Bojanala District; Lekwa-Teemane & Madibeng: audit outcomes hearing

Public Accounts (SCOPA)

11 September 2019
Chairperson: Mr M Hlengwa (IFP)
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Meeting Summary

2017/18 local government audit outcomes
Municipal Audit Outcomes 2017/18: Auditor-General briefing

The Standing Committee on Public Accounts had a hearing with three municipalities which were part of the 12 municipalities deemed problematic. The briefing by the Audit General (AG) on the audit outcomes had found that most of these municipalities had been disclaimed for more than three consecutive years, with one of them having received a disclaimer for ten years.

A recurring issue in the hearings across all of the municipalities was the over-reliance on consultants which were not yielding good results. The majority of the municipalities voiced displeasure with the poor and shoddy work of these consultants, as they had resulted in material misstatements. A concern was the lack of municipal officials with the required skills, especially when it came to finance, as this was what was leading the municipalities to go out and look for consulting firms to assist them. This had led to them continuously being issued with disclaimers.

Other factors that had contributed to the problems these municipalities were facing included leadership instability, non-compliance with legislation, no proper record keeping, lack of monitoring tools, lack of internal controls, all of which had resulted in the millions of rands of unauthorised, irregular, fruitless and wasteful expenditure. Members were highly critical of municipal officials implicated in financial misdemeanours playing an integral role in the investigations into the matters being probed.

The Chairperson said the Committee was going to make unannounced visits and oversight so that they could see the municipalities’ working environments at first hand. The Committee would also be requesting monthly reports from these municipalities to check that they were sticking to their commitments and implementing the recommendations made to them.

The Mafube municipality said that they had been put under administration in terms of s139(1)(b) of the Act in April 2017 by the provincial government. When it was revealed that the administrator was not present at the meeting, it exposed an underlying problem regarding the administrator’s capacity to hold that office. The provincial CoGTA, after a five minute break, was able to locate the administrator telephonically and established that he was at the doctor because of illness. The Chairperson described the reason as an example of malicious compliance.

The mayor of Mafube said changing the administrator was a priority.  Questions and confusion set the tone for the discussion, and Members continued to ask to why a municipal manager had been appointed while an administrator was in position.

The mayor of Masilonyana municipality was not able to attend due to the unfortunate passing of his wife, who was going to be buried on Saturday. The Speaker said that Masilonyana Municipality had been placed under administration in terms of s139(b) on 9 May 2017. In 2018, challenges had emerged between the Council and the administrator, one being the decline of accountability. The administrator was not in attendance

The Masilonyana municipality explained that a letter from CoGTA had been sent on 1 December 2018, which had led to co-administrators being appointed. The municipal manager said that the CoGTA head of department (HOD) had attended only meeting since taking up the position. SALGA clarified that appointing an HOD as an administrator was unprecedented.

The Committee decided not to engage with municipalities whose administrators were not present, so it would reconvene on Tuesday, 17 September, so the administrators and all relevant authorities could be in attendance.

Meeting report

The Chairperson said that the way the Committee going to conduct the discussions was that three of the Members would be responsible for posting questions to the municipalities. Each of the three had been allocated to one municipality. Ms N Tolashe (ANC) was allocated to the Madibeng Municipality, Mr S Somyo (ANC) was allocated to the Lekwa-Teemane Municipality, and Mr B Hadebe (ANC) was allocated to the Bojanala District. After the three members had finished posting their questions to the allocated municipalities, other Members could also post questions on areas which they felt had been left out.

Madibeng Local Municipality

Ms N Tolashe (ANC) asked the Mayor to give her a brief political overview of the state of the municipality currently

Ms Jostina Mothibe, Executive Mayor, said that the major challenge of their municipality was water. They had tried to negotiate and engage with the Department of Water and Sanitation (DWS) about the water issues and in 2015 they had agreed on a project that would alleviate the pressure on the municipality. The project had started in 2015 and the agreement was that it would end by 2017, but unfortunately it was still continuing. This was because of the lack of allocation of funds to the project by the Department. In the last financial year, they did not have any allocation, but for this current financial year, there was an allocation for it.

An issue was that the project would not serve the purpose as initially planned, because the growth in the informal settlement meant that 80 megaliters would not be sufficient. They were trying to restrict the informal settlement, but it was not an easy task as some of the land did not belong to the municipality.

Another issue instability in the municipality, with the officials highly politicised to the extent that they were unable to draw a distinction between whether they were politicians or officials.

She was not expecting the municipality to get a disclaimer, as she thought that they would get a qualified audit report, because the municipality was taking shape, but unfortunately there were a number of issues which had been raised by the Auditor General (AG).

Ms Tolashe asked her to speak about the VBS bank and the Eskom debt.

The Mayor said that Ms Tolashe was right in saying that the municipality owed money to Eskom. In December, things were looking like they were in shape as they were not that deeply in debt, but now they owed Eskom R57.9 million deficit. They had met with Eskom and had made arrangements. She added that they were trying to deal with their major creditors at the end of each month.

On the issue of VBS, she said it did not go well from when it started. The investment had been R50 million ,and when the R50 million was supposed to have been deposited back with the municipality after three months, only R20 million had come back -- without interest. Therefore the outstanding amount with VBS was R30 million, plus the interest. The investment had been made by the officials of the municipality, and the agreement was that the municipality had an investment policy which allowed them to invest without taking the item to the Council. The province and the municipality had made investigations, but the two investigations had yielded different findings. As a result, they had agreed that the office of the Member of the Executive Council (MEC) must intervene in the matter. They had also engaged the national office of the Department of Cooperative Governance and Traditional Affairs (COGTA) to intervene in this matter. However, cases had been opened against the officials who were involved, and they had been suspended. They were expecting the Hawks to give them a progress report on the matter.

Ms Tolashe said the Mayor had not said much about the state of things as they were currently. She asked for a tangible response about where exactly they were. The Mayor had talked about both the national and provincial investigations and alleged that there had been a parallel process, so she asked her to speak more on that since COGTA was also present. By the end of the meeting they should have a clear understanding of what the municipality and in her office as the Mayor were doing about the matter.

The Mayor said the VBS matter was with the police. When the administrator came, they had highlighted that this was the matter they wanted to focus on, but on the issue that affected the politicians or the councillors, the Speaker’s office was dealing with that matter. There had been one or two meetings which had discussed the matter, and they would be informed of their progress, as well as what was happening with the cases against the officials.

Ms Mothibe said that in the last financial year, there had been an instance where auditors had been chased away from the municipality. The municipality had since met with the AG, together with audit committee and officials, and assured them that they would try to strengthen their security at the municipality.

Ms Tolashe said the Mayor should be on top of things in her local municipality, because it was not ideal for her, as Mayor, not to know the latest updates on the VBS matter, since it was also now an international affair.

The municipality had been penalised for at least three financial years by AG. She asked the administrator to briefly tell the Committee when he had come in, how long he was going to be there and his turnaround strategy, as per the recommendations of the AG.

Administrator’s comments

The administrator said that he had started with effect from July 2019. Part of the key terms of reference was to improve the financial situation in Madibeng, including the perennial disclaimers for the last three years. The audit findings had indicated that a disclaimer was caused mainly by the limitation of scope. This was because expenditure was incurred, but there were no records that indicated that proper procedure had been followed or that services had been delivered. As a result, the AG had not been able to place any value on the transactions made. On the basis of that, together with the municipal officials and the post-audit action plan, the committee had developed an intervention plan to respond directly to the issues of the Auditor General.

