PRESENTATION TO SELECT COMMITTEE ON APPROPRIATIONS

PRESENTATION TO SELECT COMMITTEE ON APPROPRIATIONS

16 OCTOBER 2012

PRESENTATION BY Cllr NG HLONGWANEEXECUTIVE MAYOR: EMFULENI LOCAL

MUNICIPALITY

2

CONTENTS

22 MUNICIPAL CASH FLOW FINANCIAL STATUS

33 SOURCE OF REVENUE,COLLECTION AND EXPENDITURE MANAGEMENT

66 COMPLIANCE MATTERS

44 GRANTS EXPENDITURE

88 AUDIT OUTCOMES AND ACTION PLANS

99 CHALLENGES,WAY-FORWARD AND PRIORITIES

55 MUNICIPAL BUDGETS

77 CURRENT ASSETS AND LIABILITIES

11 MUNICIPAL OVERVIEW

CONTEXT AND BACKGROUND

Municipal Assets Value = R 9 billionMunicipal Budget

2011/12 Financial Year = R 3.7 billion2012/13 Financial Year = R 4.5 billion

Municipal Jurisdiction( area size) = 987.45 Square KM’Water and Sanitation Coverage = 98%Electricity Coverage = 97%Portable Water Quality Compliance = 100%Waste Water Discharge Compliance = 97%Refuse Collection Coverage = 100%

3

Top 10 Challenges( institutional)

• Unemployment Rate = 45%

• Water and Sanitation Infrastructure Backlog = R10 billion

• Roads Infrastructure Backlog = R9 billion

• Electricity Backlog = R2 billion

• Payment Levels in Poor Areas = 3%

• Outstanding Debt = R2 billion

• Cash Flow – Unfavorable Status

4

Top 10 Challenges( institutional)

• Water Losses = R180 million Per Annum

• Electricity Losses = R20 million Per Annum

• Billing Functionality

5

Some Key Indicators

6

MUNICIPALITY GEOGRAPHIC AREA

MUNICIPAL BUDGET 2011/12

POPULATION % of NATIONA

L GVA

Buffalo City 2 527 km² R3.9 bn 880 000 2%

Mangaung 6 604 km² R4.0 bn 850 000 2%

Emfuleni 987 km² R3.7 bn 652 819 1.78%

Budget Year on Year

7

• Budget from 2003/04 to 2006/07 was not credible and reflected either a surplus or deficit• Growth in budget is noticed due to increase service delivery demands

Budget Year on Year

8

MUNICIPAL CASH FLOW STATUS

9

Cash Flow Status- Quarter ended September 2012

10

R R Bank opening Balance 13,797,520 Total Receipts 1,084,477,600

Receipts 780,064,498 Grants Equitable Share 248,952,000 Other Grants receipted and spent 55,461,102

Less Expenditure -1,207,746,079 Eskom 571,991,951 Rand Water 163,911,425 Personnel Costs 182,020,692 Other payables 289,822,012

Operating surplus/(Deficit) for the quarter -109,470,959 Overdraft Facility utilized 109,470,959

• Council raised R 150 million overdraft facility as a bridging finance during 2012/13 financial year. Included within the Expenditure, are accruals raised at year-end amounting to +/- R 300 million. Bulk services account to + 60% of expenditure incurred.

Eskom Impact (R)

11

• Eskom bill has a significant effect on the municipality’s cash flow•A R 150 million overdraft was raised as a bridging finance to address, among others, effect of Eskom bill

Performance on Electricity

12

Performance on Water

13

Financial Sustainability

14

• Managing cash flow, debtors’ collections, distribution losses on electricity and water and overall financial sustainability of the municipality

AUDITOR-GENERAL FINDINGS

PLANNED ACTION BY ELM

Stage

INTERNAL AUDIT

COMMENT

Distribution losses on water were incurred due to aging infrastructure, burst pipes etc.

Water loss reduction programme launched. Annual target of 2% water reduction has been set.

Implementation

Smart Metering procurement in progress

Procurement stage

ACTION PLAN

Financial Sustainability (Cont…)

Improving the debtors collection rateCash flow concerns due to debtors write offSocio economic factors affecting payment rates

15

ACTION PLAN

AUDITOR-GENERAL FINDINGS

PLANNED ACTION BY ELM

DUE DATE

INTERNAL AUDIT COMMENT

Managing cash flow, debtors’ collections

Appointment of debt collection agencies at an advanced stage.

June 2012

Restructuting of non performing portion of the debtors book is at an advanced stage.

Establishment of a Revenue Management Agency.

Appointment of the following Heads were done: Debt Management Customer Services

Operations

REVENUE,COLLECTIONS AND EXPENDITURE MANAGEMENT

16

STATEMENT OF FIN.. PERFORMANCE

17

• Included in the Budget is R 364 million for capital expenditure, for which, its spending pattern is not reflected as the expense, as it has been capitalized, disclosed in the following slide. Also the depreciation increased materially due to the Fixed Assets unbundling process (GRAP 17)

Cost Drivers

STATEMENT OF FINANCIAL PERFORMANCE (30 JUNE 2012)

Description Annual Budget (R) Actual (R) % Actual to Budget

YTD REVENUE Assessment Rates 364 497 441 351 966 028 97%Electricity Services 1 491 729 462 1 390 378 935 93%Water Services 553 766 019 492 337 050 89%Sewer Services 220 818 683 197 320 365 89%Refuse Services 98 916 159 96 346 276 97%Rent of Facilities & Equipment 9 442 544 11 439 141 121%Interest Earned – Outstanding Debtors 23 309 052 21 234 644 91%Total Billing 2 762 479 360 2 561 022 439 93%Other Income 1 012 197 109 998 871 858 99%Total Revenue 3 774 676 469 3 559 894 297 94% EXPENDITURE Personeel Cost 699 503 866 722 713 867 103%Remuneration - Councillors 30 960 598 25 133 151 81%Debt Impairment 293 420 256 314 129 108 107%Depreciation 129 684 958 732 772 994 565%Repairs And Maintenance 129 527 911 120 158 199 93%Interest Expense 10 246 139 19 106 887 186%Bulk Purchases Water 370 000 000 411 834 554 111%Bulk Purchases Elect 1 156 161 403 1 162 496 093 101%Contracted Services 88 917 389 83 289 231 94%

General Expenses 866 253 949 455 385 820 53%Capital Expenditure 364 369 940 Total Expenditure 3 774 676 469 4 047 019 904 107%Surplus/(Deficit) - (487 125 607)

CAPITAL SPENDINGS (2011/12 FINANCIAL YEAR)

18

• The under-spending of council funded projects was contributed by the cash-flow restrictions. Most of the projects were rolled over into 2012/13 financial years

Funding Budgeted ( R ) Expenditure ( R ) % Spent

MIG & Counter Funding Projects

156,248,360 144,227,937 92%MIG Projects (Allocation & Roll Over)

143,885,000 144,227,937 100.00%

Council Funded Projects 64,236,580 37,720,844 59.00%

Capital Budget Spending

364,369,940 326,176,718 76.29%

Revenue (2011/12 Financial year)

19

• The billed revenue on all services are on par with the budgeted billing for the current financial year, except for rental of facilities at 121%.

Expenditure (2011/2012 Financial Year)

20

• The realized expenditure is sitting at 12% above the realized revenue and 7% above the budget. Due to the revaluation process of the Fixed Assets (GRAP 17), our assets were re-stated at the net book value of R 13 billion. This led to an increase on Depreciation from anticipated R 130 million to R 733 million in 2011/12 financial year.

