Deputy Minister on Department of Co-operative Governance & Traditional Affairs 2008/09 Annual Report

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Cooperative Governance and Traditional Affairs

26 October 2009
Chairperson: Mr L Tsenoli (ANC)
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Meeting Summary

The Deputy Minister was in attendance when the Department of Co-operative Governance and Traditional Affairs reported on its achievements, its programme performance for 2008/09 as when as the first quarter programme performance of 2009/10 and the Department’s budget expenditure. The Department had received a qualified audit opinion form the Auditor-General. In reply to the Committee’s questioning, the Department explained that they had received a qualified audit opinion, despite always performing so well in the past, as they had experienced problems balancing the Department’s fixed asset register.

Members queried what the 8% of “outputs not achieved” were. They noted that a lot of consultants were being used in the Department and that skill audits were conducted in only fifteen municipalities in the whole country. They wondered if the appropriation from the government would automatically compensate for something like a massive electricity tariff hike. Members were concerned that the Nhlapo Commission, which was supposed to resolve
traditional leadership disputes and claims, was non-functional. They wondered what the effect was on the “ground” and if municipalities actually benefited from the programmes in the Departments. The Committee asked why over R4 million was spent on the appointment of an events management company for the VUNA Awards. The Committee also noted that funds were paid over to municipalities; however, the municipalities did not spend all of the funds.

Members asked if the Department had report backs on how the Anti-Corruption Strategies/ Fraud Prevention Plans strategies had helped the municipalities. The Committee stated that the Department needed to sharpen its monitoring and control measures. The Annual Report showed that municipal spending seemed to be worsening - municipalities seemed to be spending less and less of their allocated funds each year.

The Deputy Minister and the Committee agreed that the Department had performed well over the last year; however, there was a need to improve. It was important to work together to find a balance between government and civil society. If municipalities were not performing adequately, the National Government had to intervene more proactively. They also agreed that the work of the Nhlapo Commission was not satisfactory and that they were appalled by it. Deputy Minister Carrim suggested that the Committee could bring the Nhlapo Commission to Parliament to ask them what they were doing. Collectively, the Committee and the Department were responsible for the Commission.  The Commission should be monitored quarterly and brought to Parliament to account for their actions.

Meeting report

Introduction by Deputy Minister
The Deputy Minister, Mr Yunus Carrim, stated that the Minister and he had thought that the responses the Committee had given in response to the Department’s briefing on its strategic plan were very useful. He thanked the Members that attended the Local Government Indaba and informed them that the framework for the national turnaround strategy that emerged at the Indaba would be brought to Parliament as soon as possible. The decision taken at the Indaba was to include inputs from stakeholders, unions, civil societies etc. in the framework.

Since the new term, there has been an expanded Department with a new mandate. In the year under review, the Department adapted to this mandate. Local Government transfers administered by the Department last year took in to account the recession as it was in the midst of the negative impacts of the global economic and financial recession. 98% of the Department’s budget consisted of grants for municipalities. The budget constituted the Municipal Infrastructure Grant (MIG), the Local Government Equitable Share (LGES), and the Municipal Systems Improvement Grant (MSIG). The Department also had certain programmes that it focused on such as administration, Monitoring and Evaluation (M&E), governance, policy and research, urban and rural development, systems and capacity building and, Free Basic Services (FBS) and infrastructure.

Deputy Minister Carrim stated that the year under review was accompanied by high level reforms. Cabinet approved that the Department of Co-operative Governance and Traditional Affairs (DCOGTA) be established and the Department was now negotiating with the National Treasury regarding public finances. During the year, several pieces of legislation were introduced such as the Local Government Laws Amendment Act, the Local Government Municipal Demarcation Amendment Act and the Local Government Municipal Property Rates Act. The Department also submitted to Parliament the National House of Traditional Leaders Bill. It was currently with the National Council of Provinces (NCOP) and the Department hoped to have it finished before the end of the year before the term of the
Nhlapo Commission on Traditional Leadership Disputes and Claims came to an end.

