ATC130301: Report of Select Committee on Appropriations on Oversight visit to Gauteng Municipalities from 21-24 August 2012

THE REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE OVERSIGHT VISIT TO GAUTENG MUNICIPALITIES FROM 21-24 AUGUST 2012, DATE 27 NOVEMBER 2012

1. Introduction

The Select Committee on Appropriations (the Committee) was established in terms of section 4(3) of the Money Bills Amendment Procedure and Related Matter s Act, No 9 of 2009. In terms of section 4(4) of this Act, the Committee has the powers and functions conferred to it by the Constitution, legislation, the standing rules or a resolution of a House, including considering and reporting on:

(a) spending issues;

(b) amendments to the Division of Revenue Bill, the Appropriation Bill, Supplementary Appropriations Bill and Adjustment Appropriations Bill;

(c) recommendations of the Financial and Fiscal Commission, including those referred to in the Intergovernmental Fiscal Relations Act, No. 97 of 1997;

(d) reports on actual expenditure published by the National Treasury; and

(e) any other related matter set out in this Act.

Furthermore, the mandate of the Committee encompasses the Committee’s functions to legislate, conduct oversight of the Executive; promote public participation, and review matters of public interest in relation to National Treasury and its entities, and the South African Reserve Bank.

1.1 Terms of reference

The visit formed part of the Committee’s ongoing interaction with municipalities to monitor spending patterns, collaboration and coordination pertaining to the provision of municipal services and support given to municipalities by provincial and national departments in terms of section 154(1) of the Constitution. The municipalities in Gauteng that were identified for the visit were: Mogale City Local Municipality ; Randfontein Local Municipality ; Emfuleni Local Municipality ; City of Tshwane Metropolitan Municipality and City of Johannesburg Metropolitan Municipality.

The following stakeholders (including national and provincial departments) accompanied the Committee on this visit:

· Department of Cooperative Governance and Traditional Affairs

· National Treasury

· Department of Water Affairs

· Department of Energy

· Office of the Auditor-General

· Gauteng Provincial Treasury

· Gauteng Department of Housing, Local Government and Traditional Affairs

· South African Local Government Association

· Financial and Fiscal Commission

· Development Bank of Southern Africa

· The Office of the Premier of Gauteng ; and

· Members of the Gauteng Provincial Legislature.

1.2 Purpose of Visit

The purpose of the oversight visit was to engage with the above-mentioned municipalities along with national and provincial departments on the following areas:

• Municipal cash flow and financial status
• Sources of revenue, collection and expenditure management
• Spending patterns and performance of the municipalities with regards to conditional grants.
• Development and implementation of municipality’s budget.
• Compliance with the Municipal Finance Management Act and other legislation.
• Current assets and liabilities.
• Plans to address audit findings.

1.3 Overview

The oversight visit took place from 21-24 August 2012. The central meeting place was the Birchwood Hotel Conference Centre in Boksburg . On Tuesday, 21 August 2012, the Committee interacted with three local municipalities i.e. Randfontein Local Municipality , Mogale City Local Municipality and Emfuleni Local Municipality . Emfuleni Local Municipality did not make a presentation because they were not prepared or ready to present. On Wednesday, 22 August 2012, the Committee conducted site visits to four projects of the Emfuleni Local Municiaplity and two projects of the Midvaal Local Municipality . On Thursday, 23 August 2012, the oversight visit was cut short due to the unavailability of the City of Tshwane Metropolitan Municipality and the City of Johannesburg Metropolitan Municipality’s political and administrative leadership to attend the scheduled oversight meetings. These two metropolitan municipalities as well as Emfuleni Local Municipality were re-invited to appear before the Committee, in Parliament, on 16 October 2012 and all three honoured the invitation.

2. Auditor-General’s overall presentation on identified Municipalities

The Office of the Auditor-General (AG) briefed the Committee on the 2010/11 financial year audit outcomes of the three local municipalities visited in Gauteng . The AG reported that Randfontein Local Municipality , Mogale City Local Municipality and Emfuleni Local Municipality , had all received qualified audit opinions.

The AG informed the Committee that the key focus areas that were taken into consideration when the audit opinions were expressed and that needed urgent attention were, Supply Chain Management processes, Predetermined Objectives, Human Resource Management processes, Information Technology controls, and material errors in the Annual Financial Statements submitted for auditing. These key focus areas were measured against minimal improvement, no improvement, improvement, and unchanged status.

2.1 Randfontein Local Municipality

On the Randfontein Local Municipality ’s (RLM) 2010/11 financial year Audit Outcomes, the AG reported that the RLM had shown minimal improvement. This had been because the municipality had allowed suppliers who had no Value Added Tax certificates to participate in the procurement process. Regarding predetermined objectives, there had been no improvement due to the reported performance information not being useful and reliable. The AG further reported that on human resource management there had been minimal improvement and a key dependency on consultants to manage the asset management account had been identified. The RLM employees had worked overtime in excess of the maximum hours stipulated in the Basic Conditions of Employment Act and there was a vacancy in the key position of Performance Manager. The AG also reported that there had been no improvement in IT management, as there were no formally designed security management controls (policies, procedures, guidelines) to mitigate the risk of unauthorised access. The RLM had not established a business continuity plan or a disaster recovery plan. Furthermore, the AG reported that the Annual Financial Statements (AFS) submitted for audit had material misstatements and that a manual system had been used to prepare the AFS.

On the progress towards achieving an unqualified or clean audit opinion in Randfontein Local Municipality , the AG reported that the RLM had appointed a forensic firm to review contracts where procurement policies had not been followed. The leadership of RLM had followed up on the action plans to address audit findings identified in the 2009/10 financial year audit through internal audit. With respect to financial and performance management, the RLM used the Caseware system to prepare monthly financial statements. The RLM had improved on record keeping and a filing system to facilitate document retrieval. The AG reported that the RLM had appointed a new service provider to assist with asset management. On governance, the AG reported that the RLM had appointed a new Audit Committee and a qualified Internal Audit Manager.

2.2 Emfuleni Local Municipality

The Auditor General (AG) reported that Emfuleni Local Municipality (ELM) had shown minimal improvement on supply chain management. This had been due to the fact that invitations for competitive bidding had not always been advertised for the required minimum period of days. The amount involved was R14 million. Offering of services had been made to service providers who were persons in service of other State institutions. These service providers had failed to declare that they were in the service of the State as required by Supply Chain Management Regulations. The AG reported that there had been no improvement on predetermined objectives. The information provided had not been useful or reliable. The predetermined information selected had been 93 per cent not verifiable and 61 per cent of the indicators had no source information.