2011/12 Financial Year

GRANTS SPENDINGS

21

National Grants (2011/12 financial year)

22

Opening Balance

Total Receipts

Total Expenditure Surrendered

% Spent

Closing Balance

Restructuring Grant 18,249,475 0 0 18,249,475 0 0Equitable Share 0 539,842,000 539,842,000 0 100 0Financial Management Grant

750,000 8,750,000 8,750,000 750,000 100 0Regional Sewer Scheme Grant

-1,862,813 26,298,099 23,300,618 0 95 1,134,668National Electrification Grant 673,525 16,256,000 16,256,000 673,525 100 0Electricity Demand Site Management Grant 0 6,000,000 3,912,860 0 65 2,087,140Municipal Systems Improvement Grant

500,000 800,000 800,000 500,000 100 0DWAF Grant 1,096,474 0 165,990 0 2 930,484DACE Grant

728,627 500,000 0 0 0 1,228,627EPWP Grant 1,290,258 3,049,000 6,734,674 +100 -2,395,416Sedibeng Regional Sewer Scheme Grant

9,953,530 11,553,375 12,396,780 0 58 9,110,125

Municipal Infrastructure Grant 17,242,937 126,985,000 126,985,000 0 88 17,242,937 48,622,013 740,033,474 739,143,922 20,173,000 96 29,338,565

Provincial & District Grants (2011/12 Financial Year)

23

Opening Balance

Total Receipts

Total Expenditure Surrendered

% Spent

Closing Balance

Library Grant 2,802,216 7,200,000 7,206,589 0 72 2,795,627

HIV Aids Grant 37,346 524,160 561,506 0 100 0

Health Grant 68,239 0 68,239 0 100 0

Bontle - ke - Botho Grant 743,368 4,090 930 0 0 746,528

Ex- District Grant 2,704,127 0 0 0 0 2,704,127

Social Development Grant 5,102,498 9,000,000 14,102,498 0 100 0

Sports Grant 1,118,853 0 558,722 0 50 560,131

Debtors Book Project (ALOECAP) 0 2,300,000 2,080,048 0 90 219,952

Asset Management Project (GRAP 17) 0 1,800,000 1,800,000 0 100 0

Security services subsidy(evictions) 0 26,330,339 26,330,339 0 100 0

MSIG Sedibeng 50,000 0 0 0 50,000

12,626,647 47,158,589 52,708,871 0 88 7,076,365

MUNICIPAL BUDGET

24

Budget preparation process

Establishment of effective Budget Steering CommitteeApproval of the IDP and Budget Process Plan, highlighting:

o Key Stakeholderso Key deadlineso Consultation processes

Mid term budget and performance review-January 2012Adjustment budget 2011/12 February 2012Draft 2012/13 Multiyear Budget - March 2012Public participation process Final MTREF Budget adopted 28 May 2012

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Subsequent Activities considered

Experienced Water losses in 2010/11Inflation hikes, guidelines from budget circularsIDP prioritiesInput costs v/s Output costs (Tariffs)Achieved collection rates True Cost of Service Delivery

Direct cost Indirect overhead cost

26

Tariff Modelling

Policy Shiftso Recognition of Indigents – Property value below R150 000o Free Basic Water – Only to Indigentso Equalisation of tariffs

Restructuring of Water Tariffs – Encourage water savingResidential Sewerage tariffs dependent on water consumption

27

Tariff Modelling- 2012/13 Fin... Year

Tariff structures approved by council together with Budget-May 2012Tariff Increases approved with the Budget were:

Property Rates – 10% Electricity – 13.3% Water – 21.6% (13.5% + 8.1%) Sewerage – 19.37% (13.5% + 70% of 8.1%) Refuse – 10% Sundry Tariffs – 10%

Eskom Tariff increase – 13.5%Rand Water Tariff increase – 13.5%

28

Tariff Modelling - WATER

Business - Restructuring of tariffs proposed - Watero Inclining block tariff (DBT) for watero IBT in compliance with Circular 58 and s10 of the Water Services Acto Circular 58 – prescribes IBTo S10 (2)(d) of the Water Services Act – tariffs should promote or achieve

water conservationo Tariffs cheaper for initial usage but higher with increased consumption

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Tariffs – Business (Continue)

Restructuring of tariffs proposed - Sewerage Equalisation of tariffs

Due to Impact it – proposed to equalize in 2012/13 and move towards Water consumption based in 2013/14

Additional tariffs in respect of type of business to be included in 2012/13 – Fat Traps, etc.

30

Tariffs – Business (Continue)

Refuseo Rendered at a significant loss o Previously subsidised through other tariffso Breakeven tariff calculated at 18% increase

Electricity tariffo Nersa approved an average tariff increase of 13.3 %o Emfuleni pays 13.5% towards Eskom

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Tariffs – Residential

Restructuring of tariffs proposed - Watero Inclining block tariff (IBT) for water, electricity, sewerageo IBT in compliance with Circular 58 and s10 of the Water Services Acto Circular 58 – prescribes IBTo S10 (2)(d) of the Water Services Act – tariffs should promote or achieve

water conservationo Tariffs cheaper for initial usage but higher with increased consumption

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Tariffs – ResidentialRestructuring of tariffs proposed - Sewerage

o Waterborne Sewerage principle to be followedo Basic Plus Sewerage tariff (billing units) linked to 50% of Water

consumptionRefuse

o Rendered at a significant loss o Previously subsidized through other tariffso Breakeven tariff calculated at 18% increase

Electricity tariffo NERSA approved a average tariff increase of 13.3 %o Emfuleni pays 13.5% more towards Eskom

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Tariff Structure - Residential

Water Tariff Structure Tariff increase per block (Incremental) Maximum Water consumption block – Currently 30kl Restructuring proposal (Tariff increments) Additional Blocks – 30kl-45kl and 45kl + Punitive tariff

Sewerage – Consideration of water based tariff Basic + 50% of water consumption

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Revenue & Collections – Budget 2012/13

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REVENUE BY SOURCEADJUSTMENT BUDGET

2011 / 2012 (R) BUDGET 2012 / 2013 (R) % OF BUDGET

Electricity Sales 1,298,781,712 1,489,734,764 33,0%

Grants 844,253,184 901,185,934 20,0%

Water Sales 553,766,019 695,224,834 15.4%

Assessment Rates 343,684,023 396,524,977 8,8%

Sewer 220,818,683 303,809,802 6.7%

Pre-paid Electricity 192,947,750 213,000,798 4,7%

Refuse Removal 98,916,159 125,222,157 2.8%

Other Income 169,859,395 315,865,423 7,0%

Tariff Charges Other 25,234,002 47,489,427 1.0%

Fines 26,415,543 32,399,049 0.7%

Total 3,774,676,469 4,520,457,165 100%

Expenditure –Budget 2012/13

36

ITEMADJUSTMENT BUDGET

2011 / 2012 (R)BUDGET 2012 / 2013

(R) % OF BUDGET

Employee Costs 699,503,868 693,341,946 15,3%Remuneration of Councilors 30,960,598 32,841,255 0,7%Depreciation and Asset Impairment 129,684,958 351,444,059 7,8%

Bulk Purchase – Electricity 115,616,1403 1,360,317,000 30,1%

Bulk Purchase – Water 370,000,000 380,918,643 8,4%

Provision for Doubtful Debts 293,420,256 596,271,005 13,2%

Contribution to CAPEX 364,369,940 367,488,750 8,1%

Repairs and Maintenance 158,301,955 141,545,790 3,1%

Other 572,273,491 596,288,617 13,2%

TOTAL 3,774,676469 4,520,457,165 100%

Key Expenditure Budget components

Bulk purchases 38.5 % Electricity 30.1 % Water 8.4 %

Personnel Costs 16 %Repairs and Maintenance 3.1 %Capital expenditure 8.1 %

Total 2012/13 MTREF BudgetR 4.5 billion

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LEGISLATIVE COMPLIANCE

38

Compliance with Audit Processes & the Law

Municipal Structures ActSection 79 Establishment – (1) The Council has appointed a functional Audit Committee and MPAC for the effective and efficient performance of its functionalities.Audit Committee members appointed has requisite skills as follows:

Financial Accounting and Management Internal and External Audit Performance and Risk Management Engineering Legal and Governance

39(Final)

Compliance with Audit Processes & the Law (Cont)

Emfuleni Local Municipality is in the process to appoint an IT Specialist to serve as a member to further capacitate the Committee.Audit Committee and MPAC co-ordinate their efforts on oversight as per MFMA Circular 32 and COGTA and National Treasury Instructions.

40(Final)

Compliance with Audit Processes & the Law (Cont)

Municipal System Act

Section 45 – The results of the performance measurements are audited by Internal Audit in terms of section 41(1).

Internal audit is auditing 100% not on a SAMPLE basis as other municipalities, the reason for that is to reflect the total service delivery efforts of the municipality; it is the ONLY municipality which does this in the country.

The AG audited the performance measurements annually as required (part of OPCA).

41(Final)

Compliance with Audit Processes & Law (Cont)

Municipal Systems ActSection 46 – The municipality has prepared a performance report which was subjected to IA and AG audits.Municipal Systems Act – Regulations 14(1)(a)(c)(i)The Municipality has developed and implemented mechanisms, systems and processes for auditing the results of performance measurements as part of its internal auditing process as already alluded to before.

