Working Group on Municipal Finance Management Bill

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Finance Standing Committee

18 November 2002
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Meeting report

FINANCE AND PROVINCIAL AND LOVAL GOVERNMENT PORTFOLIO COMMITTEES: WORKING GROUP
19 November 2002
MUNICIPAL FINANCE MANAGEMENT BILL: SCHEDULE TO AMEND/REPEAL LEGISLATION

Chairperson
: Ms B Hogan (ANC)

Relevant documents
Municipal Finance Management Bill: Draft of 13 September
Schedule to the Municipal Systems Act (schedule found at end of the Act)
Revised Version of Amendments to Schedule
Process for Reconciliation of Bill and Municipal Systems Act (Appendix 1)
Draft Committee Programme (Appendix 2)
Comments on Proposed Amendments to Schedule in the Systems Act (Appendix 3)

SUMMARY
The Committee considered the amendments proposed by the Department of Provincial and Local Government to the Schedule to the Municipal Systems Act of 2000. These included the repeal of Section 17(d) as a cleanup exercise, the repeal of Act 21 of 1998 dealing with the municipal accounting profession and the amendment of the assignment of functions under Section 9(1) especially with regard to unfunded mandates and the level of assessment. Stricter annual reporting requirements were imposed on municipalities via Section 46 of the Systems Act.

Members also considered Clause 23(o) of the Bill. They expressed the need for consultation between the Department of Water Affairs and Forestry, organised labour, National Treasury and the Department of Provincial and Local Government with regard to the effect on Section 10 of the Water Services Bill and Section 94 of the Systems Act. It was decided that public hearings would have to be held on this matter before any further progress could be made.

The Department of Provincial and Local Government proposed the inclusion of certain terms and definitions in Clause 1 of the Bill, and this was considered by Members.

MINUTES
The Chair referred Members to the schedule to the Municipal Systems Act of 2000 (the Systems Act); the aim is to align that Act with certain provisions in the Bill.

Proposed Amendments to Schedule to Municipal Systems Act of 2000
Item 1
Ms Jackie Manche: Deputy Director-General, Institutional Reform and Support, Department of Provincial and Local Government, informed Members that the repeal of Section 17(d) of Act 91 of 1983 is a cleanup exercise. It seeks to do away with those municipal entities created via the Companies Act, because both the Bill and the Systems Act regulates the creation of these entities.

The Chair asked Ms Manche to explain whether this decision is due to the fact that any conflict between the Companies Act and the Systems Act and Bill has to be avoided, or is it because a more comprehensive scheme is provided for in the Bill.

Mr Ismail Momoniat: Deputy Director-General, Intergovernmental Relations, National Treasury, added that the Johannesburg and Durban municipalities would be consulted to ensure such conflict is avoided. The provisions in the old 1983 Act have to be repealed as they lay the basis for privatisation here.

Mr Matthew Glasser: Consultant, National Treasury, stated that the provisions in the 1983 Act represent outdated philosophy with regard to the creation of municipal entities, and thus has to be repealed.

Mr P Smith (IFP) suggested that this repeal would be better placed in the Local Government Laws Amendment Bill, which is to be discussed in 2003.

Ms Manche stated that the Department of Provincial and Local Government does not oppose the deletion of Section 17(d), but is concerned that the unintended consequences have not yet been identified.

The Chair asked Mr Momoniat whether National Treasury has identified the unintended consequences.

Mr Momoniat replied that National Treasury has not looked at this matter specifically but contended that, on a first reading of the provision, it does not seem that there would be any consequences for municipal entities.

The Chair noted that the Committee raised on objection to the repeal of Section 17(d), subject to National Treasury checking the consequences. Should any such consequences arise, they would have to be discussed by this Committee.

Mr Glasser informed Members that several municipalities are relieved at the repeal of that provision.

Item 2
Ms Manche stated that this amendment seeks to repeal the entire Act 21 of 1988 for two reasons. Firstly, there is currently no Accounting Professions Bill which regulates the industry and, secondly, the dis-establishment of the Board for Municipal Accountants established by Act 2 of 1988 is not provided for.