In terms of moving forward, the Department already briefed the Committee on its strategic plan. The Committee agreed on the Local Government turnaround strategy and a declaration was then issued by the Department. There would be a complete policy review process by Cabinet before the end of the year. This would be brought to the Committee who would facilitate community participation in shaping the process.

The Deputy Minister noted that the DCOGTA received a qualified audit opinion from the Auditor-General (A-G). He realised it was an awkward situation when the Department, who received a qualified audit opinion, was asking municipalities and provinces to have clean audits. He assured the Committee that the Minister was “hell bent” on finding the culprits responsible for it and dealing with the matter.

Improving the public participation system was a key part of the Department’s strategic plan. The Minister and Deputy Minister thought the Department performed fairly well over the last financial year; however, it certainly was not good enough. The Department was determined to improve by implementing its new strategy and by delivering on its promises. He hoped that the Committee would engage rigorously with the Department in the future.

Department’s Briefing on the Annual Report
Ms Tumi Mketi, Deputy Director-General: Monitoring and Evaluation, briefed the Committee on the Department’s mission statement and achievement of outputs. Out of 98 (presentation says 99, should be 98) outputs altogether, 68% of outputs were achieved, 24% were partially achieved and 8% was not achieved at all. The Department also briefed the Committee on its programme performance.

Programme 1: Administration – Corporate Services
A communication framework for the 5-year Local Government Strategic Agenda was updated and shared with provinces for implementation. Unfortunately, a qualified audit was received for 2008/09. Medium Term Expenditure Framework (MTEF) submission was completed and submitted to the National Treasury by 31 August 2008.

Programme 1: Administration: Monitoring and Evaluation
A national analytical report on the 5-year Local Government (LG) Strategic Agenda was compiled and presented to the July 2008 and January 2009 Cabinet Lekgotla. The implementation of the national Performance Management Support (PMS) Strategy resulted in an increase in the number of municipalities implementing PMS from 153 to 223 by 31 March 2009. An Annual Report on municipal performance was compiled by 31 March 2009. A needs assessment was conducted and hands-on support provided to five selected District Municipalities in PMS.

Programme 2: Governance, Policy and Research
A Policy Review on Provincial and Local Government was submitted to the Cabinet Lekgotla by 31 January 2009. The strategic plan for 2009-2012, the organisational structure and post establishment for the new Department of Traditional Leadership was approved by the Minister for Provincial and Local Government on the 2nd December 2008. The Integrated Developing Plan (IDP) credibility improved from 79% to 79,5% with improvement in the medium category.

Programme 3: Urban and Rural Development
The Spatial Development Framework Assessment study of the Bushbuckridge Local Municipality was completed.
Nodal economic profiles were launched. The Department provided planning and implementation
support to the Alfred Nzo, Umzinyathi, Ukhahlamba, Kgalagadi, Zululand and Central Karoo rural nodes during the Growth and Development Summits.

Programme 4: Systems and Capacity Building
The National Capacity Building Framework (NCBF) was launched nationally. The roll-out commenced in all provinces by 31 March 2009 and three provinces with municipal capacity building strategies were informed by the strategy. The financial performance report which focused on Fixed Asset Registers and Internal Audit Committees were developed and support was provided to 160 municipalities, with 45 receiving on going hands-on support. 165 municipalities were supported to develop Anti-Corruption Strategies / Fraud Prevention Plans.

Support was provided to fifteen District municipalities who were trained to roll out the Disability Framework. The National and Provincial Vuna Awards were successfully held and Municipal Infrastructure Grant (MIG) finance to the value of R177m was mobilised for bulk water/sanitation and drought/flood relief. Skills audits were conducted in fifteen municipalities.

The Municipal Property Rates Act was Gazetted for implementation on 27 March 2009 together with the related Notice in terms of the Municipal Finance Management Act. A knowledge-sharing workshop was organised to facilitate learning from the German experience on all aspects of hosting the World Cup. Technical support was provided to the Host Cities with regard to Programme Management and the development of operational plans.

A resource pool of Service Delivery Facilitators (SDFs) was established and was operational in priority municipalities.

