ASSESSING THE IMPACT OF THE ABSENCE OF PRESCRIBED QUALIFICATIONS

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ASSESSING THE IMPACT OF THE ABSENCE OF PRESCRIBED
QUALIFICATIONS

• IMFO CONFERENCE SEPTEMBER 2007

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INTRODUCTION

• At 1516 on 19 July 1989 the tail engine of
  United Airlines Flight 232 from Denver to Chicago
  blew apartThe fate of 296 people aboard was
  in the hands of the captain and his crew in the
  cockpit !

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HISTORIC PERSPECTIVE

• Pre 1988 -
• No prescribed/legislated qualifications
• Membership IMFO
• 1930 First internal examinations
• 1970s UNISA takes up the role of final
  examining body/University graduates migrate to
  private sector/Diversification of levels of
  membership linked to qualifications, practical
  training and experience

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Municipal Accountants Act, 1988 (Act 21 of 1988)

• The Board of Municipal Accountants was
  established in accordance with the Act and, inter
  alia, tasked with the following responsibilities
• Exercise control over profession
• Maintain, promote and protect the status of the
  profession
• Determine the functions that only a municipal
  accountant may perform

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Municipal Accountants Act, 1988 (Act 21 of 1988)
(Cont.)

• Determine minimum qualifications required by a
  municipal accountant for registration in a
  particular category and
• Determine which category of municipal accountant
  may perform the determined functions for a local
  authority of a particular grade

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Transformation of local government

• Reforms initiated in the early 1990s
• Local Government Transition Act, 1993
• New legislation promulgated
• Constitution, 1996
• Local Government Municipal Structures Act, 1998
  (Act 117 of 1998)
• Local government Municipal Systems Act, 2000
  (Act 132 of 2000)

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Transformation of local government (Cont)

• First democratic local government elections,
  December 2000
• Non-compliance to Act 21 of 1988 resulting in
  disregard of any pre-scribed qualifications for
  newly appointed CFOs

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Local Government Municipal Finance Management
Act, 2003 (Act 89 of 2003)

• Repeal of Act 21 of 1988
• Competency levels for MM, CFO, senior managers,
  all other financial officials and supply chain
  management officials to be regulated (Sections
  83(1))
• Prescribed competency levels regulated, 2007 with
  final effect from 2013

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Legislated roles/responsibilities

• Municipal Structures Act
• Section 82(a) determines that a municipal
  council must appoint
• a municipal manager who is the head of
  administration and also the accounting officer
  for the municipality

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Legislated roles/responsibilities (Cont)

• Municipal Systems Act
• Section 56 legislates the appointment of
  managers directly accountable to the municipal
  manager and determines in subsection (b) that -
• A person appointed as a manager..must have the
  relevant skills and expertise to perform the
  duties associated with the post in question,
  taking into account the protection or advancement
  of persons or categories of persons disadvantaged
  by unfair discrimination

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Legislated roles/responsibilities (Cont)

• Municipal Finance Management Act
• Part 1 of Chapter 8 (Responsibilities of
  Municipal Officials) focuses on the
  responsibilities of the accounting officer (MM)
• Part 2 of Chapter 8 defines the top management of
  a municipality as
• - The municipal manager (accounting officer)
• - CFO
• - All senior managers responsible for votes and
  to whom powers and duties have been delegated
  and
• - Any other senior officials designated by the
  MM

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Legislated roles/responsibilities (Cont)

• Municipal Finance Management Act (Cont)
• Chapter 9 deals with the Municipal Budget and
  Treasury Office
• Section 80(1) requires every municipality to have
  a budget and treasury office
• Section 80(2) determines that this office must
  consist of a CFO, officials of the municipality
  allocated to the CFO any other person contracted
  for the work in the office

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Legislated roles/responsibilities (Cont)

• Municipal Finance Management Act (Cont)
• The role of the CFO is set out as follows in
  Section 81 of the Act
• - Administratively in charge of the office
• - Advise the accounting officer on the exercise
  of powers and duties assigned to him/her
• - Assist the accounting officer in the
  administration of the municipalitys bank
  accounts and in the preparation and
  implementation of the budget
• - Advise senior management

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Legislated roles/responsibilities (Cont)

• Municipal Finance Management Act (Cont)
• - Perform such budgeting, accounting, analysis,
  financial reporting, cash management, debt
  management, review and other duties as may be
  delegated by the accounting officer to the CFO

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Legislated roles/responsibilities (Cont)

• Conclusion
• Notwithstanding the absence of pre-scribed
  minimum competency levels and qualifications, the
  intention of the legislator, in my opinion, is
  clear that municipalities should appoint suitably
  skilled municipal managers, CFOs and other
  senior managers in an effort to achieve the
  objects of local government as set out in the
  Constitution.

