus areas Collaboration with Departments and CFOs Forum INTER GOVERNMENTAL RELATIONS AND FORUM Focus areas Status of records review and Audit trainee training PARTNERSHIP WITH AG NW Focus areas Status of records review and Audit trainee training FINANCIAL MANAGEMENT AND REGULATION Focus areas Cllr Capacity Building and Functionality of Audit Committees, Internal Audit, MPACs and Disciplinary Boards LEADERSHIP AND GOVERNANCE

23. Concluding remarks HAVING NOTED ALL THE CHALLENGES WE HAVE OBSERVED FOR THE PAST FIVE YEARS, THE CURRENT FINANCIAL PLAN SEEKS TO ADDRESS ALL FINANCIAL CHALLENGES AND INSTIL DISCIPLINE IN THE INSTITUTION. AUDIT STEERING COMMITTEE WILL BE ATTENDED BY THE EXTENDED MANAGEMENT TO ENSURE EXPOSURE THAT WILL ALLOW THEM TO UNDERSTAND THE IMPACT OF THEIR PERFOMANCE IN THE AUDIT OF THE MUNICIPALITY THANK YOU