Forensic reports of municipalities: Department of Cooperative Governance briefing

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Cooperative Governance and Traditional Affairs

23 August 2016
Chairperson: Mr R Mdakane (ANC)
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Meeting Summary

The Department of Cooperative Governance (the Department) gave a presentation on the forensic reports that had been commissioned by provinces and municipalities, into the situation in various municipalities. Across the country, 109 forensic reports had been received, and the presentation focused on the broad areas of misconduct that were discovered during the assessments. These included irregular, wasteful and unauthorised expenditure, procurement irregularities, appointment irregularities, as well as cash theft, fraud, corruption and malicious administrative practices. However, the Department had faced challenges because the recommendations from forensic reports were not being fully implemented. Municipal Council resolutions had not been taken on how to actually implement the forensic report recommendations. In order to monitor the implementation of recommendations by municipalities, the Department was now establishing provincial forums with district municipalities.  Some of the forensic reports would be referred to other investigating agencies, given the amount of time that had lapsed since the reports were commissioned. Another problem was that even though irregularities and transgressions had been proven, there was often lack of consequence management by the municipalities. The Department had been monitoring disciplinary cases in municipalities, and those officials who were found to have transgressed would be included in a database of dismissed staff, held by the Department, to prevent them from simply moving to other municipalities.  The Department was engaging with the National Prosecuting Authority, the Special Investigating Unit, Asset Forfeiture Unit and other law enforcement agencies to try to ensure that proper action was taken, by building solid relationships and liaising closely. The Department was also prioritising and working on obtaining Council resolutions to follow up on all cases.

Members pointed out that the report was welcomed as some of the investigations had been long in the pipeline. Linked to this was a comment and concern that many officials spent far too long on full pay, suspended, whilst their cases were pending. Members were unanimous in the need to have strong implementation of resolutions, a proper assessment of the challenges and proper plans of action that must include consequence management for any transgressors. They stressed the important role of the Auditor-General and wondered if there was some way to trigger forensic investigations immediately allegations were made. They stressed also that it was important that reports should be tracked by the Department. Members suggested the need to amend regulations. They were worried that relatively few forensic reports had been concluded, particularly in the North West, which had received disclaimers in the last year. Financial recovery should be a corollary to the disciplinary proceedings, and municipalities would have to ensure that the law was enforced. They asked when the reports on 57 cases would be produced. They were concerned that there may be lack of political will on the part of the Speakers, and asked that a proper table be compiled to indicate the provinces, municipalities and progress. The Department explained that it had reviewed the Anti-Corruption strategy and would be holding workshops and training sessions. Members questioned the reports of tensions between the law enforcement agencies, and asked what challenges were emerging. Members were dismayed to hear that in some cases the position of the Chairpersons of the Municipal Public Accounts Committees was under threat if those Chairpersons were seen as too vocal or strong. They asked what might be the position in the Councils which had seen a change of leadership appointed from an opposition party. 

Meeting report

Opening remarks
Apologies were noted from the the Minister and Deputy Minister of Cooperative Governance and Traditional Affairs (COGTA).

The Chairperson briefly highlighted a few Parliamentary rules, including the quorum and the need to adopt minutes of meetings regularly.

The Chairperson introduced the new Acting Director General, Mr Muthotho Sigidi and noted that Mr Vusi Madonsela had accepted an appointment as Director General of Justice and Constitutional Development.

Forensic Reports of Municipalities: Department of Cooperative Governance (DCOG) briefing
Mr Muthotho Sigidi said the anti-corruption strategy and integrity management framework had focused on four major steps. These included assessing all matters and recommending strategies to ensure prevention. Other cases would be dealt with after being detected through an investigative process and then would be resolved. The current presentation would outline the investigative process and implementation of resolutions. Preventing recurrence of some issues had been a challenge, but the Department of Cooperative Governance (DCOG or the Department) had followed up on cases under investigation with some law  enforcement agencies in the previous week.  The report from the Directorate for Priority Crime Investigation (DPCI) would be expected on Thursday 25 August 2016.

Mr Manqobi Nkashe, Chief Director, DCOG presented the progress on the implementation of recommendations in the forensic reports commissioned by provinces and municipalities. 109 forensic reports were received across the country. The Department received 34 forensic reports from the Eastern Cape, five from the Free-State, two from Gauteng, 19 from Kwa-Zulu Natal, 11 from Limpopo, 15 from Mpumalanga, three from the Northern Cape, four from North-West province and 16 from the Western Cape.

