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1
IMFO Conference 2008
Conference Overview September 2008
PwC
2
Day OneOfficial opening

• After the official opening by the IMFO President,
  Mr Victor Chuene, the 79th conference kicked off
  with an introduction of the Theme of the
  conference

GOOD GOVERNANCE AND FINANCIAL MANAGEMENT IN
MUNICIPALITIES

3
Day OneWelcome - Councillor Ian Neilson
Councillor Ian Neilson, MCM for Finance, City of
Cape Town presented a heartfelt welcome to all.
He wished the delegates an enjoyable, productive
and constructive conference. He proceeded to
highlight some of the recent developments in Cape
Town

• expansion of airport,
• new library,
• developments along foreshore,
• extensive infrastructural development along major
  road transport networks, and
• Greenpoint stadium for WC2010

4
Day OneWelcome - Councillor Ian Neilson
Cape Town will be ready for WC2010 and is
confident of the long-term viability of the
stadium. The stadium is expected to be completed
by September 2009 for occupation in October 2009
by FIFA. The corresponding upgrade of the road
network and other transport networks are in line
with plans.

• Cape Town is one of the most diverse cities in
  world and faces numerous challenges such as

• 400 000 households under housed
• 220 informal settlements
• Acquisition of land a significant challenge.
• Energy supply electricity (can buy green
  electricity at a premium).

5
Day OneWelcome - Councillor Ian Neilson

• In conclusion Councillor Neilson indicated that
• Cape Towns 22 000 staff is its biggest asset,
• Their skill and effort are what make Cape Town
  work

6
Day OnePresidential address - Mr Victor Chuene
The key issues emanating from the Presidential
address were

• Without good corporate governance all efforts to
  deliver services are ineffectual.
• All members of the audit committee must be
  independent and possess the pre-requisite skills
  (financial, legislation, best practice).
• It is preferable to share a districts committee
  in the absence of a municipalitys own or to have
  an ineffective committee.
• It is best to have an in-house internal audit
  unit with the appropriate skills and knowledge.
• Even in terms of the MFMA, outsourcing internal
  audit is not the long term solution it is
  expensive and affordability reduces the
  effectiveness of the function.

7
Day OneKeynote address Ms Helen Zille
Financial management and good governance in local
government and its impact on macro-economic
policies was discussed focusing on factors
affecting Cape Towns fiscal turnaround over the
last few years

• The concept of a global economy (mobile
  skills/capital) was seen to be the single most
  important issue facing developmental local
  government.
• We want people with skills/capital to live in
  Cape Town.
• We need to grow, retain and attract
  skills/capital into the city to increase the
  access to skills/capital as this represents a
  pre-requisite to eliminate poverty.
• Skills and capital avoid uncertainty, instability
  and corruption (honest government and good
  service delivery).

8
Day OneKeynote address Ms Helen Zille

• Only when the majority of the population can
  afford to pay their municipal accounts, and do
  actually pay them, can a municipality afford to
  help the poor as well as invest in capital
  projects to improve infrastructure.
• The elimination of corruption and theft,
  especially in the tendering process, needs to be
  given the highest priority.
• The separation of executive powers is required
  from operational decision making powers to ensure
  honesty, integrity and ethics in all processes.
• Transparency is essential in the decision making
  process.

9
Day OneKeynote address Ms Helen Zille
Messages

• The retention of skills is required to ensure
  effective, efficient and economic functioning of
  municipal processes.
• There is a needs to link the nations economy
  with the global economy and link the
  municipalitys economy to the nations economy.

10
Day OneThe cornerstone of good governance Prof
Andrè de Villiers
What is GOVERNANCE? Go back to basics

• Purpose of Governance how, what and why
• Principles that apply discipline, transparency,
  communication, independence, integrity,
  accountability, responsibility, fairness and
  equity, social responsibility
• Processes around governance
• People involved in Governance (right
  motivation/attitude/intellectual honesty and
  skills)
• Property the Assets including skills Tangible,
  Intangible, Natural
• Performance more than just the financial bottom
  line also the triple bottom line

11
Day OneThe cornerstone of good governance Prof
Andrè de Villiers

• Corporate governance means leading
• Democratic and effective public leadership is a
  dynamic process
• The process requires getting involved in creating
  the future - not just reviewing the Past and
  dabbling in everyday Politics
• The process requires the using of continuous
  learning in democratic and organisational
  contexts (not to close your eyes to opposing
  views)
• The process has to contribute to improving the
  quality of life of all citizens through service
  delivery (Batho Pele)

12
Day OneThe cornerstone of good governance Prof
Andrè de Villiers
Municipal corporate governance doing what is
right in the right way sticking to the basics
and innovating Only effective if

• Performed by people with knowledge, skills,
  competence and a strong desire to learn
• Using scarce assets correctly
• Within an ethical environment (ethical,
  efficient, transparent, honesty, integrity,
  committed, accountable and loyal)
• Accountability In a negative as well as
  positive way

13
Day OneDemocratic and accountable local
government Ms Qedani Mahlangu
Key messages from the presentation were

• Public resources should be used properly
• Relationship between state and its citizens
• Need to invest to ensure that our citizens
  understand what is being done, investing
  resources in public participation to ensure that
  we, as citizens, get a valuable product from the
  government.
• The key message is to capacitate the citizenry to
  participate in local government and hold
  officials responsible and politicians
  accountable.
• Very few municipal budgets are credible and
  aligned to both the IDP and SDBIP processes.

