The Department of Co-operative Governance and Traditional Affairs briefed the Portfolio Committee on Co-operative Governance and Traditional Affairs on its 2017/18 Annual Report.
The Committee was informed that the Department had received a disclaimer audit opinion for the 2018/19 financial period. The Department stated that they had achieved 71% of targets during the 2017/18 financial year because of three factors: external factors, targets depended on other departments, and internal factors. The Committee heard that the Department was too ambitious with targets and not SMART. Of the 21 targets, six (29%) were not achieved. The decline in performance during the 2017/18 financial period was acknowledged compared to 91% of the 2016/17 financial year.
The Committee heard that the basis for the disclaimer was as a result of the following areas: Goods and services; Accruals; Assets and Irregular expenditure, and that the Department had a plan to address issues of the disclaimer. In developing the plan, it has worked with the AG and progress on the plan would be shared with the Committee.
Members asked for clarity on why ward committees seemed to be optional in some municipalities because such issues have been addressed in the Structures Act; what strategy was in place to address wages paid to CWP participants that could not be verified, and what the turnaround strategy was for accruals; if the planned workshops to support provinces synchronised with the NDP; how the Department was going to deal with the situation where communities were stating that the municipality was not accountable to them and started buying electricity directly from Eskom instead of the municipality, and how things were going to be turned around if there were so many vacancies in key areas.
The Committee was provided with a progress report on the Local Government Amendment Bill. The Bill was due for presentation to the Cabinet Administration and Governance Cluster. If things went according to plan the Department would meet the Constitutional Court deadline of 9 March 2019.
Briefing by the Department of Cooperative Governance and Traditional Affairs (COGTA)
Mr Obed Bapela, Deputy Minister of COGTA, informed the Committee that the Department received a disclaimer from the Auditor-General (AG) report. The Committee Work Programme (CWP) programme was responsible for the disclaimer. He said the report of the Department would focus mainly on the accruals and recommendations. On the irregular expenditure that has accumulated for four years, the Department would see if it could talk with the AG for a condonement. That was why it was still showing because no condonement had been granted at this stage..
The Deputy Minister stated they had achieved 71% of the targets during the 2017/18 financial year because of three factors: external factors, targets depended on other departments, and internal factors. He stated the Department was too ambitious with targets and not SMART (the targets were not Specific, Measurable, Achievable, Realistic, and Time bound). The presentation would also focus on the under-achievements and remedial action.
Mr Dan Metlana Gorbachev Mashitisho, Director-General (DG), COGTA, indicated that it should not be taken as the norm that the Department would present the annual report very late. The year under review was a difficult one for the Department because it was without a permanent Accounting Officer and it had struggled to get a Director-General placement for 18 months. He reported that the Department had implemented and achieved 71% (15 of 21) targets set in the APP 2017/18 financial year. Of the 21 targets, six (29%) were not achieved. The Department acknowledged that its performance has declined during the 2017/18 financial period when compared to the 91% of the 2016/17 financial year.
Programme 1: Administration
The annual target to improve the MPAT score from 2.7 to 3 has not been improved. This was due to MPAT standard 3.3.3 relating to the implementation of HOD’s PMDS. Lack of evidence and implementation of additional actions has also contributed to the non achievement of this target. An improvement plan with corrective actions has been developed for implementation and would be monitored through governance structures on a quarterly basis. One of the areas of improvement was record keeping of evidence to support the work performed. The Department would closely monitor the implementation of the Integrated Management Tool (IMT), which sought to address the finding emanating from the AGSA, MPAT and Internal Audit.
Programme 2: Regional & Urban Development and Legislative Support
The Department had not achieved on the number of spatial contracts for key restructuring zones that had to be facilitated. Focus shifted towards supporting the Intermediate City Municipalities as part of supporting IUDF implementation by second tier cities through the integrated Urban Development Grant (IUDG) from the National Treasury. The Department would continue to focus on partnership establishment and facilitation of spatial contracts in key restructuring zones. Currently, the priority was on the pilot Intermediate City Municipality to receive the Integrated Urban Development Grant which was currently being undertaken as this new infrastructure grant was being tested in these cities in the 2018/19 financial year.
The Department further did not achieve on the number of municipalities that were to be supported during the year under review. The Department of Small Business Development was leading a programme on red tape reduction initiatives in line with the Red Tape Impact Assessment Bill. The Department of Cooperative Governance and Traditional Affairs (COGTA) participated in workshops as a voice for municipalities. The Department would focus on the development and adoption of a framework on regional economic development which would clearly define regional economic development planning for local government.
