Consolidated Report on the Performance of the Northern Cape Municipalities 2007/08; Progress Report on Interventions in Alfred Nzo, Koukamma and Sunday's River Valley Municipalities

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Meeting Summary

The Department of Co-operative Governance, Human Settlements, and Traditional Affairs, Northern Cape, highlighted the five key performance areas that were used to determine the Departments five year strategic agenda.  These areas were municipal transformation, basic service delivery, financial viability and management, good governance and public participation. The key positions in the Department were not always filled with persons with relevant qualifications. One of the major challenges was the shortage of right staff in key positions. The Auditor-General's audit opinion on 2007/08 financial statements was analysed and indicated.

The Committee asked for more clarity on expenditure and capital projects. Members wanted more details and reasons for the ineffectiveness of some municipalities. It seemed that more money was spent on administration rather than service delivery. The Committee asked why 46 of the183 wards were not functional.   Members would have wished to engage the Department on the six indicators chosen to rank municipalities if time allowed. It had been noted that the Department had identified its challenges, but Members asked why the Department could not work with other departments to solve the problems. Members were concerned about the 1% employment rate of people with disabilities and asked how the province addressed this issue.

The Sundays River Municipality said that a turnaround strategy and plan was adopted by the council and implemented over the past seven months, and updated after the Municipal Turnaround Strategy  capacity assessment. The financial recovery plan was an integral part of the plan. The credit control and debt management policy was reviewed. Cost cutting measures were put into place. Roles and responsibility manuals had been developed and approved.  The issue of service delivery had been the greatest challenge. The governance of the municipality was overwhelmed with corruption allegations and misconduct. Public participation was not effective and there were poor relations between council and administrators. An anti-corruption and fraud policy had been approved and institutionalized.

Koukamma municipality reported that governance and participation had improved. Plans had been implemented to manage staff and councillor debt, and an internal audit function had been established. Financial reporting and billing management improved and the annual financial reports for 2008/09 were compiled. The process of compiling the annual financial reports for 2009/10 also began and a new financial record keeping system had been introduced using clean data. Success was achieved in corporate services and human resources management. An asset register had been developed with a draft fraud prevention plan establihsed. A debt collection policy had been adopted and promulgated.  Funding of R177 million was obtained which improved service delivery. The remaining challenges were that discipline of staff was not yet at a satisfactory level for ongoing achievement of organizational goals.  The skills levels of employees were very low.  The maintenance and development of infrastructure was still below standard. There was a lack of water resources in the area due to a long term drought and Government intervention was required.  The new administration of the Municipality required support from the Provincial Department of Local Government.

Alfred Nzo Municipality  reported that a Chief Financial Officer and a Municipal Manager were appointed. The financial management system was up and running and specific financial policies were in place. Public participation was starting to yield the desired results.  Intervention was terminated at the end of November and the Administrator submitted a close-out report. The Department staff continued to monitor the R1 million transferred to municipality in March 2010 to improve the administrative and financial systems. The municipality was being assisted to improve the records management system and in the development of the Work Place Skills plan.

Members asked about corruption, bad conduct and ill discipline of members, the lack of service delivery, and political interference.

Meeting report

Consolidated Report on the Performance of Northern Cape Municipalities
Mr Kenneth Mmoiemang, Member of the Executive Council for Co-operative Governance, Human Settlements and Traditional Affairs, Northern Cape, conveyed his apology for not appearing at the last Committee meeting. He understood the importance of the Select Committee and its contribution towards the effective running of municipalities. The presentation would focus on work done by municipalities and achieving the five key areas that had been identified.

Mr Bradley Swartland, Acting Head of Department for Co-operative Governance, Human Settlements and Traditional Affairs, Northern Cape, highlighted the five key performance areas that were used to obtain the five year strategic agenda.  These areas were municipal transformation, basic service delivery, financial viability and management, good governance and public participation. The key positions in the Department were not always filled with persons with relevant qualifications. One of the major challenges was the shortage of  the right staff in key positions.

The Auditor-General had noted that the annual report did not include the annual performance report of the municipality prepared by the municipality in terms of Section 46 of the Municipal Systems Act  2000 as required by section 121(3)(c) of the Municipal Finance Management Act 2003.
A performance management system had not been fully implemented and the council did not comply with all the requirements as set out in chapter 6 of the the Municipal Systems Act  2000 and performance measurement regulations. No performance report was submitted for audit purposes.

An annual performance report was not submitted. The  Integrated Development Plan (IDP) did not include a budget as required.

In response to recommendations, a database on municipal regulations was established and workshops held with municipalities on these issues.