14
Day OneDemocratic and accountable local
government Ms Qedani Mahlangu
Key messages from the presentation were

• Are we comfortable with underspending? Cannot
  understand why! Local government should be
  delivering services to the citizenry, who should
  not accept mediocrity.
• Take pride in the areas in which you live.
• The silo mentality does not improve the lives of
  the people and should be eliminated.
• Strive for greater professionalism proud of
  yourself and the services you deliver to the
  community.

15
Day OneInternal control and segregation of
duties Adv Steven Powell

• Highlighted the importance of internal controls.
• Three elements required for fraud to occur
  motivation, opportunity, rationalisation.
• Exposure to fraud in the municipal environment is
  massive.
• Deviation from internal controls is the norm.
• Segregation of duties is an essential component
  of the internal control framework no single
  individual has control, where segregation of
  duties is not possible, put compensating controls
  in place.
• EFT fraud two methods create alternative
  vendor substituting own bank account details or
  substitute own bank account details for an
  existing vendor then resetting after transaction.

16
Day OneInternal control and segregation of
duties Adv Steven Powell

• Key controls
• vet vendors properly,
• enforce tight control over changes to banking
  information,
• audit changes to supplier information,
• interrogate changes, and
• verify with suppliers and banking institutions.

17
Day OneCorporate performance reporting Mr Jan
Gey van Pittius
Do strategic plans translate into actual
activities and service delivery? Is information
timely and can it be used to make informed
decisions? Put technology behind the linking of
the IDP execution, SDBIP reporting and
performance reporting

• Rather monitor fewer metrics that are directly
  measurable
• Performance can be calculated based on these
  metrics
• Monthly reports can be pushed to executive and
  non-executive directors

18
Day OneCorporate performance reporting Mr Jan
Gey van Pittius

• Facets of corporate performance reporting
• PROCESS The lifecycle of IDP execution and
  continuous adaption. How do I know what and where
  I must adapt?
• PEOPLE Who is involved in service delivery and
  who is in support? What if they change how they
  do things?
• SYSTEMS TECHNOLOGY Does my technology mirror
  the municipality and give me flexibility to
  forecast the impact of change?
• ORGANISATION CULTURE How do I merge the above
  into the daily culture of municipal employees?

19
Day OneCorporate performance reporting Mr Jan
Gey van Pittius
If you do not understand the capabilities and
constraints of your city you cannot design its
future in an IDP! Designing finance, operational
and IDP flexibility transforms a citys support
and delivery functions from playing catchup to
delivering with agility.
20
MILESTONE
Memorandum of Understanding between IMFO and
SALGA signed.
The IMFO to form part of SALGAs value add
strategic approach in supporting its members
through the establishment of virtual support
teams to provide targeted hands-on support,
skills transfer and knowledge dissemination.
21
Day OneIMFOs advisory role to SALGA Mr Xolile
George

• Municipalities are the custodians of public
  funds, whether raised from their own revenue or
  received through intergovernmental grants.
• Sound financial management practices are
  essential to long term sustainability of
  municipalities.
• Municipal financial management reforms aim to
  support a coherent institutional and procedural
  approach to financial management that assist in
  improving service delivery.

22
Day OneIMFOs advisory role to SALGA Mr Xolile
George

• General challenges in municipal financial
  management
• Demographics
• Poverty and unemployment
• Outstanding consumer debt
• Inadequate maintenance expenditure
• Vacancies at CFO level
• Experience, qualification and education levels of
  CFOs
• Skills shortage / gap
• Annual financial statements and audit
  qualifications
• SALGA has a number of interventions to address
  these.

23
Day Two

• Breakaway 1 Good governance and legislation
• Breakaway 2 Enabling legislation and the
  implementation thereof
• Breakaway 3 Execution and implementation of
  sound financial policies

24
Day Two - Breakaway 1How important is SCOPA in
ensuring effective municipal governance Mr
Themba Godi

• Oversight committees are required in terms of the
  MFMA to support accountability.
• Role of public accounts committees at National /
  Provincial level is to consider

• The financial statements of all Executive Organs
  of State and constitutional institutions when
  those statements are submitted to Parliament
• Any audit reports issued on those statements
• Any reports issued by the Auditor-General on the
  affairs of any Executive Organ of State,
  constitutional institution or other public body
  and
• Any other financial statements or reports
  referred to the committee in terms of these Rules.

25
Day Two - Breakaway 1How important is SCOPA in
ensuring effective municipal governance Mr
Themba Godi

• With respect to municipal public accounts
  committees
• These are still at a formative stage (different
  levels in each province).
• Their functions should be in line with National /
  Provincial committee functions (examine financial
  statements, audit reports, financial statements
  of municipal entities, annual reports, and any
  other report issued by Auditor-General on
  municipalities or municipal entities).
• In year monitoring of expenditure should also be
  within the ambit of the municipal accounts
  committees work.
• Must be capacitated to fulfil their role
  effectively, this is a significant challenge and
  is critical. Need for greater co-operation to
  share experiences, benchmark and determine best
  practice.

