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ROLE OF COUNCILLORS IN FINANCIAL MANAGEMENT

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ROLE OF COUNCILLORS IN FINANCIAL MANAGEMENT IMFO NATIONAL CONFERENCE CAPE TOWN 12-13 SEPTEMBER 2011 Presenters: Thulani Mandiriza & Conrad Barberton | Directors ... – PowerPoint PPT presentation

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Title: ROLE OF COUNCILLORS IN FINANCIAL MANAGEMENT


1
ROLE OF COUNCILLORS IN FINANCIAL MANAGEMENT
IMFO NATIONAL CONFERENCE CAPE TOWN 12-13
SEPTEMBER 2011
Presenters Thulani Mandiriza Conrad Barberton
Directors Local Government Budget Analysis,
National Treasury
2
Purpose of the Presentation
  • Role of National Treasury in municipal finances
  • Why the MFMA?
  • The municipal accountability cycle
  • Role of Council oversight of financial management
  • Other financial management matters
  • Supply chain management
  • Audit Committee
  • Municipal Public Accounts Committees (MPAC)
  • Oversight Committee
  • Annual Reports

3
Roles of National Treasury in relation to LG
  • In relation to local government, the national
    legislation referred to in section 216 of the
    Constitution includes the following
  • The Municipal Finance Management Act
  • The sections of the annual Division of Revenue
    Act that set treasury norms and standards
  • The Municipal Fiscal Powers and Functions Act
  • The Preferential Procurement Policy Framework Act
  • National Treasurys role with regards to
    municipal budgeting
  • Co-ordinate the development of the LG fiscal
    framework, within the context of the DOR
    Bill/Act
  • Manage the development of the Local Government
    Equitable Share formula
  • Ensure compliance with the MFMA, including
  • Adherence to the time-lines for tabling and
    approval of municipal budgets
  • Implementation of the Municipal Budget and
    Reporting Regulations, especially the new budget
    formats
  • Application of the funding compliance assessment
  • Overall evaluation of municipal budgets
  • Publication of consolidated local government
    budget information
  • Provide guidance to municipalities through the
    MFMA Budget Circulars
  • Provide budget related training to provincial
    treasuries and municipalities
  • Exercise direct oversight of the 17 non-delegated
    municipalities (261 municipalities delegated to
    the Provincial Treasuries)

4
Why the MFMA?
  • Modernise local government budgeting and
    financial management processes and practices
  • Improve financial governance by clarifying and
    separating roles and responsibilities of
    councilors vis-à-vis those of municipal officials
  • Maximise municipal capacity to deliver services
    by attending to issues of efficiency,
    effectiveness and sustainability, and dealing
    with corruption
  • Set-up the accountability cycle by ensuring
    proper linkages between IDPs, budgets, SDBIPs,
    in-year reports, annual financial statements,
    annual reports, oversight reports and audit
    reports

5
Municipal accountability cycle
6
Role of Council in oversight of financial
management
  • Reviewing policy decisions for cost implications
  • Setting of tariffs
  • Debtor management
  • Cash management
  • Indigents
  • Reviewing and approving IDP and budgets
  • Reviewing financial management processes
  • Asset management policy
  • SCM policy councillors forbidden to take part
    in SCM processes
  • Monitoring implementation of policy, plans and
    budgets, as well as the functioning of all
    municipal systems
  • In year monitoring Section 71/72 reports
  • Evaluating financial statements and annual
    reports
  • Holding the Mayor/Executive and head of
    administration accountable

7
Council committees to fulfill financial oversight
  • The Municipal Council is responsible for
    oversight of all finance and finance management
    related matter may choose to establish
    subcommittees, including
  • Finance Committee (Budget Steering Committee)
  • Usually considers the tabled budget and
    adjustments budgets
  • Municipal Public Accounts Committee (established
    in terms of Sec 79 of the MStrAct)
  • Consider and evaluate annual reports
  • Considers the annual financial statements and
    audit reports
  • Promote good governance, transparency
    accountability on municipal resources
  • May recommend or undertake any investigation in
    its area of responsibility
  • The Oversight Committee
  • Responsible for reviewing the annual report with
    the purpose of
  • Review past performance so as to improve future
    performance
  • Hold the Mayor/Executive and senior managers
    accountable (bonuses?)
  • Audit Committee (in terms of S166 of MFMA)
  • Independent advisory body to Municipal Council
    and administration on matters such as risk
    management, internal audit, accounting policies
  • Provide Council with authoritative and credible
    view of financial position

8
In-year monitoring
  • Monthly Budget Statements (Section 71 Reports)
  • Role of monthly reports is to check on the status
    of budget implementation
  • Mayoral Quarterly Reports
  • Report to council on the status of the
    implementation of the budget and the SDBIP
  • Compares financial and service delivery
    performance against quarterly targets
  • Councillors should read it and not just note the
    report
  • Mid-Year Budget Performance Assessment Report
    (Section 72 reports) Budget Adjustments
  • Presents financial and service delivery
    performance for the fist half of financial year
  • Tabled in council by 25 January and forms the
    basis for an adjustments budget
  • It takes into account Monthly Budget Statement,
    Quarterly Service Delivery Performance, Past
    Years Annual Report, Performance of Entities
  • Approval of a funded, credible and sustainable
    budget is crucial for effective service delivery

9
Governance and ethics
  • Council and officials have a duty to prevent
    corruption
  • Code of Conduct for Councilors, forbids
  • Interfering in municipal administration
  • Obstructing the implementation of council
    decisions
  • Encouraging maladministration
  • Councillors are restricted from using their
    positions to improperly benefit themselves or
    others from municipal contracts
  • Councillor may not do business with any
    municipality
  • A councillor who is full-time may not undertake
    any other paid work except with the express
    written approval of council
  • Councillors should lead by example and pay
    municipal accounts in time

10
External Auditing
  • Auditor General acts as external auditor (S188 of
    Constitution) and operates in terms of the Public
    Audit Act
  • Audit Opinions
  • Unqualified the best
  • Qualified good, but with issues that need to be
    addressed
  • Adverse very bad and implies there was an
    attempt to mislead
  • Disclaimer very bad and information is not
    available at all
  • What is my responsibility as councillor in
    preparation for External Auditing?
  • Ensure audit reports comprehensively studied
  • Ensure municipality has appropriate Performance
    Management systems, processes and frameworks in
    place

11
Causes of poor financial management in
municipalities
  • Inexperienced and unqualified staff
  • Political appointments over merit
  • Stalemate between councils and senior officials
    esp with regards to SCM
  • Rivalries between mayors and municipal managers
  • Poor morale those who want to do the right
    thing are frustrated

12
DISCUSSIONS
  • THANK YOU
  • CONTACT
  • Jan Hattingh
  • Chief Director Local Government Budget Analysis
  • National Treasury
  • Tel 012-315-5009
  • E-mail jan.hattingh_at_treasury.gov.za
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