Cooperative Governance & Traditional Affairs Budget Review & Recommendations Report

Meeting report

Draft Budgetary Review and Recommendations Report (BRRR)
The Chairperson placed the Draft BRRR before the Committee for consideration.

Key relevant policy focus areas for government: The 2014 Medium Term Budget Policy Statement stated that there was a need to build capacity of the public sector, particularly at local government level through the “back to basics approach” which focused on improving service delivery, accountability and financial management. There was also a need to reshape SA’s urban environment through integrated spatial planning and expansion of the municipal debt market.

Financial performance 2012/13: The Department received an unqualified audit opinion with matters of emphasis mainly due to irregular, fruitless and wasteful expenditure. The Committee had in its recommendations noted that the same concern had been expressed in the previous BRRR of the Committee. The Department responded that control weaknesses experienced in respect of compliance to supply chain management policies and prescripts were receiving ongoing attention, whilst investigations were also underway on control weaknesses. The Department had developed a detailed Post Audit Action Plan (PAAP) to address the identified control weaknesses.  The Department oversaw the following entities:
- The Culture, Religion and Language Commission
- The Municipal Demarcation Board
- The South African Local Government Association

A comprehensive overview of the financial performance of the Department was provided. Detail was provided on each of the seven Programmes of the Department: Administration, Policy Research and Knowledge Management, Governance and Intergovernmental Relations, National Disaster Management Centre, Provincial and Municipal Government Systems, Infrastructure and Economic Development and lastly Traditional Affairs.
 
For the period under review the Department received an unqualified audit opinion with findings on the usefulness and reliability of performance information and non-compliance with certain laws and regulations. The Report of the Auditor General noted that the Department did not have adequate monitoring systems in place to ensure that all supporting records of attendance registers, registration forms and contracts for the Community Work Programme were maintained. Consequently performance data on the Community Work Programme could not be verified.

For the second year in succession, the South African Local Government Association (SALGA) had achieved a clean audit which was considered a welcome departure from the era of disclaimers experienced in 2004/05; 2005/06 and 2006/07. The Municipal Demarcation Board received an unqualified audit opinion for the period under review, which was short of the clean audit it had targeted for. The Auditor General’s Office had raised emphasis of matter relating to incidences of irregular expenditure by the Municipal Demarcation Board. The Culture, Religion and Language Commission had also received an unqualified audit opinion.

Quarterly spending trends: Between April and September 2014 the Department spent R23.4bn (or 36.5%) of its R63.4bn allocation for the 2014/15 financial year. Reported spending pressures were inter alia the effective and efficient management and administration of the Community Work Programme, including providing and maintaining one million work opportunities in all municipalities. There was also the strengthening of capacity of municipalities to deliver sustainable infrastructure and increased access to basic services through the “back to basics” approach as well as the provision of free basic services to the poor.

Achievements of the Department: a close of term report that had been presented to Cabinet revealed that households with access to water now stood at 95%. Which was up from 92% in 2009. Also 86% of households now had access to electricity though it remained short of the targeted 92% by the end of 2014. By September 2013, 86% of households had access to sanitation, which was an increase from 81% in 2009. Households with access to refuse removal also increased to 72%
 
Key challenges faced by the Department:  despite its efforts, some municipalities continued to fill posts without due regard to the regulations on minimum competency requirements. The intermittent departmental restructuring processes had resulted in the loss of critical skills and the shrinking of the staff establishment, which rendered the Department unable to deliver on its mandate.

Entities reporting to the Department all reported that they were not adequately funded which hindered
their ability to fulfil their mandates.  

Key Committee Observations
-The Committee noted the Department’s “back to basics” approach and envisaged that it would contribute towards the building of capacity in the public sector in general and local government in particular in relation to issues of service delivery, accountability and financial management. However it was observed that provincial government, which was a key sphere that also faced huge problems, was somewhat left out. The Committee hoped that the much needed focus on local government would not be at the expense of neglecting the building of capacity in provinces.

-The Committee made certain observations in relation to service delivery performance. In as much as the Committee appreciated the achievements of the Traditional Affairs Department it seemed that the achievements were high-level achievements and did not cascade down to traditional communities.

- The Committee was concerned about the recurring death of initiates in the Eastern Cape, Mpumalanga and the Western Cape. Collaboration was not only needed between parliamentary committees and traditional leaders but also through the involvement of communities and parents of the initiates as well.

- Figures for the eradication of the bucket system of toilets were low for the previous financial year and efforts should be intensified. The Committee furthermore observed that in municipalities with non-functional project management units, Municipal Infrastructure Grant (MIG) funds tended not to be spent.  The Committee however welcomed the announcement that soon it would be permissible to use a percentage of the MIG for infrastructure maintenance.

- On financial performance including funding proposals the Committee welcomed the review of the MIG in light of its problems in spending its funds. The Committee hoped that reforms for grants would improve the uptake of available resources for social infrastructure. The Committee also noted that SALGA’s allocation from the national fiscus would decrease to R9 255 000m in 2015/16 and subsequently would be discontinued from 2016/17. Whilst concerned about the issue, the Committee also recognised that SALGA had operating surpluses of R35.8m and R31.3m in 2012/13 and 2013/14 respectively, which were above the entities allocation from the national fiscus. The Committee furthermore expressed concern about the unsustainable remuneration levels of SALGA senior management as well as on the wide remuneration gap between the higher and lower salary bands. The Culture, Religion and Language Commission had requested an additional R29m to augment its current allocation of 34.9m. The Committee however felt that the request for additional funds had not been adequately substantiated.

