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Presentation to Select Committee on Cooperative Governance and Traditional Affairs (NCOP)

MEC Mosebenzi Zwane Date: 16 February 2010. Presentation to Select Committee on Cooperative Governance and Traditional Affairs (NCOP). cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE.

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Presentation to Select Committee on Cooperative Governance and Traditional Affairs (NCOP)

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  1. MEC Mosebenzi Zwane Date: 16 February 2010 Presentation to Select Committee on Cooperative Governance and Traditional Affairs (NCOP) cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  2. Intervention in Terms of Section 139(b) of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996) in the following Municipalities: • Thabo Mofutsanyana District Municipality; • Masilonyana Local Municipality ; and • Nala Local Municipality

  3. Thabo Mofutsanyana District Municipality Intervention (4 November 2009) cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  4. Summary background • A special report on the status quo of municipalities was made available to the MEC for Cooperative Governance, Traditional Affairs and Human Settlements at the beginning of November 2009. • The report highlighted challenges identified at the district municipality. From the contents of this report, it was evident that:- • The municipality ceased to function effectively as a district municipality to render services to its local municipalities; • Most of its section 57 posts are vacant. • Does not attend to current municipal financial and other administrative challenges experienced at the municipality; cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  5. Summary background cont… • The council was failing to execute executive obligations due to the failure of the municipality to function properly; • Conflict existed between the then Municipal Manager and the Chief Financial Officer (CFO) ;and • Urgent intervention by the Provincial Executive in terms of section 139(1)(b) of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996) is necessary; cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  6. Discussions cont… • The council constantly failed to decisively deal with and resolve the following issues:- • Institutional Arrangements • The filling of vacancies of all section 57 managers with special emphasis to the following: • Manager IDP; • Manager LED; • Manger Corporate Services, and • Manager Tourism. • The cooperation between the municipal manager and CFO. cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  7. Discussions cont… • IDP Status • The district did not provide a District IDP Framework to its locals as required by MSA 32 of 2000, Chapter 5, section 27 so that municipalities can align their process plans with the framework; • The District cannot coordinate IDP issues due to the fact that the IDP manager is doing everything in his municipality. Therefore there is limited time to focus on his actual function; • It is also difficult to get districts reports as and when needed by the department for provincial development planning and in most cases Setsoto would do it on the District’s behalf; • Political office bearers or leaders do not to lead IDP meetings and take ownership to that effect cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  8. Discussions cont… • LED Status • The LED strategy is outdated and must be reviewed; • No proper LED structures in place, with filled posts; • The LED structures must be established headed by a LED Manager; • More LED partnerships must be established • Legislative compliance: • The municipality does not comply with the PMS Framework as is evident with the signing of the 2009/2010 Performance Agreements; • No performance agreement exists between the Executive Mayor and then Municipal Manager; cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  9. Discussions cont… • Legislative compliance: • Section 46 Municipal Systems Act: The annual performance reports for 2005/06, 2006/07 and 2007/08 have not been adopted by council and not submitted to the MEC as required by legislation; • Section 39 of the Municipal Systems Act: The municipality did not formally approve the performance management system; • Section 28 of the Municipal Systems Act: The municipality did not adopt a process set out in writing for the adoption of its IDP; • Section 32 of the Municipal Systems Act: The approved IDP was not submitted to the MEC. cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  10. Discussions cont… • Basic Service Delivery: • The municipality is the only District Municipality in the Free State that received a MIG allocation during the 2008/2009 financial year. The Municipality is still spending their 2008/2009 MIG allocation; • There is still an amount of R13,521,832.45 available of the allocated R27,691,043.81; • All projects have been registered and contractors have been appointed during October 2009. The balance of R13,521,832.45 must be spent by 28 February 2010. • Good Governance and Public Participation: • The municipality does not have a dedicated Public Participation Officer to support local initiatives; • This renders the office of the Speaker incapable to monitor and support local municipalities with challenges; • There has also been no clear program to include rural communities in their program cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  11. Discussions cont… • Cooperation: • The municipality constantly failed to cooperate with local municipalities and other stakeholders. • Financial Viability: • The municipality consistently failed to supply the Department with the necessary financial information and also to submit names for entry level accounting trainees. • Auditor General’s Management letter • The latest Management letter must receive the necessary attention and all aspects mentioned must be satisfactorily dealt with cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  12. Legal implications • After the endorsement of the said intervention by the Provincial Executive Council a written notice of the intervention was submitted to: • the Cabinet member responsible for provincial and local government; • the relevant provincial legislature; • the National Council of Provinces within 14 days after the intervention began .