He said that for the past three years, the AG had indicated that there was a problem of cash and cash equivalents -- that is, there was no regular reconciliation and this, therefore, may breed a culture of expenditure which was not accounted for. They had been able to update the reconciliation, and were now at the budget and Treasury office, led by the intervention team. It was expected that by reconciling daily, it would assist with the accumulation of cash to cash equivalence reconciliation going forward. The issue was that the basic element that ought to have been done had not been done for a long period of time. Part of the responsibility in finance had been the turnover of chief financial officers (CFOs), and the acting tenure of the CFO. They still had a vacancy for the CFO and were finalising the recruitment process, as it would assist in leadership.

Another challenge had been the supporting documents in relation to the journals on retentions. They had been able to update and ensure that they acquired supporting documents in relation to those transactions. However, they were unfortunately dealing with the history of the last three years and if there was any improvement they would be looking into the current audit to see if it was going to yield any positive results in relation to documentation.

One of the audit findings had been about commitments and the manner in which they were not correctly disclosed in the annual financial statements. They had attended to the specific issues of late documentation and commitments, including appointment letters, contract management, and all issues that related to the filing requirements for commitment and disclosure. These were basic issues which just required commitment to do carry them out. They were sitting with officials who were dealing with what the AG stated ought to have been done three years ago.

The other issue related to the overstatement on the operating list, and expenditure related to operating list liabilities. They had been able to indicate that in the annual financial statements (AFS), and had recalculated the 2018/19  AFS in particular to reflect the actual commitments and liabilities in relation to that.

They had weekly meetings and had met with the audit committee, which was an external oversight body of the municipality, to identify their concerns and frustrations related to improvement measures, and had suggested cancelling those which had not happened. They had met with the entire council and expressed their view and the concerns of the audit committee. They had also met with the political leadership of the municipality to insist on how functional the committees of the council should be, from both section 79 and section 80 committees, in considering these matters and being able to act so that the situation could improve.

The Chairperson said that the Mayor had anticipated that this audit outcome would have been ‘qualified,’ at the very least, and did not know how it had become a disclaimer. He said that this showed that there had been hope in the municipality that things were changing. He asked why they had not changed.

The administrator said that they have engaged the Auditor General as the intervention team to establish the basis of the AG’s findings and what measures they wanted the municipality to implement in terms of the findings. What they found from the AG was that one of the issues was that the documents that the AG required had still not been produced.

The Chairperson said that he understood that, but his point was that the Mayor had said that at the back of the disclaimer she had hoped for a qualified audit outcome. He asked him if he had diagnosed why the hopes had not materialised.

The administrator said that for these commitments and interventions to yield the results hoped for, they had implement what he had had undertaken to implement in the post-audit action plan. They had attempted to deal with issues of cash to cash equivalents, issues of reconciliation, availability of documents of expenditure, and reducing irregular expenditure with the view to getting rid of it.

For the year under review, the CFO would deal with the practical elements during the implementation of the post-audit action plan. However, for the intervention since July and going forward in terms of improving the value of the audit findings, these were the issues that he, as administrator, would be dealing with. The accountable officer was present and would be able to share with the Committee what kind of disappointments had led to the disclaimer audit opinion.

The Chairperson said the administrator was not adequately answering the question, as he was focusing on the future plans. What he was asking was whether the hope had been based on any programme of action that they had found which involved action steps to try and correct what the AG had raised.

The administrator said that the basic hope would have been anchored in the post-audit action plan.

The Chairperson asked if the assessment was practical or achievable.

The administrator said that it was, but certain aspects of the post-audit plan required that the municipality institute certain systems and implement the required actions.

The Chairperson asked if that had been done

The administrator said that not all had been done. If they regarded their figures of irregular expenditure, for example, one would see that although there was a commitment to the audit-action plan to deal with irregular expenditure issues and consequence management related thereto, these issues had not materialised in both the preceding and current years, for which the review was now due.

Ms Tolashe asked about the arrangement with the presence of the administrator as well as the Acting Municipal Manager (MM).

The administrator said that primarily the administrator became the executive authority in the municipality. Operationally, to make it easy in the municipality, they had shared the terms of reference with the MM and all other officials in the municipality. They had explained the terms of reference and had devised administrative methods where the administrator, in those functions that were the responsibility of the accounting officer, must still have the right to agree to certain decisions with major financial and institutional implications. The administrator interfaced with the administration on that basis. When a major decision needed to be taken, the administrator and the accounting officer sit down, but eventually the administrator would have to concur to the accounting officer’s decision.

Ms Tolashe asked him to confirm that his turnaround strategy was working.

The administrator said they had developed an intervention plan as required by the Department of Local Government in the province, with specific issues raised in the terms of reference to deal with the challenges that Madibeng faced, largely around governance, service delivery, finance, and administration. They had already begun the process of obtaining the input of various stakeholders and role players. They had been able to engage with employees and general management in the municipality, political leadership, local business, and other structures of the community that require services from the municipality. If this intervention plan was followed and all role players cooperate and implement what the plan intends, they should be able to turn certain issues around. Most importantly, they needed to improve the audit outcome now and going forward.

Ms Tolashe asked the acting MM to give account of what had happened, and which the Chairperson was referring to, since the administrator was more focused on futuristic plans.

Ms Grace Magole, the Acting MM, said that the Mayor had been correct in hoping for a positive outcome. The municipality’s strategic position had been that senior managers were in acting positions, and had appointed a municipal manager, a CFO, a deputy CFO and a director of the infrastructure and technical services. Plans had been put in place in order to improve the audit outcome in the year under review. However, just before the audit could be concluded, all these appointees had resigned, including the Deputy CFO, so the municipality had regressed to where they found themselves currently. She agreed with the turnaround strategy that had been alluded to by the administrator, as it would assist the municipality to improve the audit opinion.

The Chairperson asked why they had all resigned.

The MM said that the reason for the mass exodus was that they had all indicated they had found employment in other sectors of government or in the private sector.

Ms Tolashe asked if there were any pending cases involving some of the staff members. She also asked the MM how long she had been acting in the position, and also which other acting positions there were.

The MM said she had started acting in May this year, and the CFO had started in January. The directors had all resigned as of December 2018, so from January 2019 they had not had a permanent MM, CFO or director of Infrastructure and Technical Services.

The Chairperson asked if they had all resigned in December.

The MM said they had all resigned in December.

The Chairperson asked how many resignations there were.

The MM said that there were three resignations, which had taken place at the same time.

The Chairperson asked her if that did not strike her as odd. He also asked which position she was occupying permanently.

She replied that she was the Director of Corporate Support Services.

The Chairperson said that something was not adding up. What had happened in November that had led the directors to resign all at once in December?  How many of them had been in the firing line one way or the other in regard to investigation consequences?

Mr R Lees (DA) said they had been told that there were two officials who had been suspended as a result of the VBS scandal. He asked if they had resigned or if they were among the three directors who had resigned.

The Chairperson also asked about the municipality’s disciplinary processes in relation to the VBS matter. Had the investigation included those who had resigned?

The MM said that of the three officials who were implicated by the VBS report, two were still in the municipality. One was the head of the cash and investment section, and the disciplinary processes were still under way. The other was the manager of expenditure, and the disciplinary process was still under way. The third one, who had resigned, was the assistant director for assets. None of the three that resigned at the same time had been implicated in the VBS report that they had received. However, the Municipal Manager had been was cited as one of the officials who had given the manager of expenditure the instruction to invest the money with the VBS.

The Chairperson asked why he had not been implicated, when he was the one who had given the unlawful instruction.

The MM said that the recommendations which they had received from the independent investigation firm had implicated the three officials, but when the council took a resolution, it did not refer or take a decision against the then CFO, who by then was the Municipal Manager. The other two officials who resigned were said to be implicated, and not cited in the report.