With respect to human resources, the AG reported that there had been minimal improvement on human resource management matters and that ELM had relied on consultants to prepare financial statements due to a lack of adequate skills. A key dependency had been identified on the asset management account. The AG further reported that ELM had a 50 per cent vacancy rate on the approved structure. This led to employees working more than the maximum hours of overtime allowed in terms of the Basic Condition of Employment Act. There had been no improvement on IT controls. The AG also found that there had been poor user access controls and no formal programme change management controls. Furthermore, the AG reported that the Annual Financial Statements submitted for audit had material misstatements.

On the progress towards an unqualified or clean audit opinion in Emfuleni Local Municipality , the AG reported that ELM had circulated and distributed a Code of Conduct and a Disciplinary Code to all employees. ELM had conducted performance evaluation of section 56 employees. The AG also reported that the leadership of ELM had followed up on the action plans to address audit findings identified in the 2009/10 financial year audit through internal audit. With respect to financial and performance management, the ELM had a register in place to record and monitor unauthorised, irregular, fruitless and wasteful expenditure. The ELM had engaged the auditors, engineers and consultants to draft a new asset register. The AG further reported that the ELM had revised and adopted a new performance system. The AG also reported that in ELM there were no users with super user access on IT systems. On governance, the AG reported that Audit, Performance and Risk Committees monitored quarterly progress on resolving audit qualifications.

2.3 Mogale City Local Municipality

On Mogale City Local Municipality (MCLM), the AG reported that on Supply Chain Management there had been no material findings. Whereas on predetermined objectives there had been minimal improvement. The AG reported that the reported performance indicators had not been accurate and that only 37 per cent of reported indicators were based on sources of information or evidence provided. The AG further reported that there had been minimal improvement in human resource management. The asset management unit had been under-capacitated with only one employee and there had been a heavy reliance on consultants, who had not transferred the skills to employees.

The AG also reported that there had been minimal improvement in IT management. IT management had not formally designed security management controls (policies, procedures, guidelines) to mitigate the risk of unauthorised access. The MCLM had not developed user account procedures for the operating and application system. The AG also reported that programme change management procedures for implementation of the BIQ Financial Management System were not in place in MCLM. Furthermore, the AG reported that Annual Financial Statements submitted for audit had been subjected to material amendments mainly on property, plant and equipment.

On the progress towards an unqualified or clean audit opinion in Mogale City Local Municipality (MCLM), the AG reported that the MCLM had capacitated the asset management unit with skilled staff and the AG had been requested to assist with guidance on the challenges experienced on assets. The MCLM held consultants accountable for their expert advice to the municipality. The AG further reported that MCLM had installed a new IT system. With respect to governance matters, the AG reported that the chairperson of the Audit Committee met with the Executive Mayor and Council for status updates on the effectiveness of key controls.

2.4 City of Tshwane Metropolitan Municipality

Regarding the City of Tshwane Metropolitan Municipality ( CoTMM ), the AG reported that for the 2009/10 and 2010/11 financial years the CoTMM received financially unqualified audit opinions with findings. The AG added that the CoTMM political leadership and councillors needed to take ownership of key Information Technology (IT) controls which had not improved. The AG explained that in CoTMM the general control environment had shortcomings relating to security management, user access control, IT service continuity and network review process. Another concern raised, was lack of improvements in the Annual Financial Statements submitted for audit, which had material errors. The material corrections to the Annual Financial Statements included incorrect classification of investment property, unrecorded liabilities and intangible assets. The AG further reported that there was a lack of consequences for non-adherence and a lack of accountability towards achieving a clean audit. According to the AG, compliance with laws and regulations were not adequately reviewed and monitored; financial statements were subject to material amendments and Audit of Predetermined Objectives (AOPO) findings on entities prevented a clean audit opinion.

Regarding progress towards a clean audit by CoTMM , the AG reported that the Honourable Mayor continued to chair the Operation Clean Audit (OPCA) Committee and OPCA officials had been appointed. On financial and performance management, the AG reported that training on AOPO was provided by the AG to internal auditors of the CoTMM . The AG further reported that monthly financial statements were tabled at the Audit Committee and Mayoral Committee. The AG added that the CoTMM tabled monthly reports on unauthorised, irregular and fruitless and wasteful expenditure and deviations to Council. Furthermore, the AG reported that training for municipal officials was provided to raise awareness about compliance with Supply Chain Management legislation. Subsequent to that SCM unit drafted an action plan to address prior years’ findings. The AG reported that Computer Assisted Audit Techniques ( CAATs ) procedures used by CoTMM to identify possible conflicts of interest for employees in service of the municipality were effective.

The AG reported that there were a few concerns that the CoTMM needed to address. These included performance reporting which was not being done on a timely basis by all departments within the CoTMM ; IT findings which were still in the process of being addressed; IT access controls to a billing system, Systems Applications Products audit (SAP) remained a problem; revenue reconciliations on assessment rates were not done on a regular basis; the fraud prevention plan had not yet been communicated to employees to create awareness.

2.5 City of Johannesburg Metropolitan Municipality

The Auditor-General (AG) reported that the City of Johannesburg Metropolitan Municipality ( CoJM ) had received qualified audit opinions for the 2009/10 and 2010/11 financial years. On the status of key focus areas for oversight and governance structures, the AG reported that the CoJMM had minimal improvement on revenue collection. These included property category differences between the Land Information System (LIS) and the Systems Applications Products audit (SAP), a billing system; and the actual meter readings were disregarded for billing purposes as customers were billed on estimated consumptions. The AG further reported that there were minimal improvements on supply chain management. This finding related to reasons for deviations that did not meet the requirements of Supply Chain Regulation 36 resulting in irregular expenditure; and awarding of contracts to persons in the service of the CoJMM and other State institutions. This included, in some instances, declarations not made or false declaration made. The AG also reported that there were no improvements in predetermined objectives.

The AG further reported that he had found it difficult to use reported performance information because changes to planned targets were not approved; planned and reported indicators were not well defined, specific and measurable; and reported performance information was not available. Regarding human resources, the AG reported that there was progress even though proper record keeping by the CoJMM was not maintained on leave liability and financial disciplines were not adhered to. Furthermore, the AG reported that there was minimal improvement on Supply Chain Management compliance. There was unauthorised expenditure, by Johannesburg Metropolitan Police Department (JMPD), fruitless and wasteful expenditure due to interest on overdue accounts, penalties from the South African Revenue Service, and expenditure for resources not utilised. With respect to the material errors in Annual Financial Statements (AFS) submitted for audit, the AG reported that there were no improvements because there was material amendments on the Annual Financial Statements submitted for audit.