Ms R Taljaard (DP) proposed that transitional provisions be included here to link the two Bills so that it at least indicates that reform is in the pipeline since the entire Act cannot be repealed via the Bill as suggested by Ms Manche.

Mr Momoniat disagreed with Ms Taljaard and proposed that the entire Act be repealed, because there is not currently an accounting standards board that could regulate these matters.

Dr G Woods (IFP) stated that he supports Mr Momoniat's view, and contended that the Bill provides sufficient standards and capacity building measures here.

Ms Manche stated that institutions such as the Board for Municipal Accountants have to be dis-established, as this has not yet been done.

The Chair asked how long it would take to dis-establish that Board.

Ms Manche replied that she was not certain, but it would have to be provided for by National Treasury in the Bill.

Mr Smith proposed that that Act cannot simply be repealed in the Bill but would have to be repealed via a separate clause or Bill, as the dis-establishment deals with matters such as the winding up of the assets as well.

The Chair stated that this could then be done via the legislation to be considered in January 2003.

Mr Y Carrim (ANC) was unsure about the Chair's suggestion and proposed instead that the content of the amendments be included in the General Laws Amendment Bill, to be dealt with in the first quarter of 2003. He was not sure whether this legislation could be brought before Parliament by 15 January 2003.

The Department of Provincial and Local Government said that it would be able to have the Bill ready by then. Yet it does not seem that the Bill would be passed by the first week in January 2003 as planned, because the outstanding consequential amendments still have to be finalised. The Bill will probably only be ready in April or May 2003.

The transitional amendments relating to the dis-establishment of the Board for Municipal Accountants has to be contained in the Bill.

Item 3
The Chair noted that Members raised no objections to the proposed repeal.

Item 4(1)
The Chair noted that Members raised no objections to this proposed amendment.

Item 4(2)
Mr Momoniat informed Members that both the Systems Act and the Bill deals with the assignment of functions, and it was decided that, instead of containing similar provisions in the two pieces of legislation, it should all be contained in the Systems Act. National Treasury's drafter attempted a comprehensive consolidation here, and pointed out that there are three areas of assignment. The first are assignments by national government, the second by provincial government and the third is by non-Schedules 4(b) and 5(b) functions.

It also has to be remembered that assignment is done via policy and not in terms of legislation, and this does lead to funding problems. The aim here is to arrive at a tougher regime, so that in all areas at least the Financial and Fiscal Commission (the FFC) investigates this matter. This then needs the approval of both the Ministers of Finance and Provincial and Local Government.

Mr Carrim stated that he is concerned with the unfunded mandates and contended that the regime in the Bill is better than that provided for in the Systems Act, which is a welcome change. Why have amendments been effected to Section 9 of the Systems Act, such as to the phrase "an additional function or a power"?

The Chair stated that this formulation makes it clear that there are a set of functions that are initially allocated, and the "additional functions" would then be introduced to deal with the unfunded mandates.

Mr Carrim asked why "national legislation" has been replaced by the word "Act" in Section 9.

The Chair stated that this has been done because "national legislation" includes regulations.

Mr Carrim asked whether regulations can be assigned.

Mr Momoniat stated that the problem here is that regulations are not tabled and considered by Parliament.

The Chair informed Members that a Committee is currently considering whether Parliament should not be required to look at all regulations devised.

Mr Momoniat replied that an entity or municipality can be compelled to provide the service if the enabling legislation allows for the assignment, even though it may not have the necessary funds. This was the case recently with regard to community policing.

A SALGA representative stated that this is a discretionary and not a mandatory power.

Mr Smith suggested that there are two forms of assignment here. The first is a blank assignment and the second deals with a specific assignment. It appears that the proposed amendment to Section 9 of the Systems Act does not cover the second form.

Mr Carrim proposed that "national legislation" be retained because it has a wider ambit, as the aim here is to prevent avarice by councillors.

Mr Momoniat contended that National Treasury would be happy if the regulatory mechanism could be made tighter, so that every assignment is approved by Parliament. This would be supported.

Ms Taljaard agreed that it has to be passed by Parliament as the only true measure of accountability, and stated that this is the method adopted both by the United States Congress and the House of Commons in the United Kingdom.

