SALGA PRESENTATION ON 2004/05 FINANCIAL STATEMENTS

PORTFOLIO COMMITTEE ON PROVINCIAL AND LOCAL GOVERNMENT 05/09/2006

 

HISTORICAL CONTEXT

 

.:. SALGA was until September 2004, under political leadership of the former Executive Mayor of Tshwane, Fr S. Mkhatshwa and administrative leadership of Mr. T. Mokwena.

.:. Election of the current National Executive Committee under the leadership of Executive Mayor of Johannesburg, Cllr. A. Masondo took place in Sept. 2004

.: Dr Makhosi Khoza took office as the Chief Executive Officer on November 15, 2004 (five and half months into the financial year)

.:. Majority of her executive management team (including CFO) took office on January 5,2005, (seventh month into the financial period)

.:. NEC Strategic Planning session was held towards the end of January 2005

.:. Organisational structures were finalised and implemented.

 

 HISTORICAL CONTEXT

.:. Provincial and National SALGAs were autonomous until 2002

.:. In 2002 SALGA restructured itself into becoming a unitary structure

.:. Six provinces accepted the restructuring: EC; FS; MP; LIM; NW and NC

.:. KZN; Gauteng and WC rejected restructuring and therefore remained autonomous until March 2005

.:. The six provinces that accepted restructuring were all under-resourced provinces both in terms of finance and human resources

.:. The situation in these provinces unfortunately remained the same even post restructuring until the current leadership took office

.:. Provincial offices were headed by junior officials (Provincial Directors, fourth layer of management)

 

HISTORICAL CONTEXT

FINANCES .

.:. Even post the 2002 restructuring, provinces and national offices continued to produce different financial statements

.:. They continued to be audited independently (with only two provinces and the national office audited by the Office of the Auditor General)

.:. The PFMA was only applicable to the national office and not to the provinces

.:. Policies and procedures and other financial protocols were not harmonised

.:. Some province did not produce financial statements, and consequently not audited since 2000

.:. Most finance officers charged with running finances of the provinces lacked basic

understanding of accounting

.:. At national level an official responsible for finance was a very junior manager

.:. The in-house internal audit was very weak, manned by under-qualified individuals

.:. The Audit Committee at the time was seriously not capacitated to deal with issues effectively (information was withheld from them, it appears)

 

REMEDIAL STEPS

.:. KZN, Gauteng and WC were incorporated to SALGA by March 2005

.:. Due diligence audit was done in those provinces

.:. Capacity in the provinces was seriously increased by immediately deploying staff from national office and further by recruiting suitable staff

.:. Finance staff in provinces are constantly trained and their performance monitored

through reports that they are required to submit monthly

.:. Forensic audit was commissioned in March 2005

.:. Policies and procedures and other financial protocols were standardised

.:. Internal audit was outsourced as a temporary measure whilst we are building proper in-house capacity

.:. Financial statements were consolidated in 2004/05 financial year for the first time

.:. Audit Committee was replaced by the new one with three chartered accountants, an advocate and the CFO of a metro

 

REMEDIAL STEPS

.:. A chartered accountant was appointed as head of finance

.:. Experienced staff was employed and supply chain management unit was set up

.:. A detailed action plan to avert disclaimer or any negative audit opinion in future was developed and was approved by the audit committee, and is constantly monitored by the Audit Steering Committee (comprising of internal auditors and audit general), chaired by the CFO

.:. In the past with regard to revenue and debtors, membership levies were accounted for on cash basis, which practice was endorsed by Auditor General. During the year in question, the Auditor General changed their view in this matter as a result they disclaimed

.:. Other matters that SALGA was disclaimed on are properly addressed in the 2005/06 financial statements which have been sent to the Auditor General already for auditing

 

CONCLUSION

.:. A disclaimer of audit opinion brought about a lot of difficulty to the current management, which had little or no control over the period in question

.:. SALGA is quietly confident that it has done all what it can to secure a positive audit report for 2005/06 financial year

.:. SALGA continues to perfect our systems as the organisation to ensure sound financial management

.:. SALGA has full confidence in its checks and balance structures (internal audit and audit committee).

.:. Political structures in the organisation are properly exercising their oversight role

.:. SALGA constantly sends quarterly reports to DPLG and National Treasury