Mr M Mapulane (ANC) asked whether the Committee should include the issue of SALGA’s funding in the Report or should it be dealt with as a separate matter?

The Chairperson responded that the indication was that SALGA was not getting funding. The Committee needed to engage the Committee on the issue.

Mr B Bhanga (DA) felt that it was not fair to reflect in the Report that the Committee did not support the increase for additional funding to the Culture, Religion and Language Commission. How else were such institutions going to do their work if funds was lacking. The Report reflected that the Committee was not convinced that the Commission needed the additional funds; he felt that it should not be reflected as such.

Mr Mapulane said that the issue had come up at the time when the Culture, Religion and Language Commission had presented its Annual Report. The Committee found there were too many unanswered questions and they had been poorly prepared for the meeting. The Culture, Religion and Language Commission could not substantiate why it needed the additional funding. No additional activities were presented to the Committee. He pointed out that the Culture, Religion and Language Commission had paid out R1.3m as a settlement offer to its Chief Executive Officer (CEO). An additional R0.5m had been spent on legal fees. In total R1.8m had been spent on the dismissal of its CEO. In as much as the work they were doing was appreciated they could not substantiate the need for additional funding. They also had an outstanding report over the issue of the CEO still owing to the Committee. It was concerning that the Culture, Religion and Language Commission had settled the matter with the CEO, in a sense it could mean that they realised that they did not have a valid case. He felt that the observation as reflected in the Report should stand.

Mr Bhanga suggested that the wording of the observation be amended to reflect that the request for additional funds should be further substantiated.

Mr A Mudau (ANC) stated that the Committee needed a complete report from the Culture, Religion and Language Commission before a request for additional funding could be considered.

The Chairperson said that there was no harm in capturing what Mr Bhanga had suggested. The Culture, Religion and Language Commission needed to report to the Committee before the end of 2014.

Mr Bhanga asked when the Committee was going to receive the Report of the Minister regarding forensic reports by municipalities.

The Chairperson said that the Report from the Minister would be dealt with in 2015.

Mr Mapulane said that there should be a plan to ensure that the Municipal Infrastructure Support Agency (MISA) was properly constituted. The Minister should report back to the Committee over the matter.

Draft Recommendations as contained in the Report
The Department should consider special funding for municipalities with no revenue base.

The Chairperson asked if members wished to suggest additional recommendations that should be included in the Report. Receiving no feedback from members, the Chairperson said that it seemed that members did not wish to make changes to the Department’s budget as no recommendations were being suggested.

Mr Mapulane said that there was nothing that required a change in the Department’s budget. He however did wish that something was needed to track MIG performance. He wished the Committee to encourage the Department to monitor the expenditure of the MIG. A recommendation should be made to the effect that the monitoring of the MIG took place to ensure that there was no under spending. 

The Committee Researcher Mr Andile Sokomani noted that in 2013 a recommendation had been made to have a plan for the spending of the MIG.

The Chairperson said that a recommendation regarding the monitoring of MIG spending needed to be captured in the Report.

Mr Sokomani added that Mr K Mileham (DA) had submitted two recommendations in relation to financial performance. The first was on equitable share allocations and funding models and the second was on the remuneration structures of entities to ensure alignment with public sector positions.
Mr Mileham also made another recommendation, not relating to financial performance. It was that performance indicators of the Department and its entities needed to be realistic.

Mr Mapulane noted that there was no need for a recommendation on performance indicators as the issue was resolved. The Auditor General of SA was satisfied and hence there was no need for the Committee to prescribe on it. He agreed with the first recommendation suggested by Mr Mileham on the equitable share allocations. On the second recommendation about remuneration structures of entities, it was felt that it was a broader issue. There were many state entities that had remuneration issues. Perhaps the issue needed to be engaged at a different level. He felt that a recommendation in this regard should not be included in the Report.

The Chairperson suggested that if some of the issues could become problematic they could rather be included under the Committee’s observations in the Report. There were many entities ie Eskom, SAA etc.

Mr Bhanga responded that the entities being referred to were those related to the Department of Cooperative Governance and Traditional Affairs and not other departments. In many instances the Department’s entities had financial issues but still paid huge salaries to their CEOs. The recommendation could be drafted in such a manner that it was confined to remuneration of Department entities. 

Mr E Mthethwa (ANC) said that if a provision was included under Committee observations then changes to the budget were required.

The Chairperson said that the Committee Researcher would find a way to capture it. If one referred to government then it referred to many entities but if limited to the Department then it only meant four entities.

Mr Mapulane noted that the Culture, Religion and Language Commission was a Chapter 9 institution. The Committee could not ask the Department to regulate it. Only MISA and the House of Traditional Leaders were entities. MISA still had to be properly constituted. He said that salary remuneration was an academic exercise with SALGA as it was no longer being funded. A problem was that SALGA was created in terms of legislation and hence resources should be provided to it. He felt the salary issue to be important and said that it could be covered under Committee observations in the Report.

The Chairperson felt that a recommendation in relation to performance indicators should state that it should be done in accordance with the SMART Principle. Essentially three recommendations were suggested. The first related to MIGs, the second was on a funding model and the third on the SMART Principle.

The Committee also effected grammatical and other technical changes to the Report.

The Committee adopted the Report as amended.

The Committee Secretary would forward the Report, inclusive of amendments and additions, to the Chairperson for perusal.

The meeting was adjourned.