The Chair stated that "national legislation" has to be retained, and a provision has to be included which stipulates that Parliament has to perform an oversight role over any assignment, when this does occur.

Mr Carrim stated that the proposed replacement of "Cabinet" to "Parliament" in Section 9 is problematic, because Cabinet is aware of the financial implications of the assignment.

Mr Momoniat responded that, although he agrees in spirit with Mr Carrim, Cabinet cannot legislate the functioning of Parliament.

Mr Dorfling, SALGA councillor, informed Members that municipalities often enter into agreements between themselves with regard to this assignment and the provision of services.

The Chair stated that the Bill cannot protect against this.

Mr Momoniat suggested that the role played by the FFC has to be regulated and strengthened here because, although it may not make the final decision, it can issue "hoops" here. These would include requiring a full assessment by the FFC.

Mr Dorfling proposed that Section 9(1) of the Systems Act then state that before a council is able to access the assignment, the matter has to be considered by the FFC.

The Chair approved of this proposal as it ensures that the municipality invests reliably.

Ms Taljaard proposed that the role played by the FFC here be expanded even further here with regard to the assessments.

The Chair stated that Members are trying to require the FFC to perform the work of a budget office. Instead, a parliamentary budget office has to be established, whose sole task would be the investigation of unfunded mandates. This matter has to be further considered by both National Treasury and the Department of Provincial and Local Government, and more stringent tests have to be implemented to guard against unfunded mandates.

Mr Dorfling sought clarity on the reason for imposing these requirements regarding the assignment of functions and powers on the local government sphere alone, whereas the provincial and national spheres of government are not subjected to the same assessment requirements.

Ms Taljaard contended that the Financial Recovery Agency (FRA) would be the watchdog here, but this all depends on whether the FRA will be an ad hoc or permanent body.

The Chair reminded Ms Taljaard that the FRA has a very specific mandate and cannot be at the beck and call of every institution. Instead the use of the Budget Forum would be vital here. Thus the roles to be played here by both the Budget Forum and the FFC have to be included via the Division of Revenue Bill.

Mr Carrim sought clarity on the inclusion of "National Treasury" in the proposed Section 9(2)(a) of the Systems Act. Furthermore, would the Minister of Provincial and Local Government also have to be consulted here?

Mr Momoniat responded that both the Department of Provincial and Local Government and National Treasury would have to be consulted here. He was of the opinion that merely requiring consultation here is not sufficient, as the MEC could consult but then choose to ignore the recommendations made by those Departments. Formal written approvals should perhaps also be included here.

The Chair disagreed, because the aim here is to impose tougher measures with regard to assessment functions in the Systems Act.

Item 4(3)
The Chair noted that Members agreed to this amendment.

Item 4(4)
Ms Manche stated that the current wording of Section 46 of the Bill requires the municipality to provide a performance report for the financial year, which includes service delivery priorities, measures to improve performance, financial statements and an audit report. The Department of Provincial and Local Government has now drafted an amendment to that section which retains the first portion of the current formulation and has altered the remaining portions.

The problem here is that the current formulation in the Bill does dilute the scheme in the Systems Act, as all municipalities do not implement the requirements.

Mr Carrim added that, as recognised in the Systems Act, performance and funding are inextricably linked, and the amendment to the Bill creates a disjuncture between these two. It is thus proposed that Sections 46(2) to (4) of the Systems Act be removed from the proposed amendment. Furthermore, the Bill cannot contain a cross-reference to the Systems Act with regard to the reporting requirements, because the amended version of Clause 66 in the Bill does not refer to the compilation and submission of a performance report. This has to be cleaned up.

The Chair stated that both a financial report and audit is required by Chapter 10 of the Bill, and is more comprehensive than Section 46 of the Systems Act. In fact, the Systems Act deals with performance reporting, whereas the Bill deals with financial reporting, and thus the entire Section 46 in the Systems Act cannot be replaced with the proposed amendments in the Schedule.

Mr Momoniat contended that it was never the intention of National Treasury here to water down Section 46 of the Systems Act. An additional problem is created here by cross-referencing to the Systems Act because the Systems Act deals primarily with performance reporting, and if this report is not submitted together with the annual report, it could create a delaying provision. Furthermore, the office of the Auditor-General (AG) does conduct performance reports, in terms of the Systems Act.

