• Corne Oberholzer is a director in consulting and industry leader for local government at Deloitte
• Justin Diedricks is an associate director: risk advisory, Deloitte Western Cape

Any discussion about ways to improve local government finances, and therefore service delivery, would be incomplete without a focus on the role of leadership: style and substance, as well as actions and utterances.

There are many factors that are required to achieve a clean audit and sustain good performance. They range from sound financial management, continually improving skills depth, governance and oversight, performance management as well as regulatory compliance. But leadership is the glue that holds it all together, it is the crucial pillar around which all else revolves.

In the case of a municipality, the executive mayor, the council, municipal manager and senior officials must take ownership and accountability for achieving a clean audit and lead by example. The first and most important task of the municipality’s leadership is to achieve alignment between political and administrative leadership – too often municipal governance, effectiveness and sustainability break down due to tensions, lack of alignment or poor role clarification between politicians and officials. Once such alignment has been established, a key task is to put in place internal controls to monitor income and expenditure flows. This includes putting in place a strong internal audit function and an audit committee.

The leadership must continually review performance against concerns raised by the Auditor-General. The task cannot be left to the chief financial officer and senior financial managers. The reasons for poor audit outcomes are complex and often extend beyond poor financial management.  Collective ownership for ensuring improvement is therefore non-negotiable.

The relationship between the audit committee, the internal audit function and leadership requires nurturing and direction so that it becomes a trusted business advisory relationship.

Municipal leaders need not shoot in the dark without a guide. The Municipal Systems Act (MSA) and Municipal Finance Management Act (MFMA) provide important guidance on the operation of the governance framework.

The lack of implementation in municipalities is therefore not arising from an absence of guidance and legislation, but rather a lack of capacity, skills and accountability by leadership. Municipality leadership can demonstrate their positive behaviour through a number of actions. They can influence and guide the development of credible action plans to address the internal control deficiencies of audit findings and establish key control processes.

Municipal mangers must also monitor the action plans and key control processes on a regular basis and hold individuals accountable when the action plan targets are not achieved and the key control processes are not executed accordingly.  Leadership must therefore develop and monitor a relevant and user-friendly dashboard to ensure that progress and performance information is tracked.

The oversight function for municipalities at provincial level should also be functioning effectively and engagement between officials at provincial and municipal level should be clearly outlined and formalised. This will include requirements and targets for monitoring and reporting the information that the council, the Oversight Committees (including Audit Committees) and the executive mayor require to perform their duties.

The various oversight structures within council and those falling under the office of the executive mayor need to have measurable work targets which should be evaluated on an annual basis.

Municipalities face a complex and massive human resources challenge. The first, and probably the biggest, failure by too many municipalities is the practice of appointing people who do not have the right skills, competencies or experience to perform the job recruited for.  Once appointed, too few municipalities then have an effective performance management framework and system – again a key leadership failure.

Also, employees do not keep up with the changing local government environment through on-going training and development. There is also poor management of vacancies and acting positions. The biggest challenge for local government therefore is to attract, retain and develop qualified competent people across all areas of the organisation. High vacancy levels and key positions being vacant for long periods across the municipalities invariably result in poor performance.

The management of vacancies and acting position requires management to examine a number of underlying factors. These include the municipality’s attraction and retention policies, including offering market related or competitive packages and other incentives, as well as providing an environment that is conducive to job satisfaction for professionals. Poor human resource management and recruitment procedures and slow decision making on key appointments can also contribute to the municipality missing an opportunity to attract skilled senior employees.

The last area that leadership must develop and monitor closely is an effective Information Technology (IT) governance framework. Once again, this is an area of collective responsibility. The starting point to developing an IT governance framework is a business case outlining why the municipality is embarking on an IT governance programme including benefits to be derived. There needs to be strategic alignment between IT and the municipality’s Integrated Development Plan (IDP). Governance structures, such as senior management, need to provide guidance and ensure that IT enables and supports the municipal IDP with cost effective IT services, in a stable, reliable and secure manner.

Formal service level agreements (SLAs) to monitor the services rendered by service providers must be put in place and enforced. This will include service level agreements with third parties and a memorandum of understanding between the district and local municipalities with regard to any IT services provided by the district municipality.

Internal control deficiencies do not represent an insurmountable challenge. They do, however, require leadership, armed with the appropriate tools and surrounded by the appropriate expertise, to exercise regular oversight over activities within the municipality and hold people accountable for poor performance.