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Assessment

• References
• LGSETA Sector skills plan 2005-2010
• Demarcation Board
• DPLG
• Project Consolidate
• National Capacity Building Framework for Local
  Government
• General Report of the Auditor-General on the
  audit outcomes of Local Government for the
  financial year ended 30 June 2005

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LGSETA Sector skills plan 2005-2010

• Main drivers of change in the sector arose from
  legislative and social policy context rather than
  technological or environmental factors.
• Important concept for service delivery is that it
  has the right staff with the right skills in the
  right place at the right time
• Local government operates in an inflexible labour
  market
• Characterised by high staff turnover and
  exceptionally high vacancy rates of approved
  organograms

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LGSETA Sector skills plan 2005-2010 (Cont)

• Demand for skills may exist but financial
  constraints and inefficiencies within operational
  budgets as well as the lack of norms and
  standards guiding the appointment of staff and
  the allocation of numbers and types of posts
  against service standards mitigate against such
  employment even if the skills required existed
• Inability to retain senior managers and
  professionals can not be attributed to employment
  equity

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LGSETA Sector skills plan 2005-2010 (Cont)

• Demand for replacement skills is not fully met
  either through recruitment or through skills
  development initiatives.
• Vacancy rates recorded are in the lower end of
  the skills spectrum which suggest that senior and
  middle management positions are being filled but
  with less well qualified people.

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LGSETA Sector skills plan 2005-2010 (Cont)

• Qualifications profile and years of experience of
  MM as per the WSPs
• Qualifications
• Up to NQF 4 7,6
• NQF 5 17,0
• NQF 6 40,8
• NQF 7 20,5
• NQF 8 14,1

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LGSETA Sector skills plan 2005-2010 (Cont)

• Experience
• 0-5 years 37,4
• 6-11 years 36,7
• 12-18 years 9,0
• 19-24 years 6,8
• Above 25 years 10,1

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LGSETA Sector skills plan 2005-2010 (Cont)

• Greatest problems in acquiring and retaining
  skills has been in the categories of
  professionals, senior management, technicians and
  associated professionals.
• Specific priority skills (job titles) listed
• Financial directors/managers
• Heads of departments/divisions
• Accountants
• Financial officers
• Financial clerks

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LGSETA Sector skills plan 2005-2010 (Cont)

• The increase in the demand for skills is the
  result of the following factors
• Transformation and restructuring agenda of the
  sector
• Increased focus on the sector as the
  implementation agent for national policies
• Necessity to eradicate service delivery backlogs
• High staff turnover
• Transformation of human resource management
  practices and
• Employment equity considerations.

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LGSETA Sector skills plan 2005-2010 (Cont)

• One of the conclusions drawn by the report is
  that as a result of rapid restructuring, in many
  cases a mismatch has arisen between the
  organisational organograms, incumbents of posts,
  job descriptions and qualifications required to
  fulfill certain functions

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Demarcation Board

• The lack of capacity is often demonstrated, inter
  alia, in the following
• Large number of staff vacancies
• Staff employed do not have minimum level
  competencies or the attitude to do the job for
  which they are employed.
• Operational systems and processes may be poorly
  developed or are absent.
• 37,4 of Municipal managers had less than 5 years
  experience

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Demarcation Board (Cont)

• 82 of finance managers had finance related
  qualifications, but 59 of those were at NQF 4
• Factors that affect municipal performance, aside
  from the skills level and qualifications are
• The extent of service backlogs vs. financial
  resources
• Administrative and political relations
• Management experience and capability
• Efficiency of political decision making and
• Community expectations.

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DPLG Project Consolidate

• Set of performance indicators used to identify
  136 municipalities which are severely
  under-capacitated and unable to perform
• Municipal transformation and institutional
  development
• Municipal financial viability and management
• Basic service delivery and infrastructure
• Local economic development and
• Good governance

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DPLG Project Consolidate (Cont)

• 40 municipalities participated in the Annual
  Financial Statements phase of the project which
  involved direct interventions by technicians who
  used 14 areas in their approach to support actual
  activities of the municipality including
• Shortcomings in internal control
• Inexperienced officials not conversant with
  accounting and financial systems
• No statutory reporting mechanisms in place and
• Incomplete fixed asset registers that do not
  comply with the MFMA
• Majority of municipalities lacked basic financial
  and management skills

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DPLG National Capacity Building Framework for
Local Government

• Stability of local government system has been
  severely affected by complex and time-consuming
  processes of amalgamation.
• New legislative obligations require that
  municipalities significantly upgrade their
  existing capacity

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DPLG National Capacity Building Framework for
Local Government (Cont)

• Individual capacity constraints identified
• Lack of competency which leads to the inability
  to do tasks
• Poorly defined job descriptions
• Recruitment and selection not in line with job
  descriptions
• Inadequate technical skills
• Inadequate knowledge and information base within
  municipalities

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DPLG National Capacity Building Framework for
Local Government (Cont)

• Poor understanding of local government legal
  framework
• Insufficient expertise to interpret and translate
  legislation and policies into action
• Lack of in-house technical abilities to develop
  systems, support internal processes and
  accommodate new functions and
• Lack of service orientated attitude and behavior.