42(Final)


Municipal Systems Act – Regulations 14(1)(a)(c)(ii)The Internal Audit Department of Emfuleni Local Municipality submits quarterly reports to the Municipal Manager and Performance Audit CommitteeMunicipal Systems Act – Regulations14(2) (a)Emfuleni Local Municipality has appointed Performance Audit Committee which meets quarterly, reports to Mayoral Committee (Mayco) on issues of Performance, and in so doing keeps Mayco informed in that respect

43(Final)


The Performance Audit Committee reports to the Council on matters of Performance, three reports have already been submitted to Council for this financial year.

44(Final)


Municipal Finance Management Act

121(i) Preparation and adoption of annual reports:The Annual Report for Emfuleni Local Municipality was prepared and adopted by Council.121(3)The Annual report Complied with Legislation required as per Section 121(3)(a) and (b). 122 Preparation of Financial statements: Emfuleni Local Municipality has compiled the

annual financial statements on the basis as required by this Section basis.

45(Final)


Municipal Finance Management Act (Cont)

123 Disclosure on intergovernmental and otherallocations

124 Disclosure of Interest concerning Councillors, Directors and Officials

125 Other compulsory disclosuresThe Annual Financial Statements of Emfuleni Local Municipality complied with these abovementioned Sections

46(Final)



126 Submission and auditing of Annual Financial Statements The Annual Financial Statements of the Municipality was submitted within two months after the end of Financial Year to the Auditor-General for auditing purposes.

47(Final)


Municipal Finance Management Act (Cont)Section 62(1)(c)(ii) and 165(1)(a)

The municipality has established a functional internal audit department which have prepared a risk based annual audit plan as approved by the Audit Committee.

Section 165(1)(b) The Internal Audit department has continuously advised the Accounting Officer and

reported to the Audit Committee on the implementation of the plan in relation to internal controls, accounting procedures and practices, risk and risk management, performance, loss and compliance with other legislation.

48(Final)



166 Audit Committee-166(a)The committee was established as already alluded.166(b) Audit Committee reviewed the AFS.166(c) Audit Committee responded to the Council on issues raised by AG.

49(Final)

Reporting and other compliance requirements

Compliance with reporting requirement MFMA compliance reporting timelines adherence

Other Compliance issues Establishment of Risk Management Framework and registers Performance management System Formulation of risk-based audit plans

50

CURRENT ASSETS AND LIABILITIES

51

Current Assets

ITEM2011/12

(Unaudited) 2010/11

Cash and cash equivalents 12,857,572 18,497,047

Trade and trade receivables from exchange transactions

237,843,335 255,423,565

Trade and other receivables from non-exchange transactions

139,166,698 44,585,250

Inventories 20,536,147 19,886,954

Investments 114,928,212 106,269,517

Value added tax receivable 71,033,304 21,649,624

TOTAL 596,365,268 466,311,957

52

Current Liabilities

ITEM 2011/12 (unaudited) 2010/11

Trade and other payables from exchange transactions

701,169,997 526,816,744

Unspent conditional grants and receipts 21,567,411 61,248,661

Borrowings 5,268,984 6,858,622

Finance lease liability 23,161,407 62,193,495

TOTAL 751,167,799 657,117,522

• Included in the Trade payables is the Eskom billing for R175 million (2011/12) and R 136 million (2010/11), Rand Water bill for portable water amounted to R 23 million (2011/12)•The municipality managed to settle the raised Overdraft facility amounting to R 90 million during 2011/12

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Outstanding debtors June 2012

54

84% debt in

residential

• Goverment Debt in the Region of R44 million• Total Debt Stand at almost R2.7 billion (84% is Residential)

Outstanding Government Debt

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NAME OF DEPT AMOUNT OUTSTANDING AS AT JUNE 2012GOV - EDUCATIONAL R 5,749,717.89 GOV - EDUCATIONAL RATES R 962,864.54 EDUCATIONAL (SECTION 21 SCHOOLS) R 2,994,929.25 EDUCATIONAL (SECTION 21 SCHOOLS) RATES R 100,166.38 HOSPITALS AND HEALTH R 10,100,069.93 HOSPITALS AND HEALTH RATES R 1,167,329.82 GOV - HOUSING R 2,354,086.49 GOV - HOUSING RATES R 1,363,365.86 POLICE R 924.72 S.A POST OFFICE R 21,968.11 S.A POST OFFICE RATES R 839.38 PROVINCIAL HOUSING R 532,611.13 PROVINCIAL HOUSING RATES R 394,039.77 GOV - PUBLIC WORKS NATIONAL R 233,375.07 GOV - PUBLIC WORKS NATIONAL RATES R 2,347,307.08 GOV - PUBLIC WORKS PROVINCIAL R 11,314,035.10 GOV - PUBLIC WORKS PROVINCIAL RATES R 3,428,035.26 GOV - ROADS R 39,629.32 GOV - ROADS RATES R 21,907.90 GOV - TELKOM R 4,856.92 GOV - TELKOM RATES R 8,351.83

Grand total R 44,179,411.75

Risk ManagementRisk Management

56

ELM Fully functional Risk Management, Anti-Fraud & Anti-Corruption Committee

Quaterly meetings are held and report is presented to Audit Comm and Council

Risk Management represented at SMT level through the CRO being appointed on 15/10/2011

Risk Management is aligned to Strategic Planning through the IDP, whereby strategic & high level risks are identified

A Risk Management register has been developed ans approved by the Audit Committee and Council

Whistle blowing policy is in placeA reviewed Risk Management Framework & Strategy has been approved

by AC and RMAAC & is ready for next Council meeting for approvalRisk matury has improved from 3 to 4.8 maturity level (NT assesment)

Top 10 Risks of ELMTop 10 Risks of ELM

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Risk Ref ELM Strategic Objective

Risk Description Root Cause Consequences Risk Category

Risk Priority

MM.HL.01

Viable and sustainable municipal government

Inadequate Leadership Sustainability (Lack of Continuity at Senior Management)

Senior Manager contracts l imited to 5 years; lack of retention strategies;

Lack of continuity in terms of organisational direction; Lack of accountability; Organisatinal instabil ity- new management recreating the wheel;

Strategic Risk

High

MM.HL.02


Diminishing Revenue Base (Poor Cash Flow)

High Unemployment rates; Increasing Debtors Book; Ageing Infrastructure; Lack of Urban renewal;

Inability to adequately sustain operations; Inability to carry out service delivery effectively and effi ciently;

Financial Risk

High

HIGH LEVEL ORGANISATIONAL RISKS

Top 10 Risks of ELM (Cont…)Top 10 Risks of ELM (Cont…)

58



Risk Priority

MM.HL.03

Accountable and clean municipal government

Lack of Clear Predetermined Performance Criteria.

Key Performance indicators not SMART (Specific, Measurable, Achievable, Relevant & Time-bound); Lack of agreed upon pre-determined performance outputs; Lack of assessment criteria for Performance measurement in Senior Management Contracts;

Miss-alignment between Organisational Performance and Individual/Management Performance; Inability to adequately and precisely determine levels of performance; Under accounting of good performance; Inability to correct organisational deficiencies;

Strategic Risk

High

MM.HL.04

Effective and efficient municipal government

Mis-alignment of business functions and delegations of authority;

Lack of clarification of roles and responsibilities and required level of authority; Poorly designed organisational structure (disfunctional reporting lines);

Failure to make timely decisions; Loss of opportunities; Delayed service delivery; Strategic

RiskHigh



59



Risk Priority

MM.HL.05

Quality rendered, accessible, sustainable and reliable municipal services

Ageing Municipal infrastructurePoor collection rates; Lack of maintenance and maitenance plans; Inadequate Captial Budgeting; Shortage of skil led technical staff; Inadequate funding of Capital budget on own funds;

High electricity and water distribution losses; Loss of revenue; Poor service delivery; Costly provision of basic services (high municipal tariffs);

Service Delivery Risk

High

MM.HL.06


Lack of documented procedures, controls and processes

Management avoidance; Negative perceptions on limitations placed by controls; Management need to override controls (easier if not in place);

Opportunity for fraud and corruption; mismanagement of funds and missuse of assets; Non-accountability by managers in enforcing controls and rules; Inability to successfully hold employees accountable and to institute disciplinary actions where no controls are placed and well communicated;

Operational Risk

High



60



Risk Priority

MM.HL.07


Weak Procurement Processes

Shortage of Staff; Cashflow Constratints; Lack of adequate controls; Lack of organisation-wide education and training on SCM issues;

Delays in processing of orders; Non-compliance with SCM policy and legislation; Delayed/Poor Service Delivery; Fraud & Corruption; Procurement via deviations

Procurement Risk

High

MM.HL.08


Loss of Key Personnel Misplacement of qualified and/or experienced employees (Missalignment of Employee Skil ls with assigned job function); Lack of advancement opportunities/succession planning; Lack of performance recognition and reward; Lack of on-the job/off-the job training and continued education;

Brain drain; Reduced productivity; Poor service delivery; Low staff morale;

Human Resource Risk

High



61



Risk Priority

MM.HL.09


Non-compliance with rules and regulations (contravention of Acts).

