20 September 2007
Programme Director Timothy Malule;
Wits Business CPMD Director Professor Mthuli Ncube;
Executive Mayors;
Speakers and Municipal Managers;
Officials;
Ladies and Gentlemen
The central issues concerning building capacity to manage municipal finance concern financial structure; capacitating internal audit, financial routines, training in terms of the NQF and skills transfer. The importance of focusing on practical solutions to capacity challenges is critical.
It is important to develop a common understanding regarding the budget and finance office and the treasury. In this, it must be understood that in an institution there are specific functions within its finance structure with specialist in areas such as budget office, recording of finance data, supply management personnel etc. There is uneven dedicated capacity for each of these functional areas. The distinction is critical in ensuring that solutions proposed are responding to the challenge of financial structures in municipalities may be in place, they are not functioning in line with legislation. There must be caution that the issue is not addressed to only in terms of compliance.
A distinction must also be made regarding capacity and capability. Whereas capacity refers to the personnel in terms of filling a vacancies and institutional systems and processes, capability refers to skills and competencies. As such, there is a need to focus on the challenge of municipalities in having appropriate finance structures to ensure effective service delivery. The structural issues relate to the need to establish functional budget offices, appointments of capable Chief Financial Officers (CFO) and Supply Chain Management. Currently, although municipalities have budget and treasury office structures in place, they are not consistently in line with legislative requirements. In addition, capacity constraints in terms of personnel and operational systems limit effectiveness and thus, result in municipalities' inadequate delivery of their financial mandates.
Responses to the need to improve finance capacity must take into consideration on capacity, capability, IT systems and instituting change management processes. Critical success factors must be in place to ensure that the interventions implemented are relevant and effective. These are political support, political will and top management support in transforming the finance function.
In part, the fulfilment of this financial mandate requires a paradigm shift in the mindset toward prudent financial management within municipalities that reflects a clear link between the finance function and service delivery. This requires change management processes that encourage the internalisation of Batho Pele principles, specifically in the finance sections of municipalities. It also requires the implementation and appropriate application of Acts such as the Employment Equity Act and Skills Development Act appropriately.
In responding to the challenges related to the overall finance capacity of municipalities, cooperative governance mechanisms must be actively used to review financial establishments of municipalities. This requires optimising current opportunities through various projects currently being implemented at national and provincial level. For instance, support grants such as, Financial Management Grant and Municipal System Infrastructure Grant, from National Treasury should be utilised correctly in terms of establishing "shared services."
Exploring the use of these shared services, should play a role in enhancing municipal capacity and creating economies of scale. There are already some instances of this in some municipalities, where the model of 'shared services' has been tested at district level. The quality of other National Treasury initiatives, such as internships, should be improved through appropriate use, regular monitoring and evaluation.
The issues raised by the Auditor-General year after year have nothing to do with accounting issues but have got to do with leadership. I had a meeting with the Auditor-General Terrence Nombembe recently and he said the issues that are being raised have nothing to do with accounting, but leadership and document management.
In addition, the human resource processes must be streamlined to enable appropriate skills to be attracted and retained. This includes ensuring that the human resource personnel have the necessary competencies and skills to facilitate appropriate recruitment and retention processes. Linked to this, there must be a proper performance management appraisal system that is informed by the Integrated Development Plans (IDPs) and Service Delivery, Budget and Implementation Plan (SDBIP), in order to ensure that personnel continue to receive incentives for high performance. SALGA can contribute by investigating the threshold for vacant positions in municipalities.
Efforts must be put in placed to increase awareness of a career pathing within municipal finance at tertiary institutions as this will encourage quality skills to enter the local government terrain. I believe that the Certificate Progamme in Management Development for Municipal Finance programme is one such initiative and an important mile stone reached to develop municipal capability in the treasury and finance departments.
In responding to the need to improve capabilities at municipal level, generic municipal training programmes must focus on all staff and not just top management. This will also enable the implementation of competency regulations. Linked to this, a standardised procedure for conducting skills audits must be established and implemented. This will create a solid based for the introduction of multi-year training, mentoring & coaching initiatives which should also be implemented and continuously monitored by province.
Let me re-iterate the point on mentoring and coaching, managers who have attended this program need to take the lessons, tools and techniques back into the work-place. I believe that you have the responsibility to initiate and find innovative ways to usher in a new culture of learning in municipalities. We need to transform the workplace into a learning organisation, improve on our dialog and conversations about better practice and knowledge exchange, bring about a community of practice and learning; in short you have the responsibility to ensure that your capability, knowledge and skills multiply in your municipality as many times as possible. The challenge is to have all the relevant financial officials qualified and capable by 2012. You are the firsts of the lot and I look forward to a complete turn-around in the skills deficit.
In facilitating training programmes, innovations such as electronic 'on-the-job' training should be made available across the Province. This will also create the possibility for pooling resources with capacity building initiatives by other key stakeholders such as, Development Bank of South Africa and National Treasury. From practical stand point, procedures manuals should be developed and included as part of the training programmes.
In addition, the introduction of online forums within the community of local government finance officials will also assist in building the required capacities and also provide space for exchange of lessons and knowledge. In addition, such forums and on-line resources could include portals of Portal of relevant local government policies and municipal by-laws etc.
In order to further strengthen municipal finance capability, every effort must be made to ensure that every consultancy contract includes a skills transfer clause, which is monitored and evaluated.
A key issue identified in capacity improvement effort for the efficient function of the municipal finance function relates to the general need for improved information technology systems. In this regard, every endeavour should be made to implement uniform systems with respect to finance, human resource, inventory management etc, through local government. We must ensure that there acceptability and feasibility. The use of common systems will also further enable an environment for interchanging skills and capacities across municipalities in the country.
The internal audit function of municipalities requires specific consideration. Central to its improvement will be the establishment of changes in the current reporting levels in order to comply with Internal Audit standards and Municipal Finance Management Act. With this, there must be training of management so as to enable it to fully understand the role and value of the Internal Audit function. In addition, detailed guidelines on the criteria for the appointment of Audit Committee members will need to be provided by Provincial Treasury.
Finally, at the level of districts, given the known capacity and personnel constraints, it will be necessary to establish a 'shared services' framework for the Internal Audit function. The overall finance function within municipalities will need to be systematically and consistently monitored by municipal management, in order to ensure that there is sufficient discipline in the operation or execution of the routine functions.
Knowledge is power, I wish to see many more Councillors and officials taking interest in self development to improve their skills and knowledge base. There should be a time in our lifetime that municipalities are functioning like business entities whose main interest it to please their shareholders. I have a firm belief that in Gauteng this is possible because we call our call ourselves a smart province. You are here to learn and make use of this opportunity to exactly just that. Enjoy the rest of the day!
I thank you.