Abstract
This research study establishes the reasons and challenges that a local government in South African municipality faces in monitoring adequate internal control and compliance management. The reports of the Auditor General of South Africa (hereafter referred to as AGSA) regarding the state of local municipalities have identified the monitoring of internal control and compliance management as an important highlighted area of weakness in many South African local government structures. It is against this background, that a single case study is undertaken on a local municipality in the Gauteng Province to address the following aspects: (i) challenges experienced when developing and implementing control mechanisms; (ii) the necessity to develop effective internal controls; (iii) the type of internal control mechanisms developed; (iv) the drivers of internal control mechanisms; and (v) actions that the local municipality can take to implement internal control mechanisms effectively. This qualitative study is conducted to obtain a deeper understanding of the views held by senior managers and managers in relation to the topic of the study. A sample of 15 participants from a local municipality in the Gauteng Province is selected through a purposive non-probability sampling technique.
The use of semi-structured interviews with selected participants for data analysis reveals that monitoring internal controls and compliance management needs to be supported by senior management with properly planned performance management strategies that are integrated into the planning and governance process of the local municipality. The most significant findings from the collected data follow a logical progression as shown below:
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Firstly, the lack of appreciation by line managers to implement internal controls.
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Secondly, the unwillingness of line managers to accept responsibility for a lack of intellectual capital. This amounts to a lack of recognition of the importance of these factors.
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This lack of consequence management and accountability also contributes to poor organisational culture and adds to the non-compliance of internal controls in this selected local municipality.
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The combination of the lack of training and conviction (lack of knowledge, skills and awareness, poor planning and lack of accountability) by line managers and employees all contribute to the non-compliance of internal controls in this local municipality.
Therefore, the local municipality is not able to monitor the internal controls owing to a lack of strategic leadership because the City Manager does not manage compliance management directly. The lack of implementation of legislation, policies, and regulations then has effects on the general awareness of compliance management structures within local municipality. The City Manager, therefore, needs to improve strategic leadership on compliance in terms of internal controls and compliance monitoring. In addition, the use of risk management and internal auditing committees to execute these functions should, (i) have more capacity to monitor effectively; and (ii) external advisory commissions should be made responsible for monitoring internal controls and compliance management. This should include staff delegated to support these committees at the local municipality.
In terms of this research study, the recommendation is that the City Manager at this particular South African local municipality needs to establish, (i) a service such as an
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external advisory committee, as well as (ii) an internal audit and risk management function under an independent Compliance Management Department, in terms of section 62 of MFMA. These assurance service providers should have the authority to provide management with an adequate and effective organisational system of internal control processes to reduce all potential risks.
A further recommendation is that the City Manager should directly manage compliance at the local municipality in ensuring the implementation of legislation, policies, and regulations for a crucial practical awareness of compliance of its management structures.