Mr Swartland explained the challenges and recommendations on access to basic and free basic services. By June 2008, 72% of the R222 million allocations had been spent; 18 municipalities had not spent their full allocation by June 2008 and two had received no initial allocation. The bucket allocation was 45% spent and five municipalities had their funds stopped.   The Department prioritised projects that required funding to meet national targets and municipal staff had been trained in project management. Local Economic Development forums were established in all districts except Siyanda and capacity assessments were done in all districts.
17 municipalities ended 2007/2008 with a surplus, 11 with an accumulated surplus. All, except one, had some cash on hand despite eight having bank overdrafts that exceeded the amount of cash on hand. Creditors amounted to R291 million.  Eight municipalities had creditors that accounted for more than 30% of operating expenditure. 15 municipalities managed to contain salaries and councillor remuneration within 35% of operating expenditure; one exceeded 50%.

Recoverable debt amounted to R569 million; value of recoverable debtors to total revenue was 26%. Only one municipality did not make provision for bad debt. Provision for bad debt amounted to R451m or 44% of total outstanding debt. The average number of debtor days was 95.

On average 36% of income was comprised from subsidies and grants; at 13 it exceeded 40%.
In response to recommendations hand-on support was provided. Assistance with  Section 71 reports was on-going.

All municipalities were requested to submit plan of action to address issues raised by the Auditor-General.
Regional meetings were held to assist, advise and monitor. All 183 wards had ward committees, but 46 were not functional. The Department had established six indicators to rank municipalities. It identified areas where they improved and areas where no improvement was made over the three years assessed.

The Auditor-General's audit opinion on 2007/2008 financial statements was analysed and reported as follows: 20 (25) disclaimers; 0 (1) Adverse; 8 (4) Qualified opinions; 2 Unqualified with concerns raised on other matters; and 0 Unqualified without further concerns raised (slide 22).

Discussion
Mr J Gunda (Northern Cape, ID) asked for more clarity on expenditure and capital projects. He wanted more details and reasons why some municipalities were not effective. He asked which municipality exceeded more than 50% on salaries and remuneration of operating expenditure. It seemed that more money was spent on administration rather than service delivery.

Mr B Nesi (Eastern Cape, ANC) asked why 46 of the wards were not functional.

Mr Gunda asked why no municipality was unqualified without further concerns raised and how the Department was dealing with the issue. The Committee would have liked to engage the Department on the six indicators chosen to rank municipalities if time allowed.

Mr Swartland said that the Department focused on training for ward committees and there had been a lot of improvement ever since.

Mr Gunda noted that the Department identified the challenges but asked why the Department could not work with other departments to solve the problems.

Mr Nesi said the Department might have done a lot in terms of progress and also asked why the 46 ward committees were not functional. He was interested in more information on how they could improve.

Mr Mmoiemang raised his concern on municipal debt and said that all Government departments which owed money should start paying.

The Chairperson was concerned about the 1% employment rate of people with disabilities and asked how the province addressed this issue. There was a general improvement from 2007 until now. He wanted the standard to go up and not down.

Progress Report on interventions in Alfred Nzo, Koukamma and Sundays River Valley Municipalities
Opening Remarks
Mr Sicelo Gqobana, the MEC of Local Government and Traditional Affairs in the Eastern Cape, apologized for the absence of the Head of the Department. The report was an update of the 3 municipalities, Alfred Nzo, Koukamma and the Sundays River Valley Municipalities. He thought they were doing well by trying to take the municipalities out of the crisis. Alfred Nzo Municipality is politically stable and vacancies had been filled. The council meetings were progressing well and the focus was on delivery. In Koukamma some challenges emerged now that they were there, especially in the area of administration. Many incidents were investigated during the interventions and Mr Gqobana requested for these reports to be presented to Parliament at a later stage. These reports mainly referred to the conduct of municipal members. The main issue in Alfred Nzo was related to corruption. In Koukamma R1. 5 million went missing and the police were handling the issue. The Department's assignment was to bring normality to these municipalities.

Sundays River Municipality Intervention status report
Ms Vuyo Zitumane, the Admistrator of the Sunday River Municipality said that a turnaround strategy and plan was adopted by the council on 25 March 2010. A detailed turnaround plan was developed and implemented over the past seven months, and updated after the Municipal Turnaround Strategy (MUTAS) capacity assessment. The financial recovery plan was integrated into the turnaround plan. The credit control and debt management policy was reviewed and adopted by the council while the adjustment budget was approved. The tariffs which took into consideration the cost of service provision were reviewed and cost cutting measures were put into place. Roles and responsibility manuals had been developed and approved.  The issue of service delivery had been the greatest challenge. The turnaround strategy for service delivery needed an approximately R20 million financial bailout as this was critical for the survival of the municipality. The implementation of the 100 days service delivery plan yielded good results.

The governance of the municipality was overwhelmed with corruption allegations and misconduct. Public participation was not effective and there were poor relations between council and administrators. An anti-corruption and fraud policy had been approved and institutionalized. The public participation and plan was approved and implemented. The financial bail out and reconciliation with Human Settlements had to be finalized. The appointment of competent staff should not be compromised and a corruption-free environment was of critical importance. Relations with line function departments improved and should be sustained as they were planning a number of projects which were previously blocked. 