Programme 5: Free Basic Services and Infrastructure
75% indigent households had received Free Basic Water (FBW) and 58% of indigent households received Free Basic Electricity (FBE). 39 Municipalities in 5 Provinces were assisted with assessment of indigent policies and the development of improvement plans. The national framework based on the Funding Model was approved by Cabinet on 4 February 2009 to be published for public comments.

First Quarter Programme Performance 2009/10
Minister Sicelo Shiceka had launched “Operation Clean Audit by 2014” on July 16 2009 to address the challenges faced by both municipalities and provincial government departments with regards to audit management, audit findings and queries from the Auditor-General, and to help achieve clean audits by 2014. A comprehensive assessment of the state of local governance and service delivery in our municipalities was in close cooperation with both provincial and local government. Task teams were established in all provinces. The outcomes of the assessments would culminate in the development of a national Local Government Turn Around Strategy (2009-2011). The Minister embarked on a national communications strategy addressing the spate of “service delivery” protests through various media platforms.

The Department would play a key role in the preparations for the 2010 FIFA World Cup. The Host City Forum was restructured to include Premiers, Members of Executive Council (MECs) responsible for the co-ordination of the 2010 World Cup, and Mayors / Executive Mayors from the nine Host Cities.

The Department completed the process of reviewing its strategy and developing its Strategic Plan for the period 2009-2014 in line with its new expanded mandate and the Medium Term Strategic Framework (MTSF) as well as Programme of Action (PoA) projects. The performance reporting tool was reviewed to enable the provision of better quality of information from provinces and relevant sector departments.


The Municipal Property Rates Amendment Bill, which provides for the extension of the old order valuation rolls for a further two years, was approved by Cabinet on 13 August 2009.

Structure of the Department’s Budget
The budget was divided between seven programmes consisting of administration, governance and research, urban and rural development, systems and capacity building, FBS and Infrastructure, Provincial and Local Government transfers and fiscal transfers. Provincial and Local Government transfers received the highest allocation, while the urban and rural development programme received the least.

The 2008/09 budget reflected a total expenditure (excluding local and foreign aid assistance) of R35 348 092 000. This represented 99.9% of the total appropriation.
Transfers to local government were expected to increase to approximately R41 billion by the 2009/10 financial year.

Quarter Programme Performance 2009/10ffQ



Discussion
Mr A Williams (ANC) stated that he only received the Report that morning. This was a problem and the Department needed to take the Committee more seriously. It was very difficult to talk to a report if one has not seen it.

The Chairperson stated that the Annual Report was sent to Parliament months ago. Parliament was to blame if Members did not receive the document. However, the Committee could blame the Department for only submitting the PowerPoint presentation the previous day.

Mr Williams stated that even though the Annual Report was submitted months ago, he still only received it this morning. This was a valid point.

The Chairperson stated that this was still not the Department’s fault. The whips and those responsible for collecting documents were responsible for sending them to Members.

Ms Mketi stated that the Department submitted the Annual Report to Parliament on the 30 September 2009.

Mr Williams looked at the Department’s achievements of output. The 8% of “outputs not achieved” did not mean anything to him as it could be 8% of the 98 outputs. That 8% could represent the problem that was causing problems in municipalities in the country at the moment. A bit more information was needed about it. He noted that a lot of consultants were being used in the Department. He stated that perhaps there needed to be capacity building in the Department so that they did not have to rely on external consultants. He noted that IDP credibility improved from 79% to 79.5%. The Committee was not receiving enough information. He was under the impression that IDPs were written by consultants and municipalities had very little input in to it. The presentation showed that skills audits were only conducted in fifteen municipalities in the whole country. He wondered if the Department was working with the Local Government Sector Education Training Authority (LGSETA) on this matter, as fifteen municipalities was not good enough.

Ms Mketi stated that she did not have the exact information for the 8% output not achieved. The Department gave its different branches the space to indicate where they felt they were not going to deliver a particular output by the end of the year. A lot of programmes were disrupted by the reorganisation of the Department.