Mr Dorfling proposed that Section 46(3) of the Systems Act be removed, because the preparations for the phasing in of this aspect could be included when the framework for the implementation of the Bill is devised.

The Chair agreed, and called for a transitional provision for implementation to be inserted.

Mr Smith contended that this transitional provision is not necessary, because each chapter of the Systems Act can be phased in.

The Chair stated that once Section 46(3) is removed and the transitional provision is included, municipalities would not have any recourse should they fail to table their audit report in time.

Mr Momoniat stated that this places much more stringent reporting requirements on local government than is currently placed on the provincial and national spheres.

Mr Smith contended that Section 46 now seems to share the same content as Clauses 66(1) and 70(1) of the Bill, as the only difference between the two lies in the drafting.

Mr Carrim stated that if this is the case, Clauses 66(1) and 70(1) in the Bill should then simply be cross-referenced to Section 46 of the Systems Act. If Sections 46(2) to (4) are to be removed, they should be included in Chapter 10 of the Bill. He stated that he has no problem with separating the performance report dealt with in the Systems Act from the financial report dealt with in the Bill, but it has to be recognised that the two are inextricably linked, and should thus be dealt with via cross-referencing. Accountability here is vital to local government concerns.

Mr Momoniat informed Members that the annual report does allow for a period of public hearings, at which the community, National Treasury and the AG would be present.

The Chair stated that Mr Carrim's concerns regarding reporting in the Bill have to be effected.

Mr Smith agreed with Mr Carrim, because Chapter 10 of the Bill does not spell out precisely what the annual report has to contain.

Mr Momoniat agreed that Clause 66(1) is not perfectly clear, but suggested that Clause 66(1) is more comprehensive than Section 46 of the Systems Act.

The Chair agreed and stated that the provisions currently contained in the PFMA would be accepted as standard reporting procedure.

Ms Taljaard questioned whether finances and performance could be severed.

The Chair stated that, as mentioned earlier by Ms Carrim, the two are "inextricably linked", but the annual report does not have to consist of three separate documents, but should instead be an integrated report.

Dr Woods contended that financial management is essentially about a system, and it seems as though these amendments are aimed at turning it into a performance-based financial system. Yet this model deals with all the issues and it should thus be inserted in the Bill not the Systems Act, as it deals with how the system works and how performance is built in. This is all part of the model.

Mr Dorfling proposed that the relevant provisions in the PFMA be changed to provide these reporting requirements at provincial and national level as well, as more stringent standards cannot be imposed on local government alone.

Mr Momoniat replied that this should not be included in the PFMA because it would be difficult to enforce, and should instead be phased in.

Dr Woods stated that it is half implied in the PFMA that government Departments get measurable performance objectives. Yet performance auditing is a different concept because it deals with the auditing of performance information, and whether the quality of that audit is acceptable.

The Chair stated that this cannot be included in the PFMA because the Auditor General's staff is not currently geared to do this performance audit. The aim here is output-based budgeting and an audit of what has been delivered in terms of the measurable performance objectives of this budget.

Dr Woods contended that costing is at the heart of the matter and is related to performance and is therefore essentially a financial matter, because costing sets the basis for the performance in a specific financial year.

The Chair asked when the first performance audit would be completed.

Mr Momoniat replied that it is currently with the AG, and could be made available to Members by the end of 2002.

Mr Dorfling stated that this would be totally impossible. SALGA is currently engaged with 35 municipalities, and the budget process itself takes over two years.

Item 4(5) and 4(6)(a)
The Chair noted that Members agreed to these amendments.

Item 4(6)(b)
Ms Manche stated that this amendment has been proposed because the current wording of Section 57 of the Systems Act implies the granting of bonuses.

Mr Momoniat stated that it is only logical that bonuses are paid after the audit has been conducted.

The Chair stated that this only applies to the financial audit, and not to the performance audit.

Ms Louise Muller, Director: Municipal Finance Monitoring from the Department of Provincial and Local Government, stated that that the current Section 57(4) in the Systems Act can be retained if each audit report is examined in detail, but the provision is not correct in its current formulation.

