The Committee invited municipalities from the North West Province and Johannesburg metro which had previously been unable to attend a meeting to discuss their financial situations.
The Bojanala municipality was asked to account to the Committee on its affairs, particularly the transfer of R134 million that it had erroneously received. It was asked to explain what had been done since the error had been uncovered.
The Committee was in consensus that this matter could not be ruled as a “human error.” Furthermore, if it was not adequately dealt with, it would set a precedent for a lack of accountability by officials.
Johannesburg reported on its financial expenditure, because it had been identified as one of the top five municipalities in terms of irregular expenditure. Based on the outcomes from the Auditor General about irregular expenditure that had amounted to R3 billion over the past three years, Johannesburg was important because it was the economic hub of the country.
Bojanala Platinum District Municipality on unaccounted R134 million
Ms Fetsang Molosiwa, Executive Mayor: Bojanala Platinum Municipality, went through the presentation that had been circulated to Committee Members, which dealt with the erroneous transfer of funds.
The Chairperson explained that one of the reasons for calling this urgent meeting was to intervene before the municipality went under administration like various other municipalities. There were 13 municipalities under administration in the North West.
Mr Solly Davids, Chairperson: Municipal Public Accounts Committee (MPAC):Bojanala Municipality, said he found out only after eight months about the issue of the erroneous payment of R134 million when payments were not made to employees, because workers went on strike. They were unable to have meetings because of the instability that was occurring at the time. The MPAC would be meeting only this Friday in connection with the R134 million, in order for a report to be compiled.
Mr Mothibedi Gordon Kegakilwe, Member of the Executive Committee (MEC): Cooperative Governance and Traditional Affairs (COGTA), North West Province, gave a presentation on what had happened to the R134 million. There had been a written request from the Director General (DG) of the Department of Human Settlements (DHS) to transfer a development grant, which amounted to R134 million. The DG had approved the transfer, which was done in terms of section 12 (c) of the Division of Revenue Act (DORA). The decision-making officer of the DHS must, in consultation with the transferring officer -- which in this case was the national DHS -- publish in the gazette within 14 days the planned expenditure of the development grant, indicating the expenditure to be undertaken directly by the province, and the transfers to each municipality.
The logistical arrangements in terms of the capturing were done by the Department on 4 February 2019, and on 6 February the Finance Directorate received the documents to allocate the budget. The order was generated by the supply chain management (SCM). An error was made during the creation of the government order by the SCM, with the funds being issued in the name of Bojanala District Municipality instead of Rustenburg municipality. This error occurred because there was also an invoice due to Bojanala District for an amount of R49 000, which was a refund payment for disaster related matters, so a non-senior official had combined the two invoices and generated one order to Bojanala District. After an internal investigation, it was concluded that it had been a human error.
Shortly after realising the error that had been made, the Department was notified. It had then communicated to Bojanala that an error had been made in terms of the transfer of the specific funds, and requested the money to be paid to the municipality that it was intended to go to. Bojanala had transferred only R15 million instead of R134 million, explaining that they had already started to use the money. It took time for the money to be transferred, and the Department had had to involve the provincial treasury for Bojanala to return it. The Department had decided that the money should now instead be transferred to the North West Province instead of Rustenburg. The money was ultimately paid back in August 2019, after the query had been launched in April 2019.
Mr Kegakilwe said he had addressed the Bojanala council as part of oversight, and indicated to them that it was their responsibility to deal with this matter. He had also spoken to the chairperson of the MPAC regarding this matter. Bojanala Municipality was in a crisis, where they could not pay its employees. This had led to the suspension of the chief financial officer (CFO) and municipal manager (MM). The provincial treasury had recommended an acting CFO, who had been accepted by the council. The investigations were ongoing, and they had received a preliminary report which currently did not look good as it related to the municipality.
Ms Motlalepula Rosho, MEC: Finance, North West Province, explained to the Committee that the erroneous payment was discovered by the executive authority as part of their oversight duties. The treasury had had several engagements with the district municipality on issues of non-compliance as part of its daily duties. It had discovered that the budget was unfunded due to a R50 million revenue over-projection on district health inspections, and a R300 million loan for the construction of district municipal offices. The budget was inconsistent with Schedule A of the Budgetary Report Regulation and Data screen work, and was also inconsistent with the Budget A document.
About 70 municipalities had adopted unfunded budgets, so there had been an engagement with national treasury to withhold the equitable share. In the communication preparation process, communication was made to them on 2 May on issues regarding the unfunded budget, and a request was made to them to table the draft budget funding. A budget management circular was issued on 31 May to guide municipalities on budget preparations. A non-compliance letter was issued in respect of the unfunded budgets. A meeting was convened with all municipalities to address non-compliance matters.