Poor planning and scheduling;

Penalties; Imprisonment; Withholding of funds; Financial loss/Irregular/Fruitless/ Wasteful expenditure,

Compliance/ Legislative Risk

High

MM.HL.10


Poor Access Control and Safeguarding of Municipal Assets

Lack of Security Management Systems; Inadequate funding for security controls; Lack of application of policies and controls in place; Lack of accountability over asset management by Departmental Managers; Lack of documented controls for staff usage;

Theft and vandalism of municipal property; Financial Loss; Endangerment of employees;

Security Risk High


Risk Management (Cont…)Risk Management (Cont…)

62

A Risk-based Internal Audit Plan was developed determining high risk areas of ELM based on the risk registers

Operational risks are identified through the SDBIP’s & assessed quarterly and reported to Audigt Commitee and Council

Risk Champions has been appointed for each cluster to monitor and report on each cluster risks

IT Risks were identified and Action Plans are in place to remedy some risks which include: Overall IT Assessment (hardware and software) Disaster Recovery Plan Business Continuity Plan IT Governance Framework & Control IT Policies & Procedures

AUDIT MATTERS

63

Audit Report

Audit Opinion:

2006/2007 – Disclaimer2007/2008 – Disclaimer2008/2009 – Qualification2009/2010 – Qualification2010/2011 – Qualification

Basis of Qualification 2010/2011:

Property, plant and equipment Valuation of Property, Plant and Equipment (PPE)

Statement of changes in net assets 2007/08 misstatements of service charges and employee costs that affects

the 2010/11 accumulated surplus/deficit64

Audit Report (Cont…)

Matters of Emphasis:

Significant uncertainties - Civil matters Restatement of corresponding figures - GRAP 17 implementation Material losses - Water 51% and Electricity 11% Material Impairments – Irrecoverable debt

SCM Deviations: 20 deviations due to urgency. 12 Irregularities reported of providers in service of the state.

65

Status of Audit Action Plan for 2010/2011

Appointment of same service provider to finalize GRAP 17 implementation.

Establishment of OPCA steering Committee (Senior Management Team)

Action Plan-Addressing Audit findings 2010/2011

Quarterly Internal Control assessments(dash board reports) –AG

OPCA progress report presented quarterly to Audit Committee (CAE), MAYCO and Council (by Chairperson of Audit Comm)

66

67

SUMMARY OF FINDING!!

ACTION PLANS FOR 2010/11 AUDITOR GENERAL REPORT

68

Audit Findings Cluster Action Plan TakenEmployee in

charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicabl

e for Reviewin

g Remarks

N/A1. Infrastructure assets- No supporting documents for cost recorded on the financialstatements

Financial Services/Infrastru

cture Planning and Asset

Management

Consultants (PWC) have being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology.

Bernard Langa Nil Nil Nil N/AThe audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register.

2. Information not submittedFinancial

Services/Infrastructure Planning

and Asset Management


Bernard Langa Nil Nil Nil N/A

The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register.

3. Assets incorrectly valuedFinancial






4. Newly identified assetsFinancial






69


charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable

for Reviewing Remark

N/A5. Assets recorded at incorrect amount Financial

Services/Infrastructure Planning and

Asset Management


Bernard Langa Nil Nil Nil N/A The audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register.

6. Understatement of depreciation Financial Services/Infrastructu

re Planning and Asset Management



7. Assessment of Impairment for assets Financial


Asset Management



8. Assets not considered for write off Financial


Asset Management



9. Assets not bar-coded on the asset register Financial


Asset Management



10. Valuation of newly identified assets- differences on supporting documents

Financial Services/Infrastructu




11. Valuation methods for assets Financial Services/Infrastructu





70

Audit Findings€ Cluster Action Plan TakenEmployee in

charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable

for Reviewing Remarks

N/A12. Asset Register not GRAP Compliant Financial

Services/Infrastructure Planning and Asset

Management



13. Assessment of residual values Financial Services/Infrastructure Planning and Asset

Management



14. Impairment of transport assets

Financial Services



15. Valuation of newly identified assets Financial

Services/Infrastructure Planning and Asset

Management



16. Intangible assets- Classification

Financial Services



17. Overstatement of landfill site

Financial Services



18. Post balance sheet-events after reporting date

Financial Services

The matter was resolved during the audit as the statements were updated with the recommendations of the AG. A repetitive review of the AFS will be undertaken before the submission to AG.

Tsietsi Rafube Nil Nil Nil The audit finding was resolved during the AG audit process. Portfolio of evidence was provided and verified.


71


charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicabl

e for Reviewing Remarks

N/A19. The specifications were not approved by the accounting officer prior to publication of the invitation of bids.

Financial Services

Supply Chain Management functions have been decentralized and different clusters have delegated powers in terms of section 8 of SCM policy were by the Bid Specification Committee get appointed by the Accounting Officer and Bid Specification Committee is delegated to draft the specification and other requirements including approving and determining advertising methods.

Thabo Thwala Nil Nil Nil

The audit finding was resolved. An approved letter of delegation authority by the Accounting Officer was provided for as Portfolio of evidence was verified.

20. Registered address of the contractors is different to the one disclosed in the biddocumentation Financial Services

Bid Document (MBD 4 & MBD 8) requires the bidder to indicate the address where the business is operating and also declarations. The bidder is required to include Municipal Account or lease agreement to indicate were the business is operating.

Thabo Thwala Nil Nil Nil Resolved

21. Register of bids is not published on the municipality website Financial Services The awarded bids will be

published on the website Thabo Thwala Nit Nil Nil

The audit finding was resolved. Printout from Website was provided as Portfolio of Evidence and Verified.


72


charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicabl

e for Reviewing Remark

N/A

22. Non compliance with Section 32(2) of the MFMA

Municipal Manager

Irregular or fruitless and wasteful expenditure Register will be developed and monitored by delegated personnel (CFO) and feedback will be provided on a quarterly basis.

ALL DMM

Nil Nil Nil

Irregular or Fruitless and Wasteful expenditure Register was developed and submitted to the relevant management, monthly monitoring and evaluation process will be implemented with effect from 1st July 2012.Furthermore it is recommended that MFMA 32(2) must observe at all times in respect of unauthorized, irregular or fruitless and wasteful expenditure.

23. Suppliers not on the database

Financial Services

SCM department encourage suppliers to register on the data base and also our website have database forms were suppliers can print and submit to our offices during working hours

Thabo Thwala Nil Nil Nil N/A Management did not agreed with the AG audit finding.

24. Operating expenditure -Transactions recorded in incorrect period Financial Services

Year End procedures(SOP) will be work shopped to the Creditors personnel by Mid June

Derrick Maaroganye Nil Nil Nil N/A

Creditors list will be ready on the 25 July 2012. Therefore this finding will be subjected to AG processes.


73

Audit Findings Cluster Action Plan TakenEmployee in charge

ResolvedPartially Resolved

Not Resolved

Not Applicable for Reviewing Remarks

N/A25. Understatement and Overstatement of Creditors Listings

Financial Services

SCM is supposed to complete GRN first to enable the fin system to accrue automatically. Year-end procedures to be followed up by SCM. Inter-departmental communication channels with be enhanced and regular strategic meetings with SCM will be held going forward


Creditors list will be ready on the 25 July 2012. Therefore finding will be subjected to AG processes.

26. Expenditure-Information not submitted for audit

Financial Services

Documents were misfiled. An investigation of root causes is undertaken and proper record keeping is in place to prevent recurrence of such events.

Derrick Maaroganye Nil Nil Nil

The finding was resolved, Documents selected from the Register was duly filed and were verified.

27. Predetermined objectives No evidence that IDP and budget are aligned

Municipal Manager/Performance Management System

Budget Sheets SA4, SA5 and SA6 which reconcile the budgeted amounts to the strategic objectives in the IDP will be completed and submitted with the final budget for approval.

