Municipalities - the Role of National Treasury in Risk Management
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Public Sector Risk Management Framework
Municipalities - The role of National Treasury in risk management
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Template: Municipalities – The role of NT in risk management
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“Naganela Pele – Think Ahead” Public Sector Risk Management Framework Municipalities - The role of National Treasury in risk management
Contents
1 Purpose 1
2 Monitoring and assessment of risk management 1
3 Risk management capacity and training 2
4 Enforcement of risk management prescripts 3
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“Naganela Pele – Think Ahead” Public Sector Risk Management Framework Municipalities - The role of National Treasury in risk management
1 Purpose
Accounting Officers of Municipalities have an explicit duty to ensure that
effective, efficient and transparent systems of risk management are
implemented and maintained within their Institution.
This document is intended to outline the specific responsibilities of National
Treasury (NT) in developing the risk management activity in Municipalities. In
this regard NT has specific duties to:
monitor and assess the systems of risk management in Municipalities;
assist with building risk management capacity in Municipalities;
enforce the PFMA (by implication the specific prescripts therein pertaining
to risk management) in Municipalities.
2 Monitoring and assessment of risk management
The MFMA make it clear that Accounting Officers are responsible for
implementing effective, efficient and transparent systems of risk management
within the institutions under their control. National Treasury must monitor that
Municipalities comply in this regard.
Furthermore, National Treasury needs to assess the quality of implementation
to ensure that implementation does not become the end in itself, but a means
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to help institutions to understand their risks and manage such risks in a
prudent manner.
Section 5(2)(c)(i) states that the NT may monitor and assess compliance by
the municipalities with the MFMA. Section 5(2)(f) empowers NT to take any
other appropriate measures to perform its functions effectively. These
particular prescripts therefore permit NT to monitor and assess risk
management within the local sphere of government.
3 Risk management capacity and training
Accounting Officers are responsible for ensuring that a system of risk
management is implemented within their Municipality. As such, Accounting
Officers are responsible for ensuring that their Municipality has sufficient
capacity to implement and maintain the risk management activity.
In terms of Section 34(1) of the MFMA (and in the spirit of the co-operative
government), “the national and provincial governments must by agreement
assist municipalities in building the capacity of municipalities for efficient,
effectiveness and transparent financial management.”
It can be interpreted that while PT’s are to take the lead in the building of risk
management capacity in municipalities in their respective provinces, NT has
also a duty to assist and support PT’s in this regard.
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“Naganela Pele – Think Ahead” Public Sector Risk Management Framework Municipalities - The role of National Treasury in risk management
Municipalities must therefore refer all requests for assistance in risk
management to their respective PT’s. The PT’s must decide on the best
course of action to deal with such requests, after taking into consideration
their own capacity to provide the required support and/or the possibility of
assistance from NT.
4 Enforcement of risk management prescripts
National Treasury have a responsibility to enforce risk management prescripts
in instances where non-compliance or poor compliance is observed.
Section 5(1)(c) of the MFMA requires NT to enforce compliance with
measures established in terms of the Act, in this instance sections 62(1)(c)(i)
and Section 95(c)(i). Furthermore, Section 5(3)(c) requires PT’s to assist NT
in enforcing compliance with the measures established in terms of the Act.
Sections 5(2)(e) and 5(4)(d) empower NT and PT’s respectively to take
appropriate steps if a municipality in the province commits a breach of the
MFMA .
In terms of Sections 171(1)(b), failure by the Accounting Officer of a
Municipality to comply with their responsibilities for risk management shall
constitute an act of financial misconduct. Officials in Municipalities delegated
with responsibilities for risk management may also be guilty of financial
misconduct if they fail to fulfil such delegated risk management responsibilities
in terms of Section 171(3)(a).
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