26
Day Two - Breakaway 1How important is SCOPA in
ensuring effective municipal governance Mr
Themba Godi
Accountable local government is the cornerstone
of our democracy and our governments ability to
deliver services to the citizenry. Public
accounts committees are the protector of the
government purse ensuring service delivery and
transparency.
27
Day Two - Breakaway 1Significance of IMFO in
contributing to good governance and financial
management in local government Mr Krish Kumar

• Organizations with good financial management
  have
• Spending linked to goals, priorities and
  objectives
• Regular, accurate reports on the financial status
  of the organisation
• Good decision making based on integrated
  planning, budgeting and reporting
• Financial methods for evaluating past
  performances, reflecting current conditions, and
  predicting the future
• Manage cash flow effectively
• Ensure sustainability of the organisation

28
Day Two - Breakaway 1Significance of IMFO in
contributing to good governance and financial
management in local government Mr Krish Kumar

• Is IMFO contributing to the achievement of good
  governance?
• Yes, through
• Mission statement,
• Value statement,
• Objectives,
• Training and capacitation initiatives,
• CFO forum issues,
• Interaction with stakeholders,
• Major inputs made in the past (REDs, NERSA
  hearings, Project Consolidate)
• Code of conduct

29
Day Two - Breakaway 1The financial instruments
to raise revenue Policies, by-laws and
resolutions Prof Nico Steytler

• The confusion and lack of alignment hold
  financial risks for municipalities no firm
  legal basis on which to levy rates.
• In the absence of valid revenue raising measure,
  provinces may have to intervene in terms of
  section 139 of the Constitution.
• The problem is widespread across the country.
• Time is of essence full implementation date for
  the Property Rates Act is 1 July 2009. Proper
  policies, by-laws and resolutions for the
  valuation process, that should be underway now,
  should be in place.
• 60 of municipalities must still implement the
  Act.
• Financial officers of municipalities have a
  special responsibility to ensure that financial
  instruments (policies, by-laws and resolutions)
  are in order.
• IMFO should play an important supportive role in
  providing clear models of proper and effective
  policies, by-laws and resolutions.

30
Day Two - Breakaway 1Governance - Ms Zulpha
Abrams

• Benefits of good governance

• Minimises business risk and adverse publicity
• Saves costs by reducing duplication, waste and
  cancellations
• Reduces losses, penalties and damages
• Increases confidence in the organisation for all
  stakeholders
• Streamlines operations and information for
  improved responsiveness to changing circumstances
• Increases transparency and accountability.
• Contributes positively towards a better social
  economic environment.

31
Day Two - Breakaway 1The Auditor-Generals
contribution to effective governance - Mr Barry
Wheeler

• As governance depends on an effective system of
  directing and controlling organisations,
  cognisance must be taken of the following six
  principles
• a clear definition of the bodys purpose and
  desired outcomes
• well-defined functions and responsibilities
• an appropriate corporate culture
• transparent decision-making
• a strong governance team
• compliance with rules, regulations and
  legislation.

32
Day Two - Breakaway 1The Auditor-Generals
contribution to effective governance - Mr Barry
Wheeler

• Adherence to the principles is often impeded by
  the following two areas of failure.
• Firstly, there are systemic issues such as
• Inadequate strategic planning
• Deficient risk identification
• Poor internal control implementation
• Secondly, capacity considerations including
• Poor discipline
• Inadequate training
• Staff shortages

33
Day Two - Breakaway 1Does section 21 of the MSA
contribute to public participation and
accountability in terms of the MFMA Mr Gaster
Sharpley

• Context of section 21
• Section 21 must be understood in the context of
  participatory democracy
• We must understand the culture of municipal
  governance in order for it to complement formal
  representative government with a system of
  participatory governance.
• The need to create conditions for the local
  community to participate in the affairs of the
  municipality.

34
Day Two - Breakaway 1Does section 21 of the MSA
contribute to public participation and
accountability in terms of the MFMA Mr Gaster
Sharpley

• Challenges with section 21
• Cost of advertising, websites, publication of
  documents
• Inability for the community to respond
  effectively
• Inaccessible to some parts of the community
• Language can be a problem
• One sided and not consultative
• Does not cover the requirement of section 23 of
  the MFMA (consultation)
• Can compromise accountability
• Municipalities could focus on compliance

35
Day Two - Breakaway 1Does section 21 of the MSA
contribute to public participation and
accountability in terms of the MFMA Mr Gaster
Sharpley

• Section 21 does contribute to public
  participation, however it is necessary to
  introduce additional communication and public
  participation activities such as Imbizos.
• Furthermore, municipalities are required to
  ensure a greater focus on accountability in terms
  of the MFMA and not only focus on compliance

36
Day Two - Breakaway 2 Enabling legislation and
the implementation thereof Mr Johan Mettler

• Role of MM/CFO in implementing legislation
• Accounting Authority (Ch 8,ss60 - 79 MFMA)
• Trusted Advisor (ss61(1) MFMA, 55(1)(i) MSA) -
  Act in best interest of municipality
• Compliance monitor
• Nature of legislation
• Prescriptive and One size fits all (No or little
  room for discretion, or local innovation)
• Complex (Process very difficult or costly
• Command driven (When is must a must and when
  good practice?)
• Over-reliance on enforcement for compliance
  (Great emphasis to create legislation, or
  subordinate legislation that bite)