The Chair stated that the proposed Section 57(4A) must not be deleted, as it has to be made to comply with the financial reports at least.

At this point the Chair read out the document entailing the precise roles and tasks to be performed by each party to these deliberations in ensuring the alignment of the Systems Act and the Bill (see Appendix 1), as this would expedite proceedings. She noted that al Members agreed to it.

Item 4(7)
Mr Momoniat stated that Section 58 of the Systems Act has to be deleted because adequate disclosure is already required with regard to the budget and financial statements, and is thus not needed in Section 58.

The Chair questioned whether it is advisable to release the salaries received by municipal officials as a matter of public record, where they may be accessed by the media.

Mr Carrim replied that this is desirable, especially since it has become a hot topic of late.

Mr Dorfling stated that their salaries are in any event included in the annual report,which is itself published.

Dr Woods agreed that Section 58 should be removed because the information is included in the annual report, which is the primary public document.

Mr Momoniat informed Members that a website containing this information will also be introduced, and the information will also be made available to all councils.

Mr Smith proposed that the individual employment contracts of the council members also be reflected.

The Chair disagreed, as those contracts are confidential and cautioned against the creation of "space for witch-hunts" here if the employment contracts are included, as they are already included in the annual report.

Item 4(8) and 9(a)
Ms Manche stated that the Department of Provincial and Local Government has withdrawn both these proposed amendments.

Item 4(9)(b)
Ms Muller stated that this proposed amendment is aimed at getting clarity as to whether a new Section 81(2)(c) will be inserted in the Systems Act or whether it would become a new Section 81(2)(d). Clarity is thus needed as to where exactly this new provision would fall.

The Chair stated that National Treasury would "get the lettering right".

Item 4(10)
Mr Carrim asked why it is being proposed that Section 83(1)(a) of the Systems Act be deleted.

Mr Dorfling responded that a framework on procurement policy is already contained the Bill, and thus Section 83(1)(a) is no longer needed.

Mr Carrim suggested that it be retained.

The Chair agreed.

Mr Glasser stated that a problem is created here because Section 83(1)(a) requires fair procurement, yet this clashes with the procurement framework policy created in the Bill which allows preferential procurement.

The Chair stated that the Constitution itself allows for preferential access to procurement, and therefore Section 83(1)(a) does not have to be removed.

Mr Smith proposed that the word "equitable" be inserted in Section 83(1)(a) as well, so that it mirrors the Constitutional provision.

The Chair agreed.

Item 4(11)
Ms Manche stated that the Department of Provincial and Local Government is covered here.

Item 4(12)
Mr Carrim stated that the LG Bill stipulates "90 days" here, whereas the Schedule provides for "30 days". This inconsistency has to be cleared up.

The Chair stated that it should be changed to 90 days and not "3 months", as is currently the case.

Revised Version of Amendments to Schedule to Municipal Structures Act of 2000
The Chair then referred Members to the document prepared by National Treasury containing the amendments just proposed by the Committee to the Schedule, and asked Mr Momoniat to take Members through the new amendments.

Item 4(6(b)
Mr Momoniat stated that bonuses have now been included here, as proposed during the discussion.

Clause 23(o)
Ms Manche contended that the Department of Provincial and Local Government has a problem with Clause 36(o) of the Bill, because it does impact Section 94(1) of the Systems Act.

Mr Momoniat stated that this does affect both Section 10 of the Water Services Act and Section 94 of the Systems Act. There has not been sufficient consultation here between the relevant parties, and this is important because there is a need to regulate long-term contracts. The new powers cannot be exercised once these contracts have already been entered into.

Mr Carrim disagreed with Mr Momoniat with regard to the level of consultation, and stated that the Provincial and Local Government Portfolio Committee did consult all relevant bodies with regard to Section 10 of the Water Services Act. Furthermore, the Minister concerned has laid this matter to rest, and if this is changed in any way it would have to be via a process of consultation. This is a much more complex matter that it is made out to be, and public hearings are needed here. The deadlines for the Bill may have to be put back here.

Mr Momoniat agreed with Mr Carrim, but stated that the manner in which it is dealt with in the Bill does not affect Section 10 or Section 94, as it merely introduces the possibility of the FFC.