The Chairperson commented that the acting MM, who had been the CFO, had given the instruction, and it was a common cause that it was an unlawful instruction which had cost the municipality R30 million plus interest and reputational damage -- and he still got off scot-free! He asked if that sounded right.

M Lees asked if the two officials who were now suspended had been paid a performance bonus in the last or current financial year.

The Chairperson asked if the municipality could submit the report to the Committee.

The Acting MM referred to the disciplinary process, and said that according to the law, 90 days provision was given for a suspension, and if the period exceeded 90 days it would an unlawful suspension.

Ms Tolashe asked if they were still within the 90 days.

Ms Mogale said that they were now beyond 90 days, and they had lifted the suspensions. They had received an advisory report from the prosecutor of the case, that the municipality’s resolution was based on a draft report which did not have legal standing. They had then pursued the legal investigation firm to give them a final report. They had had issues of payment which they had sorted out in July, and had been able to get a final report.

She added that the disciplinary process could still go on beyond 90 days, and the suspension was the one that was regulated within 90 days. Although the two employees had returned to the municipality, the disciplinary process was still going on.

Regarding performance bonuses, she said the two officials that they still had did not fall into the category of those receiving such a bonus.

Ms F Muthambi (ANC) said that although the employees were back, it did not mean that they were exonerated. Normally the reason why people were suspended was so that they would not interfere with the investigation. By being back now there, was a possibility that they would interfere with the investigation, yet they had a whole ample time of 90 days to deal with the issue. She asked why they had not charged them within the stipulated time frame according to the law.

Ms N Mente-Nqweniso (EFF) said that earlier the Mayor had indicated that some officials were very political. She said this was a typical case of politicians being officials. She asked what was being done by the Acting MM to the person responsible for letting criminals go.

The Chairperson asked the MM to start from the beginning of the process which they had taken, and the revelation that they had invested R50 million and received R20 million back, and that R30 million was outstanding, with interest, and the issue of reputational damage.

Ms Mogale said that what happened was that the municipality had submitted a report to the council after realising a loss of R30 million from VBS. The report had been commissioned by the then municipal manager. The council had then taken a resolution to investigate, so the investigation firm had been appointed. In August 2018, a draft report had been presented by the investigation team to the council, and a resolution had been that implicated the three officials that she had referred to earlier. In that resolution, the council did not take any decision against the then municipal manager, who was the then CFO, although he was cited in the report. They had then suspended the three officials who were implicated.

The Chairperson sought clarity, and asked if she was saying that the CFO, who was acting as the MM and was the one who had given the instruction to invest in VBS, had also commissioned the report.

Ms Mogale confirmed that it was the CFO who had given the instruction to invest in VBS, and when he later became the Municipal Manager he had commissioned a report on his actions. His report only cited him, but apportioned the blame to the other three officials.

The Chairperson asked if he had been holding the positions of both MM and CFO.

She said that when the report was commissioned to council, the CFO was the Municipal Manager at the time.

Mr B Hadebe (ANC) asked if the CFO, who was now also the MM at the time, had appointed the investigators.

Ms Magole said that he was involved in the appointment of investigators.

Mr Hadebe said that this was the reason he had not been implicated. The council ought to have recused him and not allowed him even to appoint the investigators. How did it escape the council’s understanding that he was the CFO who had given the unlawful instruction and therefore could not be the one charged with the responsibility of appointing investigators? The council had failed in their duty to act in the best interests of the municipality.

Ms Muthambi said that at the time of the instruction to invest, Ms Mogale had been the then acting MM. She asked her if it had been brought to her attention that money was being invested at the VBS.

When the MM had commissioned the investigation, was it because of the council’s resolution or was it an initiative by the MM by virtue of being the accounting officer who had discovered that there was an irregularity?

At the council meeting which had exonerated him, even though he was cited in the report, was he present as an accounting officer. If he was present, what advice had he given to the council as an accounting officer?

Who had been the final person to authorise the investment at VBS -- the then CFO, or the then acting MM?

Ms B Zibula (ANC) said that she heard that the municipality had preferred the private investigators. She asked how much they had paid for the private investigators.

Executive Mayor Mothibe said that the municipality and the province had investigated the matter. However, the challenge involved the report that they got from the province, because that had indicated that the CFO was implicated, whereas in the municipal report he was not implicated but merely cited. As Mayor, she had gone to the office of the Premier and they had spoken about the two reports. The Premier had said that they would look at both the reports and would revert back to them with the way forward. At that time, they had already started implementing the findings they had made as the municipal council. After that meeting, the MEC had said that the province would appoint the investigating company which would give them the report that they would be able to act on. Therefore, at the moment, they were waiting for that investigating company to would provide them with a neutral report, as the two reports which they currently had were not coherent.

The Chairperson suggested that they give the Committee all the reports so that they could also look at them, because it seemed that the council had acted and taken decisions which were irrational in relation to the consequences and the law.

Ms Mkhize said that Madibeng municipality lost a R60 million infrastructure grant, and as a result, the community was not receiving basic services. She asked the manager of the municipality to demonstrate how their decisions were aligned with their constitutional mandate.

Ms Mente said that after the revelations of the VBS, the municipality had commissioned an investigation, and for her the report was null and void because the commissioning of the report was directed by an implicated person. She asked the acting MM and the Mayor if they thought the validity of that report can stand the test of legality. She also suggested having a fresh report which was commissioned properly, which would deal with all those who were implicated.

She asked was who was in charge of human resources management and had let the 90-day suspension expire and not bother to follow up. As for the government officials who had resigned and were now employed in government again, she asked if they knew where they were employed.

Ms Tolashe asked if they had been using the provincial report or the municipal report.

The Mayor said that the suspensions were made using the municipal report, since the provincial report came later.

Ms Tolashe also said the country had a three-tier government, and the municipality in Madibeng was a government on its own. She asked if the Mayor understood that she was responsible for everything -- especially the audit outcome -- and that she had to take full responsibility. Did she understand the implications?

A suggestion made was that COGTA should compile a VBS “watch list” so that when those investigated or might be implicated resigned, people would at least be aware of their circumstances when they were looking to be appointed again.

Ms Muthambi said that the R30million that went down the drain meant that the municipality was not able to do some of its projects. She asked how they intended to recover the wasted money.

The Mayor said she did understand her responsibilities as mayor, so she would not be resting until the VBS issue was resolved. The only time the municipality knew that the investment had been made was when the VBS could not return all the money. From the word go they never knew that an investment had been made, as it had been based on the municipality’s policy and had been done by junior officials. When the VBS failed to return the R30 million and the interest, that was when they had contacted her to let her know that they had made the investment. That was when she had spoken to the then acting Municipal Manager to ascertain if she also knew about the investments, and it turned out she also did not know. Therefore, the Executive Mayor and the MM were not informed when the investment was initially made. Additionally, the section 71 reports which they were supposed to get every month came in too late to be presented to the Mayor and the council. These reports were delayed for almost three months, and that was when they saw the information that the money was not coming. She agreed the mistake they made as the council was allowing the MM, who was implicated, to appoint the investigating company.

Mr Hadebe said that if the implicated person was the one who appointed the investigating company, it meant that he would have been the one who made the terms of reference as to how the investigation was to take place, which was problematic.

The Chairperson also asked them to submit the investment policy to the Committee

Ms Mogale responded on the issue of human resources, and said that she was the person who was responsible for corporate support during the suspension of the employees. An advisory report had been submitted to the office of the MM indicating the legal implications should they exceed the 90 days, so a decision to relieve the suspension had been taken. After receiving the final report, they had issued a letter to the prosecutor to continue with the matter, and that had been done the previous week.

