The Annual Reports for 2010/11, for the Department of Cooperative Governance (DCOG), the Department of Traditional Affairs (DTA) and the Municipal Demarcation Board (MDB) were presented, in the presence of the Deputy Minister of Cooperative Governance and Traditional Affairs (CoGTA), Mr Yunus Carrim, who conceded that the restructuring of the Department had led to some difficulties, including a high staff turnover. The quality of some community work projects was questionable. He noted that, in response to the negative audit opinion, there was work being done and the shortcomings were being looked into.
The Auditor General South Africa (AGSA) briefed the Committee on the general financial performance of the Departments in this financial year. They noted that the departments had insufficient internal financial audit systems to detect and adequately disclose irregularities. Areas of non compliance identified included irregular spending of R419 million, through failure to obtain three quotations from providers, in contravention of the applicable legislation. The Auditor-General also reported that the DCOG had failed to transfer payments into the correct primary bank account of municipalities, and had delayed payments to creditors. Recommendations to correct the irregular spending were given.
The Department of Co-operative Governance (DCOG) noted that it had received an unqualified audit opinion from the Auditor General, but repeated the emphasis of matter that had been set out, including the irregular expenditure, failure to meet the 30-day deadline for creditor payments, and failure to make payments to municipalities as stipulated in the National Treasury regulations. Some of the responses to issues raised by the Committee in relation to the previous Annual Report were also highlighted. The major achievements included the creation of 89 689 jobs through the Local Government Turn- Around Strategy (LGTAS), the signing of the delivery agreement with the Minister, MECs and Mayors, establishment of Disaster Management centres in eight provinces and the finalisation of the amendments to the Municipal Systems Act. The Department had managed to spend 99.7% of its budget allocations in this year. However, 32% of the projected targets were not achieved, whilst 21% were partially achieved, and 47% were achieved. The reasons given for the non-achievement or partial achievement included the capacity constraints mentioned earlier, as well as delays from other departments participating in these projects.
The Department of Traditional Affairs (DTA), in its presentation, focused on its strategic objectives and organisational structure. DTA had filled 58 of the 98 vacant posts, including significant executive leadership posts, so that it could carry out the new mandate, but in the area of Corporate Services it was still dependent on support from DCOG. Some of the projects had to be delayed because of the lack of strategic plans, funding and staff. Projects around recruitment and development of governance systems had therefore been reprioritised. There were legislative reviews in the National Traditional Affairs structures, and regulations would be drafted on the roles and functions of kings and queens, and norms and standards around remuneration. 36% of projects were achieved, whilst 37% were partially achieved and 21% were not achieved. The Department had spent 83% of budget, and it was explained that most of the under-spending related to new functions. The Auditor-General had highlighted instances of irregular expenditure, lack of an approved strategic plan for 2010/2011, and failure to submit quarterly reports. Initiatives were put in place to address the issues, including the implementation of the Audit Action Plan, and training of staff on supply chain management.
Members were pleased that DCOG had touched on areas of concern previously raised, asked how it would unlock funds to municipalities and address the debt issues. However, Members were concerned that many projects had not progressed far enough, asked about the competence of municipalities, and of the Municipal Infrastructure Support Agency, and asked for the status of the State of
The Municipal Demarcation Board summarised issues raised in previous meetings, and noted that the achievements included the demarcation of municipal boundaries into electoral wards, in preparation for the 2011 Local Government Elections, which were finalised in August 2010, and noted that the Board had successfully defended all reviews. The principles for the next financial years were outlined. There was currently research being done on a new Capacity Assessment Model and work to improve the Board’s structure, while a Stakeholder Management Plan was being drafted and implemented. The budget was set out over the next three years. The Board had received R37.9 million and spent R36 million, of 95%. An unqualified audit report was provided, with a matter of emphasis in relation to irregular expenditure of R726 012. Members asked about the accuracy of estimates, and asked who used the Board’s services.
The Chairperson welcomed Mr Yunus Carrim, Deputy Minister of Cooperative Governance and Traditional Affairs, to the meeting
Auditor General South Africa (AGSA) Presentation on audit findings
Mr G Swartz, Manager: Performance Audits, Auditor General of South Africa, explained the principle mandate of the Auditor General South Africa (AGSA), namely, to strengthen democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.