The Chair asked whether it would be possible to host public hearings before the Bill is passed, in January 2003 perhaps?

Mr Momoniat replied that the Municipal Infrastructure Investment Unit, (MIU), the Department of Water Affairs and Forestry and organised labour would have to be included, because each is linked to these entities. The public hearings are important for the public participation process, as there are many cases in which a number of such contracts have come unstuck because of a Clause 23(o)- type scenario.

Both the Chair and Mr Carrim expressed their grave disappointment at the inconsistent attendance of senior officials in the Department of Provincial and Local Government during these deliberations, and this problem has to be raised with those officials.

The Chair agreed that public hearings have to be held, and a resolution will have to be passed by this Committee stating that this matter and the Bill cannot be discussed further until those public hearings are held.

Mr Momoniat stated that consultation is important here, especially with regard to the long-term contracts.

The Chair stated that Clause 23(o)(1) and (3) has to be retained.

Mr Smith and Mr Glasser agreed.

Chapter 9: Municipal Systems Act of 2000
Dr Woods suggested that this chapter should be included in the Bill, especially Section 96 to 98.

The Chair contended that that chapter has more to do with customer relations.

Mr Momoniat stated that it could be seen to deal with financial management.

The Chair proposed that that chapter remain in the Systems Act because it is primarily a political issue, and does therefore not belong in the Bill.

Clause 1: Municipal Finance Management Bill
The Chair asked ms Muller to raise the definitions which the Department of Provincial and Local Government proposes should be included in the Bill.

"municipal entity"
Ms Muller stated that this term has to be clarified in the Bill.

"municipal council"
Ms Muller stated that the definition of this term also has to be aligned.

Mr Smith stated that the current definition of this term in the Systems Act does not make sense.

"budget implementation plan"
Ms Muller asked whether a definition of this term is at all necessary. It could be necessary because it is a new concept related to previous concepts in procedure, and what exactly is implied by this plan might have to be clarified.

The Chair stated that she was uncertain about whether a definition would be useful.

Mr Momoniat stated that this is an important concept, and proposed that the scope even be expanded to "budget and service implementation plan". This is needed so that the cash and revenue projections for each year are at least disclosed.

"revenue raising measures"
Ms Muller stated that this term was introduced by the Constitutional amendments and may have to be defined, because it could have either a broad or narrow definition.

The Chair asked where this term is used in the Bill.

Ms Muller replied that it is used in Chapter 11 dealing with the financial recovery plan.

The Chair questioned whether it is at all desirable or wise to define a Constitutional concept in legislation.

Mr Smith replied that this can be done, and it was in fact done via the definitions of the terms "municipality" and "service" in the Systems Act.

"temporary budget"
Ms Muller stated that this term is also used in the Bill, and clarity as to its exact meaning is needed as it is out of line with the manner in which Chapter 11 unfolds.

Mr Glasser replied that National Treasury's legal drafter has devised a formulation of this term, and it can be made available.

"municipal service"
Ms Muller stated that this term has not been defined in the Bill or the Systems Act. The LG Bill has proposed a definition, and National Treasury has to decide whether it wants to include that definition in the Bill.

Mr Momoniat replied that this can be done, to an extent, because the same definition should be used by both Bills.

Clause 107(b) of the Municipal Finance Management Bill
Dr Woods referred to this clause's requirement that each municipality have its own website, and proposed that this be included in the Systems Act instead. The Bill would then stipulate the type of financial information which these websites will have to contain. This is a further alignment issue that has to be considered.

The Chair agreed.

Mr B Nobunga (ANC) suggested that the point here is that each municipality has to have its own website, and National Treasury cannot simply be allowed to assist by providing the relevant information on its website. Those municipalities have to bear this responsibility.

The Chair agreed, and called for Clause 107(b)(2) to be deleted, as proposed by Dr Woods.

Ms Muller stated that this matter has to be thought through, because some Internet Service Providers will not provide the website for free, and municipalities may be required to pay a rental fee.

Mr B Komphela (ANC) reminded Members that some municipalities do not even have the necessary funds for such a website.

Mr Dorfling stated that an agreement was reached with National Treasury that it would fund the establishment of these websites.

