OUTCOME 9: A Responsive, accountable, effective and efficient local government system

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1. Introduction
2. Background on Operation Clean Audit
3. Audit Outcomes local, provincial and national
   spheres of government
4. Observation of the AGSA in respect of root causes
   behind municipal audit outcomes
5. Priority areas for responding to municipal audit
   outcomes
6. Conclusion

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• We hereby present to the Select Committee on
  Appropriations, a comparative state of
  Municipalities on Audit Outcomes for the
  Financial Years 2010/2011, 2009/2010 and
  2008/2009, with a view to allow the Committee to
  get progress update towards the 2014 target.
• We also submit, for the Committee to note too,
  the state of performance by Provincial and
  National Departments including National
  Parliament and Provincial Legislatures.
• We also present the consolidated support aimed
  at improving municipal audit outcomes.

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• This we do as we analyse how big the challenge is
  and how much we have to do, in mobilising all
  actors to work together, in the spirit of
  Cooperative Governance, to turn the situation
  around, with the aim of achieving the Local
  Government Turn Around Strategys two aims,
  namely Build Confidence between the people and
  Government and build a model Municipality
  characterised by the ability to provide quality
  services, uphold good governance, enhance sound
  financial management, roll out and maintain
  infrastructure as well as fight corruption
  effectively.

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• Audit Outcomes are financial performance
  accounting systems in terms of which the AG
  presents a report on the performance of
  Government Departments, Municipalities and
  State-owned Entities, reflecting on actual
  performance and providing details in dedicated
  Management letters indicating what each Unit
  should do
• The picture of performance should be viewed
  against the background that Government has set a
  target in terms of one of the Turn-Around
  Strategy Projects Operation Clean Audit,
  directing as follows
• That no Municipality should achieve a disclaimer
  or adverse rating by 2010/2011.
•  That at least 60 of the 278 Municipalities
  should receive unqualified Audit Opinion by
  2011/2012
•  That Municipalities achieving unqualified Audit
  Opinion should increase to 75 by 2013 and
•  That all Municipalities shall achieve a Clean
  Audit opinion by 2014.
• These targets are the same for provinces.

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• The department has also provided information on
  the state of performance by Municipalities in
  terms of which it is indicated as to which
  Municipality in a particular Province received a
  Clean, Unqualified, Qualified, Adverse or
  Disclaimer rating, with the understanding that
• A Clean Audit rating is a performance level where
  the municipality is found to have satisfied all
  the audit expectations.
• An Unqualified Audit rating is a performance
  level where there are matters that are courses
  for concern and which the AG gives a specific
  directive that such should be attended to.
• An adverse rating is a performance level where
  there is just nothing on the basis of which the
  AG can express an opinion.
• A Disclaimer rating is a performance level where
  a Municipality fails to provide recorded
  information to validate its facts on issues they
  have to account on.

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• The details of the Audit outcomes are
• The three year comparison for municipalities,
  refer to Annexure A - it must be noted that this
  is the status quo as at 27th July 2012 based on
  the 278 existing municipalities (i.e.
  disestablished municipalities have been
  excluded).
• The three year comparison for Provincial
  Departments and Provincial Legislatures, National
  Departments and National Parliament, refer to
  Annexure B.

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• The AGSA outline root causes. These are
• Key officials lacking minimum competencies and
  skills
• Lack of consequences for poor performance and
  transgression
• Slow response to AGSA message and not taking
  ownership of key controls
• None compliance with Laws and regulations.
• None reporting of performance information.

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• The department has started a process of intensive
  engagement with municipalities to understand root
  causes to performance linked to the 5 LGTAS
  priority areas.
• In this regard the department has engaged with 3
  municipalities, namely, Mamusa Local Municipality
  in the North West, eMadlangeni Local Municipality
  in KwaZulu-Natal and Ehlanzeni District
  Municipality in Mpumalanga which shared their
  lessons.
• Mamusa Local Municipality Has not submitted
  Annual Financial Statements (AFS) for the past 3
  financial years. Financial management matters
  relating to compilation of AFS was given to the
  district municipality. Within 5 years, Mamusa had
  5 Mayors, 4 CFOs, and 3 Municipal Managers.
• eMadlangeni Local municipality made significant
  stride from being qualified in 2009/10 to Clean
  Audit in 2010/11.
• Ehlanzeni District Municipality received Clean
  Audit for the last 2 consecutive years, and has
  in-house capacity in terms of compiling its AFS.

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• The department will engage with all
  municipalities that did not obtain financially
  unqualified audit opinions over the next 3 months
  in terms of the 5 LGTAS priority areas.

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• The Department is committed, working with all
  stakeholders, to continue implementing measures
  aimed at building a responsive, accountable,
  effective and efficient local government system.
• Thanks