The Minister of Cooperative Governance and Traditional Affairs spoke on the plans and progress of the Operation Clean Audit by 2014 Programme. Its goal was to have all 283 municipalities and nine provinces achieving clean audits on their annual financial statements by 2014. A brief outline of what had been done up to this point was given as well as the timeframes of the programme. The Head of Operation Clean Audit gave a more detailed presentation on the challenges that they faced, what was being done to resolve these and how the programme was being implemented.
Questions asked by Members included how the programme address the problem of the lack of technical capacity in the municipal and provincial sphere, what would happen to un-trainable employees, what measures were in place to ensure that the project was not hampered by unnecessary legal action, how much interaction would occur at different spheres of government and what action could be taken to deal effectively with the matters raised by the Auditor General. Other comments were that if leadership and political oversight matters were effectively dealt with, then 95% of the problems would be solved, most of the municipalities that were failing had problems with cadred employment structures (where municipalities disregarded the order of the executive because of seniority in political party structures), power struggles existed in municipalities which paralysed service delivery, and
duplication occurred between district municipalities and local municipalities.
Concerns were raised about ensuring service delivery, that municipalities complied with their constitutional obligations and that conditional grants were spent in a timely manner.
Overview of Operation Clean Audit (OPCA) 2014 Programme
Mr Sicelo Shiceka, Minister of the Department of Cooperative Governance and Traditional Affairs, briefed the seven assembled committees on the Operation Clean Audit 2014 Programme. The reasons for the creation of the programme included the recurring questions raised by the Auditor General which had not been addressed over a number of years. It was noted that
The Programme Milestones highlighted in the presentation began with, no municipalities or provincial departments having Adverse and Disclaimer audit opinions by the beginning of 2011; and culminated in all 283 municipalities and provincial departments achieving unqualified audit opinions with no matters of emphasis by 2014.
The road to the launch of the programme was outlined, which included the conceptualisation and packaging of the programme and the National Launch in July 2009. All provinces were expected to launch the programme by the end of October 2009 and up until today’s date four had already launched, three had submitted dates for launching and two still needed to do this.
The drivers of the campaign included the Provincial Coordinating Committees, the Auditor General and the Accountant General.
Political oversight of the programme needed to be strengthened. Municipal Public Accounts Committees would be established in all municipalities by 15 December 2009. Monitoring and evaluation of the programme was then briefly discussed starting with all executive authorities in all spheres receiving monthly financial statements and ending with an annual evaluation summit. The final word was that the political message from all portfolio committees, both national and provincial, about clean audits was critical.
Status Report on Operation Clean Audit (OPCA)
Some of the main institutional challenges included weak internal controls, a lack of performance management, inadequate financial controls and corruption, fraud and mismanagement.
The performance of municipalities showed that there had been improvement in all areas (disclaimers, adverse audit opinions, qualified audit opinions, and opinions with matters of emphasis) between the 2006/07 and the 2007/08 financial years. Provincial departments likewise showed improvement in all areas.
Governance and leadership in municipalities was analysed showing the number of Chief Financial Officers (CFO) employed in municipalities as at September 2009, with a total of 49 vacant posts for all provinces. Of 283 municipalities, 73% had established Audit Committees, 16% shared them and 11% had not yet established them. The respective figures for Internal Audit Units were 78%, 7% and 14%.
This year 58 of the 283 municipalities had not submitted their annual financial statements or had submitted them late.
Dr Siswana spoke about the programme’s development which had included a situational analysis and assessment of both provincial departments and municipalities and the development of an integrated logframe. This process had been consultative and provincial visits had and would occur.
The pillars of the programme, as identified by the Office of the Auditor General, included the provision of a clear trail of documentation, the availability of key officials during audits, and the timeliness of financial statements and management information.
The implementation strategy expected that all provinces were expected to establish Provincial Coordinating Committees (PCC). The PCCs would focus on leadership, governance and political oversight. The duties of the PCCs would include providing regular feedback to Premiers and MECs, developing a programme for provincial support of OPCA, and the management of deliverables to municipalities and provincial departments. The reporting parameters for the PCCs, that is the central tenets of their reports, were discussed in detail.
