Implementation of the Municipal Regulations on Minimum Competency Levels and the Professionalisation of Municipal Finance Profession By D J DE LANGE DIRECTOR FINANCE AND CORPORATE SERVICES CACADU DISTRICT MUNICIPALITY 1. Introduction It is no coincidence that the Institute of Municipal Finance Officers is celebrating its 81 st Anniversary this year. Since it was established it has remained relevant and has always been able to adapt to the changing environment. The driving force behind the Institute has bee n the desire for a professional qualification and professional status of the Municipal Finance Officer. 2. Characteristics of a profession According to Rainey (1991:150), a profession involves the application of a skill based on theoretical knowledge; intensive training at recognised educational institutions; organisation into professional associations; existence of a code of conduct enforced by a statutory body and commitment to one s work as a calling. Thornhill and Hanekom (1995:196) describe a profession as an occupation that involves intensive education and training at an acknowledged higher educational institution; mental rather than manual work; specific prescribed training to gain entry into the profession; a code of conduct, the violation of which may lead to expulsion and a monopoly in a specific field of activity. There is no short answer to the question as to whether public administration (hence municipal administration) is a profession or not. 3. What are the major elements of any profession? Philosophy Professions have their own philosophy, which must be articulated in both written and oral form. Body of Knowledge Professions must have a body of professional literature of research, study and comment. Leaders or Philosophers Professions have, both historically and currently, those who write about and research the profession. Leaders can be writers, doers, role models and those active in service. Guidelines for Behavior Professions have codes, guidelines, creeds, oaths, commitment statements, belief statements -- such as statements on ethics and professionalism. Admission Requirements Professionals in many professions are licensed, certified, and have specific initial and advanced education, as well as requirements for ongoing education. In addition, many professions require both initial and ongoing testing for admission and maintaining membership. Integrity 1
Disreputable companies usually run into legal trouble or go out of business. Hence, integrity is a vital aspect of professionalism. Many professional relationships depend on trust. Being trustworthy and having integrity means honoring commitments, being truthful, maintaining confidentiality. Other Many professions require support and/or professional development opportunities outside the work environment such as associations or professional organizations. 4. Municipal Finance Officers and Professional Standards Qualification Requirements 1928-2004 Prior to 1928 no particular form of study for qualification existed for the Municipal Finance official in SA. The first Institute Council wasted no time in formulating plans to set qualification requirements. It appointed an Examinations Committee to draw up a draft curriculum and syllabus and to make suggestions on the best system for conducting examinations of the Institute. The first curriculum included the following subjects: Preliminary Exam o Algebra, Arithmetic, English, Afrikaans and History. Intermediate Exam o Commerce, Bookkeeping and Accounts, Local Government Finance, Auditing and Law. Final Exam o o Part I Banking and Public Finance, Economics, Law, Statistics Part II Accounting, Auditing, Local Government Finance (General) and Local Government Finance (Essays). It is clear that way back in 1928 it was recognized that the Chief Financial Officer must have technical accounting knowledge to survive in the municipal finance environment. In the early eighties significant changes were made when the Institute s Curriculum made way for a new approach. In 1980, the fourteen prescribed courses fell away and any one of the following degrees were acceptable Bachelor of Commerce; Bachelor of Accounting Science; Bachelor of Accounting; or Bachelor of Science or a degree approved by the Institute Council. Two further conditions for membership were that : - Five core subjects must have been included in a degree or passed separately: Accounting I and Accounting II, Economics I and Commercial Law I. Students also had to pass UNISA Accounting III (Local Government and the Admission Examination of the Institute). 2
In 1981 the Institute s Admission Examination fell away. This signaled the acceptance of a general degree as a qualification for associate membership with relative minor adaptations like the inclusion of five core courses and Accounting III Local Government. In 1988 the Municipal Accountants Act was enacted. In terms of the provisions of the Act, no municipality could appoint a person to perform any municipal accountants function unless he / she was registered with the Municipal Accountants Board. The qualification requirements for municipal accountants gazetted by the Board were aligned to the Institutes qualification requirements. This in essence meant that registered municipal accountants were members of the Institute. The members of the board were nominated by the Institute and appointed by the Minister of Finance. Besides these qualification requirements, members also had to undergo practical training in the municipal environment and had to complete the IMFO Logbook which was a record of the practical training. With the enactment of the MFMA, the Municipal Accountants Act was abolished 5. Background And Minimum Competency Regulation Requirements In terms of Sections 83, 107 and 119 of the Municipal Finance Management Act (MFMA), National Treasury (NT) issued Regulations on minimum competency level requirements for officials who are responsible for financial management within municipalities and municipal entities (Government Gazette 29967 on 15 June 2007). The regulations cover accounting officers, senior managers, finance officials and other officials responsible for financial management and supply chain management of municipalities and municipal entities. These regulations on minimum competency levels should be read in conjunction with the Performance Management Regulations issued under the Municipal Systems Act by DPLG (CoGTA). The NT regulations, inter alia, require the officials covered by the regulations to meet minimum competency requirements in the four categories reflected below: Higher education qualification Work-related experience. Core managerial and occupational competencies (for certain groupings of officials), as described in the Municipal Performance Regulations issued in terms of the Municipal Systems Act. Financial and Supply Chain Management competencies as prescribed in the regulations and detailed in the guidelines. 