37
Day Two - Breakaway 2 Enabling legislation and
the implementation thereof Mr Johan Mettler

• Approach to legislation
• Costly to implement
• Outsourcing (Procedures are too complicated so
  get consultants)
• Stifling innovation
• Mere compliance (Do the minimum as the law
  requires (ticking the box))
• Role in legislative formulation
• Appreciate limits of the law (Analysis needed of
  what the actual problem is, and perhaps
  legislation is not the answer)
• Scope for local discretion (Focus more on
  outcomes than on process)
• Differentiation (More capable municipalities
  should be given more discretion)
• Realistic sanctions (Criminal sanctions must be
  limited to fraudulent or corrupt practices)

38
Day Two - Breakaway 2 Enabling legislation and
the implementation thereof Mr Johan Mettler

• Conclusion
• Municipalities operate in an over-regulated
  environment
• It is costly, disempowering, encourages
  formalistic compliance, and stifles local
  innovation
• Need for a differentiated approach to legal
  regulation and
• Legislation should also be concerned with
  ensuring outcomes instead of just processes.

39
Day Two - Breakaway 2 Affordability of
Accounting Standards and its contribution to good
Governance Ms Erna Swart

• Why increase accountability?
• - GDP of R1.994 bn
• - 14.4 of HH no formal dwelling
• - 5 of HH have no access to water
  infrastructure
• - 28 of HH have no access to electricity
• - Illiteracy rate of 25.6 and
• - Only 58 of SA thinks government is performing
  well
• How is accountability improved?
• - Implementing an effective monitoring and
  evaluation system, which assesses governments
  performance and
• - Stimulating public debate and analysis by
  various users of financial information in
  financial statements.

40
Day Two - Breakaway 2 Affordability of
Accounting Standards and its contribution to good
Governance Ms Erna Swart

• The role of accounting standards
• - Complete, consistent, comparable financial
  information
• - Financial accounting reporting underpinned by
  4 key qualitative characteristics
• - Understandability
• - Relevance
• - Reliability
• - Comparability
• Balance between cost benefit
• Evolving scope of financial accounting
  reporting through the inclusion of Performance
  and Sustainability reports and further analysis
  required
• Standards that enhance the management of REAL
  (Revenue, Expenses, Assets and Liabilities)

41
Day Two Breakaway 2AAT training to improve
accounting skills of finance officers in an
attempt to comply with new accounting standards
Ms Natalie Zimmelman

• Background to the programme
• Focus by all Gauteng stakeholders on obtaining
  Clean or unqualified Audit Reports
• Requirements for the implementation of the
  Municipal Finance Management Act requires skilled
  finance staff at all levels of the municipality
• The Gauteng Finance Summit (July 2007)
  resolutions confirmed the need for enhanced
  finance skills within municipalities.
• What we want to accomplish?
• A holistic financial skills programme which
• - Enhances the financial skills of the current
  municipal finance staff at all levels
• - Addresses the financial skills shortage
  through the provision of learnerships for
  unemployed matriculants and graduates, hence
  increasing the pool of trained finance staff.

42
Day Two Breakaway 2AAT training to improve
accounting skills of finance officers in an
attempt to comply with new accounting standards
Ms Natalie Zimmelman

• Benefits for the organisation
• Creates a learning organisation
• Team effort in improving financial management and
  utilisation of new financial skills acquired
• Improved financial management leading to improved
  Audit reports and credit ratings
• Improved ability for entire municipality to
  adhere to accounting standards and
• Improved succession planning opportunities for
  the municipalities.
• Benefits to the individual
• Opportunity to increase financial skills leading
  to improved job opportunities in future
• Increased job satisfaction
• Increased ability for managers to be able to
  delegate work to staff members with improved
  skills levels.
• Through the concept of the Learning Organisation,
  the ability for staff to start implementing their
  enhanced skills within the workplace.

43
Day Two Breakaway 2AAT training to improve
accounting skills of finance officers in an
attempt to comply with new accounting standards
Ms Natalie Zimmelman

• Way forward
• NQF 3 FAAT Local Government Certificate (NQF 3)
• NQF 4-5 completion of NQF 3 eligibility to the
  Local Government Advanced Account Certificate
  and/or the AAT Advanced Certificate in Accounting
  at NQF level 4 and then the AAT Diploma in
  Accounting at NQF level 5
• NQF Level 6 Minimum Competency Level Regulation
  implementation by 2013 for MM, CFO, Senior
  Management, Other Financial Officials at Middle
  Management levels and Supply Chain Management
  Staff and
• NQF Level 7 TOPP (Training Outside Public
  Practice) targeted at young graduates who wish
  to become Certified Accountants within the Local
  Government environment.

