Municipalities - the Role of National Treasury in Risk Management

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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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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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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“Naganela Pele – Think Ahead”