Dr Siswana outlined the way forward for OPCA which included an urgent focus on disclaimers and adverse audit opinions, provincial visits to discuss turnaround strategies, a close monitoring of provincial action plans and a robust campaign against corruption and fraud.
Question from Members of Parliament
Mr M Swart (DA) noted that a number of years ago the National Treasury introduced the Generally Accepted Municipal Accounting Practice (GAMAP) system of accounting and asked whether all municipalities were using this. If not, then the situation would be problematic for achieving clean audits.
Mr B Mashile (ANC) said that in the process of achieving a clean audit, unqualified Chief Financial Officers (CFOs) would be found, and asked what would happen to them.
Adv M Masutha (ANC) commented that one of the constitutional imperatives in Chapter 9 of the Constitution was that other organs of state needed to ensure the effectiveness of the Auditor General, and the launch of this programme ensured this. He asked whether the Minister was planning to interact with colleagues at all three spheres of government to ensure appropriate action was taken to effectively remove the bad elements.
Mr W Doman (DA) believed that the Municipal Finance Management Act (MFMA) was too restrictive, preventing municipalities from getting clean audits. According to the Act, on the 21st of the month the mayor needed to receive a report on the finances of the previous month, audit committees needed to be established and report back on the previous year’s audit, and public accounts committees needed to be established. Support would be given if the legislation was changed to ensure that Public Accounts Committees were set up, as this appeared to be a voluntary procedure at present. A focus on what had gone wrong in the past was needed, such as the disappearance of documentation and capacity and skills shortages, which needed to be rectified. He asked who in the Department was going to run the project.
Mr M Mokgobi (ANC) said that the problem with the clean audit programme was that of funding. It should be assured that municipalities had enough funding to implement this programme. He requested that reports be given twice a year to ensure that the parliamentary committees could make inputs during the implementation of the programme. He added that there was a need to minimise non-compliance of Section 129 of the Municipal Finance Management Act (MFMA), and move towards financial compliance.
Mr A Watson (DA) noted that most of the municipalities that were failing had problems with cadred employment structures, where municipalities disregarded the order of the executive because of seniority in political party structures. This situation needed to change and professional people needed to be employed. The Public Finance Management Act (PFMA) also inhibited politicians from being on bidding committees, which in theory sounded good, but in practice prevented politicians from exercising oversight of officials in these committees.
Dr G George (DA) said that the Auditor General had reported that senior officials did not make themselves available to discuss the findings of audits when they were in progress or to provide the necessary information. He asked what was happening in the short term to ensure that these individuals were accountable.
Mr J Gunda (ID) was concerned about the issues of leadership and political oversight and said that if these could be effectively dealt with, then 95% of the problems would be solved. In local municipalities there was not only a lack of leadership, but a failure to fully understand what leadership meant. Oversight needed to be done properly at this level, and the provincial counterparts of the Standing Committee on Public Accounts (SCOPA) needed to take the plan seriously, and those people who inhibited the process needed to be removed. This programme would be taken seriously because it was important that the Fourth Term government succeeded in their plans.
Ms Z Dlamini-Dubazana (ANC) said that technical capacity within government was a problem, but it did not feature in the proposed programme and asked how this was going to be addressed. She suggested that a database of required skills be developed. She noted that power struggles existed in municipalities which paralysed service delivery in these municipalities.
She said that the Accountant General and the Auditor General dealt with monitoring and evaluation, but there also needed to be a focus on budget allocations given to municipalities, as these could not function without correct allocations.
Ms Dlamini-Dubazana continued that there needed to be serious coordination between the Department, the Auditor General, the Accountant General and statisticians. The MFMA also needed to be reviewed as it spoke of the role of the mayor but not of the deputy mayor which resulted in the overlap and duplication on duties.