The AG reported that the following commitments were made by leadership to address the audit outcomes for the period ending 30 June 2011:

• Address all audit issues raised relating to revenue management;
• Resolve customer queries urgently;
• Resolve system integration issues which had resulted in differences between revenue source data and billing data;
• Leave provision records will be properly captured and maintained; and
• Improved documentation of reasons for supply chain deviations.

In addition the AG reported that he had made the following proposals to further address the unfavourable audit outcomes of the 2010/11 financial year:

• Prepare monthly Annual Financial Statements with supporting documentation;
• Preparation of monthly reconciliations (revenue, debtors etc); and
• Audit Committee chairpersons to attend quarterly key control meetings with the Executive Mayor.

3. Gauteng Department of Housing, Local Government and Traditional Affairs

The Gauteng Department of Housing, Local Government and Traditional Affairs (GDHLGTA) reported that a revenue enhancement and debt management model had been implemented in Gauteng . The GDHLGTA also reported that a hands-on support approach had been adopted by the province to monitor, advise and coordinate the implementation of Operation Clean Audit 2014 (OPCA 2014). The GDHLGTA added that the hands-on approach had assisted in addressing issues raised by the Auditor- General in the 2010/11 Audit Outcomes.

On progress with the implementation of revenue enhancement and debtor management, the GDHLGTA reported that the non-collection of municipal debtors, which had a debt of approximately R33 million, were of great concern to the Gauteng Province . This was seriously affecting the municipalities’ cash position and their ability to improve service delivery. The GDHLGTA reported that it had implemented two models, the Government Debtors’ Collection Project and the Debtors’ Book Project, which were aimed at reducing debt and improving billing integrity and revenue collection.

The GDHLGTA reported that the objectives of government debt management were to establish a method for the payment of arrears to municipalities owed by various national and provincial government departments; to ensure that debtor information on government accounts was clean and correctly captured on the municipal finance systems; and to facilitate regular future payment for municipal services rendered. Due to these initiatives, the GDHLGTA reported that departments kept current accounts serviced on a monthly basis while working on paying the arrears on old accounts. The GDHLGTA further reported that only the Gauteng Department of Education was experiencing problems regarding section 21 schools that were not paying their accounts regularly and that the Department of Infrastructure Development was paying its debt in quarterly tranches whereas municipalities were billing on a monthly basis.

On the Debtors’ Book Project, the GDHLGTA reported that the first phase entailed an in-depth analysis of the five year transactions of the debtors’ book of the respective municipalities and this phase had been completed in 2009. The GDHLGTA further reported that the second phase entailed the process of selling the right to collect outstanding debts of the municipal debtors’ book. Each municipality had undertaken its own Supply Chain Management bidding process and had selected preferred bidders to collect debts of 90 days and older. Although this was reported to have been done the municipalities were still experiencing challenges with respect to conditions put by the preferred bidders. The other challenge that the GDHLGTA reported was that there had been delays with municipalities’ making data available for the analysis of the debtor’s book. This had been due to the incompatibility of systems. Other delays had been related to approvals of the different processes in the implementation plan by both the administration and political leadership.

Furthermore, GDHLGTA reported that the negotiations with the investors were complex and long, due to several factors that had to be considered in contracts of this nature. Among these were that the investors had identified key institutional risks such as possible leadership changes during the project implementation which might result in the project being cancelled. The GDHLGTA also reported that the City of Johannesburg Metropolitan Municipality had 1 022 million active accounts and 20 000 of these were being reviewed through a Revenue-Step-Change plan which was meant to address the identified challenges.

With respect to addressing Operation Clean Audit, the GDHLGTA reported that an Operation Clean Audit Provincial Coordinating Committee (OPCAPCC) had been established by the Premier of the Gauteng Province . The GDHLGTA explained that the OPCAPCC was established within the Intergovernmental Relations Framework Act and it was composed of the GDHLGTA, Provincial Treasury, the national Department of Cooperative Governance and Traditional Affairs and the South African Local Government Association ( Salga ). The GDHLGTA further reported that the purpose of the OPCAPCC was to monitor the implementation of OPCA-2014 within municipalities as well as Gauteng provincial departments and to streamline the support from various stakeholders to municipalities.

Moreover, the GDHLGTA reported that all Gauteng municipalities were required to present to the OPCAPCC on the progress made in addressing issues raised by the AG as well as progress towards achieving clean audits. The Committee was told that Gauteng municipalities had met the 80 per cent target of unqualified audits, as well as no disclaimers and adverse audit opinions. The GDHLGTA also reported that a process was underway to use shared services for internal audit and Audit Committees within the West Rand Region. The GDHLGTA also reported that it had identified asset management as a high risk area in Emfuleni Local Municipality and had financially supported the municipality in this regard. Subsequent to that, Pricewaterhouse Coopers ( PwC ) had been contracted by the municipality to compile a Generally Recognised Accounting Practice-17 (GRAP 17) asset register for infrastructure and movable assets.

The Committee was informed that although this process had been finalised in 2011, there were still areas that needed to be resolved regarding the calculation methodologies as well as supporting documentation for opening balances. As a result the ELM had received a qualified audit opinion from the AG. The contract of PwC had been extended to address the issues of qualification as well as to update the asset register with new assets that the municipality procured post the compilation, including library books.

4. Gauteng Provincial Treasury support to the three local municipalities

The Gauteng Provincial Treasury (GPT) reported that Gauteng had a very good intergovernmental structure between provincial and local spheres of government, both politically and administratively. The GPT reported that the Premier was chairing the Premier’s Coordinating Forum (PCF) which remained the over-arching politically guiding structure on local government matters. The GPT further reported that, from a local government fiscal perspective, the province met quarterly in the Municipal Finance Indaba (a political and administrative structure) which was a platform to address matters related to municipal finance management. In addition, the GPT reported that the following subsidiary structures, whose work feed into the PCF, had been established:

a. Chief Financial Officer’s Forum (targeted at municipal CFOs and senior finance officials and dealing with current and upcoming issues of a technical nature).

b. Internal Audit Forum (targeted at municipal internal audit units and dealing with technical matters and latest developments in internal audit processes).

c. Risk Management Forum (targeted at Chief Risk Officers to deal with municipal risks).

d. Operation Clean Audit Forum (this provincial structure was specifically designed to monitor both provincial and municipal audit-related issues to achieve the targets of clean audit by 2014).

On capital performance, the GPT reported that the three targeted local municipalities ( Emfuleni , Randfontein and Mogale City ) had budgeted on estimates of capital expenditure for the 2011/12 financial year as follows:

Municipality	Budget	Expenditure as at the end of the 2011/12 financial year
Emfuleni	R364 mill	R193 mill
Randfontein	R84 mill	R45 mill
Mogale City	R176 mill	R139 mill

The GPT reported that the performance of the three municipalities had been largely impacted by low revenue collection, inadequate staff capacity and management of capital projects. Revenue and cash management had been an area of concern, according to the GPT. The GPT further reported that although some of the municipalities visited had ended the last quarter of the 2011/12 financial year on a favourable bank balance, it had largely been due to redeeming investments and inflowing intergovernmental grants that had pushed these municipalities into positive fiscal territory.