Budget Manager

Nil Nil Nil

Partially resolved, the core strategic objectives are reflected in the IDP2011/12 and Budget (SA4, SA5 and SA6) as aligned and verification was done. Further verification will be subjected to AG processes.

Communicate coding convention with Budget Office and IPAM IDP Manager

Budget Office to include IDP codes into Budget Budget Manager

28. IDP does not include core components


MSA determines 9 core components for the IDP. Two were not included - disaster management plan, and financial plan (7/9=78%)

Nil Nil Nil

The audit finding partially resolved, Disaster Management Plan was provided as portfolio of evidence however the financial plan is still in a draft.

Develop disaster management plan Manager Public Safety

Submit disaster management plan Manager Public Safety

Develop financial plan Manager BudgetSubmit financial plan Manager Budget


74


charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicabl

e for Reviewing Remarks

N/A29. KPI's and targets not set for all the core strategies

Municipal Manager/Performance Management

System

The 2011/12 IDP and OSDBIP, as amended, addressed and resolved this finding

Performance Specialist and IDP Manager Nil Nil Nil

The audit finding was resolved. Copy of Council Resolution was provided as Portfolio of evidence and was verified

30. IDP does not include general KPI's as per regulation requirements


System

The 2011/12 IDP, as amended, addressed and resolved this finding


The audit finding was resolved. Copy of Council Resolution was provided as Portfolio of evidence and was verified.

31. KPI's and targets are not well-defined and verifiable


System




32. IDP not aligned to the SDBIP


System




22A. IDP not aligned to the annual performance report


System

The 2011/12 IDP and OSDBIP, as amended, partially addressed and resolved this finding

Performance Specialist and IDP Manager

Nil Nil Nil N/A Audit finding will form part of AG processes

33. Lack of performance management system for predetermined objectives as per the IDP


System

Drafting the 2011/12 performance report Specialist PM Nil Nil Nil N/A Audit finding will form part of

AG processes

34. Targets in the performance contracts are not based on KPI's in the IDP.


System

The creation and commissioning of the M & E solution for the 2011/12 OSDBIP addressed and resolved this matter

Nil Nil Nil

The finding was resolved. Performance of section 56 employees is aligned with SDBIP and was verified.


75

Test Audit Findings Cluster Action Plan TakenEmployee in

charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicabl

e for Reviewing Remark

N/A

35. Annual performance report is not prepared in terms of Municipal Systems Act S46


System

Annual performance report must reflect comparative performance information of previous reporting period

Nil Nil Nil N/A Audit finding will form part of AG processes

Determine existence of comparative performance data from 2010/11 reporting period

Specialist PM

Determine performance data gap analysis Specialist PM

Report on performance data gap analysis Specialist PM

36. Annual performance report not supported by evidence


System

Annual performance report is based on Q4 OSDBIP assessment with PoE

Specialist PM Nil Nil Nil N/A Audit finding will form part of AG processes

37. The prescribed process to amend the IDP was not followed.


System

Deficiency: not properly advertised and SDM not properly consulted

IDP Manager

Nil Nil Nil

The audit finding was resolved. Advert and Letter to Sedibeng was provided as portfolio of evidence and verification was done.

2011/12 IDP amendment was properly advertised and SDM formally consulted

IDP Manager

38. Lack of community involvement in the setting of KPI's, targets and the performance management process


System

KPIs and targets of Basic Services and IPAM and EDP to be communicated during public participation process

Specialist PM Nil Nil Nil N/A Audit finding will form part of AG processes

39. Cash and cash equivalents-None compliance with the Act Financial Services

A letter stipulating banking details of the Municipality will be compiled and submitted to AG and Dept of Finance.

Tsietsi Rafube Nil Nil Nil

Resolved, Letter stipulating banking details of the municipality was provided as portfolio of evidence


76


charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable

for Reviewing

Remark

N/A

40. Debt management not effective

Financial Services

C. Review Credit Control and Debt Collection Policy and By-laws

Debt Manager Nil Nil Nil N/A Management did not agreed with the AG audit finding.

D. Indigent process1. Write off of arrears prior to 2011/2012 financial year2. Write off of arrears in abeyance on a monthly basis7. Finalization of Legal agreements8. Report to Council for approval of process

41. Differences between grant amount on the financial statements and the amount on the trial balance Financial

Services

Grants Management Committee to be established to ensure among others the correctness of grant amounts on a monthly basis.

Dobe Mokgethi Nil Nil Nil

The audit finding is partially resolved. Grants Reconciliation from July 2011 to May 2012 was provided as portfolio of evidence. Review of completeness and accuracy of Trial balance will be performed by CFO to ensure that the AFS agreed to the trial balance.

42. Information not provided for Clearance Certificates

Financial Services

The clearance certificate costs are paid directly into applicable vote number. These payments are done when a bank guarantee is received for the capital amount payable for clearance certificate. The current receipting system does not generate the property description on the direct payment.

Sam Mokoena/Laura Schmidt

Nil Nil Nil

Finding was resolved. Clearance Certificate Register was established. A sample was selected and the requested portfolio of evidence was provided to support the Clearance Certificate Register.


77


charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable

for Reviewing

Remarks

N/A43. Incorrect and incomplete calculation of VAT Financial

Services

1. Calculate the VAT apportionment rate at the end of June 2012 and affect the recalculated rate from the 1st of July 2012. 2. To run a report on all transactions zero rated, i. o.t find transactions which VAT was mistakenly not calculated.

Tsietsi Rafube Nil Nil Nil N/AManagement has appointed Service Provider to address the matter raised by Auditor General.

44. Incomplete disclosure of fruitless and wasteful expenditure Financial

Services

Post dated payments control for third parties payments is in place on Business Integration system (ABSA) on the 7th of each month.


Fruitless and wasteful register was developed the monthly monitoring and evaluation will be effected from 1st July 2012/13.This finding will form part of AG processes.

45. Non compliance with Section 65(2)(e) Financial

Services

It is an on-going issue institutional challenge. First-in-first out paid principle will be enhanced on tax invoice receipt.


The audit findings may not be resolved due to the financial constrains

46. Information not provided for audit - Grant Expenditure

Financial Services

Documents were misfiled. Investigations of root causes are undertaken and proper record keeping is in place to prevent recurrence of such events.


The finding was resolved selected sample was performed.

47. Some municipal councilors did not declare their interest

Municipal Manager

Register of Declaration of interest was developed and were issued on every Council meeting

Manager: Speaker Nil Nil Nil

Not all Councillorship and Personnel declare their interest.

48. Differences in amount disclosed in the financial statement and invoices Financial

Services


Tsietsi Rafube Nil Nil Nil The audit finding was resolved during the audit. Audit finding will form part of AG processes


78


charge

Resolved

Partially Resolved

Not Resolved

Not Applicabl

e for Reviewin

g Remarks

N/A49. Incomplete disclosure of Environmental Rehabilitation provisions

Financial Services



The audit finding was resolved during the audit. Audit finding will form part of AG processes

50. Difference between Venus and Pay Day

Financial Services

Reconciliation of salaries suspense control account on monthly basis including review and supervision i.o.t prevents the re- occurrence of variances.


The funding is partially resolved, Currently service provider has been appointed to address the reconciliation between Venus and Payday System

Total 51 16 6 0 29 Percentage 73% 27% 0%

Number of audit findings remaining for retesting. 0

Percentage 0%


79

Audit Finding Action Plan Taken Cluster/DepartmentEmployee in

charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A51. Bank account balances not properly disclosed


Financial Services Tsietsi Rafube Nil Nil Nil

The audit finding was resolved during the audit. Audit finding will form part of AG processes

52. Control environment: Shortcomings with regards to audit committee

Finding was resolved, Clause was included in the Reviewed Audit Committee Charter.

Internal Audit JS Masite Nil Nil Nil

The audit finding was resolved; the relevant clause was included in the charter.

53. Risk assessment: Implementations of internal audit findings

The finding was resolved. Internal Audit Js Masite Nil Nil Nil The audit finding was resolved.

54. Control environment: Performance of deputy municipal managers not monitored

Monitoring and evaluation of performance is done on a quarterly basis. 1st Q informal , half yearly


Henre de Hart Nil Nil Nil

Half yearly assessment was conducted; however there is one senior manager performance assessment conducted still outstanding however, management has put process is in place to finalize the performance assessments of all senior managers.