Mr S Montsitsi (ANC) was concerned that the Municipal Management Act had a clause for punitive action to be taken against municipalities or financial officials of the municipalities with respect to any irregularity, but municipalities did not seem to act on this. This was something that needed to happen to send a message to municipalities throughout the countries. He felt that some municipalities deliberately ignored the law, and there was a sense that basic accounting principles were not followed. Assurance was needed from the Department that the reports submitted by the respective committees were taken into account and responded to.
Dr Z Luyenge (ANC) said that there needed to be a service delivery standard in place which would determine and justify any delivery outcome. A skills audit, in terms of assessment and development, had occurred but this had no impact on service delivery, and clarity from the Minister on this issue was requested.
Dr Luyenge said that the recurrent issues raised by the Auditor General, had a basis in the PFMA, MFMA and the Constitution. There were institutions responsible to take action on the basis of what the AG had reported, but these institutions had not taken action. He asked what could be done to rectify this situation.
Mr T Harris (DA) noted that one in five municipalities had not submitted annual financial statements, and one in ten did not have audit committees. These were demanded by the MFMA, but a lack of these meant that effectively those municipalities operated illegally. A manner of ensuring that compliance occurred was necessary.
Mr M Makhubela (COPE) asked if there were measures in place to ensure the success of the programme because he felt that there would be legal action taken by those individuals who would be removed from their positions due to the programme.
Mr Tsenoli said that as this was the mini launch of Operation Clean Audit, they would allow interested members of the public to give inputs.
Mr Nhlapo Nhlapo, Secretary General of the South African Municipal Workers Union (SAMWU), said that for 15 years, some of the problems found in local government related to the type of management put in place. The fact that CFOs were employed on a fixed contractual basis meant that towards the end of their contractual period they would spend time looking for other employment.
He said that the emphasis should not only be placed on CFOs, municipal managers and mayors, as there was a chain in the process. When issues went to the councils, the councillors often, due to a lack of information or understanding, had problems with monitoring the reports. Capacity was the key issue, and central to this was the level of occupancy of posts in municipalities. This was a huge problem because there were more than 100 000 vacant posts in municipalities. These included CFO and municipal manager posts. The situation was chaotic and one of the processes moving forward had to be dealing with that bottleneck immediately.
Mr Nhlapo noted that municipality spending of more than 50% of its budget on wages was to meet the capacity needs of that municipality. This budget was dependant on the equitable share or an other source of income it could find.
He said that another problem was that of ‘political wrangling’, which had been seen in the
Mr P Rabie (DA) was concerned about the degree of duplication occurring between district municipalities and local municipalities. Services were becoming more and more expensive, and the impact of this was felt more in rural areas than in metropolitan areas. Two bureaucratic institutions were not needed and the situation could be simplified if these areas were governed by only one authority.
Mr Rabie said that local authorities were also too dependent on expensive consultants, and across the entire political spectrum, people were tired of paying for ‘improper’ services. The impression that was given by local authorities was that they were employment agencies, and it was important that this changed and the target of delivery was set.
Mr C De Beer (ANC) noted that since 1995, seven projects addressing capacity building had been running and these had amounted to approximately R3 billion. When it was seen what was put in, and what the results were, it was apparent that more sector monitoring was needed.
Mr De Beer said that it was the duty of committees, during constituency periods, to interact with councillors, municipal managers and mayors in terms of oversight. A technical skills vacuum had been seen in the
Mr De Beer believed that more coordination was needed between the Department and the National Treasury. This had become apparent during the visit to
Mr N Singh (IFP) said that while there was a concentration on financial audits, performance audits should not be neglected because there was a need to focus on the performance of the type of delivery that was carried out in municipalities.
He said that there were problems with the spending of conditional grants. At the end of a financial year, if National Departments had found that they could not spend a certain amount of money, this was sent down to municipalities. The haste in which this money was sent off, and the haste of the tender processes that ensued needed to be addressed.
Mr Singh said that there needed to be a change in the current situation of a lack of questioning by councillors. Added to this, basic record keeping needed to be done properly. Likewise, payments for audits needed to be budgeted for.
