OR Tambo, Nelson Mandela Bay, Matlosana, City of Johannesburg & Mogalokwena Municipalities Audit Action Plan: AGSA & National Treasury input

Meeting report

The Chairperson said that the three major problems that had been identified by the Auditor-General (AG) were accountability, lack of consequence management and the environment under which the auditors were operating, and this was problematic.

The five municipalities that had been invited had irregular expenditure that constituted 32% of the reported R71 billion total.

Four of the five invited municipalities had accepted, with the City of Johannesburg being the exception, advising that it had suffered a cyber-attack. The Chairperson said he was not happy about this and that if they did not come on their own, he would subpoena them. The City of Johannesburg would be invited within a week or two.

The municipality’s presentations would follow a specific format. They would present their post audit action plan on how to deal with irregular expenditure; a representative from the South African Local Government Association (SALGA) of each affected province would present; and a member of the Municipal Public Accounts Committee (MPAC) would explain what they do when they see such a bleak picture emerging.

Before each municipality presents, the Committee would be briefed by the AG as well as National Treasury (NT). The briefings would focus on the audit outcomes and the financial health of each municipality.

Auditor-General on top five municipalities’ audit outcomes

Mr Kimi Makwetu, Auditor-General, briefed the Committee on the audit outcomes of the top five municipalities who had contributed to irregular expenditure. He said that his presentation would be based on the audit outcomes that were published on 26 June 2019.

He said that this was the kind of engagement that was required. The audit was a backward looking exercise, and that it would not be possible to implement any solutions that arose in the current financial year as they were two to three weeks from finishing the following year’s audit.

There had been a systemic deterioration in accountability and transparency in the way financial management was being handled. 9% of municipalities had not submitted their financial statements for scrutiny by the cut-off date.

The Western Cape led the pack with unqualified audit outcomes with no findings.

Even among municipalities that had achieved an unqualified audit outcome, there were still many that had incurred irregular expenditure. This meant that even though the municipality was able to account for transactions, the prescripts of spending had not been followed.  This was not attributed to malicious intent or mere incompetence, but rather to determine if a matter was eligible for condonement, or if further steps needed to be taken.

He said that the irregular expenditure continued to grow because no one had given attention to it.

When it came to ongoing contracts, if a contract was found to be irregular five years ago, then all contracts stemming from it were also deemed irregular. It was easy for this kind of multi-year contract to be extended because of lack of consequence management.

Audit outcomes:

Nelson Mandela Bay Metro Municipality

Mr Makwetu said that Nelson Mandela Bay Metro Municipality carried a qualified audit outcome, which expressed an auditor’s unhappiness with how transactions were accounted for.  The accumulated irregular expenditure for this municipality was R12.3 billion. This was also due to the fact that the new administration had tried to go back and see if there were other uncovered irregular expenditures.

OR Tambo District Municipality

This municipality also maintained qualified audits. Unfavourable conditions for financial health were a feature. It was apparent that consequence management was not a feature.

City of Matlosana

Mr Makwetu said that the municipality had achieved an unqualified audit outcome with significant findings. It was not only important to just look at the books and being able to account for transactions, but also to adhere to financial management rules.

City of Johannesburg

The municipality also received an unqualified audit outcome, but there were issues underlying the transactions.

Mogalakwena

The municipality had obtained an adverse audit outcome. There were many areas that were faulty. On average, there had been R500 million of irregular expenditure per year. There was a lack of consequence management.

Mr Makwetu said that Accounting Officers must ensure that there was an efficient, effective and transparent system of financial management and internal controls. This requirement was present in both the Public Finance Management Act (PFMA) as well the Municipal Financial Management Act (MFMA). These were there to protect the purse as well as to ensure that public resources were spent transparently.

The Accounting Officer was charged with putting into place an internal audit system.

The preventative controls had always been a feature of the law, but there had been no follow through. People relied on reactive measures.

He said the conversation should not end with interrogation of irregular expenditure, but also an investigation into what was wrong with the preventative measures.

He referred to the human-money-material interface, in which the human plays the most critical role. The money in and of itself could not do anything -- the human used the money to purchase the material. Audits would assist in looking at the money, but more needed to be done about the human aspect of the equation.

Discussion

Ms C Visser (DA, North West) wanted to know how a municipality could charge for services that they hadnot delivered, and what happened to the revenue they received?