55. Control environment: Weakness pertaining to preventative measures on environmentalfactors affecting the municipality

The Environmental By-Laws are at the 3rd Draft and the ELM is assisted by Sedibeng and DEA. The target date for submission to ELM Legal Department is 31 August 2012. The report regarding the Environmental Plan of Action will be resubmitted to the Sec. 80 Committee and thereafter to Mayor and Council. Should be approved by 30 June 2012. Implementation will follow approval subject to funding. All the other matters raised in the Management Letter are subject to funding. The indications are that nothing will be approved for the 2012/13 financial year.

Public SafetyNnete Makhubo and Benny Mhlanga

Nil Nil Nil

The audit finding is partially resolved. Draft Air Quality Management By law, Climate Change Tools and draft Environment education and awareness strategy and action plan were provided as portfolio of evidence.


80

Audit Finding Action Plan TakenCluster/

DepartmentEmployee in charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A56. Control environment: Remuneration policy outdated

Review the salary scales for 20072008 and replace them with current salary percentage

Corporate Services Mr. Vincent Phalange Nil Nil Nil

The audit finding is partially resolved. Management will have an addendum to the policy to address the AG finding

57. Monthly budget statements not placed on the municipality's website

The Manager: Communications will be engaged in writing and the monthly budget statements will be placed on the website from February 2012.

Financial Services Doe Mokgethi Nil Nil Nil

The audit finding was resolved. Print out from Emfuleni Local Municipality website was provided as Portfolio of evidence verification was conducted.

58. Monthly budget statements do not include variances and projections for the remainder of the year

1. Monthly statements to be completed on the new template (C-Schedule). 2. Comments on material variances to solicited and recorded in the template.

Financial ServicesSenior Management Team

Nil Nil Nil

The finding is partially Resolved. Template of C schedule was introduced with effect from January 2012, explanation of variance and corrective action was given, starting from May 2012. Furthermore management to ensure that the explanation for material variance and corrective actions are submitted to Budget so as to comply with Section 71 of MFMA.

59. Non compliance with section MFMA 62(1) (d).

Irregular or fruitless and wastefulexpenditure Register was developed and monitored by delegated personnel (CFO) and feedback is provided on the quarterly bases.

Financial ServicesSenior Management Team

Nil Nil Nil

The Irregular or Fruitless and Wasteful expenditure Register was develop effective date for monthly monitoring and evaluation will is 1st July 2012.


81

Audit Finding Action Plan Taken Cluster/DepartmentEmployee in

charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A60. Fixed assets: No evidence obtained of periodic review of asset register

A Consultants (PWC) has being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology.

Financial Services Bernard Langa Nil Nil Nil N/AThe audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register.

61. Unidentified library books during physical verification of library books

A Consultants (PWC) has being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology.

Financial Services Bernard Langa Nil Nil Nil N/AThe audit finding will be reviewed by Auditor-General after PWC (Consultants) complete the rectification of asset Register.

62. Expenditure: Contracts not available for inspection

The invoice will be submitted to Internal Audit Basic Services Manager Nil Nil Nil

The audit finding was resolved. The invoice was submitted to internal audit for verification which was conducted.

63. Amount on the invoice does not agree to the amount as per General Ledger

Invoices are adjusted by user depts. for CREDITOR'S section to effect payment. A letter from supplier confirming the changes on the invoice will have to be attached before processing pmt.

Financial Services Derrick Maaroganye Nil Nil Nil N/A

Audit finding will form part of AG processes

64. The final award of above R5 million may only be sub delegated only to the Chief Financial Officer

Supply Chain Management functions have been decentralized and different clusters have delegated powers in terms of SCM policy. Adherence to SCM Policy will be encouraged. In terms of section 8 (7.3), The Accounting Officer or delegate may review and reconstitute the members of the Bid Adjudication Committee periodically.

Financial Services Thabo Thwala Nil Nil Nil N/A Will be subjected to AG process.


82

Audit Finding Action Plan Taken Cluster/Department Employee in charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A65. Non Compliance with Division of Revenue Act regarding the reporting of unspentconditional grants

Grants Management Committee to be established to ensure among others the correctness of grant amounts on a monthly basis. This will enable the correct reporting of grants at the end of the financial year.

Financial Services Dobe Mokgethi Nil Nil Nil N/A

1. Reconciliation of Grants were performed up to May 2012 2. Reconciliations up to June 2012 will be performed and submitted to the grants committee once the financial system is running. (Year end processes are in progress) 3. An application for all unspent grants to be rolled over into the 2012 / 2013 financial year will then be made to the National treasureAudit finding will be form part of AG processes.

66. Trade Payables: Overstatement of Midvale Local Municipality liability

Creditor's sec didn't have all the invoices as Midvale at the time of request. The matter was resolved with the inter-council indebtedness account reconciling. The department will vet recons prior submission of info for AFS preparation.

Financial Services Derrick Maaroganye Nil Nil Nil

The audit finding was resolved. The copy of the invoices and payments were provided as portfolio of evidence and were verified.

67. Non-disclosure of Operating Leases

Ensure full compliance with GRAP 13. The excise can only be performed during the compilation of 2011/12 AFS

Financial Services Tsietsi Rafube Nil Nil Nil N/A Audit finding will form part of AG processes

68. Budget is not based on the development priorities and targets

Tables SA4 to SA6 in the annual budget reconcile the strategic objectives in the IDP to the Budget. The tables indicate the funding for all strategic objectives as per the IDP. The Schedule will be completed again in the 2012 / 13 financial year and will be verified for correctness.

Financial Services Dobe Mokgethi Nil Nil Nil

The finding was resolved, SA4 to SA6 which reflect how strategic objectives are funded by the budget was completed and that was approved by Council. Portfolio of evidence was provided


83


Department

Employee in charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicabl

e for Reviewin

gRemark

N/A69. Monthly budget statements not submitted in terms of S71 of MFMA

S 71 reports have been submitted on a monthly basis. Starting January 2012 both the old formats as well as the format prescribed by the Municipal Budget and Reporting Regulations will be submitted to the National Treasury. Strict measures will be implemented to ensure that these reports will continue being submitted on a monthly basis.

Financial Services Dobe Mokgethi Nil Nil Nil

The audit finding was resolved. Copies of S71 report were provided as Portfolio of evidence (Letter from Provincial Treasury that outline the information that was supported).

70. Unauthorized expenditure Transfer of amounts to relevant votes on a monthly basis to ensure that votes and sub-votes are not overspent.

Financial Services Dobe Mokgethi Nil Nil Nil N/A Audit finding will form part of AG Processes.

71. Incorrect allocation of the provision amounts

The matter was resolved during the audit as the statements were updated with the recommendations of the AG. A repetitive review of the as will be undertaken before the submission to AG.

Financial Services Tsietsi Rafube Nil Nil Nil

The audit finding was resolved during the audit and verification will be performed after tabling of Annual Report.

72. Deposit register not reconciled to the General Ledger

The deposit register is updated daily as new leases or vacations are received and Reconciliation was perform on the monthly basic

Financial ServicesSam Mokoena/Gawie Nil Nil Nil

The finding was resolved and verification was conducted.

73. Vacant land charged refuse

It is the basis of the valuation and the technical indication as (VL) that gives the status of the property as improved.

Financial ServicesSam Mokoena/Shakes

Nil Nil Nil N/A

The finding still not resolved, Management should review Rates Policy so as to address the tariff of Vacant land charged refuse.


84


DepartmentEmployee in

charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicabl

e for Reviewin

g Remark

N/A74. Duplication in valuation roll Properties within the jurisdiction

which are registered appear on the valuation roll. In community of property, both names will appear and only one account will be generated on the billing system.

Financial Services Sam Mokoena/Laura Nil Nil Nil N/A Audit finding will form

part of AG processes.

75. Meters in the upload file not linked to any meter number in the transaction file

Errors corrected when picked up on the deviation report Financial Services Sam

Mokoena/Nerina Nil Nil Nil N/A Audit finding will form part of AG processes.

76. Difference in readings as per upload file and the transaction file. Deviation report and test readings

done monthly. Financial Services Sam Mokoena/Nerina Nil Nil Nil N/A Audit finding will form

part of AG processes.

77. Disclosure for Property, Plant and Equipment

The matter will be resolve during the preparation of Financial statement for 2011/12

Financial ServicesTsietsi Rafube

Nil Nil Nil N/A Audit finding will form part of AG processes.

78. Asset count not submitted to the CFO

Assets verification will be conducted and report will be prepared.