The provincial report had not yet been adopted by the council, as indicated by the Mayor.

The Chairperson said that the Committee would suspend the hearing of Madibeng. They should submit the documents requested, and then they would be rescheduled to come back.

Ms Mente asked them to define which documents they should bring when they came back.

Ms T Marawu (ATM) asked what the delegation were going to do to ensure that what they had done would have a positive impact, because experience had shown that when the administrator left, an institution went back to its previous situation.

The Chairperson asked the administrator to submit his road map on how he wants to proceed, and to forward the resolution that had been made by the council to uplift the suspension. 

Ms Tolashe told COGTA’s provincial delegation they must realise that they had a huge responsibility. She did not understand were the Premier cames in, or if it was just an arrangement. If it had been an arrangement, it was unlawful because it was not documented anywhere. Therefore, they needed detailed information of what COGTA was doing to bring Madibeng to stability.

Ms Mathambe said now that Madibeng was under administration, she hoped that now a financial recovery plan had been developed and approved, and that the roles of the administrator, council and municipal officials had been clarified. She also recommended that when they came back, the Mayor and MM should give the Committee the resolution of their financial problems, including the financial recovery plan.

The Chairperson said that they had to adopt this municipality as a priority municipality in terms of turnaround, and that when they structured their resolutions they should emphatically recommend that they got monthly reports on the areas of concern that the municipality would identify. They may want to schedule an oversight visit to Madibeng as well, which would also be in collaboration with the provincial SCOPA, and then interact with MEC.

COGTA said that one of the directives that the Minister had issued when they contracted an assessment was that their organisational structure, or their capacity, was not fit for purpose to support local government. Therefore a lot of damage had occurred, but they were trying to work on the processes and had profiled about 12 municipalities that were dysfunctional, including Madibeng. He said there were support plans which they had developed to turn the situation around, but what the Members should note was that in all the VBS matters that they had dealt with in North West province, the council had always been divided. Those were the things that needed to be addressed.

The Chairperson suspended the discussion on Madibeng so that they could come back again when they had devised a plan on the way forward.

The Mayor thanked the Committee, and said they might have overlooked some of the other issues that the Members had raised. They would therefore go back and look at all the issues raised. She believed that at their next meeting they would have progress on all the issues that had been raised, and they would also update them on their daily work engagements as a municipality. They were trying their best to turn around the municipality and it was not easy, but with the help from Parliament she believed they would move to another level.

The Chairperson added that on the list of the things that they should submit to Parliament, they should also submit their car leasing agreement. This was because there was an allegation that they leased 50 cars for R17 million per month, which was quite serious. Over three years, this was going to cost them about R620 million. He asked them to clarify this.

He thanked the Mayor and said that they would do oversight by no later than November.


Lekwa Teemane Local Municipality

Mr Somyo said that the AG had observed that the municipality stood at a 40% vacancy rate at the senior management level, and at 75% in the supply chain management (SCM) department, with inadequate skills. He asked why that was the case.

The MM said that the municipality had been trying many times to fill the senior management positions – the municipal manager and four directors. They had placed about three advertisements which were not successful. They had managed to appoint the MM after two advertisements in January 2018. After about 12 months after the appointment of the MM, the municipality had managed to fill all the other vacant senior positions. The reason he got was that while the municipality was trying to appoint, and was about to get to the final decision, it had been faced either with a position where the recommended candidates would decline the offer, or other candidates who should have applied would be falling out due to the procurement processes such as screening and other aspects of appointment. He confirmed that currently all the positions had been filled with qualified personnel.

On the SCM situation, he said the municipality had managed to fill many of the positions that were critical. For example, an SCM manager had been appointed in 2018. They had also managed to fill other positions, but the position of manager for budget had yet been filled. At the moment they were sitting with a vacancy rate of 30% in the budget and treasury office, and were looking at their financial position to try and fill those positions.

Mr Somyo said that at the time of the audit, the AG had said that those who were employed in the municipality had no capacity at all.

The MM said that this was accurate, because for the past four financial years before they appointed a permanent CFO, the municipality had been operating without one. Therefore there had never been stability within that area in the treasury office. The people who had been acting -- specifically the acting SCM manager -- were not up to the standard required. Additionally, there had never been a complete unit within the municipality. They were now moving in a particular direction with the appointment of two officials and one financial intern that had been deployed. They were left with appointing only two officials in order to make sure that they completed the unit.

Mr Somyo asked him if he was confirming that they still lacked capacity in the SCM. Did not the fact that they still relied on interns confirm that they still lacked capacity?

The MM said that they were not 100%, but they were at a level where they could be confident that they could handle the activities of the SCM in the municipality with the assistance of the CFO and the SCM manager, as well as the accountant. The only position that he felt had to be filled was the asset management position. If they filled that position they would be able to say the municipality was 100%capacitated to handle all the SCM matters.

Mr Somyo said that another worrying factor was that the municipality relied on the use of consultants. He asked him to confirm or deny this, and to indicate how they were dealing with the situation.

The MM confirmed that the municipality had relied a good deal on the use of consultants, which was because of the lack of capacity he had previously noted. There were plans in place to make sure that they stopped making use of consultants, starting from this current financial year. They were also being assisted as part of a municipal support plan from the South Africa Local Government Association (SALGA), which was assisting the municipality in developing and implementing their action plan.

Mr Somyo asked if they were still currently using consultants.

The MM said that until the conclusion of this financial year, they had to use consultants because the resources they received from the provincial treasury came at a later stage, when they also had to make sure that they prepared their financial statements. This year they had to select areas which the municipality’s capacity could not adequately handle, such as the unbundling of assets. Those were the areas that needed a specialist assistant.

Mr Somyo asked if they were using the same consultants.

He said that they were not using the same consultants. In the previous year, they had been using the Grant Thornton consulting company, and currently they were using the Arms Audit company.

The Chairperson asked how long their contract with Arms Audit was.

The MM said that the main contract with Arms Audit was with the provincial treasury, and from there they were deployed to the municipality.

The Chairperson asked how much they were paying.

The MM said that the municipality was not paying Arms Audit, as it was being paid by the provincial treasury. The only contract they had, which was for only this financial year, was for bundle consulting which had started and was going to end in the current financial year.

The Chairperson asked if they were happy with their work.

He said that they had not been happy with the previous consultancy, because they had moved from the position that they were in in 2014/15, 2015/16 and 2016/17. The current consultancy was the one they were using to move from a disclaimer opinion to a qualified opinion.

The Chairperson said that COGTA would need to do an intervention here, because Arms Audit was the one that was preparing the financials in the Thabazimbi local municipality, and it was a disaster. He said that there was a need for an audit of the Arms Audit consultancy, as they kept featuring and producing substandard work.

Mr Somyo said the reason they were using consultancy was to improve their current status. He asked how their current status was going to improve if, in the context of the outcomes of the audit, they had not done the principle things. He asked if they had investigated those who had been involved in irregular, reckless and wasteful expenditure. Had they started to respond to critical matters that were related to prior years of indulgence?

The MM said that they were not yet where they would want to be in terms of building capacity.

Mr Somyo asked him if he was the accounting officer of the municipality.

He said he was the accounting officer.

Mr Somyo said the audit report from the AG had outlined areas of failure which ought to be attended to. He asked the MM if he had started to implement or address any of the issues that had been raised?

The MM said that what he had done with unauthorised and irregular expenditure was to make sure they developed a proper register that indicated all the issues raised by the AG. They also had to develop their audit action plan so that they could deal with all the aspects of the issues that had been raised. The municipality had accumulated an amount of R260 million up to 30 June 2018 comprising of unauthorised and irregular expenditure. The unauthorised expenditure was mainly as a result of under-budgeting on the part of the municipality, resulting in depreciation, asset impairment and amortisation. These were the issues that they were currently dealing with, which required proper budgeting within the municipality. These issues were also leading them to the unauthorised expenditure. 

