SA Fakie

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Presentation to Select Committee on Finance 9
June 2006

• SA Fakie
• Auditor-General

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Background

• Municipalities Municipal Entities
• - 284 Municipalities
• - 77 Municipal Entities
• - 20 must prepare Consolidated FS

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Provincial Spread of Municipalities

• Eastern Cape 45
• Free State 25
• Gauteng 15
• KwaZulu-Natal 61
• Limpopo 31
• Mpumalanga 21
• Northern Cape 31
• North West 25
• Western Cape 30
• TOTAL 284

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3. Legislative reforms Transformation

• L.G. Municipal Demarcation Act
• L.G. Municipal Structures Act
• L.G. Municipal Systems Act
• L.G. Municipal Property Act
• MFMA
• 3 sets of Accounting standards
• - IMFO
• - GAMAP (Old New)
• - GRAP
• Ordinances Treasury regulations
• Challenge repeal absolute ordinances to
  enable coherent legal framework

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4. Macro Challenges

• Legislation does not automatically mean better
  service delivery means to an end
• Rapid ratio of urbanisation
• Rapid development growth
• Inadequate and deteriorating infrastructure

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5. Audit Outcomes 2004

• National Treasury Classification
• - High Capacity Municipalities 50
• - Medium Capacity Municipalities 107
• - Low Capacity Municipalities 127

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6. Submission of Financial Statements

• 2004
• 17 (6) end of August
• 83 (29) end of September
• 144 (51) after September
• 40 (14) Not submitted by end April 2005
• Top 50 Municipalities
• 25 (50) end of September
• 23 (46) end of April
• 2 (4) Not submitted by end April 2005

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7. Submission of Financial Statements as at
30 June 2005

• 133 (47) submitted by end of August
• 124 (44) submitted between April and March 2006
• 27 (9) outstanding at March 2006

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8. Audit Opinions - 2004

• Only 95 of 284 audit finalised by end April 2005
• Only 23 of Top 50 audit finalised by end April
  2005
• 58 (61) where qualified
• 3 (3) Disclaimers
• 10 (11) Adverse Opinions

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9. Transversal Issues Reported on (Top 50)

• Asset Management (24)
• Debtors (33)
• Personal Expenditure (31)
• Internal Audit (13)
• Unauthorised Expenditure (5)
• ICT (29)
• Other Internal Control Issues (28)

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10. Financial Performance (Top 50)

• Debt Collection period
• Provision for Bad debt
• Liquidity

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11. Debt Collection

• For 23 of the top 50 municipalities average is
  136 days
• Total debtors R19.2 billion
• 9 collect within 100 days
• 14 collect longer than 100 days

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12. Provision for Bad Debt

• Average provision 59
• Total provision R11,4 billion
• City of JHB R7,2 billion

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13. Liquidity

• Benchmark 21
• Average 1,21
• Whilst below norm acceptable

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14. Performance Management
Only 22 of top 50 Performance Audit been done
Report format Number of municipalities 2003-04 Number of municipalities 2002-03
Sufficient progress made - 3
Some progress made 21 20
Fully-fledged PMS audit 1 1
Not yet audited 28 26
TOTAL 50 50
Although a fully fledged PMS report had been
issued, only compliance issues were addressed
during the audit and not the effectiveness and
efficiency of the inputs, processes, outputs and
outcomes.
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15. Service Delivery Initiatives

• Improve accountability arrangements (IDP)
• Project Consolidate (136 municipalities
  identified)
• - Develop capacity
• - Improve financial position
• - Improve service delivery

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Thank you. Any questions?