  13. Conclusion • The effect of invoking section 139(1) (b) is that the municipality is stabilising and council is cooperating with the administrator to turn the municipality around. This intervention may end 30 June 2010. • All posts of section 57 managers have been advertised ,including the MM,and will be filled in the week of 22/02/2010 • Provincial Government has already disbursed funds to assist with financial capacity.

  14. Masilonyana Local Municipality Intervention ( 8 December 2009) cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  15. Summary background • A special report on the status quo of municipalities was made available to the MEC for Cooperative Governance, Traditional Affairs and Human Settlements at the beginning of November 2009. • The report highlighted challenges identified at the local municipality. From the contents of this report, it was evident that:- • The overall financial management of the municipality is in disarray given the inability of the municipality to pay salaries of personnel and third parties; • The inability to collect revenue which has resulted in the debtors escalation of R129 million as at the end of October 2009; cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  16. Summary background cont… • Their creditors book has escalated to R10 million at the end of October 2009; •  The inability to spend municipal infrastructure grant (MIG) funds where expenditure is at 12% by the end of November 2009, whereas the target was supposed to be 50%. The municipality is facing a risk that a portion of the conditional grant may be withheld; • The municipality has never complied with the Municipal Systems Act by submitting section 46 reports for two consecutive years;

  17. Summary background cont… • Failure to develop and adopt performance management framework to regulate the performance of staff; • The inability to provide quarterly reports in compliance with the Municipal Finance Management Act; •  The request by Council (Masilonyana) for section 137 of (MFMA) intervention indicates the inability of the municipality to prudently manage their finances; and • Urgent intervention in terms of section 139(1)(b) of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996) is necessary;

  18. Discussions cont… • The council constantly failed to decisively deal with and resolve the following issues: • Legislative compliance: • The municipality does not have a PMS framework and is evident that there was no good basis used in signing the 2009/2010 Performance Agreements. • Section 46 Municipal Systems Act: The annual performance reports for 2006/07 and 2007/08 have not been adopted by council and not submitted to the MEC as required by legislation. • Section 39 of the Municipal Systems Act: The municipality did not formally approve the performance management system.

  19. Discussions cont… • Basic Service Delivery:- • The municipality MIG allocation for 2009/2010 is the amount of R21, 7 million and the expenditure is only R2, 5 million, which is only 12% of the actual allocation. They stood a risk of not receiving the allocation of December 2009 due to poor expenditure; • Financial Viability: • Financial management • Evidence cannot be produced of a prudent financial management system; • The debtors of the municipality amounts R129 million; • The creditors amount to R10 million with water being the largest at R4, 3 million at the end of October 2009; and • Auditor General’s Report • The 2007/2008 Auditor General’s report which was a disclaimer opinion and the views of PROPAC show that there is no prudent financial management

  20. Legal implications • After the endorsement of the said intervention by the Provincial Executive Council a written notice of the intervention was submitted to: • the Cabinet member responsible for provincial and local government; • the relevant provincial legislature; and • the National Council of Provinces within 14 days after the intervention began cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  21. Conclusion • The effect of invoking section 139(1) (b) is that the municipality is stabilising as the Province has balanced their budget and the administrator is developing a financial recovery plan.This intervention may end 30 June 2010. • The MIG implementation plan is finalised and the expenditure has improved drastically. • An in-depth investigation on ghost workers is finalised.

