DRAFT OF 1 NOVEMBER 2002
CHAPTER 10
FINANCIAL REPORTING AND AUDITING
Submission of annual report and financial statements and audit report to
controlling municipality
73. (1) The accounting authority of a municipal entity must, within one month after receiving the Auditor-General’s audit report in terms of section 72 (2), submit to the entity’s controlling municipality, the annual report and financial statements and the Auditor-General’s audit report on those statements.
(2) The Auditor- General may submit the financial statements and the audit report directly to the controlling municipality of the municipal entity if the accounting authority of the entity fails to comply with subsection (1).
Compliance to be monitored
74. The accounting officer of the controlling municipality must –
(a) monitor whether the accounting authority of the municipal entity has complied with section 72 (1) and 73 (1);
(b) establish the reasons for any non-compliance; and
(c) promptly report any non-compliance, together with the reasons for such non-compliance, to the council of the controlling municipality, the MEC for local government and the Auditor- General.
Tabling of annual report and financial statements and audit report in municipal council
75. (1) The accounting officer of a municipality which has a municipal entity under its ownership control must–
(a) table in the municipal council for discussion and, as necessary, adoption in accordance with section 76 –
(i) the annual report and financial statements of the municipal entity;
(ii) the audit report on those statements; and
(iii) particulars of any corrective action taken or to be taken in response to issues raised in the audit report; and
(b) submit to the National Treasury, the MEC responsible for local government in the province and any other organ of state as may be prescribed—
(i) the annual report and financial statements and the audit report; and
(ii) particulars of any corrective action referred to in paragraph (a) (iii).
(2) The documents referred to in subsection (1) must–
(a) in the case of a municipal entity under the sole ownership control of the municipality, be tabled in the council when the consolidated annual report and financial statements referred to in section 69 (1) are tabled; or
(b) in the case of a municipal entity under the joint ownership control of the municipality, be tabled in the council within one month after the municipality has received the Auditor-General’s audit report.
(3) The Auditor-General may submit the financial statements and the audit report directly to the council of the controlling municipality or the MEC responsible for local government in the province if the accounting officer of the municipality fails to comply with subsection (1).
(4) The annual report and financial statements, the audit report and particulars of any corrective action taken or to be taken in response to issues raised in the audit report, including any recommendations by the municipal entity’s audit committee, must be made public when tabled in the municipal council.
Part 3: General
Adoption of annual report and financial statements
76. (1) The council of a municipality must consider and adopt an annual report and financial statements not later than two months from the date on which the report and statements were tabled in the council in terms of section 69 or 75. A municipal council may adopt an annual report and financial statements subject to such qualifications and explanations as it may consider necessary. Such qualifications and explanations may be contained in a separate oversight report issued by the council.
(2) The accounting officer must—
(a) give notice of any council meeting at which documents referred to in section 69 or 75 are to be tabled or discussed or at which decisions concerning those documents are to be taken, and of any public hearings by the council or a council committee on those documents –
(i) to the local community, by notice in the media; and
(ii) to the Auditor-General and the provincial department responsible for local government matters in the province, in writing; and
(b) attend such meetings for the purpose of responding to questions concerning those documents; and
(c) submit copies of the minutes of those meetings to the Auditor-General and the relevant provincial department responsible for local government matters.
(3) Within 14 days of the adoption of the annual report and financial statements the accounting officer must make copies of the report and statements accessible to the local community, interested organisations and the media, free of charge or at a reasonable price.
(4) The National Treasury may issue guidelines on –
(a) the manner in which municipal councils should consider the documents referred to in section 69 or 75 and conduct public hearings; and
(b) oversight reports.
Council meetings open to public and certain public officials
77. (1) The meetings of a municipal council at which documents referred to in section 69 or 75 are to be discussed or at which decisions concerning those documents are to be taken, must be open to the public and a reasonable time must be allowed –
(a) for the discussion of any written submissions received from the local community on those documents; and
(b) for members of the local community to address the council.
(2) Representatives of the Auditor-General and any interested national or provincial department, are entitled to attend, and to speak at, any council meeting referred to in subsection (1).
Issues raised by Auditor-General in audit reports
78. (1) A municipality must address any issues raised by the Auditor-General in an audit report. The speaker of the municipality must ensure compliance by the municipality with this subsection.