Bojanala District Municipality did not adopt one of the directives, which involved section 216 of the constitution, which council did not adopt. The provincial treasury had accepted the exclusion of directives. The 134 million was intended for the construction of 1 000 houses for Lethabo Extension. Whether the money was in line with the DORA, it was still erroneous, as it was not gazetted, and this was required in terms of DORA. Therefore this had been contravention of the DORA in terms of transferring funds to municipalities.
Bojanala also had not complied with DORA by transferring all the funds back to the province, and transferring instead to the municipality, as they had done with the initial R15 million, in terms of section 25 (3) of the Revenue Act.
The mayor was aware of all the communications made by the provincial treasury regarding the compliance issues. There had to be consequences for these transgressions. They had to consider the provisions of Municipal Finance Management Act (MFMA) and section 15 in terms of misconduct.
The MEC added that the Department of Cooperative Governance and Traditional Affairs (COPTA) had been requested to intervene. There had been a tele-conference with COPTA and it had also been discussed at the executive committee (EXCO) level. An enquiry also needed to be made as to why money was used that had not been allocated to the municipality.
A forensic investigation had been carried out after the MM and CFO were suspended. Furthermore, they ensured that the Director General’s office (DGO) was involved. They were also concluding the process of the financial recovery plan. which was in line with section 39 of the MFMA.
Bojanala was one of the municipalities that were under financial stress. They would also invoke section 139 of the MFMA in order to provide support in line with section 145 of the Constitution. There had been delays with the preliminary report because it was not broad enough, so they had requested the Head of Department (HOD) to extend the scope of the investigation to see where the money had gone to.
The Chairperson of the Standing Committee on Public Accounts (SCOPA) explained that the matter was published in the media when they realised that there was a problem with Bojanala municipality. They had engaged the municipality and the Department and Finance, after statements were given of what had happened to the money. They had concluded that it had not been an erroneous transfer, as mentioned previously, but rather a transfer.
They concurred with the MEC on the point that DORA had not been applied while performing this transaction. The reason they did not agree with it being erroneous was that four people could not all press the wrong button without any of them noticing an error. There had been a month’s gap after the money was transferred to the wrong municipality. As the committee that was responsible for public funds, they had investigated whether the Department had followed the correct processes and secondly, what had happened to the money. Upon receiving the money, the municipality had opened a non-transactional account, which was not inline with the MFMA. Why had another account been used, instead of the one which had been used to receive the money?
SCOPA had also enquired whether any criminal cases were opened, and there had been no response from the Department. SCOPA had resolved to take the matter to law enforcement for investigation. The investigation had begun from the beginning of when the money was transferred and followed the money up to the end. Law enforcement had concluded their report on the premises that they had interviewed the Department, and the Department was satisfied that it had received the money back, and therefore the case was closed. They had insisted that the matter be re-investigated, and had provided more evidence and were following up on it. Regardless of the amount transferred, it was important to ensure that the people put in those positions did their work properly.
Mr I Sileku (DA, Western Cape) was concerned about councils adopting unfunded budgets. What did the law say on the subject? Secondly, the municipality’s staff expenditure percentage was 60% of it budget, and it was a poor municipality, which meant it had 40% to render services to that community. What were their plans to lower the percentage and comply with the minimum standards in terms of staff remuneration? What may one spend in terms of budget for staff? Thirdly, they had been informed about the new Structures Act to give MPAC more powers. He was concerned about the passive role that MPAC played, as it was failing in terms of ensuring accountability when it related to money being spent.
Political principals had certain functions delegated to them in terms of the budget, to ensure that there was compliance in their municipality’s accountability. They became immune from any action, however, and their officials were the ones who took all the heat. There was no mention of the official who started the shenanigans in this case. In the Department, who transferred money to a district that did not have a mandate to build houses? What had happened to those officials who initiated the whole matter? What was the Department planning to do with them?
Mr Sileku asked how much the suspension of officials cost the municipality -- the financial implications and how long it would continue. Regarding the non-transactional bank account, if a council wanted to open a bank account, there must be a council resolution. The CFO was aware that the amount was not theirs, so it had been spent immediately after receiving it.
In an article in the City Press, it was reported that some of the expenditure – R5.5 million -- was for catering. How was the money used? The money being paid back did not conclude the issue. In the view of the municipality, what was consequence management? Consequence management should apply not only to officials, but to the political principals as well. What was going to happen to them? The internal audit unit was absent. It would have been good to hear their opinion on this matter. Why had they not identified this erroneous amount?
Mr S Zandamela (EFF, Mpumalanga) said that the issue had started in February 2019, and emphasised that all the transactions needed to be followed. Firstly, there had to be an enquiry into where the all the money that had been recouped was. Secondly, how was the money transferred to the municipalities, if it was the duty of the province? The district had suspended the MM and CFO, but it was not clear what had happened to the four people involved. Had they been suspended? There was no clear indication where the investigation was.
Mr A Gxoyiya (ANC, Northern Cape) commented that delegates had been talking past each other during the presentation. There needed to be clarity on the contradictions between the Chairperson of MPAC and the MEC for COGTA. The Chairperson of MPAC said they had picked up the issue eight months later, whilst the MEC said that they had communicated with MPAC before the eight months, which creates suspicion.
