Generally Recognized Accounting Practice (Grap) lays down specific responsibilities for Local Government in presenting their financial results. Our models and approach in terms of our work takes cognizance of these key imperatives in our approach to the compilation of Annual Financial Statements as well as the subsequent Audit.
Equally important is compliance with the Municipal Finance Management Act (Act no 56 of 2003), Division of Revenue Act, Value Added Tax Act, Municipal Structures Act (Act no 117 of 1998),Supply Chain Management Regulations and others.
Our approach will ensure that all procedures conducted contribute towards the overall achievement of the objectives of the Municipality, especially those stipulated in your strategic planning documents.
We will achieve this by ensuring a systematic approach, governed by stringent deadlines. To ensure accuracy and completeness of information presented to the Municipal Manager and the council.
Our project approach is designed to ensure sufficient co-development and on-the-job transfer of skills to the Municipal officials participating in the process.
Based on our experience of similar projects, we have defined a structured and pragmatic approach, incorporating good business practice designed specifically to meet your requirements.
Our work on this assignment would be carried out with an overriding methodology of quality, to ensure the delivery of consistent and high quality outputs. Our Project Management Methodology will be used to ensure that the project is strictly controlled, and that deviations are immediately identified, investigated, reported and corrective measures put in place.
A critical success factor in engagements of any nature, is the establishment of a close partnering between the client and the strategic advisors. Mutual trust and integrity must underpin the relationship going forward. This ensures working towards a shared vision and ultimate objective, as well as an environment of open communications, co-development and co-operation.
Effective project management arrangements will be critical if the project is to be delivered on time and within budget. The Project Team will prepare the required deliverables to the satisfaction of the Project Manager.
Whilst ensuring that our methodology is aligned to leading practice, our approach must be consistent and aligned with the strategic objectives of the Municipality and must build upon information, documentation and intellectual knowledge that already exists. It is also critical that all deadlines are met and the AFS is submitted on time.
Audit related issues are an ongoing process and problem, some municipalities lack the specialist skills to conclude a successful audit. With a great deal of experience in this area we can be of benefit to any municipality.
It is essential to determine the scope of work and the amount of intervention needed with relation to prior year audits as well as current year Audits.
The appointment to be performed in supporting your existing structures with the prior year audit and the current year audit would comprise three phases, the execution of each being dependent upon the satisfactory completion of the preceding phase.
The inability to collect debt, account for revenue and dwindling financial resources were some of the main reasons for municipalities’ ill financial health historically.
Issues affecting the going concern principle are caused by poor debt collection and a lack of revenue generation among other things, according to the auditor general report in 2014-2015 nearly half of municipalities had an average debt-collection period of over 90 days.
Finovo together with our IT partners, will implement the appropriate debt collection software to ensure we reduce the number of debtor days, whilst capacitating the finance department.
Increasing input tax deductions
Assessment and review of:
Supplies made in the production of income and furtherance of carrying of an enterprise.
Input tax deduction can only be attributable to expenses directly linked to the purpose of consumption, use or supply in course of making taxable supplies.
Suppliers who are acting as an Agent for the Municipality and the Municipality being a Principal.
Taxable supply in which Vat is levied at the Zero-rate
Grants received from Province for erection of low-cost houses, infrastructure development – all the expenses incurred from Suppliers/Contractors are direct deduction of the input tax allowed provided the supplier is a Vendor. Even though the Municipality does not have Output tax liabilities as a declaration – the enterprise has a direct benefit of Input tax as a deduction.
Decreasing output tax payments
Assessment and review of:
Test a random sample of revenue item to ensure compliance and identify potential improvement.
Determine improvements in collaboration with Accounting System provider.
Obtaining refunds of overpayments and recoveries of penalties previously claimed in error
As a primary objective, most municipalities require sufficient guidance to junior staff. Where significant management level vacancies have occurred in the Finance Department, Finovo can offer a short to medium term solution. Vacancies are bound to have an impact on the successful compilation and audit of the Annual Financial Statements as well as the adherence and implementation of internal controls and general compliance.
We propose that we provide representatives gaps perfectly. This representative will be appointed on a rolling contract basis with the following advantages:
At the client premises, full time.
Use Finovo Hardware (computers, software etc.).
Access to the vast skills within Finovo.
No statutory obligations towards sars or the department of labour as this appointment will be viewed as an independent contractor ito South African legislation.
The Service Delivery and Budget Implementation Plan (sdbip) details the implementation of service delivery and the budget for the financial year in compliance with the Municipal Finance Management Act(mfma), 2003 (Act 56 of 2003). The sdbip serves as a contract between the administration, the Council and the community, expressing the objectives set by the Council as quantifiable outcomes that can be implemented by the administration over the next twelve months. The sdbip facilitates the process of holding management accountable for their performance. It provides the basis for measuring performance in the delivery of services.
The MFMA requires the following to be included in the sdbip of a municipality:
Monthly projections of each source of revenue to be collected.
Monthly projections of each vote’s expenditure (operating and capital) and revenue.
Quarterly projections of each vote’s service delivery targets and performance indicators.
Information on expenditure and service delivery in each ward.
Detailed capital works plans allocated by the wards over three years.
The MFMA requires the Municipality to compile a sdbip for submission to the Executive Mayor. mfma Circular No. 13 further states that "…being a management and implementation plan (and not a policy proposal), the sdbip is not required to be approved by Council…"
Finovo will gladly assist in addressing this matter should the need arise.
Finovo prepares the Annual Report in accordance with the requirements of relevant legislation. The information presented in any report is a product of established internal policies, procedures and controls related to the management of organisational performance designed to provide reasonable assurance on the integrity, usefulness and reliability of the information reported.
A consultative approach will be taken in developing an Annual Report to ensure that the information presented is useful, credible and reliable. Various internal stakeholders including line function departments, entities and various governance structures of the municipality must be consulted.
Grap complaint asset register including verification
Our Approach to this section of any engagement considers the relevant legislation guiding the accounting procedures and the requirements for the creation of a Grap 17 compliant asset register.
Annually various entities are required to comply with prescribed accounting standards, in the case of Property Plant and Equipment it is governed by Grap 17 as set out by the Accounting Standards Board (asb).
The objective of this Grap 17 (Property Plant and Equipment) is to prescribe the accounting treatment for property, plant and equipment so that the users of financial statements can discern information about an entity’s investment in its property, plant and equipment and the changes in such investment. The principal issues in accounting for property, plant and equipment are the recognition of the assets, the determination of their carrying amounts and the depreciation charges and impairment losses to be recognised in relation to them.
We understand that the outcome of the asset register is for you to account for your assets as described by Grap 17, but even more importantly for it to satisfy the scrutiny of the Auditor General.
An entity requires accurate data in respect of each employee from which an adjusted provision for leave pay can be calculated and included as a reduced liability in the annual financial statements of the Council.
The leave records already exist but there might be uncertainty as to the accuracy and completeness thereof.
The adjustments needed to leave balances
Huge reductions in leave pay outs.
The compilation of the leave pay provision required at year end
It is assumed that all the data that will be necessary for execution of the work planned will be available from the Council and that Finovo representatives will not have to spend undue time in searching for missing records for the purpose of completing this assignment.
In the event that the raw data required is not available, the scope of the assignment would have to be extended by mutual agreement.
Group risk services
Capacity building, training and development
Risk analysis and roadmap for improvement
Internal control systems development, implementation and review