The AG had stated that there was a historical R64 million that the municipality had incurred in irregular expenditure.  What they had done immediately was to identify the weaknesses in the municipality's institutional arrangement, and to beef up the supply chain so that they would not have other incidents of this nature. They had made sure that all the supply processes were not decentralised as they were before so that they did not incur irregular and unnecessary expenditure in future. The issue of the non-functionality of bids was also an issue which they had immediately resolved. All procurement processes were now done through the bid committees. They were dealing with the issues raised by the AG through the supply chain processes. These activities had started to show improvements within the municipality.

He said two cases had been investigated and successfully submitted to the council for a decision. The case that had been thoroughly investigated was the R4 million library building project. This matter was investigated by the forensic unit in the office of the Premier. The report had been presented to the council and the council had adopted the resolutions and also taken the matter to the Hawks. The previous week he had received a report from the Hawks saying that they were awaiting a decision from the national prosecuting authority (NPA) so that they could indicate how to deal with this matter.

One of the issues which had impeded the municipality was that the municipality had never had stable senior administration, as evidenced by the lack of a CFO for close to four years, and this had had an impact on them failing to investigate some of these matters.

The Chairperson asked what consequences had flowed out of the reports he had mentioned.

The MM said the R4 million library case was already being handled by the Hawks. The municipality had done its own internal disciplinary process, and an official had been dismissed. The case had also been reported to SAPS for them to try and recover whatever needed to be recovered as a result of the financial misconduct of the director. He said the R30 million case had been taken up to the office of the Premier, who had said that they did not have the capacity to investigate. They had also approached the provincial DPW to try and get more assistance on how they could deal with this matter, but the reality was that it was back in the hands of the council. The DPW had also said that they lacked the capacity to proceed with the investigation.

The Chairperson asked COGTA to make a follow up on this matter.

Mr Somyo said the AG had reported that some quotations were accepted from prospective providers who were not on the list of accredited prospective providers, and did not meet the listing requirements prescribed by the SCM policy, but had found themselves onto their payroll. He asked if there had been a specific investigation of this.

The MM said that they had investigated. Among the charges that had been laid against the director who had been dismissed, had been the mismatch he had been doing in undertaking the SCM processes. They had investigated and taken the correct decisions.

Mr Somyo said that their consultant had produced a lot of misstatements, and they had been paid in full.

The MM said that they looked at this, and it was something that they had raised in the council to try and ascertain if there was any value for money in the consultants that they were hiring. In this financial year, they were making sure that they did a thorough review of the work that was done.

The Chairperson asked the AG  who had prepared the financials they received.

The AG said that they were prepared by a different consultant.

The Chairperson said that the problem was that the people or companies being used by the municipality were not doing a quality job. If they brought in a consultant, the consultant must be equal to the task.

Mr Somyo said that according to the AG, the municipality’s current liabilities exceeded its current assets by R249.1 million as of 30 June 2018. In addition to this, the cash reserves amounted to only R2.23 milllion, which showed that some significant creditors were not being paid for more than 120 days, and the unspent conditional grants also exceeded the cash reserves. He asked what their standpoint on this issue was.

The Chairperson said the finding that unspent conditional grants also exceeded the cash reserves was indicative that the grants were being used for operational means.

The MM said that the municipality got three kinds of grant funding every financial year. It was doing well in terms of spending two of them -- the Integrated National Electrification Programme (INEP) and the Municipal Infrastructure Grant (MIG). They had not had a situation in which they had utilised the grant for any activity other than what they were designed to be used for. The only challenge they had had was when they were supposed to have appointed five interns, and the municipality had appointed four interns instead. This had led them to a situation in which the AG would have indicated the opinion that the MIG had been underspent, but it had only underspent by not appointing five interns. He admitted, however, that they had used a portion of MIG for purpose that it was not initially meant for.

The Chairperson asked why, and what they had spent the money on.

The MM said they should have used the money for other things in the municipality.

The Chairperson said that this showed a failure to manage finances correctly, which became an issue -- why were they not sticking to the terms and the conditions of the grant?

The MM said that they could confirm that they had changed from that kind of approach. Immediately after the end of the period, the municipality had now made sure that all the money would be used as intended.

The Chairperson said that they understood the future plans, but for them to take comfort in their seriousness, they needed first to understand why they were speaking about corrective action in the first place. He also asked if there was any official who had been dismissed by the municipality except the director of technical services.

The MM said that between January and June they had also had to dismiss one of their managers as a result of maladministration.

The Chairperson said that when it came to dismissals, there was always a tendency to dismiss the small fish in the pond because they probably did not have any political connections. It was sometimes a cosmetic, malicious dismissal. When they had to actually look at things, were the people that they dismissed part of the decision-making processes? They were not dealing with people who did not know what they were doing, because for a person to bypass a system they had first to familiarise themselves with it so that they could be successful. Therefore when they were dealing with people who were involved in things like corruption, it was not by accident as the people knew what they would actually be doing.

Ms Tolashe said that looking at the AG’s report for the three financial years, there was no one in the municipality that had been doing anything to resolve the issues. She asked what they were doing with an MM who had not started to consider that he was in charge of the municipality. Under his watch, all of this was happening, and he did not talk much about how he was going to deal with the perpetrator – which, in this case, he was the perpetrator. He was employed to change things around and for the six months he had been employed, it seemed he had done nothing -- he lacked urgency. She asked the Mayor what he was doing with his MM.

She said that the disciplinary process that the MM had to deal with sometimes took very long. She also did not understand why they had gone to the Premier”s office. Was there some sort of legal arrangement with the Premier to help them with the investigations? They could not outsource everything from the Premier’s office. She asked when the municipality was going to take the responsibility to deal with its own issues.

Ms Mkhize asked the Mayor what he was doing when all these things were happening in front of his office. The municipality had a long history of corruption and administration without consequences. What had been the intention of the municipality when they ignored the issues raised in the audit by the AG?

She urged the Mayor to use the people they had employed, and not go out to look for people in the consulting companies.

Mr G Mpumza (ANC) said that the most violent element in society was ignorance. In the report, what was consistent was that the cause had been a lack of understanding around contract management, record management, and risk management. He asked Mayor what the oversight mandate had been in that municipality ever since they had received this audit outcome. He asked the MM what steps they had taken to address the deficiencies in the system and in the capacity or skills within the municipality so that these findings going forward would not be a factor.

He said that the MM was telling them that for over two years the municipality had been comfortable without a Chief Finance Officer. He asked why the Mayor had allowed that situation to go on for more than two years.

The audit report had shown that the recommendations had never been implemented. He asked the MM why this was the case.

Mr K Ceza (EFF) asked if the MM knew about the MEC’s letter to the municipality in 2016 recommending that the MM must resign from that municipality. He also asked about his reappointment in 2018, despite the letter from the MEC which stated that he did not qualify properly.

Ms D Direko (ANC) said the MM had indicated that they had advertised some senior positions, but that some officials had declined them. She asked if there was a specific reason why they had declined the positions. She also said that audit reports had noted that there were some contractors who were appointed without verifying their sub-status. She asked who those that got special preference were. Lastly, she asked what the role of the national COGTA was, because one could see that there were problems at the provincial level, so what was their plan to intervene and assist the municipality.

The Mayor said that when he started in January 2018, one of his tasks was to ensure that the positions of the senior officials were filled, which he immediately had done to ensure capacity issues were addressed.