Ms Mketi addressed the issue of consultants. She stated that if one considered the organisational form or the design of the Department, one would see that it was a central model designed to develop policy and to monitor the implementation of policy. The actual support for implementation on the ground was not considered in the organogram and the Department had to “stretch” itself to play this role. Hence, the reliance on the use of consultants. The Department had to find outside partnerships to assist with implementation of policies in municipalities. The bulk of the budget regarding consultants had to do with implementation of interventions designed for helping municipalities.

Mr M Jita, Chief Financial Officer (CFO), stated that the CFO/s office used very few consultants; it was the rest of the Department that used a lot of consultants.

Ms Mketi stated that there were many studies done on the impact the IDP programme had. She could not mention them at point in time but they would answer the question again. The failure of national and provincial government to work together has impacted on the negative reports the Department received regarding the performance of municipalities.

In terms of skills audits, the Department indicated that this was a long term project with an incremental approach. The fifteen audits were just for the 2008/09 financial year and the skills audits process was not an easy one. It depended on the co-operation of municipalities. The Department could send the Committee a report on the actual figures for municipalities that had skills audits.

Deputy Minister Carrim added that the Minister was very keen on finishing the skills audits processes.

Ms Mngadi added that the Department was working with the LGSETA, as they were funding the audits and they were steering the initiative.

Mr P Smith (IFP) stated that it was unfortunate that the Department received a qualified audit opinion as they had always performed well in the past. He thought that the DCOGTA did a reasonable job over the past year. One of the issues the Committee raised the previous year was the extent to which the M&E was being integrated in to the whole of government M&E. This had a bearing on compliance requirements for municipalities in terms of reporting to multiple arms of government. In terms of FBS, he wondered if the appropriation from the government would automatically compensate for some thing like a massive electricity tariff hike. He wondered how this worked at the local level. He was concerned that the Nhlapo Commission, which was supposed to resolve claims and disputes, was non-functional. This was an example of the Committee not adequately applying its mind to what was happening in the country. He asked the Department to comment on this.

Ms Mketi addressed the issue of the M&E processes extending to ground level. She said different departments such as the Presidency, Public Service Commission, the Public Service and Administration Department, National Treasury the DCOGTA were coordinating in order to do so. They established a committee that looked at the monitoring and reporting of government work. The Department was supposed to be guided by the government’s M&E framework; however, it was not helpful. Therefore each department was told to start their own polices and framework and to use their own M&E policy. 

The Department stated that an increase in tariffs had an effect on the cost of FBS. A lot of time, this was an extra cost for municipalities. It was becoming increasingly difficult for municipalities to recover all the service charges. This had an effect on other social services offered by the municipalities.

Mr Smith stated that he was under the assumption that equitable share funded FBSs and if the cost of services increases, the central government would then compensate for this. He thought it would be reflected in the report. He was not quite sure how it was handled.

Ms Mketi stated that the Minister raised concerns about the Nhlapo Commission and their under-spending. His submission was that the Commission was unknown. They were working with the Commission on how to popularise it so it could do some meaningful work.

Mr W Doman (DA) stated that Department performed well and they had achieved a lot; however, he wondered what the effect was on the “ground” and if municipalities actually benefited from the programmes in the Departments. The amount of money spent on consultants was worrying. He wanted an explanation on why over R4 million was spent on the appointment of an events management company for the VUNA Awards. This was a lot of money. He asked the Department to explain what led them to having a qualified report. He heard that it might be referred for possible legal action. He noted that the A-G’s report said that an investigation was conducted by an independent company aimed at identifying individuals within the Department who did not disclose their interest in companies that were appointed as service providers for the Department. He asked what action the Department took. He knew this would be a challenge as the Department did not have proper M&E mechanisms in place. He addressed the issue on moneys given to municipalities that were not spent. He knew the Department tried its best to pay over all the funds. It seems that the money was paid over; however, the municipalities did not spend all of it. He asked if the DCOGTA was looking in to this matter.