44
Day Two - Breakaway 2 Is supply chain management
regulation contributing to comply with new
accounting standards

• Legislation Role Players Mr Matie Boonzaaier
• Legislation
• Constitution section 217 - Procurement
• Municipal Systems Act section 83 - Competitive
  Bidding
• Municipal Finance Management Act section
  111-Supply Chain Management Policy
• Preferential Procurement Policy Framework (PPPF)
  Act section 2-Framework for implementation of
  preferential procurement policy
• Broad Based Black Economic Empowerment (BBBEE)
  Act (viewed as not important for now)
• Construction Industry Development Board Act
  section 18-Unregistered contractors

45
Day Two - Breakaway 2 Is supply chain management
regulation contributing to comply with new
accounting standards

• Legislation Role Players Mr Matie Boonzaaier
• Role Players
• National Treasury
• Provincial Treasury
• Council
• Accounting Officer
• Internal Audit
• Audit Committee
• Auditor General
• Internal Customers
• Service Providers

46
Day Two - Breakaway 2 Is supply chain management
regulation contributing to comply with new
accounting standards

• Supply Chain Management - A Box of??? Mr Louis
  Fourie
• Pre SCM policy
• NO central SCM process each department had its
  own process
• 2005 SCM policy
• SCM to be Fair, Equitable, Transparent,
  Competitive, Cost effective
• Each municipality / municipal entity required to
  have and implement a SCM policy based on the NT
  Model policy and the Regulations
• Council cannot reverse or override a decision of
  a bid once it has been awarded by the bid
  adjudication committee or the accounting Officer
  and
• - Councillors were not in full support of the
  policy and regulations from the start as they are
  excluded from the bidding process and are
  hesitant to trust the process.

47
Day Two - Breakaway 2 Is supply chain management
regulation contributing to comply with new
accounting standards

• Supply Chain Management - A Box of??? Mr
  Louis Fourie
• Current Constraints
• - SCM Capacity in-house at municipalities
• - Lack of guidelines wrt staffing, job
  descriptions and operational manuals
• - Financial burden
• - Timeframes and processes vs. service delivery
• - Resulting into
• - Emergencies and deviations from the policy
• - Appeal period
• - NT involvement or the lack thereof on certain
  pressing issues
• - Regulations not amended since 2005
• - Supplier database and capacity inadequate

48
Day Two - Breakaway 2 Is supply chain management
regulation contributing to comply with new
accounting standards

• Supply Chain Management - A Box of??? Mr Louis
  Fourie
• Role Player Involvement and Summary
• NT should consider amendments to the Regulations
  and Model Policy
• The MFMA and SCM regulations can not be seen as
  resulting in labelling Municipalities as being
  financially disorganised and unsustainable
• Grading of municipalities must be finalised
• Internship be formalised
• Municipalities should work smarter and
• BETTER PLANNING, PLANNING, PLANNING!!!!!!

49
Day Two - Breakaway 2 Is supply chain management
regulation contributing to comply with new
accounting standards

• SCM viz the MFMA Mr Kevin Naik
• Council has an oversight role to approve the SCM
  policy and ensure the AO executes and implements
  the SCM
• AOs responsibility is to implement the SCM
  policy through the SCM unit and agree to NT
  guidelines Council must delegate powers and
  duties to the accounting officer to execute the
  SCM function and
• The regulations makes provision for the
  establishment of three (3) bid committees i.e.
  Bid Specification Committee Bid Evaluation
  Committee Bid Adjudication Committee.

50
Day Two - Breakaway 2 Is supply chain management
regulation contributing to comply with new
accounting standards

• SCM viz the MFMA Mr Kevin Naik
• Challenges
• Lack of human resource capacity
• SCM structure to execute the SCM function not in
  place
• Competency levels of SCM practitioners are very
  low
• High staff turnover
• Interference of Council in the day-to-day
  operations and
• Corruption

51
Day Two Breakaway 2 Statutory Roles and
Responsibilities Adv Graham Richards

• Roles and responsibilities is NOT a compliance
  issue its an engagement between political and
  administrative components
• Political and administration components has its
  own goals which can result in break down between
  administration and politicians across the lines
  of seniority
• Need to understand the hierarchy of
  accountability as prescribed by the MSA sections
  53 and 59. Constitution has compliance
  perspective but its more than compliance.
  Legislation in the form of the constitution
  provides for this relationship. In the
  Constitution (section 152) referred to as Objects
  Matter of Public duty
• Legislation, MSA, MMFA, provides functions and
  responsibilities for municipal manager and
  council.
• Roles responsibilities of municipal manager
  SHOULD be discussed
• These functions are not powers. The fundamental
  source of power vests within executive council
  and delegated to Mayor or municipal manager
• The municipality must define the relationships
  between structures
• A municipality that has NOT implemented section
  53 of the MSA is not constitutionalised and will
  go into dispute and desertion

52
Day Two Breakaway 2 Statutory Roles and
Responsibilities Adv Graham Richards

• Relationships should NOT be left to consultants.
  Relationships can only be achieved by discussing
  (i.e. real human relationships)
• The necessity of roles to provide for adequate
  systems cannot be emphasised
• There should be continuous discussion and
  communication. Like in a marriage the Executive
  Mayor and municipal manager should have
  continuous discussion and communication. They are
  like two sides of the same coin and thus have to
  work together
• For municipal manager to be effective must be
  trusted by Executive to give advice even if it is
  contrary to political favour
• The municipal manager should assist Executive
  Council in terms of legal requirements to achieve
  objectives and
• Being an effective municipal manager is not about
  compliance only but also in managing as well. A
  municipal manager should make decisions and stand
  by his subordinates.