The GPT reported that a Grants Management Committee (GMC) had been established to ensure that municipalities receive their grants from transferring departments when they are due. Moreover, the GPT reported that the province had established a Debt Management Committee (DMC) which was specifically focusing on the payments to municipalities by provincial departments on accounts issued to them.

Regarding the concerns raised by the Auditor-General on Annual Financial Statements, the GPT reported that the province had introduced the Gauteng Municipal Finance Management Act Circular 9 dealing with the technical review of the Annual Financial Statements. Based on this circular, the province reviews the presentation and accounting policies and advises municipalities of any shortcomings prior to their submission to the Auditor-General. The GPT also reported that to address audit outcomes the province had introduced the Gauteng Municipal Finance Management Act Circular 12 which dealt with the monitoring of municipal audit action plans to address audit findings.

5. Municipal Performances and Analysis

5.1 Randfontein Local Municipality

The Randfontein Local Municipality (RLM) reported that its total cash receipts for the 2011/12 financial year had amounted to R687.6 million. The payments to suppliers and personnel had been R617.8 million and they had made a short term investment of R74.1 million. The RLM further reported that financing activities had yielded R1.1 million and this resulted in a cash decrease of R3.2 million for the 2011/12 financial year. The opening balance of the cash flow deficit had been R2.8 million and the total cash flow deficit at the end of the 2011/12 financial year had been R6 million. The RLM reported that its operational budget for the 2011/12 financial year had been R794.9 million and the expenditure at the end of the financial year had amounted to R858.4 million. The RLM thus reported that it had overspent by R63.4 million.

With respect to debtors, the RLM reported that the opening balance of debtors as at 1 July 2011 had been R245.9 million and the closing balance as at 30 June 2012 had been R278.5 million. The RLM reported a R33.6 million growth in debtors and uncollected bills for the 2011/12 financial year. The RLM added that credit control actions were being implemented to collect arrears from those who were able to pay for property taxes and municipal services. The RLM explained that the growth in debtors affected the municipality’s ability to meet its obligations and to improve service delivery. The RLM further reported that as at 30 June 2012 the outstanding amount owed to creditors had been R40.2 million without accruals. An amount of R33.2 million was reported to be in arrears at Eskom for the bulk electricity account.

The RLM also reported that the socio-economic realities had a bearing on the cash flow position of the municipality. The Committee was informed that the registered indigents who qualified for assistance from the municipality had grown from an average of 5 500 in the year ended 30 June 2011 to an average of 6 500 in the year ended 30 June 2012. The RLM reported that the result of this increase had been the increase of subsidisation from the equitable share for basic services and a reduction of cash received for property taxes and municipal services. The RLM reported that in order to address the cash flow situation, they were implementing credit control measures to collect from rate and tax payers and consumers who could afford to pay.

The RLM also reported that it had resolved to curtail expenditure that was not service delivery oriented. In addition, the RLM reported that the main revenue sources for the municipality were property taxes, service charges, government conditional grants and subsidies, revenue from other sources like agency fees, traffic fines and town planning schemes. The generated funds were spent on employee costs; remuneration of councillors, bulk purchases, finance charges, and general expenses which included depreciation. Asset impairment was expenditure of a non-cash flow nature.

Regarding conditional grants, the RLM reported that for the 2011/12 financial year it had received R80.2 million and spent R51.6 million. The overall unspent grants had amounted to R28.5 million. The RLM explained that the Municipal Infrastructure Grant projects and the construction of an old age home that was funded from the Social Development Grant had been in progress at the end of the financial year. These projects had been rolled over to the 2012/13 financial year.

With respect to compliance with the Municipal Finance Management Act and other legislation, the RLM reported that its areas of concern were performance management compliance, appointment of the Audit Committee and the performance Audit Committee and supply chain management. On the issue of audit outcomes, the RLM reported that it had obtained a qualified audit opinion in the year ended 30 June 2011. The municipality had regressed from obtaining two successive unqualified audit opinions in the financial years ended June 2009 and June 2010.

The RLM reported that to address matters raised by the AG it had appointed a service provider to review the useful lives of assets in order to address asset management matters raised. At the time of the meeting, the Committee was told that the service provider was populating or reconciling the asset register and payment of the service provider was to be based on performance. Another issue that the RLM had to address was the implementation of the Caseware system for financial reporting. The RLM reported that it had implemented the software and that the misstatements that had resulted from manual compilations of financial statements were expected to be addressed.

With regard to findings of the Auditor-General, the RLM reported that the material losses raised by the AG in the 2011/12 financial year had been due to the R1 million which had been made available for distribution boxes to curb the theft of electricity. In the 2012/13 financial year, R2 million had been provided in the budget for the distribution boxes to curb the illegal connections that contributed to electricity losses. Moreover, the RLM reported that water losses had not been materially high. The RLM further reported that under-spending of its conditional grants remained an issue due to the fact that the municipality had provisionally spent only 40 per cent of its capital budget.

5.2 Mogale City Local Municipality

The Mogale City Local Municipality (MCLM) reported that its cash as at the end of June 2012 was R22 million, made up of conditional grant funds. The operating budget had been R1.426 billion and the expenditure as at 30 June 2012 had been R1.497 billion. The MCLM reported that its expenditure had exceeded the income for six months of the 2011/12 financial year and this had led to over-expenditure of R71.5 million. The MCLM added that, based on the performance of main tariffs as of 30 June 2012, the billed amount had been R1.1 billion but the municipality had received R1 billion, this meant that for every one rand billed the council had received only 96 cents.

On sources of operational revenue, the MCLM reported that its main source of revenue had been electricity (42 per cent) followed by property rates (16 per cent), transfers recognised - operational (14 per cent), water charges (11 per cent), sanitation, refuse removal and other revenue (5 per cent each) and traffic fines and agency services (1 per cent each). Regarding sources of capital revenue, the MCLM reported that 38 per cent of its revenue had been generated internally, 58 per cent had come from transfers recognised - capital and 4 per cent from an Absa bank loan.

With respect to compliance with the Municipal Finance Management Act (MFMA) and other legislation, the MCLM reported that MFMA implementation had been substantially adhered to through In-Year Financial reporting to National Treasury, and that the Budget and Treasury Office had been established. The MCLM reported that there were four interns employed through the Municipal Financial Management Internship programme. The MCLM further reported that an Audit Committee had been established and was functional. All relevant policies were reported to have been approved with the annual budget. On assets and liabilities, the MCLM reported that, at the end of the 2011/12 financial year, its current assets had been lower than the current liabilities (R377.2 million compared to R451.7 million.)