Programme 3: Institutional Development
The Department did not achieve on the number of ward committee operational plans. A cumulative figure of 2 253 against 4 392 (51%) ward committee operational plans has been developed in some municipalities. There were pending court cases in the City of Tshwane and Metsimaholo municipalities. Late adoption of ward committee establishment policies by Council, disputes lodged by communities on the processes undertaken by municipalities in electing ward committees and political intolerance in hung/coalition municipalities have resulted in court cases in some municipalities. The Department would support 100 municipalities to have functional ward committees during 2018/19 financial period. One of the key indicators for functionality of ward committees includes the development of ward committee operational plans by municipalities. Hands-on support would continue to be provided to the targeted 25 municipalities to have functional ward committees during the 2018/19 financial year.
The Department also did not achieve on the four targeted reports on training initiatives for municipal officials coordinated. Only two reports were drafted but not finalised due to competing priorities. The Department would continue to institutionalise the Policy for Performance Information which emphasised that all reports developed must be endorsed. The Department would ensure that all the role players identified in the implementation of the Policy for Managing Performance Information exercised their responsibility and were held accountable.
Programme 6: Community Work Programme
The Department has not achieved on the number of participants trained by target dates. 19 870 out of 23 677 (84%) participants got trained. In the 1st and 2nd quarters there were delays in the procurement of training providers. The fourth quarter training was prioritised in the third quarter to compensate for the procurement timelines. Site training plans would be finalised as planned in the first quarter of 2018/19 to ensure that training is conducted earlier in the quarters. The CWP would ensure that the site training plans were prioritised as planned in the first quarter of 2018/19.
Mr Mashitisho reported that the Department has received a disclaimer audit opinion for the 2018/19 financial period. The Department has started to address the issues and has agreed with the AGSA to look at the matter during quarter four of 2018/19 to ensure that the qualification areas were fully addressed to avoid a disclaimer for 2018/19.
The basis for the disclaimer was as a result of the following areas:
- Goods and services (Project Management (PM) Fee and Wages)
- Irregular expenditure
He stated that the Department has got a plan to address issues of the disclaimer. In developing the plan, it has worked with the AG. Progress on the plan would be shared with the Committee. For example, the Department has adopted a policy for some items to be taken out of the asset register.
Goods and services:
There was insufficient appropriate audit evidence for payments made to the Community Work Programme (CWP) implementing agents because the Department could not provide accurate and complete substantiating records as required by the contracts signed with implementing agents. In addition, the AG could not obtain sufficient appropriate audit evidence for payments made to CWP participants in relation to accurate and complete timesheets. Some participants could not be verified and payments were made to deceased participants.
Accruals and payables not recognised:
The AG found there was insufficient appropriate audit evidence for accruals and payables. Schedules provided were not complete and accurate.
Irregular expenditure not complete:
The AG found insufficient appropriate audit evidence to satisfy the auditors that all BBEEE and local content non-compliance have been included in the disclosure.
Assets not complete:
The AG was unable to obtain sufficient appropriate audit evidence for CWP assets. The AG could also not trace the assets from the floor to the asset register.
Post audit Action Plans
The Project Management fees were paid to the Implementing Agents (IAs) without enforcing the conditions of the SLA which required that the IAs should substantiate the breakdown of the PM fees being claimed despite the fact that the amount paid was still within the contract amount. The AG raised the finding in relation to the lack of valid source document to substantiate the actual expenditure incurred by the IAs. There was a lack of cooperation from Implementing Agents (IA) which was not reappointed to administer CWP. These IAs failed to submit the hand over report.
The contract of the IAs had come to an end in March 2018. The Department had since April 2018 appointed the new NPOs with new SLA requirements which were amended to address gaps previously identified. Due to a lack of cooperation, the Department has withheld the retention fees due to those non-cooperative IAs, which is 5% of the contracted amount over a period of 4 years.
Wages paid to participants
The AG found that the Department has paid wages to CWP participants not supported by timesheets / paid to deceased/PERSAL participants. Participants could not be verified and/or more than one participant paid into one bank account.
The Department would participate in the MIS system similar to that of the EPWP system which is linked to the government agencies (DOH and DOL) to easily detect deceased and government employees unduly or fraudulently benefiting from the programme.
There were late submissions of invoices to finance by various units for recording and processing.