53
Day Two - Breakaway 2Mandatory Interventions in
terms of section 139 (MFMA) and turnaround
strategies Mr Danie de Lange

• Intervention process and appropriate steps that
  the Provincial executive must take where a
  Municipality fails to fulfill on Executive
  Obligation

• STEPS
• Issuing a directive
• Assuming responsibility
• Dissolving the Municipal Council (MC) and
  appointing and administrator until newly elected
  MC has been declared elected

54
Day Two - Breakaway 2Mandatory Interventions in
terms of section 139 (MFMA) and turnaround
strategies Mr Danie de Lange

• Statistics Relating to Section 139 Interventions
  to date (Source DPLG)
• Vast majority of interventions are in terms of
  section 139 (1) (b)
• PE appoints an Administrator to assume Executive
  Authority
• Limitations to interpretation of failures to
  comply to section 139 (1) (a)
• Uncertainty regarding the nature of and required
  intensity of the intergovernmental checks and
  balances
• Little indication that the Provincial
  Legislature exercises oversight over the PE
• Role of District Municipalities uncertain
• Participation of the local community in
  implementation of section 139 (1) (b)
  interventions is a critical factor for success

55
Day Two - Breakaway 2Mandatory Interventions in
terms of section 139 (MFMA) and turnaround
strategies Mr Danie de Lange

• Key Success Factors
• (a) Intervention is a targeted response to a
  failure fulfil obligations, whereby the most
  appropriate step is chosen out of the variety
  offered by section 139.
• (b) There is clarity amongst all stakeholders on
  the legal basis, appropriate steps and procedural
  requirements of section 139.
• (c) Provincial Executives have due regard to
  intergovernmental checks and balances within and
  outside section 139.
• (d) Provincial Executives adopt an incremental
  approach with, in principle, the issuing of a
  139(1)(a) directive as a regular first step.
• (e) There is timely submission by the Provincial
  Executive of complete documentation to the
  Minister, NCOP and Provincial Legislature.

56
Day Two - Breakaway 2Mandatory Interventions in
terms of section 139 (MFMA) and turnaround
strategies Mr Danie de Lange

• Key Success Factors
• (f) The effective and immediate oversight over
  the actions of the Provincial Executive is
  exercised by the Provincial Legislature.
• (h) The role of the Provincial Executive and/or
  its representatives at the municipal level is
  clear for all stakeholders.
• (i) Interventions are carried out with an
  intergovernmental approach, with the
  involvement of the district municipality (where
  applicable) as a key strategy.
• (j) Interventions are carried out with a strong
  focus on participation with the local community
  in the implementation of an intervention.
• (k) The Provincial Executive ensure that there is
  a sound exit strategy after a section 139(1)(b)
  intervention, with a role for the district
  municipality in the after care (where
  applicable).

57
Day Two Breakaway 3Need for sound financial
policies in local government Mr Lucas Opperman
The purpose of financial policies is to help
execute the IDP and bring financial governance to
the municipal operations

• Financial policies bring transparency and
  accountability to the municipal finances
• Mandatory financial policies for municipalities
  in South Africa are
• o Tariffs Municipal Systems Act Section 74
• o Property rates Municipal Property Rates Act
  Section 3
• o Credit control and debt collection Municipal
  Systems Act Section 96
• o Investments and cash management MFMA Section
  13(2)
• o Supply chain management MFMA Section 111
• o Accounting matters Accounting standards
  prescribed by the ASB, National Treasury
  requirements, supplemented by own policies for
  example on fixed assets, reserves

58
Day Two Breakaway 3Need for sound financial
policies in local government Mr Lucas Opperman

• Policies which could be dealt with generically
  (to a large extent)
• o costing for tariffs
• o preparation of budgets
• o management of and accounting for fixed assets
• o banking, investments and cash management
• o supply chain management (National Treasury
  policy) and
• o subsistence and travel

59
Day Two Breakaway 3Need for sound financial
policies in local government Mr Lucas Opperman

• Among the matters which must receive the
  statutorily prescribed attention of the
• internal audit unit are
• Internal controls
• Performance management
• Accounting procedures and practices
• Risk and management of risk
• Compliance with the Municipal Finance Management
  Act

60
Day Two Breakaway 3Need for sound financial
policies in local government Mr Lucas Opperman

• Primary focus should be placed upon crafting
  sound policies for
• o Revenue management
• o Supply chain management
• o Fixed asset management
• o Banking and investments
• o Budgets
• o Subsistence and travel

61
Day Two Breakaway 3National Land Transport
Bill (NLTB) and the financing of public transport
Mr Philip van Ryneveld
The NLTB seeks to bring greater clarity to
division of functions between spheres of
government Supports asymmetric devolution of
power metros and larger cities the key locus
of responsibility for public transport within
their areas Sets out the different
responsibilities of the spheres in some
detail provides for further devolution in
terms of s156(4) of the Constitution Municipalit
ies responsible for the planning, implementation
and management of modally integrated public
transport networks Does away with the notion
of a Transport Authority retains authority
within government emphasises co-operation
between municipalities
62
Day Two Breakaway 3National Land Transport
Bill (NLTB) and the financing of public transport
Mr Philip van Ryneveld

• The transformation of public transport in South
  Africa is one of the most important and
  achievable goals in the coming decade
• These developments represent an important
  moment in the development of the system of local
  government
• Integration of built environment related
  functions at city level
• Asymmetrical devolution of powers
• Successful public transport projects in key
  cities will bolster the confidence and status of
  local government
• Public transport is likely to become one of the
  most significant municipal services within the
  next decade