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DPLG National Capacity Building Framework for
Local Government (Cont)

• The following training needs were identified in a
  project completion report in October 2004
• Compiling asset registers
• GRAP/GAMAP
• MFMA
• Compiling budgets and financial statements
• Cash flow management
• Supply chain policy and procurement
• Development of revenue strategies

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DPLG National Capacity Building Framework for
Local Government (Cont)

• Preparation of management reports
• Analysing and interpreting financial statements
• Bank reconciliations
• Credit control and
• Cost accounting.

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General Report of the Auditor-General for the
year ended 30 June 2005

• Top 50 municipalities identified by NT based on
  specific criteria, including
• Budget
• Capacity
• Date on which the municipality entered into the
  agreement relating to the financial management
  grant
• Placement of an international finance advisor at
  the municipality and
• Restructuring grant agreements with large
  municipalities.

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General Report of the Auditor-General for the
year ended 30 June 2005 (Cont)

• All top municipalities were classified as high
  capacity municipalities
• The other municipalities are classified as
  follows
• Medium capacity 107 municipalities
• Low capacity 127 municipalities
• According to 2004/05 budget information, top 50
  municipalities represent an estimated R72,5b or
  72 of the total budgeted revenue of R101,3b

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General Report of the Auditor-General for the
year ended 30 June 2005 (Cont)

• Auditor-General findings Submission of AFS
• All municipalities
• - Within MFMA deadline 131 or 46
• - Between 1/9 and 31/3 126 or 44
• - Not submitted by 31/3 27 or 10
• Top 50 municipalities
• - Within MFMA deadline 28 or 58
• - Between 1/10 and 31/3 18 or 36
• - Not submitted by 31/3 4 or 18

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General Report of the Auditor-General for the
year ended 30 June 2005 (Cont)

• Audit opinions
• All municipalities
• - Audits finalised by 31/3 126 or 44
• - Qualified reports 72 or 57
• Disclaimers 26 or 21
• Adverse audit opinion 2 or 1
• Qualified opinion 44 or 35
• - Unqualified reports 54 or 43

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General Report of the Auditor-General for the
year ended 30 June 2005 (Cont)

• Audit opinions (Cont)
• Top 50 municipalities
• - Audits finalised by 31/3 29 or 58
• - Qualified reports 14 or 48
• Disclaimers 4 or 14
• Adverse audit opinion 0
• Qualified opinion 10 or 34
• - Unqualified reports 15 or 52

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General Report of the Auditor-General for the
year ended 30 June 2005 (Cont)

• Qualifications (210 issues raised)
• Asset management 56
• Accounts receivable and revenue 56
• Personnel 13
• Unauthorised, fruitless and irregular
  expenditure 4
• Other 81

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General Report of the Auditor-General for the
year ended 30 June 2005 (Cont)

• Emphasis of matter (461 issues raised)
• Asset management 29
• Transfer payments 4
• Accounts receivable and revenue 83
• Personnel 41
• Unauthorised, fruitless and irregular
  expenditure 8
• Internal audit and audit committee 40
• Information systems 38
• Other 218

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Summary

• Responsible institutions have identified a
  multitude of factors which negatively impact on
  the ability of municipalities to render services
  efficiently and effectively.
• From personal experience, the following factors
  could be added
• Political interference
• Intimidation
• Apathy
• Lack of transparency
• Lack of compliance due to a lack of knowledge or
  understanding of applicable legislation

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Conclusion

• Outcome of flight 232
• Managing the impossible
• Leadership qualities, skills and experience of
  captain and crew saves two thirds of the people
  on board
• Crude but vivid metaphor for the situation we are
  all facing, individually and collectively

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Conclusion (Cont)

• In a sector plagued with major challenges and
  uncertainties, who would you rather have in the
  cockpit of your municipality?
• I know I would demand a crew with the following
  characteristics
• Related skills and experience
• Personal skills
• Ability and
• The right attitude

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• Thank you
• Mare-Lise Fourie