Mr Makwetu said that SALGA would be best suited to answer that question.

Ms Z Ncitha (ANC, Eastern Cape) wanted to know about the municipalities that did not want to be audited. Who were they? She said the Committee would follow-up on these.

Mr Makwetu said that a list of the municipalities would be provided.

Ms S Shaikh (ANC, Limpopo) said that the irregular expenditure for two of the five municipalities could not be determined (Nelson Mandela and Magolakwane), and asked if the Committee could get a detailed list of the transactions.

Mr Makwetu said that with regards to completeness of irregular expenditure, it was possible that the Accounting Officers did not get all the information they requested. A detailed list with the transactions would be provided.

Mr I Sileku (DA, Western Cape) said that Accounting Officers did not account because they danced to the tune of their political masters. He asked if it was of any help to appoint political leaders while not holding politicians accountable. The MPAC chairpersons were from the ruling party -- how could they be expected to exercise oversight over themselves?

Mr Makwetu said that he preferred not to answer the question relating to MPAC, and leave it to the politicians. With regard to the Accounting Officers, he said that maybe the National Council of Provinces (NCOP) should consider how they bring about support so the Accounting Officers could be protected.

Mr K Motsamai (EFF, Gauteng) wanted to know why the people found to be responsible for irregular expenditure were not being prosecuted.

Mr Makwetu said that in the absence of an internal investigation to determine liability, it would be difficult to take the arrest route.

Mr A Gxoyiya (ANC, Northern Cape) said that the Auditor-General now had powers to enforce its recommendations. The AG’s office allocated officials to work with municipalities. Did these officials come only at the end of the financial year, or was there regular interaction?

Mr Makwetu acknowledged that the new powers do give the Auditor-General’s office the opportunity to dig a lot deeper with regard to irregular expenditure. They had already selected 10 local government institutions for the initial phase. In response to the question about the officials, he said that there was already a process in place where the chief financial officers (CFOs) from municipalities provide a trial balance for accounts (on quarters two and three). The process was called the ‘status of records review,’ and was initiated two years ago.

The Chairperson said that the tone would be set from the top. He wanted to know if the Committee could go straight to law enforcement agencies in the event of fraud.

National Treasury on top five municipalities’ financial health

Mr TV Pillay, Chief Director: MFMA Implementation, National Treasury, briefed the Committee on the financial health of the top five municipalities who contributed to irregular expenditure.

He said the presentation would be limited to the eight indicators of financial health. NT used a sliding scale, where 1 indicated that a municipality was on a good path, 2 indicated that the situation was fair but there was room for improvement, and 3 indicated a serious cause for concern for the financial health of the municipality. It was the unfunded budgets that were creating the issues with the financial health of the municipalities.

Sections 17 and 18 of the MFMA say that a municipality must prepare its budget with a realistic anticipated revenue, ensure that it was cash-backed and the projections provided were based on the actual collections from the previous year. If this did not happen, then municipalities would find themselves in a financially distressed position.

Financial wellness:

Mogalakwena

Mr Pillay said that the cash coverage was at 2, and the cash balances were at 1, meaning that the municipality either hoards the money and does not spend it, or keeps the money waiting for something. What was the thing they were waiting for? Reliance on capital grants was at 1. There was an increase in growth of outstanding consumer debtors, indicating that municipalities were not collecting revenue. He said municipalities must not bill when they know they cannot collect.

NT had a support programme in place to support this municipality. The municipality said that it wanted to employ more officials, and Treasury had assisted in ensuring that they provided a grant that would train more people who would comply with the minimum competence requirement. Treasury wanted answers regarding the internship programme, as this was part of the requirement for the grants. Interns were not being absorbed into the institutions after they completed the internships. The municipality was not able to answer whether or not they had absorbed the interns. Only 20% of the audit items had been completed, and this showed that things needed to be done.

He said that he would be focusing on the 3’s, as these were critical.

Nelson Mandela Bay Metro

Mr Pillay said that the cash coverage was at 1, and the cash balance was also at 1. Revenue management was an issue here, which led to it struggling to pay creditors.

These municipalities had been assisted by Treasury for a while. No consultants were used when dealing with this municipality. They had trained the Council and MPAC on all relevant matters.

