District Shared Audit Committee Services

Tim Maake

Hotel@ Tzaneen

08 February 2013

Content• Vision • District profile • Legislative framework• Establishment of District wide audit committee• Rationale for a shared approach• Functionality of the audit committee• Achievements on the work of the audit committee• Common issues raised by the committee to municipalities• Benefits of the shared approach• Financial implications• Possible challenges and failures• Conclusion

Vision of the Municipality

“To be the food basket of Southern Africa and the` tourism destination of choice.”

District profile - population

1996 2001 2011

BPM 108741 131537 150637

GGM 218752 240728 244217

GLM 203541 218874 212701

GTM 342551 375586 390095

MLM 87871 94382 94857

MDM 962457 1061107 1092507

District profile - Households

2001 2011

BPM 27453 41115

GGM 55334 63548

GLM 52057 58261

GTM 88556 108926

MLM 21449 24470

MDM 244849 296320

Legislative framework• Section 166 (1) of the MFMA requires a municipality to

have an audit committee;• According to section 166 (2) of the MFMA the audit

committee is an independent advisory body and must advise the municipal council, the political office-bearers, the accounting officer and the management staff:

Internal financial control and internal audits; Risk management; Accounting policies; Performance management; Effective governance and Review of the AFS of the municipality

Legislative framework cont.’

• Section 166 (6) of the MFMA indicates that a single audit committee may be established for a district municipality and the local municipalities within a district municipality;

• Section 166 (4) of the MFMA also states that the audit committee must consist of at least three person with appropriate experience;

• The audit committee must meet at least four times a year;

• No councillor may be a member of the audit committee

Establishment of a district wide audit committee

• The first audit committee was established in January 2007 through a resolution of Council as agreed at the District Intergovernmental Forum in 2006;

• The committee consisted of five (5) members: (1) from the legal field, (1) with public sector experience, (1) with both public sector and internal audit experience, (1) Chartered Accountant and (1) with municipal experience;

• The term of the audit committee was three years which was extended until June 2011;

• The current committee has five (5) members and is Chaired by a Chartered Accountant: (1) chartered accountant, (1) IT specialist, (1) legal expert, (1) municipal expert and (1) internal audit expert and

• The committee was established in August 2011

Rationale for a shared approach• The audit outcomes for the entire district were

not looking good at that time;• Three municipalities were under Project

Consolidate: GGM, GLM and MLM;• Performance management was a shared service

as well;• Economies of scale and cost sharing• Support to one another (collaboration) and• Common vision on the improvement of good

governance

Functionality of the district wide audit committee

• Contract signed with members of the audit committee with agreed rates;

• Operates as per approved audit charter;• There is also an approved schedule of meetings:

quarterly basis – one week booked;• Internal audit provides administrative support;• Reports per municipality are compiled and

submitted to the audit committee;• Provincial Treasury, CoGHSTA and Office of the

Auditor General also attend these meetings

Achievements on the work of the audit committee

• Reviewed the annual financial statements for the year ending June 2011 and June 2012;

• Submitted reports to various Councils;• Met with the Mayors and Exco’s of different

municipalities where there were challenges;• Convened quarterly meetings as per schedule;• Referred reports back where there was insufficient

data and;• Where a meeting failed because of late submission

of reports, the cost were recovered from the management

Common issues raised by the committee to the municipalities

• Poor internal controls;• Compliance with legislative requirements;• Effects of vacancy on good governance;• The issue of the policy environment;• Sustainability of the municipalities;• Performance against set targets;• Effectiveness of the internal audit units;• Budget control and management and;• Effectiveness and adequacy of the systems.

Benefits of the shared approach

• Expert advise on matters that cuts across;• Uniform approach on matters that are similar;• Encourage and promote the spirit of

intergovernmental relations;• Collective responsibility for the improvement of

good governance district wide;• Costs sharing – proportional contribution.

Financial implications 2011/12Municipality % Contribution Amount spent

BPM 14 R 319’037.05

GGM 10 R 227’883.61

GLM 10 R 227’883.61

GTM 14 R 319’037.05

MLM 10 R 227’883.61

MDM 42 R 957’111.15

TOTAL 100 R 2’278’836.08

Financial implications 2012/13

Municipality % Contribution Amount due

BPM 14 R 196’000.00

GGM 10 R 140’000.00

GLM 10 R 140’000.00

GTM 14 R 196’000.00

MLM 10 R 140’000.00

MDM 42 R 588’000.00

TOTAL 100 R 1’400’000.00

Possible challenges and failures

• Slow implementation of action plans;• Cost of specialised services;• Risk of loosing the members – improvement of

audits• Adherence to the scheduled meetings• Dedicated staff to provide administrative support

to the committee and;• Thorough engagement by Councils with the

audit committee reports.

Conclusion

• Joseph Murphy in his book entitled “ The Power of your subconscious mind writes as follows:

“ Think good and good follows. Think evil and evil follows. You are what you think all day long.”