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This report covers the progress and challenges in intergovernmental relations, implementation of the Municipal Infrastructure Support Agency (MISA) and Municipal Turnaround Strategy (MTAS), and the functionality of ward committees in the province.
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IGR Progress Statement • Out of the 10 district municipalities, 6 districts have established the district intergovernmental forum through signed protocol agreements. The remaining four districts have established the district IGR forum but are yet to have a formal working relationship in place. • How are we working together (with municipalities and other state departments) to resolve issues • Hands on support is provided (grants)to districts to ensure that district technical fora are fully functional to ensure co-ordination and alignment in respect of service delivery Challenges with implementation/ support • The high staff turnover in respect of the S56 Managers directly impacts on institutional arrangements in respect of district IGR for a • Lack of understanding and commitment by political office bearers and officials • Lack of interaction by sector departments with municipalities Remedial Action • Hands on support provided by DCOGTA in respect of capacity building workshops and implementation of institutional model • Through MISA engagements, interaction is facilitated with sector departments
LGTAS (incorp. MISA & MTAS) Progress Statement • All 61 municipalities have updated their MTAS plans. • 23 municipalities are on the National LGTAS programme which incorporates the Municipal Infrastructure Support Agency (MISA). • In-depth assessments have been conducted with each of the 23 municipalities and support plans have been developed to address challenges raised. • The National LGTAS unit visited the Province on 20 - 22 August 2012, to evaluate the progress made with regard to the implementation of the LGTAS programme.
LGTAS (incorp. MISA & MTAS) cont… Challenges with implementation / support • Implementation of the LGTAS programme is being delayed due to the non-submission of the council resolutions adopting the MTAS and LGTAS plans. This also impacts on the signing of the MOU between the National & Provincial COGTA and the 23 LGTAS municipalities. • Some municipalities need to take responsibility of the programme as their commitment to the processes thus far has been marginal. • Tangible commitment has not been forthcoming from some of the COGTA Business Units as well as the sector departments.
LGTAS (incorp. MISA & MTAS) cont… Remedial Action • High level follow up in the form of a circular to be made (from office of HOD) to municipalities as other requests have not been adhered to. • Each municipality to be requested to have a dedicated person to oversee the implementation of the LGTAS programme, preferably the MM or a senior manager. This person should also be the Chairperson of the Municipal LGTAS Steering Committee. • COGTA Business unit heads to be held to account by HOD. • COGTA will work closely with the Office of the Premier to seek firm commitments from the sector departments.
WARD COMMITTEES Progress The province consists of 51 local municipalities of the ward participatory type, within which 828 wards exists. Of the 828 wards, 790 ward committee elections were successfully conducted. The remaining 38 wards will be completed by the end of September 2012.
WARD COMMITTEES cont... The Provincial Functionality Assessment Tool is designed and aligned to the National Key Performance Indicators. The implementation of the tool is conducted on a quarterly basis per Municipality per ward. The functionality statistics indicated hereunder are as at March 2012.
WARD COMMITTEES cont… Planned Support • Department will develop guidelines for ward committee support plans & community participation plans to assist municipalities with the development of their own plans. • Municipal officials will be trained as trainers to train their ward committee members on the development of Community Based Plans (CBP). • The department is also assisting municipalities of their public participation related issues identified through the MISA diagnostic assessment (MISA).