5.1 Financial and Supply Chain Management (SCM) Competencies Generally, the financial and SCM skills required of officials are categorised into 11 competency areas. They are: 1) Strategic leadership and management 2) Strategic Financial Management 3) Operational financial management 4) Governance, ethics and values in financial management 5) Financial and performance reporting 6) Risk and change management 7) Project management 8) Legislation, policy and implementation 9) Stakeholder relations 10) Supply Chain Management 11) Audit and assurance. 3
The knowledge and skills are drawn directly from the MFMA and roles and responsibilities assigned and generally delegated to the various groupings of official and include: 1. Programme 1: Strategic Management and Budgeting 2. Programme 2: Municipal Accounting and Risk Management 3. Programme 3: Governance and Legislation 4. Programme 4: Costing and Capital Planning 5. Programme 5: Municipal IT and Project Management 6. Programme 6: Supply Chain Management and Public Private Partnerships. Annexure A reflects the specific Unit Standards, within each of these Skills Programmes, against which each grouping of officials competency will be measured (either through Recognition of Prior Learning or after undertaking formal training in the required content). There are 6 programmes consisting of 20 Unit Standards. 5.2 Core Managerial and Occupational Competencies In addition to financial and SCM competencies, senior municipal officials (S57 officials) are required to have the core managerial and occupational competencies, as described in the Municipal Performance Regulations for Municipal Managers and managers directly accountable to Municipal Managers issued by CoGTA (Gazette No 29089 1 August 2006) 5.3 Higher Education Qualifications The regulations specify the higher education qualification which the various groupings of official are required to have attained or attain by 31 Dece mber 2012. To illustrate the qualifications requirements the following table reflects the required Higher Education Qualifications per grouping of official for a municipality with an annual budget of a value below R500 million. GROUPING OFFICIAL REGULATIONS Accounting Officer CFO Senior Managers Other Financial Officials (Middle Management) Head: SCM SCM Managers OF PER LEVEL OF HIGHER EDUCATION QUALIFICATION REQUIRED At least NQF 6 or Certificate in Municipal Financial Management (SAQA Qualification ID No. 48965) At least NQF 6 in fields of Accounting, Finance or Economics or Certificate in Municipal Financial Management (SAQA Qualification ID No. 48965) At least NQF 6 in a field relevant to the senior management position or Certificate in Municipal Financial Management (SAQA Qualification ID No. 48965) At least NQF 5 in fields of Accounting, Finance or Economics or National Diploma: Public Financial Management and Administration (SAQA Qualification ID No. 49554) At least NQF 5 or National Diploma: Public Financial Management and Administration (SAQA Qualification ID No. 49554) At least NQF 5 in fields of Accounting, Finance or Economics or National Diploma: Public Financial Management and Administration (SAQA Qualification ID No. 49554) 4
5.4 Work-Related Experience Officials covered by the regulations must be able to demonstrate previous work -related experience. Where an official claims previous work-related experience outside the local government sphere, the municipality will have to evalu ate past work experience to ensure it is indeed substantially similar to the local government sphere. The following table reflects the required work-related experience per grouping of official for a municipality with an annual budget of a value below R500 million. GROUPING OF OFFICIAL PER REGULATIONS Accounting Officer CFO Senior Managers Other Financial Officials (Middle Management) LEVEL OF WORK-RELATED EXPERIENCE REQUIRED Minimum of 5 years at senior management level. Minimum of 5 years at middle management level. Minimum of 5 years at middle management level. Minimum of Head: SCM Minimum of SCM Managers 6. Implementation of the regulations a) 4 years of which at least 1 year must be at middle management level and at least 3 years at any level in a role related to the position of the official; or b) 6 years at any level in a role related to the position of the official. a) 4 years of which at least 1 year must be at middle management level and at least 3 years at any level in a role related to the position of the official; or b) 6 years at any level in a role related to the position of the official. 2 years at any level in a role related to the position of the official. The municipality is required to assess competencies of all existing managers, identify any gaps and implement a plan to address the gaps. Where an existing official does not meet the required unit standards, he/she should enrol for appropriate SAQA-recognised qualifications and address all gaps on or before 31 December 2012. The attainment of prescribed competencies and qualifications should be incorporated into the job description and evaluation criteria as reflected in the annual performance agreement of existing and new senior managers of the municipality. The following should be considered: The development plan and learning pathway of the official should be reflected in his/her annual performance agreement to ensure that existing competency gaps are met within the prescribed timeframes. All assessment of competencies must be undertaken by assessors accredited by the Local Government SETA (LGSETA) in terms of the SAQA guidelines and NQF -registered Unit Standards and criteria. In terms of S17 of the regulations, it is the responsibility of the municipality to assist the individual in attaining the required levels of competence through the provision of resources or opportunities for the training of that official. The Institute of municipal Finance Officers ha s embraced these changes and has used this opportunity to advance the profe ssional standards of municipal accountants by aligning 5