Ms Mketi looked at the issue of funds spent on the VUNA awards. It was true that there were huge costs incurred with that event; however, it was necessarily for the once-off event. The cost incurred included were for the coordination of the even over all the nine provinces. They thought it would be better to use one service provider nationally.

Mr Jita addressed the matter of why the Department received a qualified report. The Department knew there was a question of credibility concerning their fixed asset register. The Department did a physical count of all the assets in the Department. Once this was completed, it was compared with the previous financial years count. When compared, the Department found that there was equipment not listed on the asset register; however, they were on the “floor”. They also found assets in the register that could not be found in the Department. In some cases, assets had been donated to schools and the asset register had not been updated. All the assets that could not be traced had to be disposed of; hence, the Department could not satisfy the A-G as to what happened to the assets. The Department also had to “capture” the assets that could be found on the floor but not in the register. It was impossible for the Department to find the value of some of the assets, as some of them were very old. The Department had to explain to the A-G that they had to drive a specific way to find a value for these assets. The Department had to look at similar assets that were purchased in the same year. The A-G said the Department could not do this; they had to find the invoices for these assets. Therefore, the A-G had a problem with the valuation of the assets. The Department thought this was fair and reasonable.

Another issue related to prior adjustment of assets. In order to truly reflect the asset register, there had to be an opening balance, additions, disposals and closing balance. The Department could not have an amount for disposal. What ever the difference was for the opening balance of this year and the closing balance of last year, it had to because of assets which were not properly captured. Hence, an adjustment had to be made for the previous year. The problems that the Department had did not relate to this financial year, but to previous financial years. These problems were only discovered in the 2008/09 financial year.

There was also R10 million for irregular expenditure. The details of the irregular expenditure were explained in the Annual Report (page 225). R3 127 000 was spent on the lease of office equipment. An application for this was tendered with the National Treasury so it could be condoned. R6 792 000 was an amount for non-compliance with the procurement policy. Some investigations were completed and disciplinary action would be taken against officials involved.    

Mr Jita stated that the Department’s target was that all municipalities would have spent 40% of their MIG allocation by the end of September 2008. There were a number of municipalities who had not reached this target. The Committee had to consider that the end of September was the end of the second quarter according to the national financial year; however, it was the end of the first quarter for municipalities. The Annual Report was until the end of March 2009, which excluded the municipalities fourth quarter. There were support teams in each province that ensured they spent their MIG allocation. In February this year the Minister sent out letters to municipalities that were under-spending telling them about the implications of their actions. There were also issues around spending that had to do with lack of capacity in municipalities. The Department asked the municipalities to construct comprehensive municipal infrastructure plans, which looked to the future.

Ms D Nhlengethwa (ANC) noted that the Department helped 165 municipalities to develop Anti-Corruption Strategies/ Fraud Prevention Plans. She asked if the Department has had report backs on how the strategies have helped the municipalities.

Ms Mketi stated that she did not have the figures with her; however, the plans were monitored and reports were given to the Department and Parliament every second month.

Ms I Ditshetelo (UCDP) said that the Department’s presentation said that a resource pool of Service Delivery Facilitators (SDFs) was established and was operational in priority municipalities. She asked what this meant and how many municipalities were actually prioritised.

Ms Mketi stated that the SDFs were appointed to assist approximately 136 municipalities. These municipalities were in distress and needed personal hands-on support.

Mr Smith noted that the Annual Report (page 113) showed that municipal spending seemed to be worsening; municipalities seemed to be spending less and less of their allocated funds each year. He stated that in terms of transfers to municipalities that were withheld, there were only two provinces that performed perfectly. He wondered why this was so.

Mr Doman added that the Department needed to sharpen its monitoring and control measures.

Ms Mketi answered that the Department was monitoring closely the ability of municipalities to spend their funds. The Department, along with the National Treasury adopted stricter measures over the past two years to ensure that municipalities spent their grants. If funds could not be spent they were withdrawn and transferred to other municipalities that could spend the money.