WARD COMMITTEES cont… CHALLENGES (EXTERNAL) • LACK OF SUFFICIENT MUNICIPAL RESOURCES TO CARRY OUT THEIR PUBLIC PARTICIPATION OBLIGATIONS • DEDICATED PERSONNEL • FINANCIAL SUPPORT • INSUFFIECIENT FUNDING TO BUILD THE CAPACITY OF WARD COMMITTEES • INSTITUTIONALISATION OF PUBLIC PARTICIPATION PROGRAMME – CURRENTLY CONSIDERED AS AN ADD-ON • WARD COMMITTEES ARE SUPPOSED TO BE APOLITICAL – BUT CURRENTLY EXPERIENCE A LOT OF POLITICAL INTERFERANCE
WARD COMMITTEES cont… CHALLENGES (INTERNAL) STRUCTURAL ARRANGEMENTS HIGH VACANCY RATE SHORTAGE OF RELEVANT SKILLS
INTERVENTIONS (SECTION 139)
Section 139 PROGRESS STATEMENT • Out of the 61 municipalities, 4 were under intervention in terms of section 139(1)(b) of the Constitution. These four municipalities were Indaka, Umhlabuyalingana, Okhahlamba and Msunduzi municipalities. The MEC was authorised to appoint administrators to undertake the function in terms of section 51 of the Municipal Systems Act to establish and organise the administration in a manner that would enable the municipality to achieve the objects of local government as set out in section 152 of the Constitution; • The exit strategies developed by administrators focused on the reasons for the interventions (i.e. failures with regard to executive obligations), challenges and failures, progress made with regard to the recovery plans and the continuity thereof, matters that are yet to be addressed based on the recovery plans and other issues as contained in the terms of reference of the administrators;
Section 139 cont… PROGRESS STATEMENT • The Department assessed such strategies and took into account existing capacity at the municipalities and individual circumstances of each municipality, based on which the Department, after various extensions of the interventions by the Executive Council, recommended to the Executive Council, that the interventions cease at Umhlabuyalingana, Okhahlamba and Msunduzi municipalities; • On 18 July 2012, based on various challenges, the Executive Council resolved to extend the intervention at Indaka municipality for a period of six months ending on 31 December 2012. The Department also recommended that the Executive Council note that in the event that the extension of the intervention does not yield the results as required in terms of the recovery plan, the Executive Council will be approached with a recommendation for an intervention in terms of section 139(1)(c) of the Constitution.
Section 139 cont… CHALLENGES WITH IMPLEMENTATION / SUPPORT • With regard to Indaka municipality, although the administrator reported progress in respect of the recovery plan he alerted the Department to certain serious challenges:- • Finance:- Various financial irregularities were reported and because it is obvious that certain activities were done, deliberately without the administrator’s knowledge, hence the intention is to issue civil summons to recover all the irregular and fruitless expenditure from the former Municipal Manager and affected Councilors; • Governance:- The majority of priorities in respect of governance as identified in the recovery plan have been met. The Internal Auditor is effective, but is stifled by the management’s failure to either respond to the audit findings or failure to implement the recommendations. It appears that there is poor leadership in this municipality, although, all the necessary Policy Frameworks are in place. The problem, however, is a lack of implementation. • Leadership and PMS :- The weakness leadership and performance reporting affects directly the “Oversight role” of the Council over both the Executive and the Management. Although in the areas of Finance and Governance, the administrator was able to force through and implement some of the actions and controls that have resulted in some improvement; in the areas of leadership and Performance reporting, it was not being implemented.
Section 139 cont... REMEDIAL ACTIONS • In January 2012, the Mid-Year Review established a number of irregular, unauthorised and fruitless and wasteful expenditure which were reported to the Council as part of the Mid-Year Review report. • Based on the aforementioned progress and challenges the Executive Council resolved to extend the intervention at Indaka municipality for a period of six months ending 31 December 2012. • The administrator is providing continual support and direction to the municipality in respect of his terms of reference. A financial expert and governance expert had been appointed by the Department at the municipality. The financial expert’s contract has been extended. The municipality has currently appointed a PMS specialist to assist in performance management matters.
MPAC ESTABLISHMENT Progress Statement • 61 MPACs established Challenges with implementation/ support • Lack of understanding of role and responsibilities of MPAC in relation to other oversight structures • Skills and knowledge of Finances and Local Government Remedial Action • Comprehensive Councillor Training on Financial Oversight
AUDIT OUTCOMES (3 YEAR REVIEW)
AUDIT OUTCOMES cont… Municipal Progress • Ten (10) municipalities improved their audit outcome in the 2010/11 financial year; • Five (5) of which received a clean audit progressing from an unqualified audit opinion with other matters, namely Umdoni; Richmond; Umtshezi; Umzinyathi District and eMadlangeni Municipalities. • Four (4) municipalities improved from qualified audit opinions to unqualified opinions with other matters, namely Nquthu, Okhahlamba, Mfolozi and Msunduzi. • Edumbe Municipality improved from a disclaimer to a qualified audit opinion. • Forty Four (44) Municipalities’ audit opinions remain unchanged at unqualified opinions with other matters. • Uthukela District, Umvoti, Amajuba District, Newcastle, Edumbe, Hlabisa and Jozini Municipalities received qualified audit opinions. • Indaka municipality received a disclaimer audit opinion regressing from an adverse opinion in 2009/10. • Umkhanyakude District Municipality received an adverse audit opinion regressing from a qualified opinion in 2009/10.