He briefly summarised the audit findings for 2010/11, in relation to the Department of Cooperative Governance and Traditional Affairs (CoGTA or the Department). The audit revealed that CoGTA was lacking in internal financial audit systems to detect and adequately disclose irregularities. Areas of non compliance identified included irregular spending of R419 million, through failure to obtain three quotations from service providers, which was in contravention of Division of Revenue Act (DORA) and Public Finance Management Act (PFMA0 and National Treasury Regulations. Furthermore, AGSA also reported failure by the Department to transfer payments into the correct primary bank account of municipalities. In some instances, it had delayed in making payments timeously to creditors. AGSA had made a number of recommendations, including the implementation of an adequate review process of financial statements prior to submission of the statements for audit, to ensure compliance, capacitating of the internal audit unit, and creation of checklists indicating steps to be followed prior to approval to payment.
Mr P Smith (IFP) asked if the deficiencies had been created by lack of adequate systems or lack of implementation of existing systems.
Mr Swartz replied that the Department lacked an internal audit system, which was key to good governance and continuous evaluation.
A Member asked for clarification on reasons behind delays in payment to Municipalities.
Mr Smith asked if the audit included areas being investigated by the Public Protector (PP).
Mr Swartz replied that in order to avoid duplication AGSA maintained its list-based approach. The issues raised by the PP could be looked into in future audits.
Mr J Lorimer (DA) asked for reasons for the frequent use of the consultants by CoGTA.
Mr Swartz replied that the Department had a shortfall in internal staff.
A Member asked for clarification between the qualified and unqualified audit opinion trends over the previous financial years.
Mr Swartz replied that it was in different areas that were showing improvements over years, and not a specific area.
Ms M Segale-Diswai (ANC) asked how regularly the auditors met with the Department, and in those instances asked whether the Department had complied with the recommendations given.
A Member suggested approval of a designated Municipal account to avoid misplacement of funds.
Address by Deputy Minister of Cooperative Governance and Traditional Affairs
Mr Yunus Carrim, Deputy Minister of Cooperative Governance and Traditional Affairs, noted that the restructuring process had had negative impacts on the Department’s performance. He further commented that the new approach was that service delivery must be performance based, and that this had allowed CoGTA to be more accountable. The Deputy Minister stated that the quality of community works projects was questionable. He also described a few municipal successes, for example in
Departmental presentation on Annual Report 2010/2011
He described some key successes, which included the creation of 89 689 jobs through the Local Government Turn-Around Strategy (LGTAS), the signing of the delivery agreement with the Minister, MECs and Mayors, establishment of Disaster Management centres in eight provinces and the finalisation of the amendment to the Municipal Systems Act.
Mr Africa then gave a summary of the overall status of each portfolio, noting that 32% of the projects were not achieved, 47% were achieved and 21% were partially achieved. Reasons for non- and partial-achievement of projects were capacity constraints due to inadequate staff, and delays from other Departments with whom CoGTA was working in collaboration, and where its role was mainly a supportive and not primary role.
The Department had used 99.7% of the total of its total budget. The key highlights on the financial side were the filling of posts of Chief Financial Officer and Executive Manager for Internal Audit and Risk Management, the setting up of an Audit Committee and adoption of Post Audit Plan.
Mr Africa reported that, following the recommendations of the Auditor-General, certain measures had been put in place, including the establishment of management structures, including a supply management committee and Departmental Executive Committee (DEXCO), the re-checking of expenditure for 2010/2011, and the taking of disciplinary actions against individuals who had not adhered to procedures.
Department of Traditional Affairs presentation on Annual Report 2010/2011
Prof Muzamani Nwaila, Director-General, Department of Traditional Affairs, gave a presentation on the achievements of the Department of Traditional Affairs (DTA). He explained the strategic objectives of DTA and its organisational structure. He highlighted that, during the restructuring process, the Department had filled 58 of the 98 vacant posts. Significant posts filled included those in the executive leadership, which were filled in September 2010, to enable DTA to carry out the new mandate. However, the absence of a Corporate Service function had led to the dependence of the DGA on DCOG.