Although he did not go into detail about which areas of injustice were faced within the provinces, according to each forensic report, he mentioned the broad areas of misconduct that were discovered during the assessments. These included irregular, wasteful and unauthorised expenditure. There were procurement irregularities, appointment irregularities as well as cash theft, fraud, corruption and malicious administrative practices. The Department had received assistance from different stakeholders, including the Office of the State Attorney, to ensure prosecutions were instituted and followed up. DCOG had referred 11 forensic reports to the Special Investigating Unit (SIU) for further assessment, to determine whether the cases needed to be investigated under the Presidential proclamation. The Directorate for Priority Crime Investigations (DPCI) was assessing 23 out of the 109 cases. The Asset Forfeiture Unit (AFU) had identified 18 cases within the forensic reports that would potentially lead to a forfeit of assets. The DPCI had reported back that two cases from the DPCI where two of the cases were still in court and the other two cases were undergoing investigation. The remaining 57 cases were referred back to the Members of the Executive Councils (MECs) with further recommendations. Progress reports have been requested from the MECs regarding how well each case recommendation was implemented.

The Department had also faced challenges with recommendations from forensic reports not being fully implemented. There was a lack of Council resolutions on implementing the forensic report recommendations. In order to monitor the implementation of recommendations by municipalities, the Department was establishing provincial forums with District Municipalities. Some of the forensic reports prescribed under the SIU Act would be referred to other investigating agencies given the amount of time that had lapsed since the reports were commissioned. The Department also mentioned a lack of consequence management by municipalities in cases where irregularities and transgressions by the council officials had been proven. The Department had been monitoring disciplinary cases in municipalities, and Council officials found guilty were included in the data base for dismissed staff which was being maintained by the Department.  The Department would also be engaging with the National Prosecuting Authority (NPA) who would assign a dedicated team of prosecutors to focus on cases based on corruption and related offences within the municipalities. Overall the focus was to build solid relationships with law enforcement agencies.

Mr Nkashe concluded by adding that the Department would continue to collaborate with provinces, municipalities and law enforcement agencies to ensure success for the project at hand as well as focus on obtaining Council resolutions regarding the recommendations to be implemented.

Discussion
Mr K Mileham (DA) thanked the Department for the report and highlighted that the Committee was pleased to see the report as some of the investigations had begun two years ago. The Committee had asked for an intervention for law enforcement to be implemented due to a lack of consequence management in municipalities. He strongly emphasised the need for intervention into the different challenges faced before going into detail about his concerns.

He said that the Auditor-General (AG) had continuously criticised municipalities on consequence management. He said that there had to be a way to immediately trigger a forensic investigation. Whether it was within the code of conduct or a regulation of some sort there had to be an automatic reporting system as well, which would allow provincial governance the awareness of all investigations taking place. Once the investigation is complete a report should be submitted to the Department for the relevant province. In so doing, there would be a tracking of each report and the consequences followed by recommendations would be implemented. He strongly felt that the necessary regulations needed to be corrected in order to ensure that there would be a way to immediately recognize fruitless and wasteful expenditure. He highlighted that the low number of forensic reports in the Northern Cape and North-West Province which he felt were alarming. He was concerned that the North-West Province was the worst run province in the country and that a disclaimer had been received in the previous financial year about the municipalities. It was alarming to see that only four forensic reports were received. He believed that there was something wrong with the numbers of investigations that had taken place and he was concerned that the province or the municipalities could have been covering up the criminal activity. He mentioned that there were other aspects that had to be taken into account such as financial recovery in terms of section 32 of the Municipal Finance Management Act (MFMA) which stated that anyone who was responsible for fruitless and wasteful expenditure was required to repay that specific amount. He said that it was the responsibility of the municipal manager to ensure that law is enforced to guard against fruitless and wasteful expenditure.