AUDIT OUTCOMES cont… Municipal Progress • AG identified the following as the root causes of audit issues • Key Officials lacking minimum competencies and skills • Lack of consequences for poor performance and transgression • Slow response to AGSA message and not taking ownership of key controls. • Financial and performance management issues raised at 54 of the 61 municipalities • Leadership relating to accounting officers not exercising oversight responsibility over financial and performance monitoring, reporting and compliance with laws, regulations and internal control. • The non-compliance with legislation such as the MFMA, Municipal Systems Act and the Supply Chain Management procedures.
AUDIT OUTCOMES cont... Municipal Progress • The fact that 23 municipalities have conducted or are conducting investigations is an indicator suggesting deficiencies in the control environment. • 25 municipalities (41%) had poor governance. In the main, concerned with amongst other things, issues of the functionality of Audit Committees, the municipalities’ risk identification and management, setting of performance management targets and the absence of adequate fraud prevention plans and strategies. • Going concern issues were raised at Mfolozi, Mtubatuba, Big 5 False Bay, Amajuba District, Uthukela, Msunduzi, Umgeni and Ugu District municipalities.
AUDIT OUTCOMES cont... • Challenges with implementation/ support • AG identified the following as the root causes of audit issues • Key Officials lacking minimum competencies and skills • Lack of consequences for poor performance and transgression • Slow response to AGSA message and not taking ownership of key controls. • Provincial Challenges • Capacity and skills in Municipal Treasury Offices • Poor leadership and weak oversight including political instability • Weak Revenue Management and Debt Collection • Poor Expenditure Management • Increasing Unauthorised, Irregular, Fruitless and Wasteful Expenditure • Non-Compliance with legislation • High reliance on consultants compounded by inability to manage consultants and limited skills transfer.
AUDIT OUTCOMES cont.… Remedial Action: PROVIDING HANDS ON SUPPORT TO MUNICIPALITIES TO ENSURE SOUND FINANCIAL MANAGEMENT • The Department has identified twenty municipalities where it will provide hands on support to assist those municipalities to move to an improved audit outcome. • The department has a support strategy in place to assist municipalities to address audit queries in respect of reported non-compliance and unauthorized, irregular, fruitless and wasteful expenditure. • The department continues to provide support to municipalities to submit their annual financial statements timeously by reviewing year end process plans and monitoring the process. Specific high level support would be provided to five targeted municipalities.
AUDIT OUTCOMES cont… Remedial Action Departmental teams are going out to municipalities on a monthly basis to support staff within municipalities for audit readiness with amongst others the following areas namely, Bank reconciliations, Creditors reconciliations, Debtors reconciliations, Suspense accounts, Grants, Fixed asset registers/loan registers/investment registers, Cash flow analysis and projections, revenue management and expenditure management and internal control, to ensure good record keeping and increased retrieval of information during the auditing period. Continuous support is provided to municipalities in terms of the progress on the audit action plans. The Department will continue serving as ex-officio members of Audit Committee meetings providing guidance, advice and support, which has resulted in a significant improvement in the effectiveness of audit committees and which is aimed at further improving effectiveness.
AUDIT OUTCOMES cont… Remedial Action PROMOTING LEADERSHIP COMMITMENT AND OVERSIGHT • The department will also engage municipal political and administrative leadership in conjunction with the Auditor-General’s programme of quarterly engagements with municipalities. The department will address department specific matters at these meetings to ensure a holistic approach to addressing audit issues and promoting improved oversight in municipalities towards achieving clean audits. PROVIDING SUPPORT TO MUNICIPALITIES IN THE IMPLEMENTATION OF SIMPLIFIED REVENUE PLANS • The department is developing a Framework for simplified revenue plans. The simplified revenue plans will be piloted in three municipalities during the 2012/2013 financial year. This will be rolled out to the rest of the municipalities in the province thereafter.