Prof Nwaila indicated that some projects had had to be deferred to the 2011/2014 Medium Term Expenditure Framework (MREF), largely because of the lack, prior to that date, of strategic plans, funds and an inadequate staff complement. This resulted in the reprioritisation of projects around recruitment of staff, development of governance systems and legislative review of National Traditional Affairs. Some of the deferred projects included the regulations on roles and functions of kings and queens, and the drafting of the handbook of norms and standards relating to remuneration of traditional leaders.
He gave a summary of the performance of the 47 targeted projects, saying that 36% were achieved, 26% were not achieved and 38% were partially achieved.
This Department had used R61.8 million, or 83%, of its total budget of R74 million. Under spending was noted under Institutional Support and Coordination, but it had explained that this was a new function and some of the activities that it was supposed to cover were supported by DCOG.
Findings made by the Auditor-General in relation to this Department had included irregular expenditure, lack of an approved strategic plan for 2010/2011 and failure to submit quarterly reports. Initiatives put in place to address the issues included the implementation of the Audit Action Plan, and training of staff on supply chain management.
The Chairperson expressed satisfaction that the presentation by the DCOG had touched on previous concerns raised by the Committee.
A Member asked how CoGTA was to unlock unspent funds to Municipalities and how it was going to address the substantial debt owed to some Municipalities and other Departments.
Mr Africa responded that DCOG, in collaboration with Performance Monitoring and Evaluation (PME) team and the Department of Public Works (DPW) had established a task team that had finalised the aggregation of Debt per Provinces, as a pilot study. Areas included were eThekwini, King Sabata, Dalindebe and
The Chairperson expressed dissatisfaction that many programmes were still at pilot stage, pointing out that most debts were long standing.
Mr Africa responded that there were complex issues around resolving the debt. In some cases where the Government owned debt, there were disputes over that debt.
Mr Carrim agreed and added that the reduction of the debt also was a complicated matter. He asked the Committee to put pressure on National Treasury to review and modify the budget process.
Mr J Matshoba (ANC) commented that he did not agree on the disputes of billing.
A Member asked about the competences of municipalities, and in particular their infrastructure development.
Mr Africa replied that there were various questions around the competence of the Municipal Infrastructure Support Agency (MISA), which had a myriad of challenges. This had included the lack of technical capacity by poor municipalities that hindered the provision of infrastructure support. However, the Department was trying to assist municipalities in ensuring that the Life Cycle Costs were properly costed out.
A Member asked what interventions had been put in place to redress the problems arising from previous audits.
Mr Africa replied that it had implemented a Post Audit Action Plan (PAAP).
A Member asked for the reason that the State of
Mr Africa noted that the process was still being undertaken, but it was behind schedule.
A Member asked for clarity on issues of staff turnover and asked what the Department was doing to try to retain staff.
Mr Africa responded that there was a retention strategy, and it looked into issues of good morals, corporate governance and organisational structures aimed at securing terms of tenure. It also included targeted training and development, and dedicated support in health and wellness, as well as work-balance programmes.
A Member asked for explanations as to how the transactions that resulted in irregular expenditure of R419 million had been authorised without the three necessary quotations.
Mr Africa explained that it was incorrect for line managers, in terms of the National Treasury regulations, to fail to follow the set procedures for the authorisation of procurement. This amount was also the result of the repeated extension of contracts.
Mr Smith asked whether the Department had withheld information about irregular expenditure.
Mr Smith asked for clarification on what happened in relation to the programmes where the targets had either not been achieved, or were only partially achieved, and asked if these programmes were automatically rolled over, unchanged, to the next year.
Mr Africa said that each project had to be re evaluated before being rolled over.
A Member asked why the Department had not produced monthly reports, as previously requested, to the Committee on the turnaround strategy.
The Department highlighted that this was not possible, as both the municipalities and the provinces only produced quarterly reports.
Mr J Lorimer (DA) asked why there was no compliance checklist for procurement and asked what had happened to non compliant individuals.
The Department replied that a checklist had been introduced and individuals that did not comply were set for a disciplinary hearing.