  22. Nala Local Municipality Intervention (8 December 2009) cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  23. Summary background • A special report on the status quo of municipalities was made available to the MEC for Cooperative Governance, Traditional Affairs and Human Settlements at the beginning of November 2009. • The report highlighted challenges identified at the district municipality. From the contents of this report, it was evident that:- • The municipality has never complied with the Municipal Systems Act by submitting section 46 reports for two consecutive years; • Failure to develop and adopt a Performance Management Framework to regulate the performance of staff;

  24. Summary background cont… • The inability to spend Municipal Infrastructure Grant (MIG) funds where expenditure is at 25% as at the end of November 2009, whereas the target was supposed to be 50%; • The inability to provide quarterly reports in compliance with the Municipal Finance Management Act; • The overall financial management of the municipality is in disarray given the inability of the Auditor General to access documentation for audit purposes; 

  25. Summary background cont… • The recent suspension of municipal manager and the appointment of a non-section 57 manager as the Acting Municipal Manager; • Urgent intervention in terms of section 139(1)(b) of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996) is necessary;

  26. Discussions cont… • The council constantly failed to decisively deal with and resolve the following issues: • Institutional Arrangements • The filling of vacancies of CFO and related finance personnel. • IDP Status • The municipality cannot coordinate IDP processes due to the collapse of their public participation process; • The municipality does not have an IDP manager appointed. • . cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  27. Discussions cont… • LED Status • The LED Manager position is vacant; • The municipality does not have an LED strategy; • The LED structures must be established headed by a LED Manager; and • No LED partnerships exist. • Legislative compliance: • The municipality does not have a PMS Framework and is evident that there was no good basis used in signing the 2009/2010 Performance Agreements; • No Performance Agreement exists between the Mayor and the Municipal Manager;

  28. Discussions cont… • Legislative compliance: • Section 46 Municipal Systems Act: The annual performance reports for 2005/06, 2006/07 and 2007/08 have not been adopted by council and submitted to the MEC as required by legislation; • Section 39 of the Municipal Systems Act: The municipality did not formally approve the performance management system; • Section 28 of the Municipal Systems Act: The municipality did not adopt a process set out in writing for the adoption of its IDP.

  29. Discussions cont… • Basic Service Delivery:- • The municipality MIG allocation for 2009/2010 is the amount of R32,5 million and the expenditure is only R8,2 million, which is only 25% of the actual allocation. They are currently at risk of not receiving the allocation of December 2009 due to poor expenditure. • Good Governance and Public Participation:- • The municipality does not have a dedicated Public Participation Officer to support local initiatives. This renders the office of the Speaker incapable to monitor and support community initiatives.

  30. Discussions cont… • Cooperation: • The municipality has on several occasions failed to provide quarterly financial and performance reports. • It has been the tendency of the administration of the municipality to reject support from the province, including failure to cooperate with the office of the Auditor General. • Financial Viability: • Financial management • Evidence cannot be produced of a prudent financial management system • The debtors book of the municipality amounts to R177,4 million, • The municipality owes Creditors an amount of R32,5 million, the biggest creditor being Sedibeng Water Board at R12,7million

  31. Discussions cont… • Financial Viability: • Auditor General’s Report • The 2007/2008 Auditor General’s report which was a disclaimer opinion and the views of PROPAC show that there is no prudent financial management.

  32. Legal implications • After the endorsement of the said intervention by the Provincial Executive Council a written notice of the intervention was submitted to: • the Cabinet member responsible for provincial and local government; • the relevant provincial legislature; and • the National Council of Provinces within 14 days after the intervention began cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

  33. Conclusion • The effect of invoking section 139(1) (b) is that the municipal council is stable and all councillors attend council meetings.This intervention may end on 31 December 2010 . • The municipal manager has been re-instated and working closely with the administrator to improve MIG expenditure • Provincial Government provided funding for the appointment of a firm to assist with CFO function.

  34. THANK YOU! cooperative governance and traditional affairs Department of Cooperative Governance and Traditional Affairs FREE STATE PROVINCE

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