Finance

Answer:

1. “Whether his Department provides support to strengthen the internal audit function in municipalities; if not, why not; if so, what are the relevant details?”

The Provincial Treasury, within its Corporate Governance Directorate, has dedicated resources to monitor, evaluate and provide support and guidance to municipal internal audit functions and their respective audit committees.

During the 2013/14 financial year the following support was rendered:

Chief Audit Executive (CAE) Forum

Chief Audit Executive forum met twice to discuss issues of common interest and to share best practices. A Combined Assurance Conference was also held to share matters of co-ordination between internal auditors, risk managers and the audit committees.

Direct support

SOR assessments

State of Readiness assessments were performed for the following municipalities in preparation for external Quality Assurance Review, as required by the Institute of Internal Auditors and the Internal Audit Framework:

• Beaufort West
• Stellenbosch
• Breede Valley
• Eden District municipality
• Swartland
• Drakenstein

State of Readiness (SOR) assessments support plans

Follow up sessions were held with Beaufort West Municipality, Stellenbosch Municipality and Breede Valley Municipality to monitor progress in respect of remedial steps taken to address SOR report findings.  Implementable action plans were also compiled to assist the CAE with implementation.

Training Support

During the recent external audit cycles, the quality of performance information and the evidence files were identified as major concern areas. It was also noted that internal audit units did not audit performance information.

Following this the PT commenced the development of training material as well as the provision of training on the Auditing of Performance Information via the University of Stellenbosch (USB-Ed) during:

• 20-21 January 2014 – CT
• 23-24 January 2014 – George
• 13-14 March 2014 – CT
• 19-20 March 2014 – George

Western Cape Financial Management Support Grant

In support of municipalities submitting viable business plans to advance their assurance processes, support grants were allocated to 13 municipalities namely:

• Beaufort West municipality
• Prince Albert municipality
• Laingsburg municipality
• Central Karoo District municipality
• Matzikama municipality
• Cederberg municipality
• Bergriver municipality
• Eden District municipality
• Hessequa municipality
• Cape Agulhas municipality
• Theewaterskloof municipality
• Swellendam municipality
• Overberg District municipality

Allocations were made on the basis of the business plan to improve the MGRO outcomes.  The allocation made to assurance processes totalled R 2 000 000 out of the available R 6 900 000.

During the 2014/15 financial year the following support has been and will still be rendered:

Forum

Chief Audit Executive forum will meet twice to discuss issues of common interest and to share best practices. A combined Assurance conference was also held to share matters of co-ordination between internal auditors, risk managers, audit committees and MPAC members.  The MEC Finance presented the keynote address, with the National Accountant General (OAG), SALGA and other esteemed specialists delivering papers.

Guidance documents

Circular on the Role of IA and the AC in Combined Assurance was issued as guidance to municipalities per PT Mun Circular 45 of 2014 dated 9 Sept 2014.

Further guidance was provided to municipalities by virtue of:

1. Disseminated IIASA guidance on:

• Auditing Anti-Bribery and Anti-Corruption Programmes, 3 July 2014
• International IA Awareness Month, 24 April 2014
• Audit Risk Assessment, Best Practice White Paper, 9 May 2014
• White Paper: Combining IA and 2^nd Line of Defence Function, 9 October 2014

2. Response to query from CAE of Theewaterskloof (TWK) Municipality on whether the AC is deemed to be an assurance provider.

Direct support

State of Readiness (SOR) assessments

State of Readiness assessments were performed for the following municipalities in preparation for a full blown Quality Assurance Review, as required by the Institute of Internal Auditors and the Internal Audit Framework:

• Cape Winelands District Municipality
• Oudtshoorn Municipality
• Theewaterskloof Municipality
• Hessequa Municipality

Training Support

IIASA Quality Assurance Review training, along with City of Cape Town (CoCT) was held in Cape Town to save municipalities travelling costs to Johannesburg.

• 26-28 May 2014

Western Cape Financial Management Support Grant

A further R 1 440 000 was allocated to 5 municipal CAE’s in respect of Western Cape Financial Management Support Grants namely:

• Bergriver Municipality
• Breede Valley Municipality
• Eden District Municipality
• Eden District Municipality(for Bitou Municipality)
• Swellendam Municipality

Allocations were made on the basis of the business plan improving the MGRO outcomes in a sustainable manner.

Going forward, the following new initiatives will be driven, in addition to ensuring the strengthening of the support as outlined above:

Continuous auditing

Major deficiencies in the audit process within municipalities lies with the resources the internal audit activity has at its disposal. A key need identified is the ability to have access to data analytics thus enabled to perform continuous auditing.