Mr J Lorimer asked how many investigations into non-compliance had been made. He also wanted to know who was carrying them out and when the Committee could expect the results. In addition he wanted more details about the inspectorate on fraud and corruption, who could initiate investigations, and how many were in progress.
Mr Africa highlighted that the Anti Corruption Investigation Unit was currently focused on three internal investigations, as it had suffered break-ins. Externally, the unit was coordinating the Anti Corruption Inspectorate, through which the Presidency had referred 121 enquires to the Department. The Public Service Committee hotline had referred 251 cases to the Department.
Mr J Lorimer asked for justification on the expansion of the staff complement.
Mr Africa noted that the changes in strategy and mandate accounted for the increase in staff.
Mr J Lorimer asked about the “provincialisation” of the Department, and in particular wanted to know whether this was constitutionally correct, and what would happen if the provinces disagreed.
Mr Africa noted that this move had been taken to increase the effectiveness and efficiency of operations in the Department.
A Member asked about the role of the Implementation Forums.
Nkosi N Mandela (ANC) asked for the cause of delays in responses to disaster in the parts of the
The Department noted that some challenges were still being faced in this regard. However, interventions had been made. A new conditional grant of R775 million had been made, for 2011/12, at Provincial and Municipal level for short-term humanitarian relief, and this could improve the response to disasters. In addition, DCOG was working on the review of the Framework, through the National Disaster Management Committee (NDMC), and had engaged with the ongoing research by the Financial and Fiscal Commission to make recommendations on more effective disaster funding models. Finally, the Department was in the process of reviewing the Disaster Management Act and that review would include a review of the funding sections.
Nkosi Mandela asked how the Department of Traditional Affairs was capacitating the Commission on Cultural, Religious and Linguistic Rights (CRL).
Prof Nwaila replied that it had assisted in provision of funds amounting to R228 000.
Nkosi Mandela asked if there were clear regulations around the burial of kings and queens. In addition, he asked about the disparities in benefits and remuneration given to different tribal kings. He cited the fact that apparently a Batembo King still had not received his vehicle, while the King of the Zulu had a staff complement of 105 members. He asked how the DTA was working to resolve these inconsistencies, and how it would try to establish consistent treatment.
Prof Nwaila noted that inconsistencies in burial and reburial allocation of resources still needed to be addressed by the policy. The Department was in the process of creating a baseline for resource allocation. The issues of remuneration were handled by the Security Commission.
Nkosi Mandela expressed concern that only 800 senior leaders had received training by DTA.
Prof Nwaili responded that this process was ongoing and the number of 800 referred to the first group that was trained.
A Member noted that the role of traditional leaders was not acknowledged at South African Local Government Association (SALGA), and highlighted that their role had to be acknowledged at the upcoming COOP
A Member asked about what measures had been put in place to guide against future irregular spending.
Prof Nwaila indicated that the relevant unit had distributed a checklist for procurement to all line Managers to use before authorising payment. In terms of irregularities on already paid out transactions the Post Payment Unit evaluated each voucher and those that did not compile were placed in the irregularity register.
The Chairperson asked for an end of month progress report in this regard.
Ms W Nelson (ANC) asked why businesses were allowed to continue to owe money to municipalities.
Mr Africa noted that the issue of rates was handled by the Department of Public Works, from 2008 onwards.
A Member asked for the criterion used in the selection of sites for the Community Worker Programme.
Mr Africa noted that the selection of cities was based on the provision of a range of indications on five indicators, which related to income and material, employment, health, education and living environment. It was also based on selections that were aligned to other ongoing projects, for example the War on Poverty.
Members asked what the Department was doing about a particular area where a crisis situation had been reported.
Mr Africa responded that no official complaint had been lodged at the Department, but it appeared that there were disputes around the payment of people of people working with the implementing agent, but not with DCOG. However in the event that the situation destabilised, the Department could intervene.
A Member expressed concern at the high figure for staff turnover, and delays in filling vacant posts.
Mr Africa noted that the high staff turnover had resulted from anxieties in staff as to their future role in the Department, once it had been restructured.
A Deputy Director General noted that conditions were now in place for effective implementation of the turnaround, and the situation looked more hopeful for the next financial year.