Regarding plans to address audit findings, the MCLM reported that the AG had expressed a qualified audit opinion on the 2011/12 financial statements. The qualified audit opinion had been due to the fact the AG had been unable to verify by alternative means the adjustments made to the opening balances of property, plant and equipment which resulted in the increase of carrying value by R38.9 billion. The MCLM also reported that it had suffered significant water and electricity losses to the value of R49 million or 36 per cent and R27 million or 6 per cent respectively. The MCLM reported that it had developed a strategy to curb these losses, which would be thoroughly monitored by the infrastructure department.

The MCLM further reported that it had incurred unauthorised expenditure of R11 million as a result of exceeding the total allocated budget. This expenditure was condoned by Council. Moreover, the MCLM reported that an unrecoverable amount of R48 million on material impairments had been incurred. This also included writing off the bad debts that related to indigents customers. However, the MCLM reported that after developing a cash flow turnaround strategy in December 2011, it had managed to collect 96 per cent of debts. This had been more than the projected collection rate of 94 per cent.

5.3 City of Johannesburg Metropolitan Municipality

On the municipal cash flow status, the City of Johannesburg Metropolitan Municipality ( CoJMM ) reported that it had an average of R2 billion cash balances since December 2011, and on 30 June 2012 it closed the 2011/12 financial year with a positive cash balance of R2.1 billion. The CoJMM added that Commercial Paper ( CPs ) issuances had been used to manage cash flow mismatches and R1.1 billion worth of CPs were issued in the 2011/12 financial year compared to R3.4 billion raised in the 2010/11 financial year. The CoJMM further explained that all CPs had been redeemed by April 2012.

On cash receipts and payments including grants, the CoJMM reported that month-on-month cash receipts which included grants received were higher than expenditure. The CoJMM added that current assets versus current liabilities were at 1 ,25:1 which showed an improvement which was slightly higher than the benchmark of 1:1. Regarding debtors versus creditors, the CoJMM reported that at the end of the 2011/12 financial year, consumer debtors was R6 116 949 and trade payable was R6 977 521.

With respect to sources of revenue, collections and expenditure management in the 2011/2012 financial year, the CoJMM reported that it had collected R33 414 billion from property rates, service charges, operating grants, interest and other sources. Furthermore, the CoJMM reported that it received conditional grants (Expanded Public Works Programme Grant, National Electrification, Neighbourhood Development Partnership Grant, Public Transport Infrastructure and Systems Grant, Urban Settlement Development Grant) worth R3.7 billion and spent R3.3 billion as at the end of 2011/12 financial year. The CoJMM added that historical revenue collection levels over the last three financial years had been on average 91.5 per cent which was approximately 7 per cent of debt older than 120 days. The CoJMM further added that it had managed to settle its credits within 30 days of receipt of invoices.

On capital budget performance by funding sources, the CoJMM reported that in the 2011/12 financial year it had received USDG (R1 billion) and spent R971 million (94 per cent). The CoJMM further reported that on grants and other subsidies it had received R1.4 billion and spent only R1.1 billion (75 per cent). According to CoJMM the major under expenditure (R10.7 million) was that of the Neighbourhood Development Partnership Grant.

Regarding development and implementation of budgets, the CoJMM reported that it had a five year Integrated Development Plan within which there were short, medium and long term plans to roll out programmes that would ensure that the municipality was financially sustainable, would shift to low carbon infrastructure; integrate waste management; green ways and mobility; move from informal settlements to sustainable human settlements; have urban water management; encourage citizen participation and empowerment; provide strategic communications and marketing; ensure human capital development and management; provide economic growth; have a safe, secure and resilient city that protects, serves, builds and empowers communities; and be a city where none go hungry.

On compliance with legislation, the CoJMM reported that it maintains a legislative compliance register. The CoJMM further explained that in ensuring compliance, templates on legislative compliance including fruitless and wasteful expenditure are completed by internal departments monthly, in compliance with sections 32 and 103 of the Municipal Finance Management Act 56 of 2003.

Regarding plans to address audit findings, the CoJMM reported that a detailed action plan was in place not only for the audit report issues but also for the entire management letter; all audit findings were shared not only with the affected departments but with all departments to ensure that the issues are addressed organisation-wide; regular follow-ups are done with each department, ensuring that the relevant target dates are achieved; to improve the internal control environment and strengthen internal control mechanisms; strive to strengthen oversight system and responsibility at senior management level; improve the consistency of data and records; further engage with the AG and find common ground on the interpretation and understanding of Supply Chain Management regulations (deviations); enhance revenue management through the Revenue Step Change Roadmap; and secure the services of KPMG to assist in addressing audit challenges.

5.4 Emfuleni Local Municipality

The Emfuleni Local Municipality (ELM) reported that for three financial years, 2008/09, 2009/10 and 2010/2011, it had received qualified audit opinions. The basis for qualification in 2010/11 was valuation of property, plant and equipment. On audit outcomes, the ELM added that there were matters of emphasis regarding civil matters, General Recognised Accounting Practice 17 (GRAP 17) implementation, material losses (water 51 per cent and electricity 11 per cent) and material impairments - thus irrecoverable. The ELM further reported that there were SCM deviations (20 due to urgency) and 12 irregularities were reported of service providers in the service of the State. The ELM assured the Committee that it had an Audit Action Plan to address the audit outcomes. These included: appointment of service providers to finalise the GRAP 17 implementation; establishment of an OPCA Steering Committee; quarterly internal control assessments with the AG; an OPCA progress report to be presented quarterly to Audit Committee, Mayoral Committee and the Council.

The ELM further reported that in the 2011/12 financial year its budget was R3.7 billion and its assets were valued at R9 billion. The ELM reported that as at 30 June 2012 it had spent R4.04 million (7 per cent over-expenditure). The ELM listed its challenges as: unemployment (45 per cent); water and sanitation infrastructure backlog (R10 billion), roads infrastructure backlog (R9 billion), electricity backlog (R2 billion), payment levels in poor areas (3 per cent), outstanding debt (R2 billion), unfavourable cash flow status, water losses (R180 million per annum), electricity losses (R20 million per annum), and billing functionality. The ELM reported that it was owed a total amount of R2.7 billion by debtors. Residential debtors owed R2.2 million (84 per cent) of that amount followed by government which owed the municipality R44 million.