The Chair agreed, and stated that National Treasury should try and make those sites as separate from itself as possible.

The meeting was adjourned.

Appendix 1

19 November 2002 Schedule

PROCESS FOR RECONCILIATION OF MFM BILL AND MSA:

1) To finalise the two draft Bills (for alignment purposes and to address municipal entities per item 7 below), NT, DPLG and SALGA must meet through December and early January, and must keep an attendance register of each meeting

2) Draft MFM Bill ready and distributed to PCOF and PCPLG by 10 January 2003, including:
a) Changes resulting from PCOF deliberations 3rd draft of MFM Bill (including provisions regarding municipal entities)
b) Amendments (if any) arising out of November PCOF discussion of schedule
c) Amendments arising out of Constitutional Amendment
d) Amendments to align definitions
e) Amendments related to penalties

3) Draft LG Amendment Bill ready and distributed to PCOF and PCPLG by 16-17 January, and will include:
a) Proposals from NT following on deliberations of PCOF on 3rd draft of MFM Bill (including provisions regarding municipal entities)
b) Amendments to Schedule
c) Amendments arising out of Constitutional Amendment
d) Amendments to align definitions
e) Amendments related to penalties

4) 16-17 January (and 18 January if necessary) technical subcommittee of PCOF will meet to discuss any changes to MFM Bill and new draft LG Bill.

5) Draft LG Bill published end of January, for comment within 21 days. Issues related to entities, definitions, and penalties, or arising from PCOF discussions may be refmed as 10%' amendments to LG amendment bill.

6) PCOF considers MFM Bill week of 20 January

7) MUNICIPAL ENTITIES

a) Will be discussed by PCOF 20 November
b) Following PCOF direction, NT, DPLG and SALGA must discuss changes that may be necessary to both:
i) Draft MFM Bill
ii) Municipal Systems Act
c) These changes will also be discussed 16-17 (and possibly 18) January.

Appendix 2:

PORTFOLIO COMMITTEE ON FINANCE
DRAFT PROGRAMME
(Subject to change)

(Dated 15 November 2002)

Monday, 20 January 2003

09:30 - 17:00 Deliberations on MFMB

Tuesday, 21 January 2003

09:30 - 17:00 Deliberations on MFMB

Wednesday, 22 January 2003

09:30 - 17:00 Deliberations on MFMB

Thursday, 23 January 2003

09:30 - 17:00 Deliberations on MFMB

Friday, 24 January 2003

09:30 - 17:00 Deliberations on MFMB

Monday, 27 January 2003

09:30 - 13:00 Briefing on the Government Employees Pension Fund Increase (Members
of Non-Statutory Forces)

14:00 - 17:00 Briefing on Insurance Laws A/B

Tuesday, 28 January 2003

09:30 - 17:00 Formal Consideration of MFMB
Adoption of Report on Overseas Trip
Adoption of Committee Annual Report

Wednesday, 29 January, 2003

09:30 - 17:00 Hearings on Government Employees Pension Fund Increase (Members of
Non- Statutory Forces)

Thursday, 30 January, 2003

09:30 - 17:00 Hearings on Insurance Laws A/B

Friday, 31 January 2003

09:30 - 13:00 Deliberations and Formal Consideration Government Employees Pension Fund
Increase (Members of Non-Statutory Forces)

Monday, 3 February 2003

09:30 - 17:00 Deliberations and Formal Consideration of Insurance Laws A/B
Briefing on Banks A/B

Tuesday, 4 February 2003

09:30 - 13:00 Briefing on FFC A/B

Wednesday, 5 February 2003

09:30 - 17:00 Hearings on Banks A/B

Thursday, 6 February, 2003

09:30 - 13:00 Hearing and Formal Consideration of FFC A/B

Friday, 7 February, 2003

09:30 - 13:00 Deliberations and Formal consideration of Banks A/B

Appendix 3:

PROPOSED AMENDMENT OF THE LOCAL GOVERNMENT ADMINISTERED
LEGISLATION BY THE SCHEDULE TO THE MFMB, 2002

Column 1

Section 17(D) of the Promotion of Local Government Affairs Act, Act No. 91 of 1983.
Comments

The repeal of Section 17D needs to be subjected to rigorous factual and legal opinion. The reason being that it may amongst others have a direct effect on the companies established pursuant to the Egoli 2000 project.