AUDIT OUTCOMES cont… Remedial Action PROVIDING SUPPORT TO MUNICIPALITIES WITH EXPENDITURE MANAGEMENT An expenditure management framework is being developed and will also be piloted in the following municipalities, Ulundi, Uthukela District and Sisonke District during the 2012/2013 financial year UNAUTHORISED, IRREGULAR AS WELL AS FRUITLESS AND WASTEFUL EXPENDITURE The department is developing a Framework to support municipalities to address Unauthorised, Irregular, Fruitless and Wasteful Expenditure which will include a process to deal with prior year issues. This framework will be rolled out to all municipalities. Support will be provided to municipalities that reported this expenditure in the prior year in implementing the framework and monitoring and reporting such expenditure. In this regard, a database relating to such expenditure will be maintained in respect of matters reported SUPPORT TO IMPROVE MUNICIPAL COMPLIANCE The department is developing a Framework to support municipalities to improve compliance with certain legislation thereby reducing the risk of queries relating to compliance. This will be rolled out to all 61 municipalities in the province.
AUDIT OUTCOMES cont… • Remedial Action PROVIDING SUPPORT TO MANAGE INCREASING DEBT • The department is developing a strategy to deal with the increasing debt in the province. A debt management forum is established to implement the strategy. Municipalities will be assisted with data classification and data cleansing to improve integrity of debtors’ information on their systems. Further, they are supported in the implementation of the credit control policy. BUILDING CAPACITY AMONGST MUNICIPAL LEADERSHIP AND OFFICALS • The department is extending a holistic and more practical Financial Oversight training to MPAC’s, EXCOs, Internal Audit units, Audit Committees, Councillors and Administration to capacitate them in carrying out their oversight responsibility in conjunction with the Provincial Treasury, SALGA and the Office of the Auditor-General. IMPROVE GRANT MANAGEMENT IN MUNICIPALITIES • The department is assessing the OPEX and CAPEX trends in all municipalities to determine a strategy to maintain grant expenditure, improve budget planning and management. On a monthly basis Grants and DORA reviews and reconciliations will be performed or reviewed in municipalities.
AUDIT OUTCOMES cont… Remedial Action REDUCING DEPENDANCY ON CONSULTANTS BY MUNICIPALITIES • Continuous support is given to municipalities in the filling of critical posts especially within the Budget and Treasury units, ensuring that experienced and competent people are recruited and that there is compliance with the legal framework and due process. This process will assist in reducing dependency on external service providers in drafting financial statements as well as effective operations in the Budget and Treasury units of municipalities. PROVINCIAL CO-ORDINATION • The department undertakes, in accordance with the framework for Operation Clean Audit to convene quarterly steering committee meetings to promote co-ordination, alignment and cohesion in the delivery of support to municipalities in KwaZulu-Natal. • All of the above commitments have also been captured either in the Annual Performance Plan of the Department or the Business Plan of the General Manager: Municipal Finance and will be monitored and reported on through the department’s monitoring, reporting and evaluation processes. • This department will also continue to work with relevant stakeholders in supporting municipalities to achieve clean audits in the spirit of co-operative governance
FUNCTIONALITY OF INTERNAL FINANCIAL STRUCTURES Municipal Progress • 12 CFO posts vacant and turnover as a result of contracts expiring • 61 Internal Audit Units in place • 61 Audit Committees in place • 61 MPACs in place
FUNCTIONALITY OF INTERNAL FINANCIAL STRUCTURES cont… Challenges with implementation/ support • Political instability affecting appointments of CFOs and other staff • Internal Audit Units • Many still outsourced and not managed effectively • Limited resources • Audit Committees • Skills and knowledge of Local Government • Political interference although limited • MPAC • Skills and knowledge of Finances and Local Government Remedial Action • Support provided in filling of CFO and other critical finance posts • Comprehensive Training Programme • For EXCOs, Portfolio Committee Chairpersons, MPACs, Audit Committees, Administrative Heads and Internal Audit • To be rolled out in September 2012
OUTSTANDING DEBT Progress • Audited consolidated consumer debt provincially as at 30 June 2011 was R4.1 billion Challenges with implementation/ support • Municipalities do not categorise debt appropriately and accurately • Large amounts of unrecoverable debt not written off • Property Rates on RSA properties are not determinable Remedial Action • Engaged all municipalities to categorise debt appropriately • RSA property debt being investigated with municipalities