 He asked when the Committee could expect to receive reports on the 57 cases that were implementing the recommendations from the forensic reports. He said that the Speaker was responsible for enforcing the code of conduct but there was a lack of political will from the Speaker to enforce it. He asked what could be done by going through legislation or regulations or the code of conduct to ensure that recommendations were implemented and that the Speakers take responsibility.
Mr Tebogo Motlashuping, Acting Deputy Director General, DCOG, responded to Mr Mileham’s concerns. He said that the Department would be open to any suggestions made by the Members of the Portfolio Committee, including Mr K Mileham’s suggestion to help strengthen the regulations. He said that the Department was in the process of reviewing and analysing ways to regulate misconduct. He acknowledged the possibility of adding sections into the regulations that would automatically point out misconduct. He said that the 57 cases had to do with irregular and invalid appointing procedures within the municipalities. The Department had a dedicated team working on the remedial actions that would be applied in the disciplinary cases. A report that dealt specifically with the recommendations given on the forensic reports would be compiled in order to assist municipalities and provide hands-on support. He also mentioned that the database for dismissed staff would be a good platform to introduce strict disciplinary measures. There would also be a cooling off period for dismissed staff, which would automatically exclude them from being appointed during the new official term for municipalities. Progress on the forensic reports was dependant on the municipalities and so the Department would provide support to ensure that all progress reports were submitted. Unfortunately, the Department could only know of the success of the implemented recommendations by getting submissions from the municipalities.
 
Mr Nkashe commented about the will of Speakers to enforce the code of conduct. He would not confirm nor deny that speakers were hesitant to go through corrective procedures against councillors. However, during the Councillor Induction programme, the Department,  in partnership with the South African Local Government Association (SALGA), had placed emphasis on ensuring that the Speakers would be trained efficiently and selected according to their experience and ability to do what is required. The Speaker would have to manage the Councillors’ code of conduct and it would be essential to have had experience with dealing with Councillors in a local government atmosphere.

The Department also had also reviewed the Anti-corruption strategy as well as an Integrity Management framework. He said that it was necessary to have separate workshops at a district level where there will be an opportunity to go through the Integrity Management framework with the speakers and the ethics officers. The Department may not have the capacity to facilitate all the information session and so it was decided that in house training would be provided for municipality speakers. It would also be important for different district officials to understand the Anti-corruption strategy and Integrity Management framework so that it can be incorporated during the training.

He pointed out that DCOG had not gone into great detail about the forensic reports from the provinces, but the comment was noted. He was also dealing with the National Corruption hotline, also known as the Whistleblowers, which would potentially identify any form of misconduct. Once the Department received a call alleging that suspicious activity was taking place within a municipality, the Department would investigate the case further and write to the MECs in that specific province, asking for a full report within 40 days. If no reports were received within the 40 day period, the Minister would have to deal with the matter according to the set procedure.

Mr E Mthethwa (ANC) urged the Department not to cluster the forensic reports into one category. He asked that each case be highlighted separately so that the Portfolio Committee can monitor issues related to the cases in each province. As the information was presented now, the Committee had found itself unable to follow which cases had been finalised, and so he asked that the Department provide the requested information in the form of a table.

Mr M Hlengwa (IFP) was concerned that the AG had not been included as part of the assessment process. The AG played an important role in identifying theft or wasteful and fruitless expenditure, and if that office was omitted he would have some doubts about the authenticity of the information presented. The Committee would have to ensure that impacts were effective within the new term. He felt that audits on each office were necessary and that a full report would enlighten the Committee about all the organisations that were involved in the forensic cases. He said that much focus seemed to have been placed on leadership and that perhaps the Department needed to investigate further. He too emphasised  the need for a fully detailed table on all the forensic report cases, since the Portfolio Committee needed to take note of the offences in order to deal with problems faced in each province accordingly. He noted that at the end of the financial year, some municipalities had merged. He felt that the Department needed to closely analyse the operations towards the end of the municipal term before the new municipalities came into office. He also emphasised on the need to monitor finances, and asked that DCOG prioritise the Eastern Cape municipalities. Finally he also made the point that the councillors might change, but most of the work would be done by the officials.

Mr N Masondo (ANC) felt that the report had been able to clarify most of the issues. The Department had all the information the Portfolio Committee needed. He urged the Department to pay attention to detail, since it should not assume that the Committee was on the same page as the Department. He was also concerned about the relationship among law enforcement agencies. The media had highlighted tension between the agencies. He believed that there was nothing wrong with disagreement, if it was about the best way to solve problems, but there would be concerns if the agencies were actually battling each other. Furthermore, if there was contradiction, the public would lose faith and trust in the organisation’s ability to provide excellent service delivery.

He asked what issues emerged as the NPA engaged with the government. He said that if there had been challenges faced the Department and the Portfolio Committee would need to find solutions to each problem, lest it have an impact on service delivery.

Mr A Mudau (ANC) also encouraged the Department to ensure that offices and municipalities had enough staff. He also urged the Department to specify time frames for each step within the 40 day period provided, to receive reports submitted by MECs.

