Strengthening Good Governance in the Public Sector

Antony MelckUniversity of Pretoria

Principles of sound corporate governance

• Presentation based on King III Report • and • Document by PriceWaterhouseCoopers

Public Sector

• King III written primarily for the Private Sector but its principles apply equally to the Public Sector.

• In the Public Sector much of King III is reflected in:– Public Finance Management Act (PFMA)– Municipal Finance Management Act (MFMA)– Municipal Structures Act– Municipal Systems Act

Core philosophy• Governance, strategy and sustainability are inseparable• Good governance = effective leadership– Accountability, integrity, service delivery

• Sustainability – nature, society and business are interconnected

• Corporate citizenship– Innovation, fairness and collaboration – Social transformation

• Apply or explain

Ethical leadership and corporate citizenship

• Ethical effective leadership underpinned by– Responsibility – Accountability– Fairness– Transparency

• Responsible & ethical corporate citizen– Clear and measurable objectives – Commitment to service delivery and stakeholders– Code of conduct

Role of Boards / Councils

• Custodian of good governance• Acting in best interests of the institution, taking into

account– Financial– Environmental– Social consequences

• Determining direction and policies• Setting clear delegations to committees (charters) and

executives whose performance must be evaluated regularly

Audit Committee

• Independent audit committee oversees– Integrated reporting (financial and sustainability) – Combined (coordinated) assurance– Internal audit function– Risk management process– External audit process– Performance reporting– Assurance of internal financial controls

Governance of Risk

• Board/Council responsible for Governance of Risk– Delegation to Audit/Risk Committee

• Process for – identifying– assessing – managing or ameliorating risks

• Assurance with respect to risk management– Risk-based audit plans

Governance of Information Technology

• Importance of IT in modern institutions– Strategic asset– Significant risks

• Establishing IT governance structure – IT policies– Evaluating major expenditures– Disaster recovery planning– IT risks

Compliance with legal requirements

• Board/Council must ensure compliance with applicable legal requirements– Compliance policy – Compliance officer

Internal Audit Function

• Effective internal audit function– Informed by strategy of the organisation– Risk-based approach– Assessment of internal controls – Assessment of risk management

Stakeholder relationships

• Importance of stakeholder involvement– Integrated Development Plan (IDP)– Community participation– Adequate disclosure– Transparent communication

Integrated reporting

• Triple context– Economic, social, environmental

• Integrated reporting• Integrity of reporting• Performance reporting against objectives

Additional aspects

• Alternative dispute resolution– Avoiding protracted and costly court proceedings

– Remuneration of Executives– Transparency

Tshwane

• Structures and processes in place

• Many processes are new and need to be ‘imbedded’ – become part of the institutional culture

• Importance of ‘tone at the top’ – examples set and standards required by mayoral committee

End