its membership requirements with the NT competency level requirements a s more full y detailed below. 7. Alignment of IMFO Membership Requirements to NT Competency Level Requirements Legislation gives the Minister of Finance the power to legislate competency standards of municipal Chief Financial Officers. At a strategic planning session held on 27 November 2008 the Institute Council resolved that the NT competency standards must now be incorporated in the membership requirements of the Institute. By aligning IMFO s membership requirements with NT qualification and competency level requirements and other national legislation dealing with qualifications, new opportunities were created for the Institute. The alignment of IMFO membership requirements to NT competency level requirements is a logical step towards standardizing the qualification and competency requirements for municipal Chief Financial Officers and Senior Financial Officers in South Africa. A critical issue is whether the Institute can continue to enhance the professional status of the municipal accountant. It has to provide those services that enhance the quality and recognition of the municipal accountant. IMFO is assisting officials in achieving the required competency standards and monitors the development and progress of its members in achieving the prescribed competencies. 7.1 Qualifications and Experience The NT Municipal Regulations on minimum competency level requirements have made a distinction between the competency level requirements for different categories of municipalities based on the size of their annual budgets. The main difference is that Chief Financial Officers of municipalities that have a budget below R500 million must have a Higher Education Qualification on NQF level 6 plus 5 years experience and Chief Financial Officers of municipalities with operating budgets equal to or above R500 million must have an HED on NQF level 7 plus 7 years experience or must be a Chartered Accountant. The qualifications must be in the fields of Accounting, Finance or Economics. In the case of the municipalities with operating budgets of less that R500 million, the Certificate in Municipal Financial Management SAQA Quali fication ID No 48965 is also an acceptable qualification. It is therefore clear that with regard to qualifications there are no significant differences between IMFO s qualification requirements and those that have been published in the NT regulations. 7.2 Core Managerial and Occupational Competency Requirements The specified core Managerial and Occupational Competency Requirements (CM OC) and the Financial and Supply Chain Management Competency Requirements are added dimensions to competency levels that municipal finance officers and senior officials must achieve. The process of assessment of competencies is initiated by the candidate undertaking a self assessment in each of the unit standards to assess whether he/she is competent or not yet competent. Annexure B is the assessment of competencies template for Unit 6
8. Conclusion Standard 116364 Plan a municipal budgeting and reporting cycle. If the candidate indicates that he/she is competent, evidence has to be provided. Competency may be achieved by either opting for accredited training or undertaking the Recognized Prior Learning (RPL) Route. The candidate has to provide the assessor with details of qualifications, work experience, CV and evidence of training and experience. Thereafter agreement will be reached on what training gaps need to be addressed and which unit standards will be assessed by means of the RPL assessment. The RPL assessment consists of producing a portfolio of evidence which will provide proof of prior learning and the candidate will be expected to prepare case studies, make presentations and answer questions relating to the subject matter being assessed. According to section 18 of the Municipal Regulations on Minimum Competency Levels, no municipality or municipal entity may with effect from 1 January 2013 employ a person as a Chief Financial Officer (CFO) or Supply Chain Management Officer if that person does not meet the competency levels prescribed for the relevant position. This means that there are only ± two years left for CFO s and finance officials to meet these requirements. In terms of the NT Guidelines it is not a specific requirement for CFO s and finance officers to have Accounting III included in their qualification. IMFO as a professional institute for Municipal CFO s and finance officers prescribes Accounting III for Associate Membership. This will ensure that the high standard in financial management and interpretation and implementation of new accounting standards is maintained by officers who have the technical knowledge and expertise. To align the IMFO Associate Membership categories with the NT qualification requirements, two categories of associate membership have been introduced : - Senior Associate Membership: NT Requirements for Budgets above R500 million Associate Membership: NT Requirements for Budgets below R500 million The new IMFO Qualification requirements are detailed in Annexure C The time may be right to promote the professional status of the Municipal Manager by legislating appropriate qualification requirements for Municipal Managers as well as the registration of persons that wish to apply for these positions. To enhance the professional status of the municipal manager and CFO it will be essential that in respect of these professions, professional bodies are established to deal with inter alia the following issues: 9. References - Keep a record of registered professionals that comply with the qualifications and other requirements provided in legislation to promote the professional status of Municipal Managers and CFO s. - Take action against registered members who are guilty of misconduct. - Promote the ongoing training and development of members. Hanekom, S.X. & Thornhill, C. 1986. The functions of the public administrator. Pretoria: Rainey, H.G. 1991. Understanding and managing public organisations. New York: Jossey - Bass. 7
