31 January 2008

By Emily Visser

JOHANNESBURG has turned around its finances over the last five years, quadrupling its capital budget and improving its credit status. And now the City and its 14 municipal-owned entities (MOEs) have received an unqualified "clean audit" report for the 2006-07 period.

Speaking at a media briefing at the Metro Centre, Executive Mayor Amos Masondo said it showed that the City's financial management was in good hands, and it was remarkable considering the range of services it provided. "It is a significant milestone in our ongoing efforts to ensure clean and accountable governance in the City."

And there is more of which to be proud: Johannesburg has submitted consolidated group financial statements complying with the Generally Accepted Municipal Accounting Practices for the last three years, despite an exemption granted by Finance Minister Trevor Manuel. It is the only city in the country to have achieved this.

Parks Tau, the member of the mayoral committee for finance and economic development, ascribed this to the strong emphasis that is placed on building in-house capacity in the City. "Over the last two years the City has used its own capacity to produce its consolidated reports. The bar has been raised consistently every year."

In 2007, Manuel extended the deadline for full implementation of the Municipal Finance Management Act, exempting municipalities from preparing consolidated annual financial statements incorporating the statements of the municipality and its municipal entities, until 2008-09.

Masondo elaborated on the difficult financial road the City had had to travel over the last seven years. In the late 1990, Johannesburg was on the brink of financial collapse, unable to service debts, and with interest rates of up to 22 percent.

However, it devised an evolving strategy, Igoli 2002, that, among other things, improved financial management and accountability, focussed on attracting highly skilled staff and developed a strong political will to drive the process forward. "Another key element of Igoli 2002 was the corporatisation of City entities, which were converted into autonomous, but City-owned utilities, agencies and corporations (UACs)."

At least two major factors contributed to the turnaround, Masondo confirmed. The City had been able to increase its capital budget - raising revenue to deliver services - year-on-year over the past couple of years. The 2007-08 financial year had a capital expenditure (capex) budget of R4,7-billion, a 35 percent rise on the previous period. There was a time when the City's capex shrunk to a mere R84-million, Masondo pointed out.

And revenue collection rates were steadily climbing, Tau confirmed, with the year under review showing a 92 percent collection rate. "Part of the solution lies in cleaning our data through Project Phakama, a process which is ongoing."

The City envisages that Project Phakama will be completed by December 2008.

Another crucial intervention was the adoption of an Integrated Development Plan. "We are now able to set targets and identify priorities in terms of service delivery," Masondo confirmed.

In 2004, the City introduced Operation Clean Audit Report (Opcar), after it "became apparent that we needed to launch a fairly aggressive approach to our [the City's] financial operations", Tau said. Opcar's focus was to build an environment of strong financial control. Revenue management and an asset register were key components of Opcar.

Then, in 2006, Opcar was scaled up, with emphasis placed on the level and extent of accountability by management. An Opcar project team was formed that looked at the issues contributing to the City's receiving qualified audit reports. At the same time, the Johannesburg risk and audit services (JRAS) was established, looking into high-risk areas such as revenue and procurement.

JRAS maintains its independence and works within the guidelines set by the Institute of Internal Auditors. "To further good governance, JRAS is overseen by the Group Auditing Committee, established by the council to give additional assurance of independence."

The committee, consisting of independent professionals from the private sector, ensure that the quality and reliability of the City's financial information and financial statements are maintained.

Brian Hawksworth, the chairperson of the Group Auditing Committee, said that the committee had concentrated on problems identified by the auditor-general in the last audit report. "A number of matters were raised, relating mostly to [municipal] entities."

Specifically, unreconciled bank accounts and statements were at issue, but these were dealt with throughout last year, with "chief executive officers reporting throughout the year to the auditing committee". But, said Hawksworth, "most importantly, the City manager and staff put in considerable effort to achieve this unqualified audit".

"We place a serious premium on governance in the City," Tau concluded.

Source: Joburg.org.za