Mr Singh continued that procurement seemed to be passed to officials, and these officials operated like a cartel, running contracts for themselves. Many of these were high-ranking political office bearers, which created a measure of awkwardness. A balance needed to be gained on procurement committees between political office bearers, administrators and perhaps, outside adjudicators.
Mr Singh echoed Mr Rabie’s question, asking if there was an actual need for district municipalities.
Ms I Ditshetelo (UCDP) asked how the Operation Clean Audit programme was going to continue on-job training while at the same time remove those elements that could not fulfil their functions. She said that rural municipalities were in a bad shape and suggested that these needed to be addressed first.
Mr N Du Toit (DA) pointed out that there existed a misuse of acting allowances, where someone who assumed the duties of an official, even for a very brief time, was paid an allowance fee regardless of their performance. These acting allowances were earned down the reporting line, which amounted to a shameless self-enrichment clearly outside the definition of what acting allowances were supposed to mean. Although this was a ‘nitty-gritty’ detail, it spoke to the issue at hand and the Minister was requested to reveal any instances of this occurring that he was aware of.
Mr Sogoni said that it was clear that there was much excitement about the programme, but clarity was needed about SCOPA requiring quarterly reports. SCOPA had a clear role to play in the process, but other parliamentary committees also needed to be involved and be allowed to play their own roles.
He said that the concerns raised about the MFMA were not apparent in the municipal visits undertaken by the committees, but some details of it could be reviewed by the committees.
Mr Sogoni said that the roles played by the members present also needed to be revisited and scrutinised to ensure that they were able to enhance the programme themselves.
Response by Minister of Cooperative Governance and Traditional Affairs
The Minister, Mr Sicelo Shiceka, said that the issue needed to be made into something more than a ‘matter of interest’ because local government affected everyone. The role of parliamentarians could not be over-emphasised and a challenge in the past had been the outsourcing of oversight procedures by politicians to officials, but there was a need for politicians to take this power back from officials.
The Minister noted that every square inch of
The Minister said that the problem of unqualified CFOs was simple to resolve, where if they proved to be un-trainable, they would be removed. A skills audit would be done, which would complement the audit done by local government and the Sector Education Training Authority (SETA). An outcome of this would be to ascertain what the model of the treasury within a municipality should be like, and what capacity it should have.
The Minister said that he could not understand that someone could be given a disclaimer or adverse audit opinion and still be left in their position, still receiving bonuses in some cases. A person was supposed to face the consequences of their inactions, and that was what would happen. That was why OPCA needed to be a part of performance management, to ensure that it could be used as a punitive instrument. Labour laws should not prevent the Department from acting. There was a need to scrutinise the laws that said that the appointment, suspension and dismissal of Section 57 managers must be made with the approval of both the MEC and the Minister. It was necessary for people that were employed to be skilled at the outset. Those that were employed as Section 57 managers should join the appropriate bodies, such as the Institute for Local Government Mangers and so forth. The reason for this was that if employees did not fulfil their functions, they could be disciplined by the relevant organisational body.
The Minister said that if the laws could be implemented properly, 50% of the problems faced would be gone. The question was however, why were parliamentarians, who passed the laws, not ensuring that the monitoring of them happened at a departmental level. The Department was building its capacity of lawyers to ensure that the implementation of laws occurred. The capacity would also be built for creating standard bylaws for municipalities that could be tailor-made depending on the particular problems faced.
The Minister said that a meeting had been held with the President and with Helen Zille (at her request), and in this meeting it was requested that he (the Minister) convene the reviews of the laws, which was underway anyway to review which laws were inhibiting service delivery. For example, when building a house it took a number of years before the first brick could even be laid because of impact assessments and so forth. This could not continue to be the case.
The Minister said a government notice would be sent to deal with the issue of municipal public accounts, and by the 15th these needed to be in place. The Department would monitor the implementation of this, but required parliament to train municipal public accounts leaders, to ensure that they benefited from experience and knowledge.
The Minister said that mayoral funds, which in reality had the danger of being secret slush funds, should be done away with and the use of these made illegal.