There would be centralisation of the function to receive invoices and recording to better address late submissions. There would also be an automation of invoice register to develop the service standards for payments of suppliers’ invoices.
The Department made payment in contravention of the Supply Chain Management (SCM) requirements. The Department could not supply appropriate audit evidence to satisfy the auditors that all BBBEE and local content non-compliance have been included in the disclosure. Consequently, the AGSA was unable to determine whether the irregular expenditure disclosed at R1 680 809 000 was complete. Management has not investigated the full extent of the irregular expenditure.
The specifications for required items required by the Implementing Agents prior to issuing of the order to ensure compliance with local content requirements would be reviewed.
Audit Action Plan: Asset register
Mr Mashitisho reported that in the financial year of 2016/17, the Department appointed TAT i-Chain to perform physical verification of assets for the Community Work Programme and consolidated the asset register for submission of 2016/17 Annual Financial Statements. The asset register compiled for 2016/17 financial period was accepted by the Auditor-General SA with minimal findings. A detailed asset register was compiled for 2016/17 financial year and was reasonably accepted by the AG (the opening balance). As the Department was required to conduct an asset verification on an annual basis for the 2017/18 financial year, the Department had to appoint a new service provider again to perform asset verification. Supply Chain Management (SCM) processes were followed to appoint ALCM as a service provider to conduct asset verification for the Community Work Programme for 2017/18 financial year. However, ALCM did not manage to produce a complete and credible asset register timeously to allow completion and submission of the annual financial statement to the AGSA and National Treasury. The Department was unable to perform quality assurance of the work done by the service provider prior to submitting the annual financial statements to the AGSA and National Treasury due to time constraints. The submission of the asset register to AGSA came with a number of findings that were raised during the audit period which could not be substantiated by any evidence.
The COGTA in collaboration with the National Treasury has developed a CWP Asset Management Policy which would assist in management of all assets, consumables and inventory, both major and minor assets. The draft policy was en route to consultation with different stakeholders. The non-profit organisations have to submit updated asset registers. NPOs have submitted business plans which included a procurement plan which identified different needs for each site and sub-site for approval by the department. The procurement of the assets and inventory has been restricted to take place only in quarters 2 and 3 to allow verification and preparation for the year-end closure during quarter 4 of the financial year. The Department has embarked on a process to validate the work done by ALCM and also address the gaps identified by the AG in preparation for 2018/19 financial year.
With regard to proposed corrective measures for predetermined objectives, the Department would conduct quarterly gap analyses on reported achievement and variance and provide feedback to project managers for improvement. The identified gaps would be presented at the Departmental quarterly review meeting to sensitise all project managers about the importance of providing actual reasons for variances and substantiating achievement and or non- achievement with portfolio of evidence. Proper planning and targeting would be conducted during the 2nd draft APP process to ensure that targets are realistic and do not change during the course of the financial year. Simultaneous processes would be facilitated to develop technical indicator descriptions, standard operating procedure and supporting schedules on all selected performance indicators for clear definition of the indicator.
(Tables and graphs were shown to illustrate budget allocation and expenditure)
Mr X Ngwezi (IFP) asked for clarity on why ward committees seemed to be optional in some municipalities because such issues have been addressed in the Structures Act.
The Deputy Minister said Tshwane and Metsimaholo were the two municipalities that did not establish ward committees. The party in charge at Tshwane decided not to establish ward committees and took the matter to court. Unfortunately, it did not win. The Department engaged the municipality for compliance. This whole thing has got political overtones, he said. The municipality needs to be pressurised because it was violating the Structures Act. In Metsimaholo, the municipality collapsed. As a result, they had to do re-elections. Everything would be set up to ensure ward committees were in place.
Mr E Mthethwa (ANC) wanted to know what strategy was in place to address wages paid to Community Work Programme (CWP) participants that could not be verified, and he also asked what the turnaround strategy was with regard to accruals.
The DG stated that they were going to tap into the Expanded Public Works Programme (EPWP) system and explore the biometric system. In terms of consequence management they would do an investigation and whoever has been found wanting, would be punished. Information would be shared with the Committee as things progressed. Regarding accruals, he said they would develop service standards for payment of suppliers. If the plan is implemented, they would be able to sort out some of the challenges.
Mr C Matsepe (DA) wanted to understand how the Department was going to deal with the situation where communities were stating that the municipality was not accountable to them and started buying directly from Eskom instead of the municipality.