With respect to its cash flow status, the ELM reported that as at the end of September 2012 it had an opening balance of R13.8 million and received R1.1 billion for grants and equitable share. The ELM reported that it spent R1.2 billion on electrification, water supply, personnel costs and other payables as at the end of September 2012. This indicated an over -expenditure by R109.5 million. The ELM reported that its Council had raised an R150 million overdraft facility as bridging finance for 2012/13 financial year which they utilised to settle their shortfall. The ELM further reported that it had R40.5 million available from their overdraft facility.

Furthermore, the ELM reported that for its capital expenditure it had received R364 million and had spent only R326 million (76 per cent). The ELM reported that the cash-flow restrictions contributed to the under-spending on Council-funded projects. The ELM added that most of the projects were rolled over into the 2012/13 financial year. On conditional grant allocations and expenditure, the ELM reported that it had an opening balance of R48.6 million and received a total of R740 million and spent R739 million (96 per cent). The closing balance was R29.3 million. With respect to provincial and district conditional grants, the ELM reported that it had an opening balance of R12.6 million and received R47.1 million and subsequently spent R52.7 million. The closing balance was R7 million.

Regarding the budget preparation process, the ELM reported that it established an effective Budget Steering Committee; the Integrated Development Plan and Budget Process Plan were approved after consultation with key stakeholders through a public participation process. The ELM further reported that its Council had appointed a functioning Audit Committee and Municipal Public Accounts Committee (MPAC) for the effective and efficient performance of its functions. The ELM also reported that it was in the process of appointing an Information Technology (IT) specialist to serve as a member of the MPAC which reported to the Council on matters of performance.

The ELM reported that it had challenges with respect to billing and non-payment of services which had resulted in a R2.6 billion debtor’s book; high water and electricity losses, theft and non-payment of water (R241 million) and electricity (R60 million); skills shortage and a high vacancy rate; infrastructure backlog worth R20 billion; non-payment for services in former black townships with no metering; unfunded provincial mandates like health, libraries and facilities; arrear government accounts to the tune of R44 million; insufficient cash flow which led to an overdraft facility worth R150 million being raised on 01 July 2012; data integrity; and customer service ethos amongst staff.

5.6 City of Tshwane Metropolitan Municipality

The City of Tshwane Metropolitan Municipality ( CoTMM ) reported that the incorporation of the former Metsweding District Municipality , Nokeng-tsa-Taemane and Kungwini Local Municipalities into CoTMM culminated in it being the largest municipality in South Africa . For that merger, the CoTMM reported that it received only R20 million from the Gauteng Provincial Government. With respect to development and implementation of its budget, the CoTMM reported that various factors and variables had influenced the compilation of the 2011/12 budget. The CoTMM reported that during the Medium Term Revenue and Expenditure Framework (MTREF) its departments were requested to do periodic planning which directly informed the Service Delivery Budget Implementation Plan (SDBIP).

Regarding compliance with the Municipal Finance Management Act and other legislation, the CoTMM reported that its budget was approved in line with MFMA Circular 42 and the Funding Compliance Guideline. Moreover, the CoTMM reported that the following legislated compliance had been met: approval of Budget-Time Schedule, table MTREF after consulted with community, draft MTREF approved on 28 April 2011, monthly reporting - thus in-year reports were submitted timeously. The CoTMM further reported that in compliance with sections 45 and 46 of the MFMA it had secured short and long term funding.

With respect to the sources of revenue, its collection and expenditure management, the CoTMM reported that in the 2011/12 financial year it generated from various sources R19 billion and spent R20 billion. For operational costs, the CoTMM reported that it received R1.2 billion and the actual amount spent was R1.8 billion. The CoTMM reported that a number of issues contributed to over-expenditure. Amongst those were network distribution losses for electricity and water. The CoTMM reported that the value of electricity losses amounted to R339.8 million as compared to R133.9 million for the 2010/11 financial year. On water losses, the CoTMM reported that it had lost in revenue amounts totalling R369.5 million as compared to R282.96 million for the 2010/11 financial year.

On spending patterns and performance of the municipality with regards to conditional grants, the CoTMM reported that it had received conditional grants funds to the amount of R1.3 billion and spent R1.2 billion (86 per cent) of that total amount. Regarding the operating grants and subsidies, the CoTMM reported that it had received R271 billion and only spent R201 billion (74 per cent). The CoTMM further reported that the Mayoral Committee had established a Capex Committee which was chaired by the Leader of Executive Business and the Mayoral Member of Council responsible for Finance. At the time of reporting, the CoTMM reported that the Capex Committee had resolved to compile procurement plans in line with capital budget and it had approved specification to the value of R1.5 billion.

Moreover, the CoTMM reported that its Chief Finance Officer issued a weekly report on capital expenditure. The CoTMM also reported that it had a cash flow strategy which targeted to save R21 million per month on its reserve. The ultimate target was to save R252 million in the 2012/13 financial year. The Cash Flow Management Model entailed daily monitoring of cash flow for 12 months, red flag alerts in the forecasts, non-negotiable monthly revenue collection, reduction of debtors days to 56 days by the 2014/15 financial year (with the ultimate aim to match the 30 days required by the MFMA), repayment/redemption of capital and interest without compromise, improve networking capital/cost coverage from 1.3 months to 2.3 months, and discourage all surprise creditors/expenditure not forecast, ensure proper usage of overdraft facility to bridge finance for capital expenditure while waiting for finalisation of borrowings, and invest excess cash to earn interest and to set off debt cost of overdraft.

The CoTMM reported that it had established strategies to reduce the debtors book and improve liquidity and it had set aside R2 million for exploring a right to collect the debtors book. The CoTMM added that it was in the process of purifying data to ensure correct and accurate billing through smart meter reading and computer assisted audit techniques. The CoTMM further reported that it had initiated interaction with national and provincial government regarding outstanding debt. With respect to collecting debts older than 30 days, the CoTMM reported that it was following all legal processes against defaulters and all debtors had been handed over to collection agencies. The CoTMM further reported that it had audited assets worth R21 billion and audited current liabilities worth R12 billion.

With respect to audit findings, the CoTMM reported that it had received an unqualified audit opinion in the 2009/10 and 2010/11 financial years and it strived to maintain the unqualified audit opinion and move towards achieving a clean audit opinion. The CoTMM reported that PWC/Sekela Consortium had been appointed for 24 months to assist the Asset Management Unit in establishing a sustainable unit with established policies and procedures and ensure GRAP 17 compliance. The CoTMM further reported that it was strengthening ICT security and access control deficiencies and governance policies and framework.

6. Oversight visit to projects

The Committee undertook inspections-in-loco to two projects of the Midvaal Local Municipality (MLM) and four water purification projects of the Emfuleni Local Municipality .