Ms Mngadi added that the municipalities that did not receive funds because they had failed to spend their allocations were identified through their failure to report to the Department. In instances where reports were submitted and it was indicated that the funds had not been spent appropriately, the Department guided these municipalities as to how the funds should be spent.

The Chairperson noted that there was a need for additional information on high capacity and low capacity municipalities. The turnaround strategy should show how conditions would be treated given the different municipalities. He stated that there was an observation about intergovernmental relations and the intergovernmental fiscal system. The Department said that it currently constrained collaborative working. He wanted feedback on this. He asked if there was any internal monitoring of legislation as it related to Local Government.

Mr Williams looked at the percentage of available funds spent by municipalities (page 277). If one looked at Mpumalanga, one would see that the municipalities that had low percentages of spending were those towns that were experiencing serious problems at the moment. He noted that the Department received quarterly reports of municipalities spending. He asked if the Department intervened when they noticed municipalities were not spending their money.

Ms Mketi stated that the Department was responsible for its performance as well as for the performance of municipalities and that they reported on their performance. Problems with cooperation and coordination compromised this work. One of the issues that the turnaround strategy sought to look at was the issue of coordination and cooperation. 

Deputy Minister Carrim thanked the Committee for their comments and support. He thought that the Department performed well over the last year; however, there was a need to improve. There were people who would say that Local Government was relatively autonomous, while on the other hand there were people who wondered why National Government (NG) was not doing more to monitor Local Government. During this policy process, it was important to work together to find a balance between government and civil society. If municipalities are not performing adequately, the National Government had to intervene more proactively.

Ms M Wenger (DA) asked where the Department would get all the extra capacity and staff that would be involved support initiatives for municipalities.

Ms Nlhengethwa stated that all the problems with municipalities stemmed from a lack of an integrated approach and coordination. She asked the Department to “re-strategise” their monitoring approach.

The Chairperson added that if the relationship between the Department and municipalities were not working, the Department had to look at the factors behind the problem.

Ms Smith addressed the Municipal Systems Improvement Grant. He was completely “bamboozled” as he did not understand what the report was saying (page 131-150). The numbers did not correlate and this made it difficult for the general public to understand. He did not understand the statement saying that in terms of the MSIG the number of municipalities where transfers were withheld was 37 in 2008/09 signifying an improvement compared to 25 in 2007/08. This did not make sense to him as it was not an improvement.   

Ms Mketi replied that she could not provide any answers to the question as the person who could answer it was not at the meeting. The Department would get back to the Committee with the answers to the question.

Mr J Matshoba (ANC) stated that there were a lot of problems with the Nhlapo Commission regarding claims and disputes. The Department spent a lot of money on this Commission. He asked what the plan was to resolve the matter.

Deputy Minister Carrim stated that the Department already came before the Committee and explained that the work of the Commission was not satisfactory and that they were appalled by it. The Act was passed that was not workable in some ways. Because the Commission was unable to set up committees in some provinces it was not able to function as efficiently as it wanted to. The National House of Traditional Leaders Bill was now being amended; however, it was stagnating with the NCOP who were now even unable to meet their deadlines. The process would move a lot faster if the Committee spoke to comrades in the Select Committee. The Committee could also bring the Nhlapo Commission to Parliament to ask them what they were doing. Presumably, the Committee did not monitor the Commission and the Department also failed to prevail upon the Commission to do its job. Collectively, the Committee and the Department were responsible for the Commission.  The Commission should be monitored quarterly and brought to Parliament to account for their actions.

The Chairperson noted that the Commission was established with a certain task to do. The Committee, Department and the Ministry had to look at the financial implications of the decisions they were making regarding the Commission. He felt that they may have set the Commission up to fail by giving them a task and not giving them enough resources to complete it.  

Deputy Minister Carrim stated that the Minister thought that for the amount of funds the Commission was given, they had done too little.

Deputy Minister Carrim thought the Department performed better in the year under review than in the years that he chaired the Committee for six years. The Department had its weaknesses; however, it was performing reasonably well. 

The Chairperson urged Members to read over the Department's Annual Report again so that they could raise issues with the Department in the future.

The meeting was adjourned.

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