Progress Report on Municipal Audit Outcomes: Operation Clean Audit 2011-2014

2. Background • Overview of Municipal Audit Outcomes 2009/2010 • Progress on performance of municipalities in respect of Operation Clean Audit • Some of the areas to continue concentrating upon during the 2011/12 financial year • Key Partners • Overview of Provincial Audit Outcomes 2009/2010 • Progress on performance of municipalities in respect of Operation Clean AuditQulification issues • Conclusion

3. Operation Clean Audit was launched in 2009 • The vision of Operation Clean Audit is “By 2014, all 283 municipalities and 9 provinces’ departments in South Africa will have achieved clean audits on their Annual Financial Statements and maintaining systems for sustaining quality financial statements and management information”.

4. Specific targets for municipalities: • 2010/11 municipal financial year: No municipality achieving disclaimer or adverse opinion; • 2012: At least 60% of the 283 municipalities achieving unqualified audit opinion; • 2013: At least an increase in municipalities achieving unqualified audit opinion to 75%; and • 2014: All municipalities achieving unqualified audit opinion.

5. Specific targets for provinces: • 2010/11 provincial financial year: No provincial department achieving disclaimer or adverse opinion; • 2012: At least 60% of provincial departments achieving unqualified audit opinion; • 2013: At least an increase in provincial departments achieving unqualified audit opinion to 75%; and • 2014: All provincial departments achieving unqualified audit opinion.

6. The Auditor-General has still to publish (release) the “Consolidated General Report on the Local Government Audit Outcomes: 2009-10”. • The information in this briefing is based on work-in-progress based on Reports of audit outcomes as obtained from both or either provincial departments responsible for local government and the provincial offices of the Auditor-General, and is still subject to change as information pertaining to 47 municipalities is still outstanding at this stage. • The challenges facing these 47 municipalities may be far much greater than that facing those municipalities with disclaimers and adverse audit opinions.

8. Comparing progress in respect of the audit outcomes of the 247 municipalities (audit outcomes for 36 municipalities not finalized timely) in respect of 2008/09 and the 236 municipalities (47 municipalities still outstanding) in respect of 2009/10 financial years, so far the national picture of audit outcomes is as follows: • 62 municipalities have improved upon their 2008/09 audit outcomes; • 15 municipalities have regressed; and • 159 municipalities remain unchanged

9. Establishment of Municipal Public Accounts Committees (MPAC's) • Workshops on establishment of (MPAC's) were convened in all provinces • However following the LG elections all municipalities, including those in Gauteng that established MPAC’s will have to establish or re-establish them.

10. Individual or shared Internal Audit Units have been established in 246 municipalities and audit committees in 252 municipalities. • To assist those municipalities that have not yet established Internal Audit Units and Audit Committees to e • Through provinces, monitor and support municipal action plans to address previous audit outcomes.

11. Among others, key partners in supporting municipalities include the following: • Provincial departments responsible for LG; • The National Treasury and provincial treasuries; • Salga; • The Auditor-General; • Association of Public Accounts Committees (APAC)

13. The audit outcomes of provincial departments for the current year generally showed a steady reduction in audit qualifications. This positive trend is, however, distorted by the continued deterioration in the education, health and public works sectors in five provinces, as evidenced by the disclaimers or adverse opinions of 8% (2008-09: 5%) of departments.

14. Overall the provincial outcomes of departments showed 61% (2008-09: 70%) unqualified opinions with internal control shortcomings (related to reporting on predetermined objectives and/ or compliance with laws and regulations) and an improvement in clean audits (financially unqualified with no findings on reporting on predetermined objectives and compliance with laws and regulations) to 11% (2008-09:4%). With regard to audit qualifications, 20% (2008-09: 25%) of departments received qualified opinions

15. Capital assets remained the major reason for qualifications, constituting 79% of departments qualified. Other areas that were qualified and require attention at provincial departments are disclosure notes (59%) and reporting on unauthorised, irregular as well as fruitless and wasteful expenditure (53%).

16. The targets for operation clean audit are ambitious, but concerted effort is being exerted toward realising them. • It is hoped that the establishment/re-establishment of MPACs following the LG elections will be a useful intervention. Thank You