Koukamma Municipality Intervention Status Report
The Chairperson asked the Administrator of Koukamma municipality, Mr Thando Tubane, to focus on the challenges and successes.

Mr Tubane said that governance and participation had improved. The Council guidelines and rules of order had been developed and approved by the Council while the lax attitude towards corporate governance processes and the lack of organizational leadership had been addressed. Plans had been implemented to manage staff and councillor debt, and an internal audit function had been established. Financial reporting and billing management improved and the annual financial reports for 2008/09 were compiled. The process of compiling the annual financial reports for 2009/10 also began and a new financial record keeping system had been introduced using clean data.

Success was achieved in corporate services and human resources management (HRM). The 2010/11 budget had been approved and an asset register had been developed with a draft fraud prevention plan in place. A debt collection policy had been adopted and promulgated.  Change management and organizational climate improvement workshops were held to improve staff morale and discipline. Systems and procedures were developed to improve the implementation and monitoring of technical projects as well as records and grant management. Funding of R177 million was obtained which improved service delivery.

The remaining challenges were that discipline of staff was not yet at a satisfactory level for ongoing achievement of organizational goals.  The skills levels of employees were very low and suitable training and development needed to be implemented. The maintenance and development of infrastructure was still below standard. There was a lack of water resources in the area due to a long term drought and government intervention was required.  There had been political interference in the work of the Municipality and local politicians should strive for a better balance between their oversight role and interference. The culture of non-payment for services by the community had not been completely overcome and needed more attention. The new administration of the Municipality required support from the Provincial Department of Local Government.

Alfred Nzo District Municipality Intervention Status Report
 Mr Mzimasi Mangcotywa, Deputy Director-General (DDG),  the Alfred Nzo Municipality, indicated that the focus of his presentation was not on the past, but where the  Municipality was at this stage.  The Chief Financial Officer and a Municipal Manager were appointed. The financial management system was up and running and specific financial policies were in place. Public participation was starting to yield the desired results.  Municipal Infrastructure Grants (MIG) projects were ring fenced and thus used for their intended purpose only. Intervention was terminated at the end of November and the Administrator submitted a close-out report.
After the section 139(1) (b) intervention came to an end, it was submitted by a section 154 support to ensure that the gains achieved were continued. The Department staff continued to monitor the R1 million transferred to municipality in March 2010 to improve the administrative and financial systems and ensure that they were utilized for the intended purposes. The Municipality was being assisted to improve the records management system and in the development of the Work Place Skills plan.

Discussion
Mr Nesi was worried about the administration of the Sundays River Valley Municipality. He asked about the complaints he received from Sundays River Municipality that it was not given support from the Department and Cacadu. He asked if it was about the role of money. His main concern on the Koukamma Municipality was the track to clean governance. The Municipality should distinguish between political interventions and political interference. He asked what could be done to manage political interference.

Mr Gunda expressed his deep anger at the suffering of the people. He said it was not good for the Administrator to come to Parliament and beg for money to serve the people and not herself. The Committee should assist municipalities where money was needed. He requested a separate joint meeting to address the challenges in the municipalities. The Committee should assist the people so that justice could be done regarding service delivery.

The Chairperson reminded the Committee that the delegations from the Eastern Cape had already made those recommendations. There would be a workshop on Provincial Legislation on 02 November where this issue could be brought forward. Mr Gqobana had already clarified on incidents of corruption and what had been done on those issues. The Chairperson asked Mr Gqobana to clarify and deal with issues of accreditation.

The Department needed to critically look at considering outsourcing water and sanitation to the Amatola Water Board as this should not be a permanent occurrence. He asked what the Koukamma internal audit function meant and who was fulfilling that function.  The staff discipline was a serious issue and serious intervention was needed by political leaders. He understood that some funds could be recovered, but for funds that could not be recovered, the responsible people should go to jail.  The Chairperson welcomed the move of the Administrator from Koukamma to Alfred Nzo.

Ms Zitumane responded that the main challenge in the Sundays River municipality was finance related.  The Amatola Water Board agreed that its assistance would be done on a service level agreement.

Mr Gqobana said that the internal audit was a shared function, but wanted this function to be performed internally.  If they needed more support, the municipalities could assist in those processes.

Ms Zitumane said that shared services only provided services to a certain extent. The Municipality needed an intern who could continually attend to those matters. The Municipality could not get full attention from shared services.

Mr Gqobana said that the Eastern Cape was ranked eight from all the Provinces when it came to service delivery and he reflected why the Eastern Cape was in that position.  Some of the issues that had been noted were that municipalities were either underreporting or not reporting at all. There was need to commission an audit to see where all the finances were going for service delivery and ask what could be done to improve it. The lessons learned from the interventions were to identify who would be responsible for certain areas and making intensive investigations to what was lacking or needed to be done. He acknowledged that political interference was escalating accompanied by ill-discipline. The Department was doing everything they could to assist those municipalities.

The Meeting was adjourned.





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