As part of the support materials, they did recommend that the chairperson of the MPAC must be from an opposition party, and not the party that was in office. When the Financial Misconduct Regulations were issued, NT had separated the role of the disciplinary board and the councillor. There was no councillor on the municipal finance management disciplinary boards. Municipalities keep asking to put a councillor on the boards, but Treasury reminds them of the separation between the council and the administration.

The issue of capacity building and the absorption of interns also persisted in this municipality. It  had completed only 4% of the 27 audit items that needed completion.

OR Tambo

The cash coverage for the municipality was at 2, and the cash balance was at 1. The reliance on grants was at 3. Under-spending on capital budgets was at 3. The growth in the debtor’s book was at 3. This had led to the municipality’s inability to pay creditors.

City of Johannesburg

The municipality had cash coverage of less than one month. The liquidity ratio was not very positive. The debtor’s collection rate was not good. The City had a list of councillors that had not paid their rates and taxes for over 90 days. There was a large number of audit items that had not been completed. This could be attributed to the size of the municipality, as well as the number of entities that were in that municipality.

City of Matlosana

The cash coverage was at 3. The cash balance and reliance on grants was at 3. This was true for the growth of the debtor’s book as well. Some information was not available because municipalities did not report.

Mr Pillay said they needed to ask themselves why they were still paying consultants to prepare financial statements when they had chief financial officers (CFOs). Maybe they should re-examine and re-test all the CFOs to ensure the competence was there. He was aware that there were some measures that required specialist knowledge, like asset management, but this was not the case when it came to preparing financial statements.

He recommended that there be a joint committee that meets every quarter so that the issues could be addressed.

Discussion

Ms Ncitha said that NT continued to expect municipalities to collect revenue, yet some municipalities did not have a revenue base, and this became an audit query. Was it sustainable for Treasury to expect an increase in revenue every year from these municipalities?

Mr Pillay said that in every municipality there was an opportunity to collect some revenue, even if the amount was as little as R10 per house. Every municipality had businesses that it could collect revenue from. Municipalities must be more creative.

Mr Sileku said that one would find that the deviation clause was being abused by municipalities. How did they ensure that this clause was not abused? MPAC seemed to deal only with annual reports and did not sit again. How did one ensure that the MPAC fulfills its functions? How many senior officials did the municipal councils have?

Mr Pillay said he would be dealing only with the questions that involved financial issues. The issue of deviations boiled down to poor planning and creating an emergency where there should not be one. When it came to the councillors that do not have the full qualifications, Treasury assisted them to at least reach the minimum competence required.

Municipalities’ action plans to deal with irregular expenditure

The Chairperson emphasised that the Committee was interested only in the post-audit action plans of the municipalities. The MPAC of each municipality must say what they were doing. SALGA should tell the Committee what they were doing to support the municipalities. The Chairperson of COGTA in each province would also have an opportunity to tell the Committee what it was they were doing.

Mogalakwena Municipality

Mr Malesela Mokwele, Member of the Executive Council (MEC), Mogalakwena Municipality, introduced the delegation that would be presenting to the Committee. The Executive Mayor and Municipal Manager had sent their apologies as they were writing exams. A representative from SALGA was not present.

Mr Charles Malema, Chief Financial Officer, Mogalakwena Municipality, said the municipality was aware that it had an adverse audit opinion. As of June 2019, 119 of the 121 issues that had been outlined had been dealt with. All the municipality’s accounts had been reconciled.

In the 2018/19 financial year, the annual financial statements were prepared by himself as the CFO, and no consultants were used. Most of the issues could be traced back to the fact that the municipality did not have a Municipal Manager or Chief Financial Officer. Both of these vacancies had now been filled. They recognised there was a lack of capacity with regard to finance, but the official responsible had been capacitated.

He said that 40% of the issues emanated from the configuration of the bid adjudication committees. The committees had now been reconfigured. A template as well as a checklist had been introduced to ensure that the committees were able to follow the prescripts of Supply Chain Management (SCM) when considering bids.

With regard to the incomplete picture when it comes to irregular expenditure the municipality had gone back and checked all the bids that had been awarded. and these had been sent to Council.

A resolution had been taken to investigate and report any relevant matters to the MPAC. They were currently waiting on Council to appoint the MPAC, as it had not been effective.

Councillor L Satege, member of MPAC, said he had not been officially appointed as chairperson of MPAC. They were waiting on Council to appoint an Acting Chairperson.