Competency Level In Unit Standards (20 USs) Annexure A Programme 1: Strategic Management and Budgeting (77 credits) 6 USs Unit Std ID 116358 116342 116345 116364 116363 116341 Unit Std Name Contribute to the strategic planning process in a South African municipality Apply approaches to managing municipal income and expenditure within a multi-year framework Apply the principles of budgeting within a municipality Plan a municipal budgeting and reporting cycle Prepare and analyse municipal financial reports Conduct performance management to a South African municipal environment NQF level Credits 6 15 6 15 5 15 6 8 6 12 6 12 Programme 2: Municipal Accounting and Risk Management (60 credits) 5 USs 119350 119348 116362 116339 116351 Apply accounting principles and procedures in the preparation of reports and decision making 5 15 Apply selected GRAP (Generally Recognised Accounting Practices) to 5 12 periodic accounting reporting process Manage a municipality s assets and liabilities 6 11 Apply risk management in South African municipalities 6 10 Conduct auditing planning and implementation in a South African municipality 5 12 Programme 3: Governance and Legislation (38 credits ) 4 USs 116348 Conduct stakeholder consultation around municipal 6 8 finance programmes 116343 Apply the principles of ethics 6 10 8
116361 119334 in a municipal environment Interpret South African legislation and policy affecting municipal financial management Discuss the selected legislative regulatory framework governing the public sector management and administration environment 6 8 5 12 Programme 4: Costing and Capital Planning (27 credits) - 2 USs 119331 119341 Conduct working capital management activities in accordance with sound financial management policy Apply cost management information systems in the preparation of management reports 5 12 5 15 Programme 5: Municipal IT and Project Management (27 credits) - 2 USs Unit Std ID Unit Std Name NQF level Credits 119352 119343 Apply principles of information systems to public finance and administration Apply operations research principles and tools in the management of project activities and resources 5 12 5 15 Programme 6: Supply Chain Management and PPPs (12 credits) 1 US 116353 Participate in the design and implementation of municipal supply chain management 6 12 9
Annexure B SO & AC NO. SO 1 AC 1 AC 2 US 116364 Plan a municipal budgeting and a reporting cycle LEVEL NYC PC C EVIDENCE OF COMPETENCE Identify the roles and responsibilities of municipal political executives and senior management required by the local government legislative framew ork for budgeting. Identify the roles and responsibilities of municipal political executives, accounting officers and senior managers in the budget preparation using the regulatory framework. Identify the roles and responsibilities of municipal political executives, accounting officers and senior managers during the municipal budget cycle using the regulatory framework. [Should include roles and responsibilities of the mayor, municipal manager, council, chief finance officer and senior managers]. 10
Annexure C The New IMFO Qualifications requirements are detailed below: ASSOCIATE MEMBER (AIMFO) Higher Education Qualification Work Related Experience At least NQF level 6 Qualification in fields of Accounting, Finance or Economics and must have passed Accounting III Or Certificate in Municipal Financial Management (SAQA Qualification ID No. 48965 and must have passed Accounting III Minimum of 5 years experience at middle Management Level Competency Minimum competencies as prescribed by Government Gazette 24967, 15 June 2007. SENIOR ASSOCIATE MEMBER (SAIMFO) Higher Education Qualification Work Related Experience Competency At least NQF level 7 Qualification in fields of Accounting, Finance or Economics and must have passed Accounting III Or Chartered Accountant (SA) Minimum of 7 years at senior management and middle management levels, of which 2 must be at senior management level Minimum competencies as prescribed by Government Gazette 29967, 15 June 2007 Please note that the Competency requirements will be formally assessed by a registered assessor. LICENTIATE MEMBERSHIP (LIMFO) Higher Education Qualification At least NQF level 5 Qualification in fields of Accounting, Finance or Economics and must have passed Accounting II. Current Licentiate members need to study in the Accounting field, as Accounting III is necessary in order to apply for membership on Associate or Senior Associate level. 11
Work-Related Experience Minimum of - (a) 4 years of which at least 1 year must be at middle management level and at least 3 years at any level in a role related to the position of the official Or (b) 9 years at any level in a role related to the position of the official. Current licentiate members need to study in the Accounting field, as Accounting III is necessary in order to apply for membership on Associate or Senior Associate level. JUNIOR MEMBERSHIP (JIMFO) Education Qualification Completed Grade 12 (NQF level 4) It is advisable to choose Accounting as one of the subjects when you further your studies in order for you to apply for either Licentiate or Associate Membership Level. 12