The King Report on Corporate Governance requires management to confirm publicly that it has reviewed the effectiveness of the internal control of the organisation. The implementation of control and information systems is essential to the effective discharge of manage-ment’s responsibilities.
Council must continuously review current trends and best practice in relation to corporate governance. As part of Council’s plans to fulfil its obligations to demonstrate greater accountability and ensure higher quality of service, Council has decided to address internal control through the establishment of a Performance and Audit Committee. The need for such a Committee is also stipulated in the Municipal Finance Management Act, Section 166 of the Municipal Finance Management Act, Act 56 of 2003.
The specific responsibilities assigned by the Council to the Committee, are outlined in the Performance & Audit Committee Charter and details the manner in which the Committee will operate. The charter is subject to annual review by the Council.
The Council approved the appointment of the members to serve on the Performance & Audit Committee for the period 1 Oct 2016 – 30 Sep 2019.
The members were appointed in line with Section 166(5) of the Municipal Finance Manage-ment Act, Act 56 of 2006.
AUTHORITY AND POWERS
The Committee is an independent committee and does not have any executive powers and consider matters relating to management and the Council in the discharge of their duties to safeguard assets, operate adequate systems and controls and review annual financial statements.
The Committee does not perform any management functions or assume any management responsibilities as this could prejudice the objectivity of the Committee. The Committee will mainly make recommendations to management in respect of the activities.
The committee fulfils its functions according to the requirements of the above-mentioned section, i.e.:
Section 166 (2): A Performance and Audit Committee is an independent advisory body which must –
- advise the municipal council, the political office-bearers, the accounting officer and management staff of the municipality, or the board of directors, the accounting officer and the management staff of the municipal entity, on matters relating to –
- internal financial control and internal audits;
- risk management;
- accounting policies;
- the adequacy, reliability and accuracy of financial reporting and information;
- performance management;
- effective governance;
- compliance with this Act, the annual Division of Revenue Act and any other applicable legislation;
- performance evaluation; and
- any other issues referred to it by the municipality or municipal entity;
- review the annual financial statements to provide the council of the municipality with an authoritative and credible view of the financial position of the municipality or municipal entity, its efficiency and effectiveness and its overall level of compliance with this Act, the annual Division of Revenue Act and any other applicable legislation;
- respond to the council on any issues raised by the Auditor-General in the audit report;
- carry out such investigations into the financial affairs of the municipality or municipal entity as the council of the municipality, or in the case of a municipal entity, the council of the parent municipality or the board of directors of the entity, may request; and
- perform such other functions as may be prescribed.
Section 166 (3): In performing its functions, a Performance and Audit Committee has access to the financial records and other relevant information of the municipality or municipal entity; and must liaise with the internal audit unit of the municipality; and the person designated by the Auditor-General to audit the financial statements of the munici-pality or municipal entity.
The Committee considers any matters that it determines desirable, in relation to the finan-cial affairs of the Council and to the internal and external audit of the Council’s activities, including the following:
- Review and approval of the Internal Audit Charter;
- Review the audit approach of the internal audit function, for compliance with The Institute of Internal Auditor’s Standards for the Professional Practice of Internal Auditing;
- Review of the organisational structure, competence and qualifications of the inter-nal audit function;
- Review of plans and budgets of the internal audit function and, in so doing, to ensure that the plans address the high-risk areas and that adequate resources are available;
- Review of audit reports, action plans and/or action taken by management;
- Ensuring that the work performed by the internal audit function is co-ordinated with that of external audit in order to minimise duplication of work;
- Ensuring that no unreasonable restrictions or limitations are placed on the internal audit function;
Responsibilities relating to the external audit function performed by the Auditor-General:
- Ensure that there are no restrictions or limitations placed on the external auditors;
- Review the Auditor-General’s report and action taken by management to rectify unsatisfactory issues;
- Consider significant disagreements between the external auditors and manage-ment;
- Consider material unsolved accounting and auditing problems; and
- Ensure direct access by the external auditors to the Committee, the Chairperson of the Committee and the Municipal Manager.
Responsibilities relating to Anti-Fraud & Corruption:
The role of the committee is to oversee the institution’s approach to fraud prevention and corruption incidents, reported by employees or other external parties. This committee is a sub-committee of the independent members of the Performance & Audit Committee. The various business divisions should have representation of a compulsory member.
The committee shall meet at least quarterly to discuss the following issues:
- Progress made in respect of implementing the Anti-Fraud & Corruption Strategies and Fraud Prevention;
- Reports received by the institution regarding fraud and corruption incidents with the view to making any recommendations to the Chairman of the Audit Committee;
- Reports on all investigations initiated and concluded; and
- All allegations received via the hotline.
The members of the committee possess the necessary skills, experience and qualifications to fulfil their duties and responsibilities. The skills vary from accounting, AGA of SAICA, financial and business management and MBL (Advanced Financial Systems).
The committee meets quarterly and an approved sitting allowance is payable.