Financial Services

Bernard Langa

Nil Nil Nil

Progresses of the assets verification were conducted. Currently PWC has been appointed to assist Emfuleni with Property Plant and Equipment.

Total 28 10 6 0 12Percentage 63% 37%

Number of audit findings remaining for retesting. 0

Percentage 0%


85

Number Audit FindingAction Plan

TakenCurrent Management Comment

Employee in charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A

80

79. Control environment: Information requested but not submitted for audit

Financial Services

1. The Budget Office has a Budget Policy which is used as a guideline in the compilation of budgets. 2. The MFMA, MFMA Circulars and the Budget Regulations are guidelines to the Budgeting Process as well. 3. The IDP and Budget Process Plan detailing timeframes and deadlines for events within the budget cycle was also approved by Council in August 2012. 4. The Budget Policy, MFMA Circulars 58 and 59, The Budget Regulations and the IDP/Budget Process Plan are attached as evidence.

Dobe Mokgethi N/A Nil Nil Nil

1. Copy of Budget Policy and Council Resolution was provided as portfolio of evidence.

81

80. Quarterly reports were not submitted to the mayor

Financial Services

In terms of standing orders of Emfuleni Local Municipality The quarterly SCM reports serves at SMT, Section 80, MAYCO, and Council. All this committees have different dates which overlap beyond the 10 of every quarter. The Executive Mayor is the member of MAYCO and Council and the quarterly report serve in those committees.


Partially Resolved. Quarterly reports were submitted to the Mayor, however the reports are not submitted within ten working days framework stated in the Supply Chain Management regulations 7 (3)

82

81. Monthly reports were not submitted to the accounting officer

Financial Services

In terms of standing orders of Emfuleni Local Municipality The SCM reports serves at SMT, Section 80, MAYCO, and Council. The Accounting Officer is the member of SMT, MAYCO and Council and the reports serve in those committees.


Partially Resolved. Monthly reports were submitted to the Accounting Officer, however the reports are not submitted within five working days framework stated in the Supply Chain Management regulations 5 (3)


86



Employee in charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A

83

82. Variance between the creditors listing and the financial statements

Financial Services

Ensure that cut-off procedures are observed and adhered to by issuing out a Memo informing all departments about the yearend cut-off dates. The system must be temporarily closed after the cut-off date to prevent further processing

Tsietsi Rafube Nil Nil Nil N/A

Creditors list will be ready on the 25 July 2012. Therefore finding will be verified after the completion of creditor's list therefore it will be subjected to AG processes.

84

83. Community not invited to make representations in connection with the 2009/2010 annual report

Municipal Manager

Matter was resolved, Currently ELM invited the community for participation through media (news paper, Local Radio, Emfuleni external News letter, etc)

Henry De hart Nil Nil Nil N/A Audit finding will form part of AG processes.

8584. Completeness of finance lease disclosure Financial Services

Ensure full compliance with GRAP 13. The excise can only be performed during the compilation of 2011/12 AFS

Tsietsi Rafube Nil Nil Nil N/A Audit finding will form part of AG processes.

86

85. Differences in amount disclosed as restructuring Grant Withheld and amount as per Correspondence with National Treasury

Financial Services The matter was addressed during the audit. Tsietsi Rafube Nil Nil Nil

The audit finding was resolved during the audit. This will form part of AG audit processes.

87

86. Differences in Grants opening balances

Financial Services This was resolved during the audit. Tsietsi Rafube Nil Nil NilThe audit finding was resolved during the audit. This will form part of AG audit processes.

88

87. Reconciliation between valuation roll and update on thereof on Venus not madeavailable

Financial Services The matter will be resolve during the preparation of Financial statement for 2011/12


89

88. Differences in grants reconciliation and grants receipts disclosed in the financials

Financial ServicesThe matter was resolved during the preparation of financial Statement for 2010/2011



87

Number Audit Finding Action Plan Taken Current Management CommentEmployee in

charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A

90 89. Leave policy in draft Corporate Services Policy has been work shopped by Speaker.

Mr. Vincent Phahlane Nil Nil Nil

The finding is partially resolved. Policy has been work shopped by Speaker.

91

90. Rentals agreement not signed by both the lessor and lessee EDP Properties: Agreements with

outstanding rental amounts be investigated by Debt Collection.

Properties: A. Streak Housing: F Human

Nil Nil NilThe audit finding is partially resolved. Current status was provided as portfolio of evidence.

92 91. Approval for cancellation of fines Public Safety

There was SOP in place when the incidents occurred. The SOP will be amended to address the specific error that occurred and will be distributed to all personnel. There matter will be discussed with traffic division to inform their personnel about the correct procedure on how to cancel a document

Wynand Pretorious Nil Nil Nil

The finding was resolved, Copy of Standard Operation Procedures was provided as portfolio of evidence.

93

92. Rental agreements not received

EDPProperties: Finance to be informed of agreements not valid anymore. Housing:

Properties: A. Streak Housing: F Human

Nil Nil Nil

The audit finding is partially resolved. Current status was provided as portfolio of evidence.

94

93. Insufficient controls around stock Financial Services

Quarterly stock take will continues be done to detect discrepancy with the stock and to improve controls around stock

Thabo Thwala Nil Nil NilThe audit finding was resolved, Quarterly stock takings were conducted.


88



Employee in charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A

95

94. No formal appointments of members serving on bid specification, evaluation andadjudication committee

Financial Services Appointments of members serving on bid committees are done Thabo Thwala Nil Nil Nil

The audit finding was resolved. Copy of formal appointment letter was provided as portfolio of evidence.

96

95. Extensions of contracts

Financial Services

Clusters or Department will be encouraged to do proper costs projections when doing planning of the projects. This will help to ensure that extensions of contracts are not encouraged.

Thabo Thwala Nil Nil Nil N/A Internal Audit still verifying the audit finding raised.

97

96. Performance of contractors not monitored on a monthly basis

Performance Management

System/ Infrastructure Planning and

Asset Management

Department usually hold Project Steering Committee once a month whereby all Consultants and Contractors report on progress reports and verified all action taken during weekly projects meetings

Khulekani Nxumalo Nil Nil Nil

Audit finding is partially resolved, not all performance of the contractors was monitored on a monthly basis.

98

97. Bid awarded other than the one recommended by bid evaluation

All DMM's

Should the Bid be awarded to other than one recommended by Bid Evaluation Committee, section 114 (1) & (2) of MFMA No. 56 of 2003 should be complied with. For this finding the National Treasury, Provincial Treasury and Auditor General were not informed and section 114 (2) of MFMA No. 56 of 2003 was applied to rectify an irregularity.

Thabo Thwala Nil Nil Nil N/A

Internal Audit could not provided assurance as the tender file could not be provided by SCM. The file is still with Ratanang

99

98. Balances disclosed on the financial statement with no supporting evidence (DebtManagement & Sports and Recreation)

Financial ServicesThe matter will be resolve during the preparation of Financial statement for 2011/12



89


TakenCurrent Management Comment Employee in charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A

100

99. Assets not bar-coded on the asset register

Financial Services Assets Register will be updated by Management after Auditor General express the opinion


101

100. Completeness of asset register-other assets Financial Services

Consultants (PWC) has being appointed to assist in all issues related to the Emfuleni Assets and afterward Auditor-General will retest the Assets Register Methodology.


102

101. Non compliance with section 62(1)(d).

Financial Services

Develop a policy on unauthorised, irregular, fruitless and wasteful expenditure. Design a register to populate these expenditure and distribute it to different clusters for identification.


Irregular or Fruitless and Wasteful expenditure Register was developed and submitted to the relevant management however monitoring and evaluation????.

103102. Non compliance with Section 65(2)(e) Financial Services

Put strategy to improve cash flow through revenue enhancement and cost cutting measures.

Derrick Maaroganye Nil Nil Nil N/AThe audit findings may not be resolved due to the Financial constrains

104

103. Finance lease - Appendix A not agreeing to the Trial Balance Financial Services



The audit finding was resolved during the audit. This will form part of AG audit processes.

105

104. Minimum bank accounts not kept

Financial Services

Still not in agreement with the AG. Write a correspondence to AG to validate the finding and give appropriate recommendation

Tsietsi Rafube Nil Nil Nil N/AManagement did not agree with the audit finding raised. Therefore the finding is not applicable for verification.


90



Employee in charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A

106

105. Late Submission of the details of new bank account Financial Services

Obtain a list of all banking details each month and report new accounts to AG and Provincial Treasury.


