Gauteng Business News

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LOCAL GOVERNMENT: There is Hope for Local Government


Recent Gauteng Business News

The Auditor-General’s report on the outcomes of audits of local governments and entities has had an alarming effect in the public domain. Many municipalities have under achieved for the umpteenth time and there is a general regression in fiscal governance and financial sustainability and viability within the Local Government sector as a whole. Naturally there are also pockets of excellence!

The Auditor-General Mr Terrence Nombembe ascribes the poor results to the following root causes:

Weaknesses in supply chain management systems, poor quality of annual performance reports and submitted annual financial statements, human resource management and information technology controls and there were minimal improvements to these systems, if any, during the 2011/12 financial year. Weaknesses in the above systems highlight the risk of poor financial health in many municipalities.

The Auditor-General prescribes that municipalities must attend to key controls and address the risk areas and root causes. Good practices must be sustained. If municipalities are prepared to address these issues, , they can be on the way to achieving satisfactory audit outcomes as well as maintaining and improving on them.

The Auditor-General directed a request to Municipal Managers, Mayors, National Treasury, Department of Cooperative Government, the Offices of the Premiers and the South African Local Government Association to accelerate their efforts and cooperation to address the following root causes of the poor audit outcomes that he highlighted in his 2010/11 report;

· The lack of capacity in local government which is affecting the ability to account for the public resources administered on behalf of society.

· Filling the key positions which are vacant at 73% of municipalities.

· Ensure that key officials have the minimum competencies and skills, otherwise these officials will continue to make it difficult for these auditees to produce credible annual financial statements and annual financial reports. Although capacity building and the professionalization of local government is an on-going-multiyear project, many municipalities are not using the opportunities for skills development.

· Reduce the dependency on consultants to complete the annual financial statements. In order to fulfil the skills gap, 71% of auditees depended on consultants to assist with financial reporting.

· Decisively deal with Political leaders and officials that deliberately or negligently ignore their duties and disregard legislation through a formal performance management process that is complemented by the legislated consequences for transgressions. At just over 70% of the auditees the lack of consequences for poor performance and transgressions slowed down the improvements in local government outcomes as role players in local government often say that they do not know what remedies to apply to deal with transgressions.

The institute of Municipal Finance Officers has been the Professional Body for local government finance officers since 1929 and the profession regarding ethics, standards, discipline, education and statutory control was governed by the Law on Municipal Accountants 1988 (Act no 21 1988). The Act prescribed that a Board for Municipal Accountants be established that determined the qualifications and experience that a Municipal Accountant had to have before he could practice as a chief finance officer in a municipality. In 2006 the Law on Municipal Accountants was repealed by the Minister of Finance of the time. This left the way open for any unqualified person to be appointed as a Chief finance officer of a Municipality. The Institute of Municipal Finance Officers (IMFO) has, after a long struggle to regain their status as a Professional Body for Local Government Finance Officers, been recognised by the South African Qualifications authority as a Professional Body.

The Institute of Municipal Finance Officers continues to provide a platform to municipal finance officers to share their views and challenges regarding technical matters, provide input on draft legislation affecting local government issues, attend inter active workshops to address challenges in the implementation of new legislation and various other services that add value to the local government sphere.

The past cannot be undone, but IMFO is optimistic that if governance and accountability is enforced as much as audit standards are enforced on local governments there will be a radical improvement in discipline at political and employee levels in municipalities.

When the standard chart of accounts for all municipalities is implemented all budget and reporting information will be in the same format thus standardising annual financial statements and annual reports, making local government far more transparent in reporting processes and understandable to the general public.

The implementation of the Municipal Regulations on Minimum Competency levels for Municipal Finance Officers will, to a lesser extent, improve skills levels in a municipality.

Once all the GRAP Standards are finalised and there is full understanding of how these should be implemented, the goalposts will not keep moving during financial years when standards are amended. Many Chief Finance Officers lament that there does not seem to be a consistent interpretation by role-players and stakeholders from one year to the next and across the country as a whole. The Accounting Standard Board has been considering simplified GRAP Standards for smaller municipalities.

Despite all of the challenges in the sector IMFO remains committed to upholding the standards set by the applicable sector and provincial departments as well as all relevant role-players and we are willing to take hands to build a better life for all of our citizens.

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