A Member asked if the Audit Committee members served full time in this portfolio.
Mr Africa responded that they did not, and added that the Audit Committee comprised independent, external members.
Prof Nwaila noted the performance delivery shortcomings of the DTA, partially as a result of the fact that the Department did not have a separate budget vote, and therefore had to share procurement, corporate services and human resources with DCOG. DTA was currently engaging with Treasury to get its own budget vote.
Municipal Demarcation Board (MDB) Annual Report 2010/2011
Mr Hillary Monare, Chief Executive Officer, Municipal Demarcation Board, began his presentation on the Annual Report of the Municipal Demarcation Board (MDB or the Board) by outlining previous issues raised in the Portfolio Committee held on 24 May 2011 (see attached presentation for full details). He then outlined the outputs of the Board, and said that the major achievement was the demarcation of municipal boundaries into electoral wards, in preparation for the 2011 Local Government Elections, which were finalised in August 2010.The final wards were officially handed over to the Independent Electoral Commission (IEC) on 1 September 2011. There were various challenges, including legal action, but he noted that the Board had won all cases that were taken on review.
Mr Monare then outlined the strategic direction for financial years 2011 through to 2015. There would be six guiding principles over these years, and the Board aimed to ensure the boundary determination of municipalities, capacity assessments of municipalities, good organisation and administration, good corporate and financial management, and stakeholder management.
Mr Monare revealed that research on a new Capacity Assessment Model was currently being carried out by an independent service provider for 2011/2012. An organisational design specialist was working on improving the organisation’s structure. Increased stakeholder participation was being promoted through the development of a Stakeholder Management and Governance Framework. In addition, a Stakeholder Engagement Plan was being implemented.
He reported that the MDG had a budget of R37.6 million for 2010/11, with R39.3 million for 2011/12, r40.8 million for 2012/13 and R43 million for 2013/14.
Ms Patience Leburu, Senior Finance Officer, Municipal Demarcation Board, then briefed the Committee on the financial results. MDG recorded a total income of R37.9 million, with an expenditure of R36 million, resulting in an expense variance of R1.6 million. The presentation also focused on the breakdown of expenditure of the year ending 31 March 2011. She noted that the administrative expenses accounted for 38% of spending, with employee benefits at 31%, project expenses at 10%, depreciation and amortisation at 2% and audit fees at 31%. The MDG had achieved in total 95% expenditure against budget.
She said that the Auditor-General had provided an unqualified report, with a matter of emphasis in relation to irregular expenditure of R726 012, which was in contravention of the Preferential Procurement Policy Framework Act.
She noted that the Medium Term Expenditure Framework (MTEF) figures showed an allocation of R121.4 million for the 2011 year, increasing by 3% in 2012, and by 5% in 2013.
A Member wanted to know the accuracy of the estimates given by the MDG.
Mr Landiwe Mahlangu, Chairperson, Municipal Demarcation Board, replied that continuous consultations with various stakeholders could result in situation where the MDG’s own intentions for various projects would not remain unmodified and this might result in changes to the amounts.
The Chairperson asked if anybody besides the municipalities would be interested in using the services of the MDB.
Mr Mahlangu noted that the services now extended beyond the traditional users to include civic bodies and non government organisations.
The Chairperson indicated that Members seemed to be satisfied with the presentation made by the MDG and were in general satisfied with its audit performance.
The meeting was adjourned.
- PC Coop: Office of the Auditor-General on BRRR processes; Department on its Annual Report 2010/11 Part 3
- PC Coop: Notice of termination of section 139 intervention in Ngaka Modira Molema District Municipality Part 1
- PC Coop: Office of the Auditor-General on BRRR processes; Department on its Annual Report 2010/11 Part 1
- PC Coop: Office of the Auditor-General on BRRR processes; Department on its Annual Report 2010/11 Part 2
- Municipal Demarcation Board Letter
- Framework for requesting MDB to re-determine Municipal Boundaries
- Municipal Demarcation Board Annual Report Presentation
- Audit Report: Department of Cooperative Governance and Traditional Affairs
- Department of Cooperative Governance and Traditional Affairs Annual Report Presentation
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