63
Day Two Breakaway 3Social accountability
methods Mr Craig Schwabe
Citizen report cards are a set of tools being
used internationally to evaluate the performance
of service providers in addressing the needs of
citizens This tool also provides a scientific
mechanism to compare performances between areas
by collecting information through the use of
household surveys A key component is the
dissemination of this information as simple
messages to citizens The Citizen Report Card
(CRC) involves a facilitated engagement between
citizens of an area and service providers to
enable a social compact to be drawn up between
them ensuring that the service needs of people
are effectively addressed Tshwane and O.R.
Tambo conducted CRCs in 2006 and 2007 with funds
from the World Bank
64
Day Two Breakaway 3Social accountability
methods Mr Craig Schwabe
Residents indicate that they were not
explicitly involved with the IDP process CRCs
show that municipalities need to be communicating
more about what they are doing, what they have
accomplished, what their priority areas are and
even what bottlenecks they are facing in
implementing their programmes Citizen Report
Cards should be used by all tiers of government
in addressing the service and infrastructure
needs of the people. In bringing about targeted
engagements it is necessary to ensure that all
communities within a local municipality have an
equal opportunity to express their needs and
participate
65
Day Two Breakaway 3Ethics, conduct, the CFO
and financial management Mr Krish Kumar
What is ethics? It simply involves learning what
is right or wrong and then doing the right thing.
However, this is easier said than done One of
the ways in which high ethical standards can be
promoted is by developing codes of conduct that
set a standard of behaviour. If integrity is
second to any of the alternatives, then it is
subject to sacrifice in situations where a choice
must be made. Such situations will inevitably
occur in every persons life The approaches to
ethical decisions are UTILITARIAN Focuses on
taking the action that will result in the
greatest good for the greatest number of people
66
Day Two Breakaway 3Ethics, conduct, the CFO
and financial management Mr Krish Kumar
MORAL RIGHTS Concerns itself with moral
principles, regardless of the consequences.
Under this view, some actions are simply
considered to be right or wrong there are no
grey areas UNIVERSALISM Is similar to the
Golden Rule. It has two steps. First you
determine whether a particular action would apply
to all the people under the circumstance, and
secondly, you determine whether you would be
willing to have someone else apply the rule to
you COST-BENEFIT One balances the costs and
benefits of taking versus not taking a particular
action
67
Day Two Breakaway 3Ethics, conduct, the CFO
and financial management Mr Krish Kumar

• Unethical conduct is
• Corruption is the giving of direct or indirect
  compensation to someone for something they should
  not do, or for not doing something they should
  do. Examples disclosing confidential
  information, etc.
• Fraud is the illegal and wilful perversion of the
  truth which is made with the intent to deceive
  another and which results in actual prejudice to
  another. Example cheque fraud
• Fraud is not only the theft of money, but is also
  the theft of time by leaving work early, and
  manipulating attendance registers and leave
  records. This is just as bad.
• One of the ways to prevent fraud and corruption
  is to promote the right ethics in your
  organisation.
• Remember, the fish rots from the head -
  management must set the right tone at the top! Do
  not use staff to do your personal things as it
  sets the tone that bending the rules is
  acceptable
• New anti-corruption bill being debated by
  Parliament

68
Day Two Breakaway 3Ethics, conduct, the CFO
and financial management Mr Krish Kumar

• Unethical conduct can be addressed by
• Strong internal controls and checks (including
  spot checks)
• Lifestyle audits
• Regular price tests and anti-fraud reviews to
  ensure no collusion with suppliers
• Report cases to the police. Apparently less than
  50 of fraud or corruption committed is reported
  in fear of negative publicity
• Inculcate a culture of whistle-blowing - a fraud
  and corruption hotline.
• Screen staff properly when employing in terms of
  prior criminal records, credit problems, previous
  employer, etc.
• Watch out for sole suppliers
• Watch out for staff with gambling habits, having
  affairs, excessive overtime, refusing a
  promotion, not taking leave
• Reconciliations must be up to date
• Gift registers, and declaration / disclosure of
  business interests

69
Day Two Breakaway 3Ethics, conduct, the CFO
and financial management Mr Krish Kumar

• One needs to instil the following controls
• Cash receipts Ensure all cash received,
  deposited and reconciled
• Cash disbursements Ensure that cash is
  disbursed only upon proper authorization of
  management, for valid purposes and are properly
  recorded
• Petty cash Ensure that petty cash and other
  working funds are disbursed for proper purposes,
  are safeguarded and properly recorded
• Payroll Ensure that payroll disbursements are
  made only upon proper authorization to bona fide
  employees, related legal requirements are
  complied with, and properly recorded
• Grants, gifts and bequests All received and
  disbursed must be properly recorded
• Asset management Acquisition and disposal
• Accounting procedures manual Policies and
  procedure for handling financial transactions are
  best recorded in such a manual, describing the
  tasks and who is responsible for them.
  Facilitates smooth turnover in financial staff