The Minister said that Dr Siswana was head of the project and would be accountable for its success. Dr Siswana would work very closely with the municipalities and other parties involved. The Department wanted to change the way government worked, and wanted to run everything in a project management style. This needed to coordinate with multiple areas focused on different work.
The Minister said that having a Statistician General was a good point, and this would be implemented, as there were issues with statistics in
The Minister said that it was the Department’s view that Parliament should maintain a continual assessment of the project, and not merely meet twice a year for a performance update.
The Minister said that Section 139 interventions were about the mismanagement of finances, but at the core the problem was a lack of capacity and skills in doing the work. The DA should ‘not throw stones in a glass house’ by over politicising the situation. If a municipality was not performing it needed to be dealt with regardless of what party it was controlled by.
The Minister said that cadred deployment occurred everywhere. Regardless of employee’s political affiliations, if they proved to be incompetent, then they needed to be removed. In addition to this, the supply chain management needed to be reviewed, and in the short run, politicians needed to be allowed to call officials to account.
The Minister said that in moving forward, people needed to be empowered to take on oversight responsibilities. He agreed with the views expressed about service standards.
A report was being developed on the power struggles that existed between the mayor, the speaker and municipal managers, and there was a need to ensure that this power struggle was corrected. All present needed to indicate where problems existed and what needed to be done about them, as it was not a time to remain silent on such issues.
The Minister said that he was awaiting a report from the NCOP, and that work needed to be done around the issue of co-operative governance with Parliament.
Officials in departments were not used on the ground, and when taken out, they were shocked at the situation they encountered. The Department wanted other departments to be visible on the ground so as to help ensure a coherent strategy. He added that people who undermined the government needed to be disciplined.
The Minister said that the budget for the municipalities needed to be dealt with amongst the municipalities themselves. Basic accounting principles were not followed and this needed to be dealt with.
The Minister said that there was a need to build capacity and to expect Parliament to keep account of the Department. There was a need not to tolerate secondary quality services.
The Minister disagreed with the proposal of having permanent managers, and felt that fixed term contracts were better as this ensured that managers did not get lazy in their positions. He acknowledged that there was a need to work towards amending the vacancy rates.
The Minister said that in terms of the Division of Revenue and the coordination of conditional grants there were two considerations. Firstly, local government was not funded as it should be, and the structure of funding needed to change.
The Minister said that the private sector was prepared and willing and was being mobilised.
The Minister said that there had been coordination with the National Treasury and that the relationship had been strengthened.
The Minister said that the issue of dumping of grants and tenders at the last minute needed to be addressed.
Finally, the Minister assured the Committees that there would be a focus on rural municipalities.
Dr Siswana said that it was important that the project ran smoothly, and that audit management was assured.
Mr Tsenoli said that it would be useful to place the policy paper on the agenda as it provided an opportunity to hear from civil society.
Lunchtime Address by Accountant General
Mr Freeman Nomvalo, Accountant General, National Treasury noted that the Minister of Finance, although not present, was in full support of the project.
Mr Nomvalo said that it was recognised that the Constitution required standard practices. He said that GAMAP standards were updated standards that applied only to the current financial year.
He said as a general comment, no qualifications of audits were acceptable, but even worse, was when there was a disclaimer by the Auditor General.
Mr Nomvalo noted that the SCOPA Chairperson had said that all organs of state needed to support Chapter Nine institutions, such as the Auditor General.
He concluded that the milestones presented were attainable, but for everything to work and for the success of the project, four things were needed:
▪ Properly qualified people filling suitable positions was the first issue, and once CFOs were in place, service delivery would be an issue of programme managers. There was a need to interrogate the availability of CFOs during audit time, as there had been a tendency for CFOs to take leave during this period in order to avoid being held accountable for their failings. A further issue in this regard was that it had been note that CFOs employed consultants to do their work.
▪ A governance and control environment in place.
▪ Political and administrative leadership had to aid one another. Politicians should be held accountable, and oversight needed to play a role. There could not be situation where municipalities came up with excuses and no follow-ups took place.
▪ Ensure that the right issues were addressed and that the project was not undermined.
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