The Chairperson of the Committee said that Mr Satege must speak to the issues as a member of MPAC.

Mr Satege said that they were waiting on Council to appoint a Chairperson, and he would not be able to answer.

Mr Funani Maseko, Member of the COGTA Committee in the Limpopo Legislature, said that the municipality was one of the hotspots in the province. A joint committee had been convened to focus on the municipalities that were from the hotspots. This had resulted in the mandating of a task team to tackle the issues. He expected the establishment of MPAC to deal with the relevant issues.

Discussion

Ms Visser said she wanted proof that the Municipal Manager, as well as the Mayor, were indeed writing exams. She wanted to know about the qualifications of the senior managers of the municipality in order to determine if they were competent to hold their posts.

Mr Sileku wanted to know if the previous MPAC was killed for work-related issues or not? He wanted to know how the municipality was going to ensure that it was able to execute oversight.

Mr S Mfayela (IFP, KwaZulu-Natal) said that the Auditor-General had identified four points that led to irregular expenditure. Could the municipality explain how it planned to tackle each of these points?

Ms Ncitha asked the municipality speak about its liquidity. She wanted to know how the MPAC could be expected to take action when they were non-functional.

Mr Mokwele said that they were aware that the MPAC was the most critical committee. The person responsible for appointing the MPAC must do so as a matter of urgency. The committee had not been functional even while the chairperson was still alive. They were currently in the process of capacitating committee members so they could be more effective.

Ms Shaikh wanted to know what was being done about consequence management within the municipality. What was the actual amount of irregular expenditure?

Mr Gxoyiya wanted to know what happened to those officials that provide contracts to companies that were not on the database. What was being done? He wanted MPAC to clarify what was really going on and whether any information was being concealed. Was the MPAC a committee that functioned only because of the Chairperson? It seemed that in the absence of a chairperson that anyone could just take over and runs the committee. How was the municipality going to improve its revenue collection? The report seemed incomplete.

Mr C Smit (DA, Limpopo) said that Mr Kekana and Kganyana had been assassinated. They had had a meeting with him before they were shot. They were busy with an investigation that would have implicated councillors and officials that were subcontracting with the municipality. He asked about the bulk-water contract and whether any councillor or official was contracting or sub-contracting.  Mr David Malepa had been introduced as the Technical Services Manager. The Technical Services Manager post was actually still vacant. The current Municipal Manager was on forced leave. He wanted to know why that was. He said it was because she feared for her life. He said that the municipality had between R500-600 million in its investment account before he left as councillor. He wanted to know what was currently in the municipality’s investment account. He wanted to know what the municipality’s collection rate was. 

Mr Mokwele said that he was not aware of the Municipal Manager being put on forced leave. Instead, the Municipal Manager was actually on study leave. He was not aware of any officials or councillors that were contracting or sub-contracting with the municipality, and if the Committee had evidence suggesting otherwise then the municipality would take it on.

Mr David Malepa, Acting Technical Services Manager, clarified that the bulk-water project was funded by the Department of Water and Sanitation, and had 30% local content. The municipality actually had a plan for revenue collection, including the installation of prepaid meters. 

Mr Malema said that the investment account was currently at zero.

The Chairperson said that he felt that the municipality did not appreciate why they had been asked to appear before the Committee. They have regressed from being one of the cleanest municipalities in Limpopo to the point where a councillor had lost his life while investigating corruption.

Mr Motsamai said that the municipality was just a municipality by name. It seemed that the delegation was not aware that they were appearing before Parliament. Were people being prosecuted?

Ms Ncitha reminded everyone present that they were speaking under oath, so the information must be accurate. The Committee was not just there to police them, but also had a responsibility to help them.

The Chairperson said that the Committee was going to sit urgently and formulate a strategy on how to deal with the issues of Mogalakwena.

OR Tambo Municipality

Ms Thokozile Sokhanyile, Executive Mayor: OR Tambo Municipality, acknowledged that administrative instability in the municipality had contributed to the increase in irregular expenditure. There was a section 32 ad hoc committee, which had resulted in some of the irregular expenditure being written off. On 28 March 2018, MPAC had been tasked with investigating irregular expenditure. After investigating, letters had been sent to initiate the process of consequence management.

