Progress Report on Operation
Clean Audit by 2014
Presentation to Select Committee on Appropriations
29 August 2012
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Outline of Presentation
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Introduction
Background on Operation Clean Audit
Audit Outcomes: local, provincial and national spheres of
government
Observation of the AGSA in respect of root causes behind
municipal audit outcomes
Priority areas for responding to municipal audit outcomes
Conclusion
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Introduction (1/2)

We hereby present to the Select Committee on
Appropriations, a comparative state of Municipalities on
Audit Outcomes for the Financial Years 2010/2011,
2009/2010 and 2008/2009, with a view to allow the
Committee to get progress update towards the 2014
target.
 We also submit, for the Committee to note too, the state of
performance by Provincial and National Departments
including National Parliament and Provincial Legislatures.
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We also present the consolidated support aimed at
improving municipal audit outcomes.
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Introduction (2/2)
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This we do as we analyse how big the challenge is and how
much we have to do, in mobilising all actors to work
together, in the spirit of Cooperative Governance, to turn the
situation around, with the aim of achieving the Local
Government Turn Around Strategy’s two aims, namely: Build
Confidence between the people and Government and build
a model Municipality characterised by the ability to provide
quality services, uphold good governance, enhance sound
financial management, roll out and maintain infrastructure
as well as fight corruption effectively.
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Background on Operation Clean Audit (1/2)
 Audit Outcomes are financial performance accounting systems in
terms of which the AG presents a report on the performance of
Government Departments, Municipalities and State-owned Entities,
reflecting on actual performance and providing details in dedicated
Management letters indicating what each Unit should do
 The picture of performance should be viewed against the
background that Government has set a target in terms of one of the
Turn-Around Strategy Projects: Operation Clean Audit, directing as
follows:
 That no Municipality should achieve a disclaimer or adverse rating by
2010/2011.
 That at least 60% of the 278 Municipalities should receive unqualified Audit
Opinion by 2011/2012;
 That Municipalities achieving unqualified Audit Opinion should increase to 75%
by 2013; and
 That all Municipalities shall achieve a Clean Audit opinion by 2014.
These targets are the same for provinces.
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Background on Operation Clean Audit (2/2)
 The department has also provided information on the state of
performance by Municipalities in terms of which it is indicated as to
which Municipality in a particular Province received a Clean,
Unqualified, Qualified, Adverse or Disclaimer rating, with the
understanding that:
• A Clean Audit rating is a performance level where the municipality
is found to have satisfied all the audit expectations.
• An Unqualified Audit rating is a performance level where there are
matters that are courses for concern and which the AG gives a
specific directive that such should be attended to.
• An adverse rating is a performance level where there is just
nothing on the basis of which the AG can express an opinion.
• A Disclaimer rating is a performance level where a Municipality
fails to provide recorded information to validate its facts on issues
they have to account on.
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THE AUDIT OUTCOMES
 The details of the Audit outcomes are:
• The three year comparison for municipalities, refer to Annexure A - it
must be noted that this is the status quo as at 27th July 2012 based on
the 278 existing municipalities (i.e. disestablished municipalities have
been excluded).
• The three year comparison for Provincial Departments and Provincial
Legislatures, National Departments and National Parliament, refer to
Annexure B.
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Observations of the AGSA
 The AGSA outline root causes. These are:
• Key officials lacking minimum competencies and skills;
• Lack of consequences for poor performance and
transgression;
• Slow response to AGSA message and not taking
ownership of key controls;
• None compliance with Laws and regulations.
• None reporting of performance information.
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Priority Actions for Responding to Municipal Audit Outcomes (1/2)
 The department has started a process of intensive engagement with
municipalities to understand root causes to performance linked to
the 5 LGTAS priority areas.
 In this regard the department has engaged with 3 municipalities,
namely, Mamusa Local Municipality in the North West, eMadlangeni
Local Municipality in KwaZulu-Natal and Ehlanzeni District
Municipality in Mpumalanga which shared their lessons.
• Mamusa
Local Municipality: Has not submitted Annual Financial
Statements (AFS) for the past 3 financial years. Financial management
matters relating to compilation of AFS was given to the district
municipality. Within 5 years, Mamusa had 5 Mayors, 4 CFO’s, and 3
Municipal Managers.
• eMadlangeni Local municipality made significant stride from being
qualified in 2009/10 to Clean Audit in 2010/11.
• Ehlanzeni District Municipality received Clean Audit for the last 2
consecutive years, and has in-house capacity in terms of compiling its
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AFS.
Priority Actions to Respond to Municipal Audit Outcomes (2/2)
 The department will engage with all municipalities that did not obtain
financially unqualified audit opinions over the next 3 months in terms
of the 5 LGTAS priority areas.
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Conclusion
 The Department is committed, working with all
stakeholders, to continue implementing measures
aimed at building a responsive, accountable,
effective and efficient local government system.
Thanks
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