The MM said that he had been the MM who had resigned because of issues which had arisen, including the letter from the MEC which had instructions for his dismissal.

The Mayor said that the letter from the MEC had stated that the MM must be expelled within four hours. In terms of the Municipal Systems Act, the appointment of any MM was a decision that was made by the council. He did not have the authority to take such a decision. He had then advised the MEC to write to council, because in terms of their rules of order, council could be convened within 48 hours. Unfortunately, the MEC had not wanted to take the Mayor’s advice. If he had done as instructed by the MEC without following proper procedure, litigation would have followed.

The Chairperson asked if the matter had gone to the council.

The Mayor said that the matter had gone to the council, but the MM had resigned.

The Chairperson said he found it strange that the council had reappointed someone who had practically been dismissed by the province, and had produced an environment in which the person could come back comfortably.

The Mayor said that with the second appointment, the council had declared a vacancy. A panel had been established which he had chaired as Mayor. The MEC had asked him to write to the Minister to ask for a waiver on the qualifications. She was the same MEC who had told him to fire the MM because he did not qualify, and now she was also the same MEC telling him to ask for a waiver. She had said that she did not have a problem with the re-appointment, but she asked him to go and ask for a waiver from the Minister.

COGTA said that the re-appointment was in relation to asking for further particulars in support of the MM, because the information they received did not satisfy the requirements in the legislation. In instances were the MM did not have requisite expertise, experience and qualification, it would lead to the municipality requesting a waiver from the Minister. If the Minister was satisfied that certain steps had been taken in relation to that, the Minister could grant a waiver. However, in this case, the municipality had been supplied with information about the additional qualification that had been obtained by the MM, and also a letter confirming the equivalence from the South African Qualifications Authority (SAQA) which indicated that the MM at the time had attained a postgraduate diploma that was equivalent to the appointment requirements for the MM. As a result, they had agreed that the appointment had been made according to the principles of the Act.

The Mayor said he agreed with the AG that once liabilities were bigger than assets, there was a problem. To ensure that their current assets were more than their current liabilities, their critical challenge was cash flow. What caused this was the non-payment for municipal services.

On the issue that they did not have some important officials, they had placed an advertisement for the position of the CFO, but it had never materialised. They were not playing with finances, but it was because of the circumstances which were not under their control.

In conclusion, he said that their municipality had always cooperated with both the provincial and national departments. The AG could attest that in their report they said before 2014 that they had nearly collapsed their auditing. However, from 2014 they had ensured that the AG was given the necessary cooperation. He was not saying that they were perfect, but as a municipality they needed to be assisted so that they could do their work correctly.

Bojanala District

Mr Hadebe said that the audit outcome for the Bojanala district had been the worst since 2012/13, which made seven consecutive years of regression. The reasons expressed were that it was because of the instability in senior management, lack of political will to effect consequence management, and political instability.

They had received a disclaimer for four consecutive years since 2015. Things were so bad that they could not even produce evidence to support their financial statements, yet they were relying overly on consultancy to produce their audited statements and were still receiving disclaimers. According to the AG, they had not had a CFO for quite a number of years, the quality of their financial statements was very poor, and they lacked oversight. Also, the structures that were supposed to give assurance, such as the municipal council, internal audit and the Executive Mayor, were not doing anything.

He asked why they had not executed their mandate as enshrined in the legislation.

The Mayor said that of all the audit findings, what she found as the key challenge was the incapacity of their Budget and Treasury Office (BTO), which brings them back to the lack of internal controls. There was a process between them and the SA Local Government Association (SALGA) and provincial government to try to capacitate the entire BTO staff. The programme had started in 2017.

When the current CFO had started, she had pointed out to her all the challenges as indicated by the AG, and they had agreed to have a monitored programme led by the provincial treasury to comply with the Municipal Financial Management Act.

Ms Hadebe said that there were known SCM compliance shortcomings. Goods and services that were below R200 000 had been they were procured without obtaining required quotations, meaning the three quotation system had not been followed. Secondly, quotations had been accepted from bidders that did not declare whether or not they were employees of the state. Thirdly, goods and services for a transaction that was above R200 000 had been procured without competitive bids, and they had relied on a deviation even though there was no justification for them to do so. Fourthly, the preferential points system had not been applied in procuring goods and services that were less than R30 000. These were the issues raised by the AG, which showed that they were providing limited assurance. He asked how all these things had happened under their watch.

The MM acknowledged that they had challenges in respect of the Budget and Treasury Office. The reason why SCM procedures had been overlooked was that the supply chain in the municipality was decentralised -- each department was procuring on its own. Due to the lack of capacity in those departments, the supply chain process was not followed. They now had a centralised supply chain. They had appointed supply chain committees to oversee the whole SCM process, with the CFO as the chairperson of the adjudication process.

He added that they could not give the AG documents, because these were stuck all over the place, as filing was not properly done. They now had a system where they scan all the documents for the AG’s purposes and record management purposes.

Mr Hadebe said that their irregular and fruitless expenditure amounted to R304 million. He asked what steps they had taken against officials who had not followed SCM policy. He also asked how many people employed by the municipality were doing business with the state.

The MM said that there were no municipal employees doing business with the state.

Mr Hadebe asked him if he saying the report from the AG was inaccurate.

The MM said they were not necessarily connected to the services that were rendered to the municipality. On the issue of irregular expenditure, he said that most of the investigations had been concluded, and they anticipated oversight within the first quarter.

Mr Hadebe said he was asking if they had identified the officials who had not followed the SCM policy. How many were there, and what had they done with them?

The MM said that there were cases they were aware of and they had identified the culprits. The only challenge was that the AG had raised the issue that the register was not complete and in other instances, those irregular expenditures had not been included in the register. They had had to go back and redo the register, and had finalised it in July, so it was only now that they could say they had the correct register to act upon.

Ms Muthambi said the MM was failing to answer the question. The question was which officials and businesses were involved.

The MM said that only one case had been reported to him.  When they did the investigation, they had found that the person had already resigned.

Ms Mutambi said that the AG had not said there was one person -- it was a lot of people. It seemed the MM had not even bothered to go through the reports.

Ms Direko asked the MM if he was saying that if a person resigned, they let them go without facing consequences.

The MM said that the delay for consequence management to kick in was the fact that the AG had raised the issue that register was not complete. However, now that the issue of the register had been resolved, they were in the process of making all the investigations.

Mr Hadebe asked that there be a report that identified all the culprits who had been involved in the maladministration, corruption, and fraud. Secondly, he wanted a list of employees who were conducting business with the municipality, who were employees of the state.

He said there had been a media report about the municipality paying the employees late. As a result, the municipality had taken a loan of R50 million from the overdraft. He asked what had led to that unfortunate incident.

The MM said that they had been paid late because, according to the provincial treasury, they had not submitted a funded budget, and the equitable share had been withheld. They had not taken a loan of R50 million, but rather the R50 million had been given to them by the Treasury as part of the equitable share.

Mr Hadebe asked that when he said they did not submitted a funded budget, who exactly ought to have complied and submitted it for them to have access to their equitable share.

The MM said that the main culprit was their financial system, which was not working properly.

Mr Hadebe asked him if he was attributing the problem to the system, and that there was no one behind the system.

The MM said that their officials were running the system, but there was no capacity and the employees could not even operate the system.

Mr Hadebe said that what the MM was saying was that the blame should be put solely on the system, and no one was going be held accountable.

The MM said that the system could not log the budget, the budget was unfunded, and there was an issue of data strings. The budget was not capacitated to operate the system.

