Department of Co-operative Governance, Human Settlement and Traditional Affairs.

1. Department of Co-operative Governance, Human Settlement and Traditional Affairs. LIMPOPO PROVINCE

2. OPERATION CLEAN AUDIT 2011/12 Departmental Action Plan Audit Outcomes

3. TABLE OF CONTENTS Purpose Comparative Overview of the audit outcomes Comparative audit outcomes Root causes on audit findings Additional key common audit findings Current status of filling of MMs and CFOs positions MMs vacancy rate CFOs vacancy rate 2011/12 audit remedial plans Resident Accountants appointed Impact of the Resident Accountants interventions Scope of work for Resident Accountants Project implementation and Monitoring Municipal governance Structures Challenges with regard to the Project Interventions Strategic Interventions

4. Purpose Briefing of the committee on departmental action plans in response to the 2010/11 and 2011/12 consolidated general report on the audit outcomes of Local Government

5. Comparative Overview of the audit outcomes

6. Comparative audit outcomes for four consecutive financial yearsU= UNQUALIFIED; D=DISCLAIMER; Q=QUALIFIED, A=ADVERSE, C= CLEAN AUDIT, P=PENDING

7. Root Causes on audit findings • People • Lack of Shared vision • Delay implementing corrective measures • Accountability • Lack of consequences for inappropriate behavior • Sustainability • The discipline of credible monthly reporting not transversally in place

8. Additional key common audit findings • Non-compliance with Supply Chain Management • An increase in unauthorised, fruitless and wasteful expenditure: • Unauthorized expenditure: ( 2010/11)R 546m and (2011/12) R 738m. • Irregular expenditure: ( 2010/11) R 945m and (2011/12) R 1 157m • Fruitless and wasteful expenditure: (2010/11) R 40m and (2011/12) R 22m • Assets Management- assets registers not compliant with GRAP • Lack of supporting documents • Completeness of revenue • Ineffectiveness of governance structures • Lack of application skills and knowledge of financial systems

9. The current status on filling of MMs and CFOs positions • 24 MMs’s positions filled except for Modimolle; Bela-Bela; Aganang; Mookgophong; Ephraim Mogale and Mutale • 21 CFOs’s positions filled except for Mutale; Mopani DM; Tubatse; Aganang; Polokwane; Maruleng; Vhembe DM; Ephraim Mogale and Thabazimbi.

10. Municipal Managers vacancy rate

11. CFOs Vacancy Rate

12. 2011/12 Audit Remedial Plans • Municipalities have develop and submitted audit remedial plans to the Department. • Department has assessed audit remedial plans and provided feedback to Municipalities. • Monitor the implementation of audit remedial plans and ensure supporting documents on issues resolved.

13. Residents Accountants appointed The Department is currently assisting municipalities under “Resident Accountant” project. Allocations of municipalities are as follows: CorpMD(Makhuduthamaga; Sekhukhune DM; Greater Giyani and Musina) Ngubane/Kgorong Consultants(Bela-Bela; Makhado; Ba-Phalaborwa and Modimolle) and started June 2012. 3. Advertised for additional Service Providers for six municipalities, i.e. Tubatse, Mogalakwena, Maruleng, Greater Tzaneen, Greater Letaba and Mookgophong and briefing session held.

14. Scope of Work for Resident Accountants To provide hands on support on technical financial management with regard to the closure of the financial year with specific emphasis that the municipality’s financial records for that financial year are in order and ensure skills transfer. To prepare the financial statements To ensure that working papers are available before preparing the financial statements as evidence for auditing purposes. To assess the state of financial management in the municipality and provide recommendation on areas of improvement; and

15. Impact of the Resident Accountants Interventions The audit opinion has not largely improved however the resident accountants have managed to assist municipalities in performing the following duties: a) Preparations of audit file b) Stock take count procedures and counting c) Clearing the 2010/11 audit queries d) Hands on support training e) Preparations of reconciliations f) Responding to audit finding raised during the current audit in the year under review.

16. Project implementation and monitoring The Project is monitored through the following structures: MEC/Mayors forum, co-chaired by MEC for Coghsta and Provincial Treasury. Comprises of Executive Mayors/Mayors, Municipal Managers, Office of the Auditor General and SALGA , it meets on quarterly basis Monthly reports of Resident Accountants are signed off by respective Municipal Managers and Chief Financial Officers and submitted to COGHSTA

17. Municipal Governance Structures • Provincial MPAC Forum has been established and the Provincial Executive MPAC committees is established. • Conducted MPAC district-based training sessions in-collaboration with Provincial Treasury, Provincial Treasury, Provincial Legislature and SALGA. • All municipalities have established Internal Audit Unit and appointed Audit Committees. • Establishment of Risk Management Committees. • Monitor implementation of internal audit and audit committee recommendations.

18. Challenges with regard to the Project • Limited skills base in terms of financial management • High vacancy rate in Budget and Treasury Unit • Lack of knowledge and skills in respect of migration and support from financial systems providers. • Lack and unavailability of supporting documents. • Lack of proper internal controls such as adhering to management policies and treasury regulations, safe guarding of assets, • Non-implementation of recommendations made by the internal audit and audit committee • Non-implementation of audit remedial plans • Lack of skills in respect of municipal accounting procedures and standards.

19. Interventions • Assist municipalities to develop performance indicators. • Continuous monitoring of functionality of Audit Committees and Performance Committees functionalities. • Strengthen Oversight Committees. • Review and implement Operation Clean Audit Plan. • Monitor implementation of audit remedial plans. • Monitor and assist municipalities with implementation of MPRA- Utilization of Valuation Appeal Board • Assist municipalities with recruitment of section 56 positions. • Implementation of the Provincial Capacity Building Strategy focusing on financial management training for Councilors and officials

20. Strategic intervention • The recent ANC Lekgotla and EXCO Lekgotla resolved that Municipal Mayors and Senior Management should take responsibility for non-improvement on the financial management issues.

21. THANK YOU