SCM COMPLIANCE Progress Statement • 56% (34) of municipalities had issues relating to procurement and contract management raised in audit reports • Unauthorised, Irregular, Fruitless and Wasteful Expenditure • Seventeen (17) or 28% of municipalities incurred unauthorised • Thirty seven (37) or 61% of municipalities incurred irregular expenditure • Twelve (12) or 20% of municipalities incurred fruitless and wasteful expenditure
SCM COMPLIANCE cont.… Challenges with implementation/ support • Political interference in SCM processes • Extensive use of Regulation 36 • Poor planning and project management • Non-implementation of section 32 of the MFMA • Not investigated • No disciplinary or criminal action Remedial Action • Framework for Unauthorised, Irregular, Fruitless and Wasteful Expenditure • Ensure recording of such expenditure • Improve oversight • Ensure compliance and remedial action by municipalities • SCM Training via Comprehensive Training Programme
UNFUNDED MANDATES Progress Statement • Mainly in relation to Clinics, Libraries and Museums Implementation/ support • Current investigation under way • Municipalities requested to provide details on all unfunded mandates Remedial Action • Department to facilitate processes of service level agreements and payment arrangements across departments and municipalities
STATUS OF SERVICE DELIVERY • Progress • MIG Expenditure for the 2011/2012 Financial Year • Massification Programme • Installation of water Purification plant programme • Universal Access Planning Programme • Operation and Maintenance Programme • Special interventions (Umkhanyakude and Uthukela)
STATUS OF SERVICE DELIVERY cont… Challenges with implementation/ support • Slow pace of Supply Chain Management processes • The change in the financial year from national / provincial year to the municipal year and associated adjustments to allocations • Changeover to “Proof of Payment” reporting • Procrastination or disputes, even at Council level, are still causing some delays in project prioritization and implementation. • Re-prioritization of projects associated with the municipal elections • ICT – registration delays due to failures on the MIG-MIS • Poor performance of service providers – engineers / project managers and contractors. This is partly due to deficiencies in SCM evaluation methodologies which all but eliminate factors relating to a service provider’s ability to do the job. Price is the overwhelming factor. The number of contractors who “fold” during implementation due to lack of liquid cash, skills, plant, equipment and adequate “know-how” is too high. • Lack of municipal technical capacity – bid committees do not have the appropriate skills to draft technical specifications and evaluate technical tenders. Further, municipalities do not have adequate human resources with appropriate technical skills and experience to manage project implementation. While private sector resources are utilized, municipalities do not have the technical skills and management capacity to interrogate the services rendered. Quality control is hence inadequate. • Lack of co-ordination, particularly from Human Settlements hence infrastructure projects to support housing development often initiated late.
STATUS OF SERVICE DELIVERY cont… • An analyses conducted on expenditure patterns and the especially the reasons for poor expenditure. This is done monthly. As a matter of course, CoGTA’s MIG Unit undertakes a monthly assessment of all municipal implementation plans to highlight concerns / deficiencies, for the relevant municipality’s attention. • A range of district-wide workshops and one-on-one engagements have been held to educate municipalities (including Councils) on scheduling of projects, project and particularly contract management, cash flow management and the relationships between schedules and cash flow, MIG MIS training, and on the Division of Revenue Act • Special interventions (with deployees) have been initiated in identified critical municipalities • Intense support has been provided in project business planning project registration • Streamlining SCM processes. Support from Treasury on tap • Expenditure results from project implementation. Capacity building programme to improve project management (estimating, scheduling, contract management and administration, inspections, contingencies and variations, project tracking etc)
STATUS OF SERVICE DELIVERY cont… • Remedial Action • The establishment of district shared-service Project Management Units is been is being attempted, to address skills shortages • Municipal commitment • Funding through MIG “top-slice” mechanism • MIG commitment levels, project implementation and expenditure are monitored monthly and municipalities are engaged immediately as necessary • Recommendations have been made regarding the implementation of existing Division of Revenue Act re-allocation clauses which will assist in grant utilization and expenditure management • The standard of service from certain sectors of the consulting engineer fraternity is deteriorating. CoGTA is engaging CESA (the representative body of South African Consulting Engineers. Such engagement is aimed at improving standards of service rendered to municipalities as well as more balanced fee structures. Municipalities have also been work-shopped on the management of service providers