The Mayor said that they had an unfunded budget which the provincial treasury had assisted them with. In March, the provincial COGTA had erroneously deposited R134 million into their account, which was not gazetted in March. After they had deposited the money, it was put into a transversal account, wanting to check why they were sending the money to the district.  She said that along with the process, they had sent a letter noting that the money had been erroneously sent to the district and that they must transfer it to the Rustenberg Municipality. When they wrote to them, they had already used a portion of the amount, and the remaining portion was R50 million. The issue then was the repayment of the R134 million, of which half had already been used, and R50 million had been transferred to Rustenberg. The municipality In Rustenberg had returned R50 million to Bojanala, and the other R84 million had been utilised. They had then paid back the R84 million with the equitable share. This was the reason why they had not got their equitable share. It was no longer an issue of compliance, but of the R134 million erroneously deposited with them which had not been budgeted for and had to be returned.

Mr Hadebe said that he needed an answer to the question about the three-code system not being followed, and the one about competitive bids.

The MM said that the reason there had been non-compliance was because of decentralisation, but he was aware of those employees as they had a list. There had been no consequences so far as they were still investigating.

The Chairperson asked where those employees were.

The MM said that they were still employed and not suspended.

The Chairperson said that it was not appropriate to undertake an investigative procedure while the people were still there at work. He asked the audit committee if they were being taken seriously or if they were making reports and no one was listening.

The chairperson of the audit committee said that they had reviewed the post-audit action plan which would have been developed, and had their own recommendations that they made to the municipality. No adequate attention that was being given to their reports.

Mr Hadebe said the AG had noted that there was a lack of skill in the finance department. He asked why they had hired people without relevant competence, and why they were also making use of consultants to do the work of the very people they had hired. How much had they spent on the consultants, and who were they?

The MM said that the consultants were called TNT, and they were not happy with their services.

The CFO said that the consultants had been terminated immediately after the audit, and they had adopted a plan to do the financials in-house. They were no longer using the consultants.

The Chairperson said that the fact that they still going to the provincial treasury for help did not mean that they were doing the work in-house yet, because this was still costly.

Mr Hadebe asked COGTA why the municipality was not under administration.

The Chairperson said that COGTA was not here to answer.

Ms Marawu said the Mayor could not be there for two years and have a disclaimer. She asked what they were doing even after having an effective audit Committee.

Ms Direko asked why deviations were not disclosed in the financial statements. Why had the municipality approved an unfunded budget?

Mr  Somyo said that there was no indication of support from COGTA, as this would help the municipality.

The MM said that on the issue of asking assistance from COGTA, they had done this as a municipality and COGTA had assigned someone to come and assist them.  On the issue of executing the recommendations of the audit committee, they were in the process of appointing an internal audit head to assist the audit committee to perform their function.

The Chairperson asked how they were interacting with the audit committee.

The MM said that they attended the meetings of the audit committee at times. They also had one-on-one engagements where they discuss issues affecting the municipality.

The Chairperson asked how they acted on the recommendations from the engagements.

The MM said after that, he discussed the recommendations with the management.

The Chairperson said that it was very clear that there was no structured system in response to the audit.

He asked that they submit the three last reports from the audits and the response of the municipality to those recommendations.

The Mayor said that they really needed monetary assistance. Regarding consequence management, they had to pull up their socks. The MM and the CFO should also stand their ground. However, if they did not get financial assistance, the same issue was going to reappear.

The Chairperson said that the financial assistance they needed was going to depend on their compliance in turning things around, as this would inspire confidence in those who would want to assist them. The MM really needed to change his outlook because the impression he had left with the Committee was that he was an island, and his cooperation depended on whether he was comfortable with things or not.

The Chairperson also said that they were scheduling unannounced visits and oversights, because they also wanted to see the working environment.

Mafube Local Municipality

Mr Masala Ntombela, Mayor: Mafube Local Municipality, said that the Municipality had been put under administration with reference to s139(1)(b) of the Act in April 2017 by the provincial government. It had continued to be under administration since then.

The Chairperson asked if the administrator was present.

The mayor replied that the administrator was not present.

The Chairperson said the non-attendance of the administrator posed a problem, as the Committee had taken a decision not to engage with municipalities whose administrators did not attend. He asked for an explanation.

The Mayor explained that a meeting had taken place on Monday, called by the Member of the Executive Council (MEC). The Administrator had been in attendance and, to his knowledge, was aware of the current meeting. He asked whether the provincial Cooperative Governance and Traditional Affairs (CoGTA) representative could shed light on the matter.

The CoGTA representative said the administrator had not given an apology for his non-attendance, and he was not aware as to who the exact person was. 

The Chairperson expressed dismay, and said it was unacceptable for CoGTA to be unaware of who the administrator was. He contrasted the situation with the other municipalities whose administrators could not attend - the Mayor of Mamusa had apologised beforehand and informed of the Committee that their administrator was unwell, while Phokwane local municipality had indicated their administrator had been hospitalised. He said the meeting would break for five minutes to allow the CoGTA representative to locate the administrator, adding that the administrator had better have a good explanation as to why he or she was not present at the meeting.

After the break, the provincial CoGTA representative reported that the Administrator had been contacted via cell-phone and advised he was not well, and would forward an image of the sick note to Committee. He had not been able to answer his phone earlier as he had been at the doctor’s’ offices.

The Chairperson replied that the reasons put forward were unacceptable, and were what he referred to as malicious compliance. He wanted to know when the municipality had been placed under administration, and what the levels of cooperation were.

The Mayor responded that Mafube was placed under administration in April 2017, and had had the same administrator since its commencement.

The Chairperson asked whether the Mayor and municipality were satisfied with the administrator’s performance in the period of his deployment, which had been well over two years.

The Mayor said that the administrator had been hired by CoGTA and the decision of appointment had been made by the Executive Committee.

CoGTA said that according to the reports that had been communicated between themselves and the administrator, the administrator was on the right path.

The Chairperson sarcastically questioned as to what “the right path” was, as the administrator had been in his position for well over two years, and yet for two years contingent liabilities were overstated, sufficient audit evidence could not be obtained, payables were understated and irregular expenditure was not included. The list went on and on.  The Chairperson sought insight from the Mayor as to whether the administrator attended work daily, and was present when matters of concern arose, or not.

The Mayor confided that unhappiness regarding the current administrator had been raised several times. It was a matter of grave concern, as the municipality was getting no assistance from the current administrator.

The Chairperson stated he would have done the same if he had an administrator who did nothing. He opened the floor for discussion, and requested Members not touch on the substantive issues of the hearing but rather on the matter at hand regarding the administrator.

Mr B Hadebe (ANC) queried what precisely the roles of the two administrators were, as well as what precisely had happened to the incumbent chief executive officer (CEO) and chief financial officer (CFO) when the administrators were appointed. He wanted to know if any conflicts of interests had resulted, and who the selection panel were. From his perspective, it seemed that there were conflicts of interest.

CoGTA clarify that there was one administrator -- the other administrator had been appointed to assist at a technical level. The contract of the municipal manager (MM) had expired and the municipality had not had a CFO for some time. When the municipality advertised for the position of the Mafube MM, the incumbent administrator’s assistant had applied for that position and had been appointed by the municipality. The incumbent MM had held the position of administrator’s assistant for a period of nine months.

Mr Hadebe asked why CoGTA had appointed a CFO and municipal manager a year after the administrators had been appointed, and while the administrators were still incumbent in their positions. The appointments would result in a clear conflict of interest.

CoGTA responded that in the terms of reference of the administrator, the administrator played a political role and not an administrative one. Part of the terms of reference was to oversee the functioning of the administrator through the assistance of the assistant administrator. The administrator oversaw the work of the administration as part of Council in terms of s100(1)(b) of the Act.