6.1 Midvaal Local Municipality Projects

6.1.1 Sicelo Informal Settlement Housing Development Project

The MLM reported that the Sicelo Informal Settlement was located on part of Meyerton Farms on an area of 351 hectares. The original township had been approved in 1909, and the MLM explained that the Sicelo Informal Settlement had been established in the year 2002. At the time of the visit the Committee was told that it was estimated to have between 2500 and 3500 households, of which close to 2000 did not qualify for government housing subsidies.

The MLM reported that a housing development project of 1473 housing beneficiaries had been approved by the Gauteng Department of Housing, Local Government and Traditional Affairs. The new housing development had started after a feasibility study had indicated the need to relocate the Sicelo Informal Settlement on an emergency relocation basis due to adverse dolomite soil conditions. The area where the new housing development was moving to was owned by the MLM. The Committee visited the site and it was reported that storm-water, bulk sewerage and infrastructure had been installed and that all that was left was for the provincial Department of Housing, Local Government and Traditional Affairs to start building houses.

The MLM reported that there were challenges regarding certain portions of land at the Sicelo Informal Settlement plots. The major challenge was that portions 41, 52, 53, and 184 were located in a dolomite classification zone 8, a high risk for sink hole and doline formation. The MLM added that the affected settlements had access to limited services including chemical toilets which cost the Gauteng Department of Housing, Local Government and Traditional Affairs R1 million per month to maintain. When the housing development was completed the MLM said an allocation criteria would be established in consultation with the community and ward members. The MLM reported that because this area had certain portions of land which needed to be rehabilitated, a different model of Rural Development Programme houses was needed and that construction of three storey walk-up top structure should be considered.

6.1.2 Bantu- Bonke Hydroponics Agricultural Cooperative

The Midvaal Local Municipality reported that Bantu- Bonke was a township located on the Southern part of Midvaal Local Municipality on a farm called Panfontein . The estimated population of Bantu- Bonke was about 422 with 87 households. The MLM further reported that the first phase of the Bantu- Bonke Hydroponics and Poultry Farming Project had started in 2003 and it had been registered as an agricultural cooperative in October 2009.

The Committee visited the project and saw a 15-Hydroponics-tunnel-production situated on 4 hectares of land. The MLM reported that the land had been donated to the community of Bantu- Bonke by Anglo American Farms. The Committee was informed that the project had employed 20 community members on a full-time basis. 80 per cent of those employed were women and youth. The project was producing cucumber, green pepper, tomato, and spinach. The main buyers were reported to be fresh produce markets in Johannesburg , Pretoria , Klerksdorp , Vereeniging and Springs . When the Committee visited the projects there were small plants but the people who were there reported that the plants were taking long to grow because of the winter cold. They said the hydroponics were effective when temperatures were high.

The Midvaal Local Municipality reported that it had supported the project with drawings for the developing project’s administrative block, pack house, training room and storage facilities and these had been completed and approved by its Building Control Unit. This project had also received a donation of Bio-mite waste treatment plant donated by MLM and the Rand Water Foundation. The Committee was also informed that this project was expecting a R10 million donation from the Gauteng Department of Agriculture and Rural Development.

The Bantu- Bonke Agricultural Cooperative project had a project partners committee which included: Rand Water Foundation (principal funders), National Development Agency , Gauteng Department of Agriculture and Rural Development; Midvaal Local Municipality ; Ocon Brick Manufacturing; Sky Sand (PTY) Ltd; Vaal University of Technology. The Bantu- Bonke Agricultural Cooperative project partners committee acted as a monitoring body for the project development.

6.2 Emfuleni Local Municipality Projects

The Municipal Manager of the Emfuleni Local Municipality informed the delegation that the lack of capacity in terms of waste water management had led to a moratorium being placed on any new developments in the area. A R40 billion project was being planned, which included the upgrading of the Leeuwkuil , Sebokeng and Rietspruit waste water treatment works.

6.2.1 Leeuwkuil Waste Water Treatment Works

The Leeuwkuil Waste Water Treatments Works has a capacity of 36 mega litres per day and serves Vereeniging , Three Rivers , Sharpeville and a part of Vanderbijlpark . It was already operating at full capacity, making it difficult for the Municipality to maintain compliance with the Department of Water Affairs license requirements for the final effluent discharge. Nonetheless, they had achieved 99 per cent compliance during the year from July 2011 to June 2012. At the time of the visit, a tender had already gone out for an upgrade to increase the plant’s capacity to 75 mega litres per day and to look for new, more eco-friendly technology.

6.2.2 Sebokeng/Evaton Pressure Station

The Sebokeng/Evaton Pressure Station is a public/private partnership project to reduce leakages. It works on the principle that by managing the water pressure, the frequency of bursts as well as background and household leakages are reduced and the life of the reticulation system is prolonged. This leads to a saving of 24 mega litres per day. This station is virtually maintenance-free and no personnel are needed on site. Monitoring is done off site via the internet. This project won the South African Association of Consulting Engineers’ Excellence Award in 2005.

6.2.3 Sebokeng Waste Water Treatment Works

The Sebokeng Waste Water Treatment Works has a design capacity of 100 mega litres per day but at the time of the visit it was operating 50 per cent over capacity at 150 mega litres per day. The foreman indicated that they were still operating within licensing specifications, but should they get as little as five mega litres more, the plant would not be able to cope. The plan was to upgrade the plant to 200 mega litres capacity. In order to bring down the cost of this, two old modules would be demolished and the material used in the construction of two new modules. This would take an estimated three years to complete and the demolition and construction was expected to begin in October 2012.

The following were issues of concern which required attention:

· Poor turnaround time on the repair of defective equipment had a negative impact on the overall waste water process. This may have been as a result of poor communication between the operations and maintenance components. The situation was being addressed in the form of weekly meetings between operations and maintenance staff.

· The critical shortage of operational staff in relation to the size of the works had been partly addressed by the employment of six general workers in October 2011.

· The fact that chlorine was not procured timeously posed a major challenge as it seriously compromised water quality.

6.2.4 Rietspruit Waste Water Treatment Works

The Rietspruit Waste Water Treatment plant has a capacity of 36 mega litres per day and serves Bophelong , Bonane and a part of Vanderbijlpark . The plant was due to undergo an upgrade to increase its capacity to 70 mega litres per day. The tender for this work had gone out together with the tender for Leeuwkuil . During April 2012 a service provider had been appointed to assist with sludge management at the plant. The project included the cleaning of all digesters and two sludge lagoons.

7. Submission by key stakeholders and government departments

The Department of Water Affairs (DWA) reported that it had assisted the Gauteng Municipality to eradicate unlawful irrigation water use by 2013. The DWA added that it had initiated the implementation of water conservation and water demand management which targets to reduced unlawful use of water by 15 per cent in 2015. The DWA further reported that after noticing water pollution by mines in Witwatersrand , it established Inter-Ministerial Committee on Acid Mine Drainage which set for the first time on 1 September 2010. The DWA reported that it’s Director-General and that of Department of Mineral Resources appointed a team of expects to conduct an assessment of the damage caused. Recommendation was made by the team, and a report was produced for DWA.