Column 2

Municipal Accountants Act, Act No. 21 of 1988.
Comments

As the Act deals with the establishment of a Board for Municipal Accountants. The registration of Municipal Accountants and the control of their profession. Training and other incidental matters.

The Board for Municipal Accountants has stated the following: The Municipal Accountants Act establishes a Board (the Board for Municipal Accountants) as a statutory body corporate so as to make it responsible for achieving the purpose and objective of the Act. The Board has been carrying out its duties and responsibilities since inception in 1988. A significant amount of work has been done to consolidate the whole accounting profession in South Africa. These efforts have led to the publication of the Draft Accountancy Profession Bill. This draft Bill provides for the
repeal of both the Municipal Accountants Act and the Public Accountants Auditors Act, Act 80 of 1991.

It appears that our Department is responsible for the administration of this Act. Out Minister appoints the members of the Board and the Department administers all Parliamentary requirements and related matters associated with the Act. The Department / Ministry therefore needs to approve the dis-establishment of the Board for Municipal Accountants.

The Institute for Municipal Finance Officers (IMFO) feels that the repeal of this legislation will leave a vacuum as far as the educational requirements for municipal financial officers is concerned. There is a move to incorporate the Municipal Finance Officers into IPFA. But this process is still underway due to the restructuring of the Accounting profession.

Column 3

Section 10G of the Local Government Transition Act, Act No. 209 of 1993.

Comment

The repeal is in order as long as it is supported by Section 119 of the MFM Bill.

Column 4

Local Government Municipal Systems Act, Act No. 32 of 2000.

Comment

Item 1

The proposed amendment is in order.

Comment

Item 2

Consideration may need to be given to an insertion in Section 1 of the definition of 'additional powers'.

Mr Pat Mosiane is to furnish the team with a legal opinion that can give guidance to such definition.
Comment

Item 4

Reject proposed amendment. But would want to insert the principle of Section 46 in the MFMB. The point is not to dilute the principle and object of Section 46.

Comment

Item 5

The amendment is in order.

Comment

Item 6

6.(a) The amendment is in order.

6.(b) Propose deletion of [compliance with these provisions must be measured against the audit report on the financial statements of the municipality]

Comment

Item 7

The repeal of Section 58 unnecessary as the publication of Salaries is one of the only available leverages for the Public to hold municipal Managers accountable. One of the decisions made in the Portfolio Committee was to possibly include this aspect in the annual report of the municipality. This would then come up in the revised version of Chapter 10. At this stage Chapter 10 has not been revised.

Comment

Item 8

The amendment of Section 74 is rejected. Section 74 already states that any other applicable legislation would apply to the adopting and implementation of a tariff policy. In effect the amendment therefore limits the clause to only deal with the MFM Bill and not any other legislation dealing with any aspect of municipal finance management. In effect this clause could negate the provisions in the Water Service Act, the Electricity Act and the Housing Act. Legal opinion should be sought.

Comment

Item 9

9(a). The same comments as raised in the point above should be borne in mind.

9(b). The insertion of a new (c) after 81 (2)(b) appears problematic considering that there is currently Section 81 (2)(c) to (e).

Comment

Item 10

It is not clear why the principles of competitive, fair, transparent and cost effective should be deleted under the competitive bidding process. It is also essential that the regulatory framework be in place when the MFM Bill is enacted to ensure that the processes undertaken by municipalities are not unnecessarily delayed. It is also essential that any processes already underway in terms of the old legislation are protected for a phase-in period until the current process is completed.

Comment

Item 11

The same comments as raised in point 8 and 9(a) above should be borne in mind.

Comment

Item 12

Sub-items (aA) and (aB) proposed amendments are in order.

Sub-item (b) is already provided for in terms of Section 50 of the Local Government Laws Amendment Bill, 2002 which provide that:

"'Councillor in arrears'
12A. A Councillor may not be in arrears to the municipality for rates and service charges for a period longer than 3 months."

Sub-item C insertion is in order.

 

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