(2) The MEC for local government must—
(a) assess all financial statements, oversight and audit reports and determine whether the affected municipality has addressed any issues raised by the Auditor-General in an audit report; and
(b) report to the provincial legislature any omission by a municipality to adequately address those issues within 60 days.
Submissions to provincial legislatures
79. (1) The following documents must be submitted to the provincial legislature:
(a) the annual report and financial statements of each municipality;
(b) the annual report and financial statements of each municipal entity except if included in the consolidated annual report and financial statements of the controlling municipality;
(c) the Auditor-General’s audit report on those financial statements;
(d) the adoption resolution in terms of section 76 (1) and any oversight report issued by the council, including any qualifications or explanations subject to which an annual report and financial statements have been adopted;
(e) a report by the Auditor-General on any responses by the relevant municipality or municipal entity to any issues raised in an audit report; and
(f) an assessment by the Auditor-General whether those responses satisfactorily address the relevant issues.
(2) The accounting officer of a municipality must submit the documents
referred to in subsection (1) (a), (b) and (d) to the provincial legislature within 30 days
after the municipal council has adopted the annual report and financial statements in
terms of section 76 (1).
(3) The Auditor-General must submit the documents referred to in subsection
(1) (c), (e) and (f) to the provincial legislature without delay.
(4) The MEC responsible for local government in a province must monitor
whether municipalities in the province comply with subsection (2).
(5) A provincial legislature may deal with the documents referred to it in terms of subsection (1) in accordance with its constitutional powers.
Consequences of non-compliance with certain provisions
80. (1) If the accounting officer of a municipality fails to submit financial statements to the Auditor-General in accordance with section 69 (1), or fails to table the annual report and financial statements, or the audit report on those statements, in the council in accordance with section 70 (1)—
(a) the accounting officer must promptly table in the council a written explanation setting out the reasons for the failure;
(b) the Auditor-General, in the case of any failure to submit financial statements for auditing must promptly —
(i) inform the speaker of the council, the National Treasury and the MEC for local government in the province of such failure; and
(ii) issue a special report on the failure to the relevant provincial legislature; and
(c) the municipal council –
(i) must request the mayor or any other councillor to investigate the reasons for the failure and report to the council; and
(ii) must take any appropriate steps to ensure that the financial statements are submitted to the Auditor-General or that the annual report and financial statements, and the audit report on those statements, are tabled in the council, as the case may be; and
(iii) may take disciplinary steps against the accounting officer or other person responsible for the failure;
(d) the MEC for local government may intervene in the municipality in terms of section 139 of the Constitution; and
(e) the National Treasury may take appropriate steps against the municipality in terms of section 5 (2) (h).
(2) The Auditor-General must submit to Parliament and the provincial
legislatures –
(a) by no later than 31 October of each year, the names of any municipalities or municipal entities which have failed to submit their financial statements to the Auditor-General in terms of section 69 (1) or 73 (1); and
(b) at quarterly intervals thereafter, the names of any municipalities or municipal entities whose financial statements are still outstanding at the end of each interval.
Annual report to Parliament
81. The Cabinet member responsible for local government must annually report to Parliament on actions taken by MECs for local government to address issues raised by the Auditor-General in audit reports on financial statements.
Investigations and special audits by Auditor-General
82. (1) The Auditor-General may carry out an appropriate investigation or special audit of any municipality or municipal entity if the Auditor-General considers it to be in the public interest or upon the receipt of a credible complaint.
(2) The Auditor-General may appoint a person to carry out an investigation or special audit in terms of section (1) on behalf of the Auditor-General.
(3) If the Auditor-General issues a special report on an investigation or special audit in terms of subsection (1)—
(a) the report must promptly be tabled in the council of the relevant municipality or, in the case of a municipal entity, the council of the controlling municipality; and
(b) the Auditor-General must submit a copy of the report to—
(i) the National Treasury; and
(iii) the relevant provincial legislature.
(4) The Auditor-General may claim the reasonable cost of performing the duties and exercising the powers in terms of this section from the municipality or municipal entity in question or, in the case of non-payment by the municipal entity, from the controlling municipality.