Mr M Sigidi said the DCOG officials took note of the information requested on slide 10 and Mr Nkashe would put together a table with the requested information within the next week, covering information such as how many procurement issues and theft cases were found in each province from the 109 assessed cases. This report had been based on challenges faced during the investigative process, and the DCOG aimed to ensure not only that the challenges were outlined, but that there was resolution. The Auditor General played an essential role in detecting fruitless and wasteful expenditure as well as theft. Audits had not been completely ignored although they were not specifically mentioned in this presentation. The Department also mentioned that the function of Municipal Public Accounts Committees (MPACs) across different provinces was analysed and it was found that there were 79 committees which was risky. It was also discovered that if the Chairperson of the MPAC tended to become too vocal s/he would be removed, and he suggested that the code of conduct ought to be corrected to ensure that the role of the Chairperson was more secure. SALGA had issued documents with guidelines on issuing contracts beyond the financial year as well as dealing with the staff to be appointed at the senior management level. He had personally written to the City of Tshwane as staff had been appointed without following the correctly outlined procedures. The regulation had clearly defined the advert process, but the public had already received notification prior to Mr M Sigidi’s assessment.
 
The challenges faced in the Eastern Cape were due to funds not being transferred to municipalities. The Department had been made aware of unauthorised use of finances from the grant in specific municipalities and had decided to transfer the money to the provincial government instead. The Department had also not received a performance plan for the financial term. The Department would try to outsource a team to provide a Lifestyle Audit (this might need to be corrected) as it was beyond the Department’s capabilities.

He advised Mr Masondo that he was not qualified to talk about the relationship between law enforcement agencies. The Department only had an anti-corruption task team. The Department was working with the NPA asking the latter to dedicate itself to some of the challenges faced within local government.

Mr Nkashe mentioned that the Department was also engaging with NPA, the Auditor General and with National Treasury to come up with the framework for all progress reports.  The terms of references for each forensic report would be clearly stated, as most municipalities would have to repeat the entire process because information could be missing. He also highlighted that in the past, a lot more investigation had taken place, but this was not followed up until the final stage of prosecution. This had resulted in more investigations taking place with no disciplinary action following directly afterwards.

Mr Motlashuping mentioned that the Department would be conducting a three phase training programme for councillors to ensure that the municipalities were well equipped to offer excellent service delivery. This would begin with an induction programme for councillors in different districts, running over a five day period, followed by a specific capacity programme focussed on dealing with financial challenges within municipalities. During the third phase each councillor would receive a certificate proving that the induction programme had been completed.

Mr  Mileham was concerned to hear about the position of the Chairperson of MPACs, which had been made a permanent position and asked what would happen to the position when there were many changes taking place within municipalities, particularly if the Chairperson had previously been a member of an opposition party. He asked if the decision to make this position full-time would be analysed again in the future, and if anything was to be done about the regulation noting that the Chairperson should be an opposition party member, and perhaps consideration could be given to whether that decision was correct.

Mr Sigidi said that the guidelines on the MPACs did say that the Chairperson could be from the opposition party. The Department had had a debate about whether the Chairperson should be appointed from an opposition party. The conclusion was that it would only be advisable to appoint a Chairperson from the opposition. The final decision would be left to the Department, but in any event the regulation would need to be strengthened in order to prevent any problem around corruption.

Mr Masondo said that it was a political choice as to which people were to be appointed to the position, and it would be interesting to see what the DA was going to do with the municipalities that this party had recently won in the elections.
 
Mr K Mileham emphasised that he was only speaking in general terms and had not been referring to any political party. He did not agree with the comments made by his colleague Mr Masondo.  The Chairperson mentioned that the Committee Members would have to look into the matter raised by Mr Mileham. He also mentioned that the party in power would decide how to place Council officials. The regulation only made a suggestion that the Chairperson could be from an opposition party. He himself was concerned that the investigative process took long and that even when officials were found guilty of transgressions, no disciplinary action would be instituted. In addition, officials under investigation would be suspended for far too long, being paid without doing any work. This issue hindered the progress of many municipal offices. He observed that officials would be suspended for at least two years; some were even virtually permanently suspended. Much more work was needed on this aspect. It was affecting progress in the Department and the whole country. He strongly believed that forensic reports were put in place to ensure that the recommendations on each outcome must be implemented as soon as possible, but implementation was being delayed. He could not understand why a municipal Council would not make the final decision to either dismiss or take disciplinary measures against those who were found at fault.

The Chairperson thanked the Department and wanted to stress the important of the work that had to be completed. He reminded the DCOG to submit progress reports and detailed breakdowns by province.

The meeting was adjourned.
 

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