Key success factor to this initiative will be the availability of funding, buy-in from all stakeholders with the provision of data and support to acquire ACL or tools to perform data analytics.

Answer:

(2) “Whether his Department provides support for the           establishment        of budget and treasury offices at       provincial level; if not, why       not; if so, what are the         relevant details?”

Assistance provide prior to 2014

Provincial Treasury (PT) has identified municipal Budget and Treasury Office (BTO) capacitation and development as a critical governance issue which has been incorporated in the Municipal Governance Review and Outlook (MGRO) process.  In doing so PT has provided municipalities with criteria as how to progressively improve the capacity of their BTOs and as a result proactive monitoring and support to municipalities and collaboration with municipalities takes place in this regard.

The design of an optimal BTO structure is a fundamental element that contributes to the effective and efficient functioning of the municipal BTO.  Provincial Treasury in partnership with USB-ED developed and issued the Western Cape Provincial Treasury BTO structures guideline on the 7 October 2013.  The guideline provides a methodical approach to the design of optimal BTO Structures within municipalities of the Western Cape. The BTO structures guideline is based on the principles of sound financial management and organisational design and promotes the standards of good corporate governance. 

To capacitate CFO’s/ BTO Managers/ HR Functionaries in the application of the BTO Structures Guidance Pack training workshops took place from the 9 - 10 December 2013 and 30 - 31 January 2014.  The purpose thereof was to enable the aforementioned target group to understand the process of developing the BTO functional key activities, as well as the basic principles of organisational structuring of a BTO.

The provision of the aforementioned guidance and training serves as a catalyst towards the improvement of practices in organisational structuring towards improving the effectiveness and efficiency of BTO’s at municipalities.

Assistance provided 2014/15

Emanating from the training sessions and municipal engagements numerous municipalities have identified the need to review and redesign BTO structures in line with the WCPT BTO structures guideline however; funding was identified as a challenge.  Provincial Treasury will support the following municipalities namely; Witzenberg, Matzikama, Hessequa and Cape Agulhas with funding towards the review and redesign of their BTO structures.

An optimal structure works hand and hand with a competent and skilled workforce.  The following support initiatives are currently been implemented by Provincial Treasury to assist municipalities in improving the skills and competencies of municipal financial management officials:

• Municipal Regulations on Minimum Competency Levels, 2007 (“the Regulations”) - Progress has been made by the Province towards achieving compliance with the Regulations. The advanced position of the Province can be attributed to early monitoring and cooperation by municipalities. Emphasis is placed on compliance with the Municipal Regulations on Minimum Competency Regulations, 2007 by the extended timeframe. With continued support from PT, municipalities strive to attain full compliance and improve financial management competencies.
• Financial Management Internship Programme - Provincial Treasury has identified the National Treasury Municipal Financial Management Internship Programme (MFMIP) as a “game changer” in terms of the status of financial management skill within municipalities.  The focus in terms of monitoring and support to municipalities in this regard is the quality of practical and theoretical training received by interns during the duration of the programme.  Provincial Treasury in collaboration with a municipal focus group is undertaking the development of an internship model that is customised for the Western Cape environment and responsive to current and future municipal financial management skills demands.
• Accredited training to municipalities in terms of specialised MFMA functional areas with emphasis on practical training has been identified as a need; in partnership with USB-ED accredited training material has been developed and training to municipal officials has been provided in the following areas:
  • Public Sector Governance
  • Auditing of Performance Information
  • Supply Chain Management
  • Risk Management
  • Predetermined objectives
  • Budget and Treasury Office Structures Guideline
  • Municipal Finance Management Information
  • Cash Management

Future Assistance

Further support will be provided to more municipalities’ in terms of BTO structure review and redesign. The implementation of the Standard Charter of Accounts (SCOA) regulations requires the realignment of BTO business processes and PT will support municipalities in this regard.

BTO skills survey - The BTO skills survey project has been initiated to identify the existing level of financial management skill of officials within municipal BTO’s and skills gap’s against financial management functional responsibilities. Roll out of the survey will be implemented via an online survey tool which is currently been investigated.  Piloting of BTO skills survey is planned for the fourth quarter 2014/15.  The objective is for focused Provincial and Municipal support to respond to current municipal financial management skills gaps and future skills demand municipalities may be faced with.

The aforementioned support initiatives to municipalities will continue to be provided and PT will continuously strive to improve the capacity of municipal financial officials.