With respect to the support provided to the municipalities, the DWA reported that a War on Leaks project was launched in Mogale City Local Municipality and City of Tshwane Metropolitan Municipality. The youth of that area were trained and contracted for that project. The DWA also reported that Gauteng Provincial Business Plan for Project Save 15 per cent by 2013 had been drafted and presented to the Gauteng Department of Local Government and Housing. The DWA further reported that a Regional Bulk Infrastructure Grant projects (R1.1 billion over MTEF) were being implemented in Emfuleni Local Municipality . The DWA also reported that it supported City of Johannesburg with R33 million for retrofitting, leak detection and repair, and pressure management in hostels in the 2010/11 financial year. Moreover, the DWA reported that R5 million was provided to City of Tshwane Metropolitan Municipality which focused on solid waste removal in the streams and along the banks. This project employed 300 women during the 2011/12 financial year. On water services regulation and support, the DWA reported that all five municipalities received blue drop water status in the 2011/12 financial year.

8. Observations

Whilst interacting with the Gauteng municipalities, invited stakeholders and conducting inspections-on-loco on projects, the Committee observed the following:

8.1 The three local municipalities invited had all obtained qualified audit opinions in the 2010/11 financial year.

8.2 The Emfuleni and Randfontein Local Municipalities had bypassed Supply Chain Management regulations by hiring service providers who did not submit valid Value Added Tax certificates and the minimum days for advertisements had not always been adhered to.

8.3 Buy letting employees work overtime in excess of the maximum stipulated hours, the Emfuleni and Randfontein Local Municipalities did not comply with the requirements of the Basic Conditions of Employment Act.

8.4 The Randfontein, Emfuleni and Mogale City Local Municipalities did not have IT security management controls to mitigate the risk of unauthorised access.

8.5 The Randfontein Local Municipality was R33.2 million in arrears with their bulk electricity account at Eskom.

8.6 The Mogale City Local Municipality had incurred unauthorised expenditure to the amount of R11 million for the 2011/12 financial year.

8.7 The Mogale City Local Municipality had water losses to the value of R49 million, and electricity losses to the value of R27 million.

8.8 The Emfuleni Local Municipality had contracted service providers that were owned by government employees who had not declared their interests.

8.9 The Emfuleni Local Municipality had, during auditing, submitted information that was 93 per cent not verifiable and 61 per cent of indicators had no source information and the municipality had relied on consultants to prepare financial statements. This was due to the fact that the ELM had a 50 per cent vacancy rate.

8.10 The Sicelo Informal Settlement Housing Development Project had progressed very well with bulk infrastructure having been installed but certain portions of land needed to be rehabilitated before houses are built.

8.11 Failure by section 21 schools to pay municipal accounts call for an intervention by the Gauteng Education Department.

8.12 Inappropriate billing might also be contributing to a culture of non payment of services.

8.13 There is a need for funding when municipalities are amalgamated as was the case in the City of Tshwane Metro Municipality.

8.14 Reliance by municipalities on overdrafts for operational activities is not sustainable in the long run.

9. Recommendations

Based on the above observations, the Select Committee on Appropriations recommends the following:

9.1 The Gauteng Department of Housing, Local Government and Traditional Affairs should work closely with the Gauteng Provincial Treasury and support the Randfontein, Emfuleni , and Mogale City Local Municipalities towards achieving unqualified audit opinions.

9.2 The Gauteng Provincial Treasury should investigate and submit a report , within three months after the adoption of this report by the NCOP, on how and why the Emfuleni and Randfontein Local Municipalities had hired service providers who did not have valid Value Added Tax certificates and why minimum days for advertisements were not adhered to. The department should further ensure that disciplinary steps as well as legal steps are taken against those engaging in wrong practices such as non compliance with applicable supply chain rules.

9.3 The Emfuleni and Randfontein Local Municipalities should, at all times, comply

with the provisions of the Basic Conditions of Employment Act and not allow employees to work overtime in excess of the maximum stipulated hours. These municipalities should urgently fill all the funded vacant positions to avoid unnecessary over times.

9.4 The Randfontein, Emfuleni and Mogale City Local Municipalities should establish and install IT security management control measures that would

ensure that the risk of unauthorised access is minimised.

9.5 The Randfontein Local Municipality should ensure that it starts servicing it’s

R33.2 million debt to Eskom for the bulk electricity account.

9.6 The Mogale City Local Municipality should submit a turnaround strategy on its

plans to address, and prevent a repeat of, the R71.5 million over-expenditure and all unauthorised expenditure that was incurred in the 2010/11 financial year. They should also submit to Parliament, within three months after the adoption of this report by the NCOP, a turnaround strategy on how it will address the loss of water and electricity that is counted at R76 million.

9.7 The Gauteng Provincial Treasury should submit a report, within three months

after adoption of this report by the NCOP, on what consequences will be faced by all the government employees who did not disclose that they were government employees when their companies were contracted by the Emfuleni Local Municipality as service providers.

9.8 The Emfuleni Local Municipality should fill all vacant posts that have been

budgeted for before the end of the third quarter of the 2012/13 financial year. The report on the filling of vacant posts should be submitted to Parliament before 31 March 2013.

9.9 The Gauteng Department of Housing, Local Government and Traditional Affairs should start implementing the next phase, the construction of houses, in the Sicelo Informal Settlement Housing Development Project before the end of the 2012/13 financial year.

9.10 The Gauteng Education Department should take steps against section 21school that owes municipalities. The Department to report to the Committee within three months after this Report has been adopted by the NCOP.

9.11 All the municipalities should provide progress report on their plans to deal with water and electricity losses in their area.

9.12 The GPT and GDHLGTA should provide support and monitoring to

municipalities to ensure that credible supply chain structures are put in place

within the municipalities.

9.13 The GPT and GDHLGTA should provide monitoring and support to the municipalities to ensure that they develop credible billing systems.

9.14 The National Treasury should ensure that there is proper funding for any

proposed amalgamation of municipalities.

9.15 The National Treasury and CoGTA should provide support to municipalities to

ensure that they are able to optimise their revenue collection while minimising

unnecessary losses due to leakages.

9.16 The Premier’s Coordinating Forum (PCF), in promoting good intergovernmental relations, should encourage and organise consistent training for the Chief Financial Officers, Internal Audit Committees and Risk Management Committees of municipalities, with the assistance of the Provincial Treasury.

Report to be considered