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CHAPTER 6: KPA – GOOD GOVERNANCE AND PUBLIC PARTICIPATION
6.11 Audit and Compliance .1 Internal audit
The scope of work of the Internal Audit function is to determine whether the municipality’s risk management, control and governance processes, as designed and represented by management, are adequate and functioning in a manner to ensure:-
• That risks are appropriately identified and managed;
• That interaction with the various governance groups occurs as needed;
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• That significant financial, managerial, and operating information is accurate, reliable, and timely;
• That employees’ actions are in compliance with policies, standards, procedures, and applicable laws and regulations;
• That resources are acquired economically, used efficiently, and adequately protected;
• That programs, plans, and objectives are achieved
• That quality and continuous improvement are fostered in the municipality’s control process.
• Those significant legislative or regulatory issues impacting the municipality are recognized and addressed appropriately.
• Effective, efficient and transparent governance / administration
6.11.2 Audit Committee
Matatiele Local Municipality has an Audit Committee. The Audit committee operates in terms of accepted terms of Reference for the Audit Committee as set out in the appointment letters subject to the provisions of Section 166 of the MFMA. In particular the Committee emphasizes that its overall objective is to ensure that good corporate governance is observed and practiced by the Municipality. In particular the purpose is to assist the Council in the course of the Council fulfilling and achieving its developmental objectives which are to deliver a quality service to ratepayers, service consumers and stakeholders utilizing minimum resources, while creating and bringing about a self- sufficient municipality.
The Audit Committee is responsible for all issues as outlined in Section 166 of the MFMA. This committee serves also as the Performance Audit Committee. The committee is made up of the following members:
NAME CONTACT NO.
T.W. TSABO (Chairperson) 083 392 3822;039 737 3319
B. MDLETSHE 082 604 1413;035 772 2433
W. MUSHOHWE 081 896 9610;078 444 8631
A. MARTINSON 072 630 8344;39 727 1570
M. NCIKI 072 220 5113;031 570 5600
Table 14: audit committee members
Audit Outcomes Opinions for the last three financial years
Opinion Financial Year Audit Findings
Unqualified Audit Opinion
(with matters of emphasis but no material findings) Clean Audit Opinion
2015/2016 Impairment loss
Electricity distribution losses
Predetermined Objectives; Usefulness and reliability of reported performance information
Qualified Audit Opinion 2016/2017 Property Plant and Equipment Material impairments - receivable Irregular expenditure
Unaudited disclosure notes
Unaudited supplementary information Achievement of planned targets Adjustment of material misstatements
Financial statements, performance and annual reports Unqualified Audi Opinion 2017/18 Material Impairments – Receivable from non-exchange
transactions
Material Impairments – Receivable from exchange transactions
Material Impairments – Property, Plant and Equipment Restatement of corresponding figures
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Irregular Expenditure Unaudited disclosure notes
Unaudited supplementary information Annual Performance reports
Achievement of planned targets Adjustment of material misstatements
Financial statements, performance and annual reports Strategic Planning and Performance Management
Table 15: Audit opinions for 3 financial years 6.11.3 Audit Plan
The purpose of this plan is to set out the nature, role, responsibility, status and authority of the Internal Audit function within the municipality and to outline the scope of the internal audit. The Audit Committee accepted the conclusions of the Auditor-General on the Annual Financial Statements for the year ended 30 June 2017.The municipality developed and an action plan (audit Improvement Plan). The plan in monitored by the internal audit unit, and is actioned by the by the management; to address the findings raised.
6.11.4 Compliance Auditing
Compliance Auditing is performed after the internal controls have been evaluated and is defined as test of controls with the objective to express an opinion that is satisfactory, needs improvement, or unsatisfactory on the achievement of the control objectives of each significant system.
6.11.5 Performance Auditing
The promotion of economy, efficiency and effectiveness depends on adequate overall management arrangements for planning, budgeting, authorisation, control and evaluation of the use of resources. Whereas accounting officers are responsible for the implementation of proper functioning of such overall management arrangements, the responsibility of performance audit is to confirm independently that these measures do exist and are effective and report to the management and the Audit Committee on these issues.
Accountability - The Internal Audit function, in the discharge of its duties, shall be accountable to the Audit Committee to:-
• Provide annually, an assessment on the adequacy and effectiveness of the organization’s processes for controlling its activities and managing its risk in the areas set forth under the mission and scope of work;
• Report significant issues related to processes for controlling the activities of the organization including potential improvements to those processes;
• Periodically provide information on the status and results of the annual audit plan and sufficiency of the division resources; and
• Coordinate with and provide oversight of other control and monitoring functions (risk management, compliance security, legal, external audit).
Independence - To provide for the independence of the Internal Audit function, it reports to the Accounting officer administratively and operationally to the Audit Committee periodically.
Responsibility - The Internal Audit function has responsibilities amongst others to develop a flexible annual audit plan using an appropriate risk-based methodology, including any risks or control concerns identified by management, and submit that plan to the Audit Committee for review and approval as well periodic updates. It also has a responsibility to implement the annual audit plan as approved, including as appropriate any special task or projects requested by the management and the Audit Committee.
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Authority - There are no restrictions placed upon the scope of internal audit’s work. Members of the internal audit function engaged on internal audit work are entitled to receive whatever information or explanations they consider necessary to fulfil their responsibilities to senior management. In this regard, internal audit may have access to any records, personnel or physical property of the organization.
6.12 Risk Management And Fraud Prevention