Enhancing Municipal Financial Reporting in KwaZulu-Natal

1. SELECT COMMITTEE OF FINANCE STATUS OF MUNICIPALITIES KWAZULU-NATAL Presented by Mrs HB Krishnan

2. CONTENT • Background • Capacity • Context • Annual Financial Statements • Submissions • Opinions • Main Qualifiers • Annual Reports • Disclosures and Remuneration • Challenges • Departmental Support

3. BACKGROUND • MFMA • MEC Obligations • Phased approach for Annual Reporting • H: 2004/2005 • M: 2005/2006 • L: 2006/2007 • KwaZulu-Natal • High: 9 • Medium:16 • Low: 36

4. CAPACITY • Defined in 2003 • Based on self assessment by municipalities • Anomalies originally identified • Need for a review

5. CONTEXT • A new legislative and policy environment is not sufficient to ensure transformation! • Underpinned by • Skills; • Systems; • Knowledge; and • A transformation agenda or will. • “The cart before the horse?”

6. ANNUAL FINANCIAL STATEMENTS • Submissions • 46 within the statutory deadline (75%) • No backlogs in KZN • Outstanding audit opinions • Edumbe and Ulundi Municipalities • Reasons for late submissions • Processes and role of Mayor • Role of Speaker • Council oversight

7. ANNUAL FINANCIAL STATEMENTS • Opinions • As at 09 May 2007 47 opinions issued by AG • 14 Unqualified – 30% • 24 Qualified – 51% • 9 Disclaimers – 9%

8. ANNUAL FINANCIAL STATEMENTS • Main qualifiers/matters • Outstanding service debtors • Inadequate provisions for doubtful debts • Asset Registers • Water and Sanitation assets • Environmental Health Functions • Reconciliations not done • Inability to verify assets • Outstanding/inaccurate VAT reconciliations • Internal control • Compliance with legislation

9. ANNUAL REPORTS • Submission of Annual Reports • Disclosure requirements • 7 of 9 submitted in respect of 2004/2005 reporting cycle • 8% submitted to MEC by 31 March 2007 (2 of 25) • Late Submissions • Delays in audit process • Capacity to respond to audit issues and to prepare annual report • Delays in tabling in councils

10. DISCLOSURES & REMUNERATION • Disclosures of Section 56 Manager salaries • Compliance with Remuneration of Public Office Bearers Act

11. CHALLENGES • Standards • Onerous • Conversion • Standards are underpinned by processes and not events. • Timing • Capacity • Technical financial skills • Council Oversight • Transfer of functions • Lack of uniform performance measures and standards for functionaries and councils

12. CHALLENGES • Debt Management • Data Cleansing of Billing Systems • Implementation of Credit Control by certain councils • Indigent administration and Management • Inability to write of historical debt • Accounting records management • Lack of Discipline

13. DEPARTMENTAL SUPPORT • Frameworks to promote MFMA compliance • Annual Reporting • Analysing responses to audit reports • Reporting to Parliament • Debt Management Pilot • Asset Management Pilot Project • Shared Services • Internal Control and Risk Management • PMUs etc.

14. DEPARTMENTAL SUPPORT • Hands-on support • Project Consolidate • Siyenza Manje • Need for improved coordination • Council training on governance and oversight • Support in implementation of the Municipal Property Rates Act

15. Thank You!