70
Day Two Breakaway 3Ethics, conduct, the CFO
and financial management Mr Krish Kumar
We need to bring back pride and passion into
the local government financial workplace. A
great leader has courage to fulfil ones vision
which comes from passion and not position.
Strong management required it is necessary
to eradicate unethical behaviour Financial
staff need to set the example and lead the way
be the torchbearers when it come to ethics,
honesty and transparency
71
Day Two Breakaway 3Enterprise-wide risk
management Cllr John Douw
Every manager whether political or
administratively must take some sort of
responsibility towards the communities that we
serve When looking at the eight principles of
Batho Pele, we can link all of them to risk
management and accountability towards the
community. These are 1. Consultation 2. Service
standards 3. Access 4. Courtesy 5. Information
6. Openness and transparency 7. Redress 8. Val
ue for money
72
Day Two Breakaway 3Enterprise-wide risk
management Cllr John Douw
Strategic management in local government is
sometimes wrongly perceived as only to delivering
services to the community A well structured
risk management plan, as opposed to risk
avoidance plan, is central to successful
municipal leadership In terms of section 45 of
the MSA internal audit as well as external audit
must audit the results of performance
measurements Audit committees and internal
audit must ensure that performance results and
measurements do not become generic in nature, but
that it contains the important aspects of running
a municipality successfully The performance
results must include specific aspects on risk
management, advice, avoidance measures and
regular reporting on risk issues
73
Day Two Breakaway 3Enterprise-wide risk
management Cllr John Douw
Section 62(1) of the MFMA states that the
accounting officer of a municipality is
responsible for managing the financial
administration of the municipality, and must for
this purpose take all reasonable steps to ensure
(c) that the municipality has and maintains
effective, efficient and transparent systems-
(i) of financial and risk management and internal
control. The Chief Financial Officer as advisor
to the Accounting Officer must assist the
Accounting Officer in developing such a system of
risk management and internal control as it
relates to the finances of the municipality.
The individual roles of the audit committee,
internal audit, the chief financial officer and
the councillor responsible for finance cannot be
answered by isolating the responsibilities. Every
municipality must strategically aim at doing
things holistically
74
Day ThreeElectricity distribution reforms
Lessons from international experience Dr Saha
Govind

• Big issues or difficulties and why New Zealand
  reform is now struggling
• Planning poor - policy White Paper was done in
  a hurry
• Reform across value chain misaligned - between
  the generation / transmission reform and creation
  of wholesale electricity market (took over 6
  years)
• Regulation development creating uncertainty and
  design poor - 1998 attempting to operate in a
  relatively light handed regime but
  progressively moving to heavy handed.
• Remaining economies of scale not being realised -
  as the governance structure (trust ownership)
  necessary to ensure buy-in is now inhibiting
  further merger / acquisition activity
• Lack of government momentum

75
Day ThreeElectricity distribution reforms
Lessons from international experience Dr Saha
Govind

• Big issues of Australian reform
• Regulation set up not smooth - transition from
  government to independent regulation was not as
  smooth as expected and could have been set up
  sooner
• Some areas lacking in support - many decisions
  the government were later not fully supported by
  independent regulator (eg. rural risk premium,
  urban rural cross subsidy) and many issues not
  fully analysed, and needed further work.
• Valuation premium on privatisation was not
  sustainable - the independent regulator took a
  more balanced view as opposed to the government
  during reform and privatisation.
• Strong government commitment

76
Day ThreeElectricity distribution reforms
Lessons from international experience Dr Saha
Govind

• Big issues of Australian reform (continued)
• Some things done well (and good outcomes for
  consumers)

• reform on time
• low initial customer impact
• upfront, customers got price reductions (but
  prices increased before reform)
• urban rural cross subsidy was well managed, with
  cross subsidy phased over many years, easy to
  manage
• all distribution businesses were cash positive
  and were profitable, and were privatised for
  significant premiums above book value

77
Day ThreeElectricity distribution reforms
Lessons from international experience Dr Saha
Govind

• Lessons learned
• Dont strive for perfection immediately move to
  commercial state first and be clear about
  objectives
• Stakeholder support is critical and parties will
  look to government for champion role
• Analysis and design critical at every step and
  must be constantly updated as reform progresses

78
Day ThreeA futuristic perspective for
sustainable infrastructure asset management Mr
Jannine Pietersen

• Current infrastructure asset management
  environment in SA
• There is a strategic vacuum in many organisations
• Infrastructure planning is often fragmented and
  short term
• Funding allocations are often mechanistic
• There is a paucity of information
• There is inadequate risk management
• Implementation is cumbersome and
• Capacity constraints are acute

79
Day ThreeA futuristic perspective for
sustainable infrastructure asset management Mr
Jannine Pietersen

• Challenges ahead
• Imbedding asset management practice into the
  municipality as a key business process
• Senior management/councillor buy-in.
• Provide additional funding to municipalities for
  infrastructure asset management and maintenance
  through MIG. (Municipal Infrastructure Grant)
• Key infrastructure asset management quality
  elements to get right
• Training of municipal officials
• Co-ordination challenge (we need to use
  infrastructure asset management to glue together
  engineers, accountants and planners)
• Make use of infrastructure asset management and
  the maintenance budget to create sustainable
  jobs.
• Retain our scare skills-engineers, accountants
  etc.
• How should we respond to the issues of climate
  change.

80
Day ThreeA futuristic perspective for
sustainable infrastructure asset management Mr
Jannine Pietersen

• Take home messages
• Asset management is critical to any
  infrastructure rich business
• It must be done as a total enterprise
• It is all about cultural change get this part
  right
• Plan the change thoroughly, get buy in across the
  business
• Choose what you can justify and do it ..
• Apply the resources needed and monitor progress

81
Contact details

• Derek Browne 082 453 7116
• Glory Khumalo 083 447 5099
• Ian Wilkinson 082 551 9471

82
Thank-you Travel home safely