She said that all senior management posts were now filled. Bid specification committees were now in place, with a dedicated SCM specialist. The municipality had said that they have requested the Auditor-General to audit them in-year, as if it was the end of the financial year. This would help them improve. There was a municipal disciplinary board to deal with financial misconduct. The municipality now uses term contracts so that they did not have a qualification with regard to contracts.

The Chairperson of the MPAC said that contracts that were awarded without following the proper bid adjudication process had been sent for consequence management.

A member of the Portfolio Committee on Co-operative Governance and Traditional Affairs said they have not got closer to the municipality because they were still busy with annual reports. The process was slow because the municipality was being very meticulous in looking at every cent that had been spent.

The Chairperson said that he was concerned that it took Members from Cape Town to identify that there was a problem at OR Tambo.

Discussion

Ms Ncitha wanted to know exactly how much had been written off. What exact steps that had been taken with regard to consequence management, and was the AG aware of these steps? How much did the municipality have in reserves? What steps had the office of the City Manager taken on matters referred to his office?

Ms Sokhanyile said that an amount of R3.1 billion had been written off after the investigation.

Mr Owen Hlazo, Municipal Manager, said that they were taking consequence management very seriously. All the matters that had come through after investigation, had come through as Council resolutions that were being handled by his office. Some municipal workers had even gone on strike, saying that they were being dismissed or chased away by the municipal manager. This was because of the implementation of consequence management.

Ms Shaikh wanted clarity on the spike in irregular expenditure. What amount of irregular expenditure had not yet been investigated? She said that the municipality was verbally speaking to consequence management, but not in writing.

Mr Moabi Moleko, Chief Financial Officer, said that the spike in irregular expenditure was a matter of policy, where a contract with Amatole Water had been changed from schedule 6(b) to schedule 5(b) by the Department of Water and Sanitation. The municipality had continued using funds under the existing contract because it was the same service provider. The AG had found that the expenditure was irregular because the contract was not regularised – for example, there was no re-advertisement.

He also said that tender requirements had changed without there being a waiting period, and this had caused irregular expenditure. There had been a shift from manual to the Central Supplier Database (CSD) that meant that manual tenders that were valid became irregular.

Mr Mokone said that the trend in irregular expenditure was going down.

Ms Visser said they all had tools to guide them on how to govern a municipality, yet people were not being held accountable. There was a need to be serious about consequence management. People needed to be brought to a court of law.

Mr Sileku wanted the municipality to clarify the irregular expenditure related to water and sanitation. He asked it to explain what it meant by consequence management. Were the people responsible for wrongdoing still at the municipality?

Mr Mfayela wanted to know if the municipality’s investigation into irregular expenditure was in line with what had been discovered by the AG.

Mr Gxoyiya said information was being concealed here. There was an amount of irregular expenditure that had been written off after an investigation. What was the investigation on? What was found? What action was taken after the investigation? He said that provincial legislatures must not act like shop stewards for municipalities.

The Member of the of the Portfolio Committee said that he was not easily annoyed, but he did not appreciate the insinuation that he was a shop steward for the municipality. His committee was there to provide support, but would not micromanage the municipalities.

Nelson Mandela Bay Metro Municipality

Mr Jackson Ngcelwana, Acting Chief Financial Officer, said that the municipality’s collection rate was at 94.7% against the projected goal of 95%. The R12.3 billion irregular expenditure was an accumulated amount that had come about as a result of continuous audit findings. He gave an example of ‘evergreen consultants’ who were consulted for big projects that covered multiple years.

He said that the decentralisation of SCM had contributed to some expenditure being deemed irregular because the AG did not have access to tender documents while conducting the audit. The initial amount had been more than R20 billion, but R7.1 billion had been written off after an investigation was completed.

Mr Andile Lungisa, MMC: Infrastructure, Energy and Engineering, said that the municipality took consequence management very seriously, and they had submitted the names of officials who were implicated in irregular expenditure.

Ms Phumza Tshanga , Chairperson of MPAC, said that they had monthly meetings with the audit committee to discuss various issues, including progress against the audit action plan,. MPAC also meets with Internal Audit and Forensics in regard to the implementation of internal audits. This also happened on a monthly basis. The City Manager had to submit comprehensive reports to MPAC. A technical section 32 committee had been established to deal with historical cases of irregular expenditure.