The Chairperson said that the section cited was incorrect. He added that there was a lot of confusion regarding several factors, but he wanted clarity as what became of the incumbent mayor if the administrator had performed a political function, because conflicts of interest would arise.

CoGTA explained that the administrator assumed a function of Council, except those functions of Council that could not be delegated.

Mr R Lees (DA) said he wanted to home in on the mayor’s reply that the municipality was not receiving the cooperation of the administrator. He wanted to know if the administrators were ever present at work, attended meetings, could be seen at work, and what time they clocked in and out. He explained the reasoning behind his question was because they were not present currently.

Mr S Somyo (ANC) said that the bottom line was that the administrators were not present at the meeting, so the hearing could carry on. What was the point in wasting time by asking all the questions currently when the people meant to be accounting to them were not present? The delegation should be allowed to leave and then come back with their administrators and relevant officials in order to account for the conditions at the municipality.

The Chairperson said the reason the process was continuing was because, despite the Administrator not being present, the mayor had also raised the issue regarding the competency, or lack thereof, of the incumbent administrator and therefore it was important to get feedback on that. He emphasised that there was a spanner in the works regarding this specific administrator.

The mayor said that during the month of the administrator’s appointment, there had been cooperation, but this had diminished as time went on. There had been no communication as to what the administrator’s plans and strategies were since the position was taken up.

The Chairperson wanted to know if the matter had been formally raised.

The mayor responded that it had been raised formally. A resolution had been taken by7 the Council to pass the matter on to the MEC regarding the negative feedback onthe incumbent administrator. The municipality was willing to accept a new administrator, as the current one was not helping or assisting the municipality in any way.

Ms T Marawu (ATM) pointed out that CoGTA was not only confusing themselves, but the Committee too. The reality was that CoGTA themselves did not understand the processes and was trying to explain things to the Committee using common sense, but CoGTA themselves did not understand what they were saying. She argued that it would be better to get the correct people to account to the Committee on the positions they were responsible for, and not delegate it to someone who did not understand it.Ms N Mente–Nqweniso (EFF) commented that the bottom line was that the administrators were not present, so no relationship could be established with them. CoGTA was trying to explain the relationship with the administrator when it was evident there was no relationship, and that COGTA was unaware of what was happening. She posed a rhetorical question -- who was steering the ship? The so-called political power was the incumbent administrator, but he did not even realise that he was there to deal with the paperwork and instead thought he was the mayor, and had to supervise. He probably did not even know what he was meant to be doing.

She emphasised that CoGTA had given the Administrator powers that were not his to exercise, as there was no such thing in the Constitution, the Municipal Finance Management Act (MFMA), or any regulations that mentioned a ‘political administrator’. She repeated that the administrator did not even know what he was doing there, so CoGTA needed to go back and fetch him, and explain to everyone what their correct functions and responsibilities were. Lastly, she sought clarity as to why a municipal manger had been employed while an administrator was in office, as the administrator automatically became the municipal manager.

The Chairperson said that on Tuesday next week, the Committee would meet to finalise the Eskom report. If the current matters were left open ended, then they would lose sight of them. The municipality would come back the following week, on Tuesday, 17 September, along with provincial CoGTA, the MEC, the Head of Department (HOD), the administrator, the manual team and any officials responsible for the administration in the provincial CoGTA. The mayor should bring any relevant correspondence with the provincial CoGTA, and the minutes since the commencement of the administration. The AGSA was asked to provide feedback on their interaction with the audits, and to prepare a presentation for Tuesday.

Mr Hadebe asked that the Committee be furnished with the resolution of Council that gave the go-ahead to advertise the post, the resolution of Council that had made the appointment, and all documents surrounding the matter.

The Chairperson said that it would be put on record for the relevant documents mentioned by Mr Hadebe to be supplied. The delegation was dismissed.

Masilonyana Local Municipality

The Chairperson welcomed the Masilonyana delegation, and informed them that Mr S Somyo (ANC) was the Member responsible for the Masilonyana municipality.

Ms Elizabeth Modise, Speaker: Masilonyana Municipality, explained that the Mayor was not able to attend due to the unfortunate passing of his wife, who was going to be buried on Saturday.

The Chairperson, on behalf of himself and the Committee, expressed his deepest condolences to the mayor on the passing of his wife and wished him strength during the sad time for him and his family. He asked if the condolences could be passed on to the Mayor by the delegation present. The Speaker had earlier informed the Committee that their administrator was not present, and he wished it to be noted for the record.

The Chairperson wanted to know how long Masilonyana local municipality had been under administration.

The Speaker explained that Masilonyana Municipality had been place under administration through s139(b) on the 9th May 2017. In 2018 there had been disputes between the Council and the administrator, where the relationship of accountability was on the decline. The administrator had been acting as if the municipality had been evoked with s139(c), whereby the municipality had requested the terms of reference of the administrator.  There were 19 councillors, but only three had been retained since 2011, meaning 16 of them were new. She emphasised that the relationship between the councillors and the administrator had not been healthy or productive.

In 2016, a new mayor with no prior experience at the local government level had been appointed, but unfortunately he had passed away. The administrator was Mr Seve Kau. However, there had been major unrest in the community.

The Chairperson asked CoGTA who the incumbent administrator was.

CoGTA responded that the HOD of CoGTA was the incumbent administrator, and that the administrator was an interim appointment. Further details could not be given on the matter.

The Chairperson rhetorically asked why the official from CoGTA was present if he basically served only to deliver an apology. He was still trying to process the fact that an HOD was an administrator. He asked the South African Local Government Authority (SALGA) if an HOD being an administrator was precedented.

SALGA responded that it was not precedented.

The Speaker explained that a letter had been received from CoGTA on 1 December 2018, which stated that CoGTA was withdrawing the administrator from the municipality due to labour unrest. This had resulted in co-administrators being appointed.

Mr S Somyo (ANC) expressed his appreciation for the team that had attended, but said he was disappointed at the nature of the intervention currently taking place in the municipality. It looked like the entire situation was covered in a blanket of confusion, which was further perpetuated by the letter the municipality had received on the appointment of co-administrators. The point still remained that the administrators were not present and therefore the executive authority, as things stood now, resided with the MEC of the province, as per the resolution of Cabinet to intervene in the municipality. The authority in the executive, and partly in the political instance, resided with the MEC. The Council had no sole responsibility over the functions of the municipality.

Mr Sipho Mtakati, municipal manager, said that when the administrators were introduced, the HOD had attended only one meeting since taking up the position. He stressed that an accounting officer needed to be present in order to steer the ship in the right direction, but the municipality could not wait for someone who was never there.

The Chairperson commented that the Municipality was basically on autopilot.

Mr Somyo stated that in terms of the intervention, the municipal manager was not an accounting officer. The MEC assumed that responsibility delegated to the administrator who he had appointed. He said that whatever action was taken, had legal grounding. He had questions, but would reserve those for Tuesday.

Mr Lees said that the appointment of the administrators and the processes followed needed to be done correctly in law from the onset, or it would invalidate the entire process. He sought clarity as to how exactly someone could serve two contracts, and secondly, he wanted Members to ponder on the consequences for the municipality if the appointment of the administrator had been done incorrectly -- it would have invalidated the entire process and led to an even bigger issue.

The Chairperson said that the Committee would deal with those issues in the coming week. The Committee needed to accept that there had been a breakdown in due processes and recklessness in governance which bordered on incompetence on the one hand, and an ‘I don’t care’ attitude on the other. Service delivery at local government was where the tyre hit the tar, and problems were arising at small municipalities where they ought not be arising.

The Chairperson thanked everyone for attendance, and said the meeting would be reconvened on Tuesday, 17 September 2019.

The meeting was adjourned.

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