The DG stated that the status quo would remain as it was for now until service delivery agreements were signed. The service delivery agreement framework has to be signed by Cabinet. The business community raised serious concerns that it was paying the municipality, but the municipality was not paying Eskom. That was why it has been saying that the government must come up with plans because the problems were real. He said there was a municipality that owed Eskom R2.8 million, but when one looked at its financial situation, there was no way it would be able to pay Eskom. Some of these municipalities owe water boards as well because they were not paid by residents. The Inter-Ministerial Task Team (IMTT) is there to come up with holistic solutions. Eskom was being owed by municipalities plus minus R17 billion.
Mr Mthethwa asked what the progress was in terms of the National Disaster Plan’s allocation.
Mr Chaka Moloto, Chief Financial Officer (CFO), COGTA, explained that 2.5% of the allocation was for the equitable share. During the current financial year, money was surrendered to the National Treasury, but there were no rollovers. The funding was for disasters for municipalities which they could not afford from their own reserves. Not all of the allocation was spent.
Mr Mthethwa wanted to know if the planned workshops to support provinces was synchronised with the National Development Plan (NDP).
The DG explained that at both provincial and municipal levels there are strategies that talked to the NDP. The IMTT was dealing with integrated development for the provincial and municipal levels. Strategic plans have been formulated on how COGTA should address these kinds of service delivery areas in order to meet the NDP targets. The Department was interacting with provinces once every six months, and twice a year.
Mr Molefi Seabelo, Chief Director Monitoring & Evaluation and Corporate Planning, COGTA, said the indicators in the Medium Term Strategic Framework (MTSF) were finding expression in the annual performance plans of provinces and municipalities. The Heads if Department (HODs) were signing the indicators. Provinces were submitting quarterly reports to the Department and the Department of Planning Monitoring and Evaluation (DPME) to ensure they reported on the indicators.
The Chairperson asked if the Deputy Minister was meeting the targets.
The Deputy Minister said they were meeting the targets and hade achieved more than 70%.
Mr Mthethwa asked how things were going to be turned around if there were so many vacancies in key areas.
The DG explained that some of the vacancies indicated in the Annual Report have been filled already and others have been merged. He said they were at an advanced stage of filling other vacancies before the end of the year.
The Deputy Minister said that sometimes it is good to be compliant, but it was also important to look at the impact at ground level. The Annual Report does not deal with impact most of the time. So, it was important to monitor COGTA’s provincial departments to ensure impact on the ground. The Challenges were around water treatment because many communities have been sharing sewerage systems, but no infrastructure has been expanded to accommodate the growing communities regarding water treatment.
The Chairperson remarked that it was clear that there were lots of challenges in the areas which should be discussed outside of the Annual Report, especially in towns that have the potential to be economic hubs. Some rural towns have become deserts and most people were moving to Gauteng. These were the challenges that needed to be addressed because some of these towns were thriving before. Most cities were not doing very well and COGTA should be pushing a little bit harder on these areas because most of these things were political, not administrative.
Mr Ngwezi commented that COGTA must be at the forefront of issues because with poor planning things were going to move backwards. He said where he comes from most community members want electricity, but they have to get it from Eskom at R250 000 and he has tried to engage with the municipality. Unfortunately, the Municipal Manager admitted that the municipality was poor and in distress. 80% of the municipality does not have electricity.
Progress Report on the Local Government Municipal Systems Amendment Bill
The DG said that the Bill was going to be presented to the Cabinet Administration and Governance cluster. If things went according to plan, the Department would meet the Concourt (Constitutional Court) deadline of 9 March 2019.
Advocate Charmaine van der Merwe, Parliament Legal Advisor, said the Bill would be classified as a 76 Bill. The wording would still be the same, but the Committee still needed to do public hearings. One aspect of the Bill, especially political participation, was a contentious issue. She said her concern was the NCOP because provinces had to conduct public hearings. She recommended that the Committee and the Department should request a deadline extension from the Concourt.
The DG stated that the court did not deal with the substantive amendments, but dealt only with tagging. It said the Act was tagged wrongly. What was important was the correct tagging of the Act.
Advocate van der Merwe said if the Bill was not passed by 9 March 2019 and assented to by the President, the Act would be invalid. The Committee and Department needed to advise on the constitutionality clause.
The Chairperson said the legal unit of Parliament and that of the Department would work together to find the best solution and advise the Committee.
The meeting was adjourned.
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