An advisor for SALGA spoke about the support that was being provided to municipalities. Capacity-building exercises included the training of officials in matters of financial management. The Association assisted in the establishment of a consequence and accountability framework. In addition to this, a toolkit had been developed for MPACs to assist them in carrying out their function.

The Chairperson said that it did not seem that the interventions were workings, as it appeared that the situation was getting worse. What was SALGA’s take on this observation?

SALGA  said that the support could only go up to a certain point. The Association had set up some actions to look at the gaps in the support that was currently being provided.

A Member of the Portfolio Committee said that one could not set a political tone at an administrative level.

Discussion

Mr Sileku asked what had been done regarding the AG’s findings on the bid adjudication committees? Could the municipality provide the full extent of the irregular expenditure? Had the irregular expenditure been investigated? He wanted clarity on figures regarding collection rates. There was a discrepancy between the figures of the AG and the municipality. The disciplinary board had lapsed --when was it being revived? How many councillors were owing for services for more than 90 days? How many suspended officials were at home while on full pay?

Mr Ngcelwana said that the 88% collection rate that was in the Auditor-General’s report was for the 2017/18 financial year, whereas the 94.7% was for the 2018/19 financial year. There was a note in the financial statements that identifies the councillors that owe for services. Employees of the municipalities that owed for more than 90 days would have an automatic debit order taken from their salaries.

Ms Nobuntu Mpongwana, Acting Municipal Manager, said that contracts for the disciplinary board had expired in October, and the municipality was currently drafting new terms of reference.

Mr Lungisa said that it was part of labour law to pay a suspended employee while the disciplinary process was ongoing. Only the Municipal Manager had been suspended.

Ms Ncitha wanted to know how many fulltime section 57 employees the municipality had. If there were vacancies, when were they planning on filling them? What action was being taken regarding the reports that were put together by MPAC?

Mr Lungisa said that the municipality only had only one fulltime section 57 employee, because most contracts had expired this year. When trying to fill the positions, political issues had arise and they were not able to reach the numbers required.

Ms Shaikh asked how far the municipality was with investigations. Treasury had noted that the municipality had completed only one out of 28 audit action plans. What about the remaining 27? When was the R7.9 billion that was written off, incurred? What consequences were implemented in connection with the R7.9 billion irregular expenditure? Who was held responsible? How long did the municipality contract for?

Mr Ngcelwana said that only the Budget and Treasury directorates had outstanding audit items, pending vetting and verification by internal auditors.

He said that the R7.9 billion was not irregular expenditure for the 2017/18 financial year, but it was a historic figure commencing from when the MFMA came into effect, and the municipality had not taken certain steps. He said that value for money had been confirmed.

He said that the length of a contract was determined by the length and type of project that the municipality was taking on.

Mr Gxoyiya wanted to know what action was taken after the conclusion of an investigation. What was being done about people suspended with pay? Who was responsible for the decentralisation of SCM,  and why this was done? He had heard about threats that were made to investigators while they were conducting an investigation in Nelson Mandela Bay Metro Municipality, and said this was problematic.

Mr Ngcelwana said that he did not mean to say the whole of SCM was decentralised, but only the tender documentation. Each directorate held its own documentation. The investigators in question were from the AG, and an envelope had been inserted under the door of the office they were allocated. The envelope contained a newspaper clipping with two articles. The one article was about the equitable share being removed if the municipality did not conclude the investigations, while the other was about unrelated assassinations within the Nelson Mandela Bay Metro. The investigators had left for Bisho as a precautionary measure.

The Chairperson said that the insertion of the enveloped could be looked at as a threat, and it was serious.

He said that the Committee would sit urgently to discuss a way forward.

City of Matlosana

Mr Roger Nkumise, Municipal Manager, said the main contributor to irregular expenditure was the incorrect composition of the bid adjudication committees. The municipality had requested the MEC for Local Government to assist with the appointment of qualified people to the committee. The municipality had decided to stop the appointment of section 32 committees in 2017/18. It had appointed all the directors except for the CFO, and the post had already been advertised. All the managers that were appointed had passed the competency assessment.

The Supply Chain Management unit had been decentralized, but was now in one unit.