Resolved, letter was submitted Provincial Treasury and Auditor-General. (P.O.E Email sent)

107

106. Incorrect tariffs used

Financial Services Sam Mokoena/Laura Nil Nil Nil N/A Audit finding will form part of

AG processes.

108

107. Supporting documentation not provided for audit purposes (ExpenditureManagement)

Financial Services

Proper record keeping procedures are currently implemented and in place to maintain and safeguard information for easy access.

Derrick Maaroganye Nil Nil Nil The finding resolved as per

our selected sample.

109

108. Mid-year budget and performance assessment report not placed on themunicipality's website

Municipal Manager

Midyear budget and Midterm SDBIP was placed in the Emfuleni Municipality website.

Paseka Rakosa Nil Nil Nil

The audit finding was resolved. Printout of website was provided as portfolio of evidence.

110

109. Security Management

Municipal Manager

The Issue was raised with BCX who are the vendor of the Venus system. Their response to this issue was forwarded to the AGSA. The IT section cannot do any alterations to the system as they have no rights. BCX felt that this could not be done for reasons. Attached find the documents from BCX Marked as BCX109

CIO Nil Nil NilDraft security Management policy was developed still awaiting for council approval.


charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A

106

105. Late Submission of the details of new bank account Financial Services

Obtain a list of all banking details each month and report new accounts to AG and Provincial Treasury.


Resolved, letter was submitted Provincial Treasury and Auditor-General. (P.O.E Email sent)

107106. Incorrect tariffs used

Financial Services Sam Mokoena/Laura Nil Nil Nil N/A Audit finding will form part of

AG processes.

108

107. Supporting documentation not provided for audit purposes (ExpenditureManagement)

Financial Services

Proper record keeping procedures are currently implemented and in place to maintain and safeguard information for easy access.

Derrick Maaroganye Nil Nil Nil The finding resolved as per our

selected sample.

109

108. Mid-year budget and performance assessment report not placed on themunicipality's website

Municipal Manager Midyear budget and Midterm SDBIP was placed in the Emfuleni Municipality website.

Paseka Rakosa Nil Nil NilThe audit finding was resolved. Printout of website was provided as portfolio of evidence.

110

109. Security Management

Municipal Manager

The Issue was raised with BCX who are the vendor of the Venus system. Their response to this issue was forwarded to the AGSA. The IT section cannot do any alterations to the system as they have no rights. BCX felt that this could not be done for reasons. Attached find the documents from BCX Marked as BCX109

CIO Nil Nil NilDraft security Management policy was developed still awaiting for council approval.


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charge

ResolvedPartially

ResolvedNot

Resolved

Not Applicable


N/A

111

110. User Access Control

Municipal Manager/Informatio

n Technology

This will form part of the IT assessment and review and IT strategy development. Current status: Unix, Access control procedures are documented for Payday and Venus. The IT usage approved policy control is available and have been in use since the year 2009.

CIO Nil Nil Nil

The finding was resolved, Adding and Modifying is the same procedure. Removal of users are done when personnel resigns/ retire or deceased upon request form pay office informing IT.

112 111. User Access ControlMunicipal

Manager/Information Technology

The changes to these items were discussed with BCX who is the vendor of this system. As BCX does all changes and database administration on the system this would have been done via an upgrade to Solaris 5.9 operating system. This could not be done for reasons as set out in the letter (Marked as BCX 111) in the attached file.

CIO Nil Nil Nil

IT to discuss the finding with Business Connexion as they are the once having database administration rights.

113 112. Program Change Management


n Technology

The requested Procedures have been developed and implemented by IT. Proof is marked Change Management112 in attached file

CIO Nil Nil Nil

Change management procedure have been developed and approved by IT Management.

114113. Information Technology Service Continuity


n Technology

The Disaster recovery plan for PAYDAY was developed, implemented and tested by IT. Finalised The test results and proof is marked PAYDAY DRP113 in the attached file.

CIO Nil Nil Nil

DRP plan was in place for Venus and Payday system and were tested, however BCP was still not developed, Management committed to develop an ogranogram BCP by Service provider (Umnombo)


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Number Audit Finding Action Plan TakenCurrent Management

CommentEmployee in charge

Resolved

Partially

Resolved

Not Resolv

ed

Not Applicable for Reviewing

Remark

N/A

115 114. Information Technology Governance

Municipal Manager/Information

Technology

The IT Steering Committee have not been fully functioning. Only one meeting was held during the current financial year as at May 2012.

CIO

Nil Nil Nil

Resolved, meetings held on 30 September 2011, 9 December 2011, 25 May.2012

The IT Department is still not being fully capacitated. The intenda system has been shut down and no longer in use.

Nil Nil Nil N/A

CIO has been appointed and currently Emfuleni Local Municipality and Sedibeng District still busy negotiating to move IT department to Emfuleni.

Payday user Account Management Nil Nil Nil

Resolved – account management is now done by IT

Asset Management Department



Assets Register of IT department will form part of AG process

Total 39 14 10 1 14Percentage 56% 40% 4% Number of audit findings remaining for retesting. 0

Percentage 0%


Road Map to an Unqualified Audit

Project Management

93


Project Management

Interventions:• Engagement with AG on compilation of AR during 2011/12 – Completed•Revised asset valuation method - Completed•Submission of Assets register to AG - 30 Aug• Computerized Assets Inf Syst (IQMS) – In progress

94


Project Management

Interventions:• Decentralisation of SCM – Aug Deadline• Capacitation – Skills – In progress• Creation of Contract Mngt – In progress• Review of SCM policy – In progress• Data base clean up – Partially completed• Price benchmark implementation (value for money ) - Completed

74


Project Management

Interventions:• Meter Audit, verification and data clean-up – In progress• Accounts reconciliation – On going• Segment customers – In progress• Appointment of debt collecting agencies - Completed• Restructure the debtors book – Process to be reviewed• Creation of Revenue Agency – in progress (50%)• Review Tariffs and funding model – In progress• DSM interventions (water & elec loss reduction) – in progress• Appointment of key personell in revenue - Complete

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Project Management

Interventions:• Allignment of KPI’s with IDP• Review of KPI’s• Review of IDP & SDBIP• Submission of Performance Information for Audit by Aug 2012

100% complete

97


Project Management

Interventions:• Functionality of Sect 80 /79 Committees and Other Committees esp MPAC

100% complete

98


Project Management

Interventions:• Establishment of IPAM• Development project mngt framework/system• Implementation of contract mgt• Implementation of ePmLive

70% complete

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CHALLENGES,WAY-FORWARD AND PRIORITIES

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CHALLENGES

Billing and non payment of services – R2.6 billion Debtor’s BookHigh Water and Electricity Losses, theft and non payment

Water (66% ) = R241 million Electricity (11%) = R60 million

Skills shortage and high vacancy rate In adequate Funding – High indigence Infrastructure Back log – R20 billionNon payment for Services in former black townships – No MeteringUnfunded Mandates – Provincial Functions (Health, Libraries & Facilities)Arrear Government Accounts – R44 million Insufficient Cash Flow – Overdraft facility of R150 million raised as at 01 July 2012Data IntegrityCustomer Services Ethos Amongst Staff

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WAY FORWARD & KEY PRIORITIES

Ring-fence the revenue function Establish a customer call and walk in center

Meter verification and data clean up (Meter audit) Installation of meter at un-metered areas Ensuring accuracy of meter readings at the right time. Addressing internal control deficiencies

Improvement of Revenue Collection Impose Stringent Credit Control Measures Appoint collecting Agencies for all debt Restructuring of Debtors’ book

Address all AG Findings Obtain an Unqualified Audit 2011/2012

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Intend

WAY FORWARD & OTHER PRIORITIES

Upgrade and Maintain infrastructure through MIG – R143 885 000 Allocation for Basic Service Delivery Programs

Enforce all Municipal By-Law by creating a super by-law enforcement unitReview Organizational Structure (People, Processes & Systems) Implement Demand Side Management Partnerships to Reduce Water and

Electricity Losses Water = Reduce by 25% Electricity = Reduce by 5% Waste = Reduce waste to landfill sites by 5 to 10%

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THANK YOU AND SINCERE APOLOGIES!!

FROM EXECUTIVE MAYOR

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PRESENTATION TO SELECT COMMITTEE ON APPROPRIATIONS

Documents

Transcript of PRESENTATION TO SELECT COMMITTEE ON APPROPRIATIONS