In May I had the great honour and satisfaction of presenting my office's inaugural Clean Audit Awards to seven municipalities that had achieved the ultimate clean administration, as measured by our audit reports for the 2009-10 financial year.

What is strikingly interesting about these municipalities – Mpumalanga's Ehlanzeni district municipality, Steve Tshwete and Victor Khanye municipalities, the City of Cape Town, the district municipalities of Metsweding (Gauteng) and Frances Baard (Northern Cape), and the local municipality of Fetakgomo (Limpopo) – is that they are from diverse backgrounds. Some are small in terms of size and budget allocations; some are rural or peri-urban; while one is a well-resourced metropolitan municipality.

Of further interest is that, despite the vast diversity of their make-up, these municipalities have a common thread that binds them – the commitment and single minded intention of their leadership to lead and set the right tone: that in their municipalities they will drive, maintain and accept nothing less than clean administration.

Leadership in these municipalities, irrespective of their different geographic, economic or social circumstances, have made it a priority to ensure that the basic internal controls and systems are in place in their municipalities. They have done this by developing and implementing action plans to remedy deficiencies highlighted by my office in previous years' audit findings. The seven have, for example, made it a way of life to perform daily, monthly and quarterly reconciliations of their financial records. They are therefore doing what accountants and financial staff in leading private sector companies are doing: making sure that they do not go home at the end of the day until the books are balanced. Apart from being able to produce reliable accounts on their revenue, expenses, liabilities and assets, they pay attention to corroborating their service delivery reports and have put measures in place to ensure legislated duties are being performed and prohibited transactions are prevented - as should all municipalities and other government entities for that matter.

Most importantly, they have also formed mutually beneficial working partnerships, led by the mayors, with their respective audit committees for heightened and effective oversight. The positive results of these partnerships and the commitment of the leadership of these municipalities are there for all to see – their clean audit reports. Needless to say, their professional relationship with the AGSA is another key factor to their success. These municipalities have also demonstrated that there is nothing stopping the rest of their counterparts from obtaining and maintaining clean audit opinions.

This leads me to state once again that administrative challenges in local government are not insurmountable and they can be addressed and turned around, for the positive, within a short time if the leadership, mayors to be exact, set the right tone and lead the movement towards ultimate clean administration in their municipalities.

Announcing the 2009-10 local government audit results recently, I reiterated my heartfelt belief that having clean municipal audits by 2014 is still an achievable target. However, our mayors, in partnership with their functional municipal public accounts committees and the relevant provincial and national departments, need to work together in a coordinated manner to improve and sustain positive audit outcomes.

Support is available for all municipalities to improve their results
Support and technical tools to support municipalities as they work towards clean administration are abundantly available. What has been lacking in most municipalities, though, is the strong will of leadership to bring about the necessary change by ensuring that action plans and checklists to address previous years' audit findings are developed and implemented to the letter. Those municipalities and entities that have responded and put corrective measures in place when we pointed them in the right direction, have been able to produce the desired positive results.

While mayors, municipal managers and officials are urged to engage fully with the AGSA staff during the quarterly key controls visits as outlined in my previous article, we will also work closely with the national and provincial role players, as well as SALGA, to intensify and sustain the monitoring efforts in the key focus areas identified by my office, namely:

1. Supply chain management
2. Reliability, usefulness and regulatory requirements of reporting against predetermined objectives
3. Financial management
4. Turnaround plans
5. The management of information technology
6. Human resource management
7. Optimising the assistance provided by consultants relating to financial statements
8. Performance of administrators in municipalities under administration
9. Existence and effectiveness of municipal public accounts committees, audit committees and internal audit units

Where there are shortages of critical skills, for example in finance departments, municipalities must also use the available National Treasury grants for interns optimally – they can use the trained interns provided by Treasury to boost their workforce while recruiting permanent skills. And in most cases they could end up employing the interns permanently, thus minimising the risks of high vacancy rates and appointment of candidates with inappropriate skills.

My 2009-10 general report on the audit outcomes of local government, which is accessible from the AGSA website, provides more information on these nine focus areas.

Use of consultants must be accompanied by skills transfer
What some municipalities are doing well is to use external consultants to assist them with the compilation of financial statements, but they have not man- aged to use them optimally.

I have constantly stated that there is nothing wrong in using consultants but where there is a valid case to use consultants, municipalities need an internal staff member to check if the consultants are working in line with internal policies, systems and governance laws. In most instances, consultants respond to errors identified by auditors during audits. They should, however, strengthen systems of internal control in partnership with internal officials, in such a manner that daily and monthly reconciliations become the institutional culture of each and every municipality without it having to wait for audits to pick up errors.

Such an approach would facilitate the skills transfer in a more structured manner. This would address the current situation where close to 90% of 206 municipalities that used consultants also had employees who were supposed to do the same job. When the consultants had completed their assignments, there was minimal or no transfer of skills; and even the audit outcomes of most of these municipalities had not improved.

Here we had a valuable resource of skilled professionals that have proven to be available in abundance. This resource would, if channeled meaningfully by the leadership, propel most municipalities towards clean audits with speed.

Why I firmly believe that clean audits are still attainable by 2014
While the picture as at June 2011 still shows only seven municipalities with clean audits, we equally recognise the fact that about 120 municipalities have, for years, consistently received financially unqualified audit opinions. This means that these municipalities have the capacity to graduate to full honours if they also respond diligently to the priority of upgrading the internal quality controls in the areas of finance, service delivery reports and strict adherence to laws and regulations. One hundred and twenty is quite a critical mass to be able to turn the corner by 2014. A coordinated approach by all spheres of government in dealing with municipal challenges would have an even greater impact on the rest of the municipalities that still received worst audit opinions. What strengthens our optimism is the fact that these municipalities are a minority compared to three years ago, when the majority of municipalities had disclaimers of audit opinion.

My office has been unambiguous in spelling out all the pertinent actions that need to be attended to in over- coming challenges facing our municipalities. We have taken time to visit and brief all those charged with governance on what they need to do to turn their administrations around for the better. Government's strong will and commitment to improve and steer local government towards clean administration has been commendable. But the time has come to turn these commitments into actions that will see local government meeting and maintaining clean administration beyond 2014. Until leadership start to constantly monitor, evaluate and impose appropriate sanctions where there are deviations from internal control systems, we will continue to see the same picture year in, year out.

Supply chain management, commonly referred to as the tender process, is the area in government and in local government in particular on which most citizens raised a major concern. I will accordingly dedicate some time to this subject in my next column in August 2011.

Rural local municipalities such as Fetakgomo have shown us all that achieving a clean audit report is not a pipe dream; others need to emulate their best practices as local government marches toward the 2014 target.

Most of our stakeholders have commended my office for producing “simple, easy-to-read” general reports on audit outcomes. In response to these compliments, I appeal for many more such inputs to help us improve even further and fine-tune the quality of our communication to South Africans. Suggestions on this column or general reports can be sent to agsa@agsa.co.za.

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