When it came to consequence management, the municipality had been ready to proceed with charges, but lawyers had requested certain documents and they were not available, as they had been lost. The municipality was serious about investigations, as it wanted to have a water-tight case when it was time to charge individuals. This would ensure that those that were charged did not escape on a technicality. He recommended attaching audit queries to particular directorates so that it formed part of those managers’ performance agreements.

The Acting CFO said the municipality had adopted a revenue enhancement as well as a cost-containment policy. In order to address the municipality’s low rate of collection, it had launched Operation Khokha, where businesses were approached and payment was demanded for services that had been used. Illegal connections were disconnected and the installation of prepaid meters was now a priority. Additional debt collectors had been appointed to supplement those that were already in the municipality’s employ.

She said there was a draft report on the reviewing of tariffs. These cost-reflective tariffs would need to be increased gradually over time, and not all at once, so that they did not become too costly for the masses. This would also ensure that the debtor’s book did not increase. Non-priority items had been identified – catering was not the same as before, there was no more coffee and tea, overtime had been reduced and there was a limit on contractors.

The municipality handled the audit of internal controls and non-compliance by having the State Information Technology Agency (SITA) on site to assist with IT. Standard operating procedures were now being implemented. Management was now signing off on all reconciliations. A checklist had been developed for the SCM processes.

A committee independent from SCM had been appointed, and it would play a role that was similar to quality assurance. This was in response to the audit finding that had said that the municipality was procuring uneconomically.

Documents were now being scanned, and there no longer just reliance on hard copies. All deviations were being reported to Council.

The Chairperson of the MPAC said there was separation of powers and functions, and this helped the committee to execute its role. MPAC had demanded consequence management for members of bid adjudication committees who did not attend meetings.

A SALGA advisor said she would not be repeating the issues that had been highlighted by her colleague from the Eastern Cape, because it almost the same at Mathlosana. They had launched the Municipal Audit Support Programme which focused on leadership, financial management, governance and institutional capacity.

There was collaboration with Provincial Treasury and the Department of Local Government to assist municipalities. SALGA assisted the disciplinary board with drawing up a consequence management policy. They also trained officials on record management.

Discussion

Mr Sileku wanted to know if the issues that had led the municipality to be placed under administration had been resolved. How did the tender documentation get lost? What effort had been made to get the documentation back? There had been an attempt to write off an amount of R8.8 million in 2017/18, but the AG had not agreed and this was written back. What had led to Council writing off the amount without following due process? Who were the members of the section 32 committees? Did the office of MPAC have capacity? How far was the process of recruiting a fulltime CFO?

Mr Nkumise said that when he requested the tender documents, he had been told that they were lost when being moved from one building to another. He had tried multiple times to recover the documents but had been unsuccessful. The person who was recorded as having been the last one to have access to the records, was responsible. He said the CFO post had already been advertised.

The MPAC Chairperson said that the office of MPAC did not have capacity. He did not have a researcher or legal advisor, both of whom were necessary to make the MPAC effective. Members of the section 32 committee were MPAC members.

Ms Ncitha asked how many fulltime section 57 employees the municipality had. She wanted to know how many vacancies there were, and when these would be filled. Did the municipality have backup of their data, since they had begun scanning documents? What steps were being taken against those who were responsible for bid committees not reaching a quorum?

Mr Nkumise said the municipality had six fulltime section 57 employees, with only the post of the CFO needing to be filled.

The MPAC Chairperson said that MPAC had requested consequence management for those that were not attending meetings.

Ms Shaikh said the municipality had completed only 73 of the 120 audit issues that were in the AG’s report. What about the other 47? She wanted to know what had happened with the previous CFO?

Mr Nkumise said that the previous CFO had resigned due to a family issue, and needed to work closer to home.

Mr Gxoyiya asked who prepared the annual financial statements for the municipality. Had it reconstituted the bid adjudication committee? If the historical irregular expenditure was not investigated, what was the forensic investigation about? He wanted to know why the municipality would rush to write the expenditure off, if there was a possibility that the money could be recovered.

Mr Nkumise said the bid adjudication committee had been reconstituted. The annual financial statement was compiled with the help of a service provider, but this would be phased out as from next year.

The Chairperson wanted to know how much the municipality owed Eskom as well as the Water Utility Company.

Ms Sekgata said the municipality owed Eskom R487 million, and it owed Midvaal R382 million.

The Chairperson said the Committee would sit urgently to map a way forward.

The meeting was adjourned.