How often did the MPAC meet? What do they discuss, if they were picking up these irregularities only after eight months? It would make sense for the MPAC to meet monthly to investigate the transactions of each month.
How much did the transfers cost in terms of bank charges? Even if the houses were delivered, the point was that they had not been delivered at the time they were supposed to be delivered. If this issue was not addressed, it set a precedent for a lack of accountability, and such actions could be repeated. This was too big to be a “human error”. There were loopholes in the details, because had it been an error, it would have been something that could have been corrected at the bank before the money even reflected. Whether the money was recovered or not, there would be criminal cases opened. The explanation of a “human error” would not be entertained. The Department and COGTA, as well as Bojanala Municipality, must open up cases for thorough investigation of the matter, and they must furnish the Committee with case numbers.
To expand on what had already been mentioned, the four people who approved the transaction all approved it at different intervals, meaning that at least one person should have noticed a discrepancy.
Mr S Mfayela (IFP, KwaZulu-Natal) said it was very disappointing to see the mistakes that had occurred in the provincial government and district municipality. What was the reason for the suspension of the MM and the CFO? What had been the basis of the transaction? It needed to be investigated why four people had pressed the wrong button.
Ms M Mmola (ANC, Mpumalanga) addressed a question to MPAC, saying they had not met for eight months, and were meeting only this coming Friday. The explanation for the lack of gathering for meetings was the geographical distance of members, but when one had been appointed to fulfil a duty, location should not be a reason for meetings not to be held.
She asked how unfunded budgets had been adopted when there was no source of where the funding would come from. She asked SCOPA why the Chairperson had found out about this matter through the media. It meant that they were not fulfilling their duty of doing oversight work.
She added that it was pure corruption that four people could press a button without being detected. People must be arrested. Did law enforcement give reasons for why the case had been closed? Could the Committee get the case number in order to investigate the matter further? It was not only the CFO and MM that were corrupt, but also the political heads. There were politicians involved. She pointed out that the MM gives the Mayor a section 71 report which puts into detail all the financials of the municipality.
She advised the MEC of COGTA that if they were not doing their work, the Committee would do it or arrest them. Service delivery was poor, and people were suffering, but there were people who were misusing money. A timeframe must be set for a report back on what was happening.
Ms Z Ncitha (ANC, Eastern Cape) wanted a discussion on the responsibilities of MPAC. The committee also had an oversight duty. The MPACs in municipalities were not resourced well enough for them to be able to discharge their responsibilities. There must be a budget for staff that would be working with MPAC, and well-resourced offices. She added that the National Treasury needed to clarify the issue of unfunded budgets that seemed to be trending among municipalities.
What steps was Bojanala taking to reduce the 60% personnel costs? In the mayor’s presentation, she had also mentioned that they still had open vacancies, meaning that they were still recruiting despite the crisis they had. In the Mayor’s presentation, it was also indicated that in their adjustment budget of 2020, because of the challenges of non-payment of creditors, they had failed to ensure that the creditors were paid. The President had also announced previously that whoever the state owed money to, must be paid within 30 days. Where was the municipality in terms of that instruction?
Lastly, the Mayor was supposed to receive quarterly financial reports. The fact that this matter had gone unnoticed for a long time was unfounded, because the Mayor was responsible for overseeing matters in the municipality and picking up on any discrepancies. She asked SCOPA if the Committee could receive a report to indicate where they were in terms of following up on this matter. Municipalities were given an agency responsibility for overseeing the building of houses.
Ms S Shaikh (ANC, Limpopo) highlighted that there were transgressions in financial management at every level of government. What was happening with Rustenburg municipality, because they had also received money irregularly? There was a lack of internal control in terms of financial management. What was the municipality doing about internal controls?
SCOPA was more reactive in respect of attending to matters after they had occurred, and they were expected to be more proactive. COGTA and treasury had an oversight responsibility as well. She asked COGTA to explain what was happening in Rustenburg municipality.
Executive Mayor Molosiwa referred to unfunded budgets, and said Bojanala municipality was no longer a water service municipality, so 50% of their revenue was from Health and Social Services, so R50 million had been projected. Bojanala municipality did not have offices -- they were rented from Rustenburg. Regarding the bloated structure, they were looking into how people could be shifted. When Bojanala was a water services municipality, the salaries of senior managers were allocated through that. They had requested the South African Local Government Association (SALGA) to assist with salary adjustments, since they were no longer a water services municipality.
There had been challenges with the section 71 reports. There had been no reports for specific timeframes because they had been unable to reconcile -- the system would crash, which had been reported to national treasury. Since June, there had been instability in the institution. The last mayoral report on record had been in February 2019.
The council had written a letter to the MEC to request assistance in running of institution and funding. With regards to creditors, when they sought to resolve the matter, there were creditors who never arrived. Some issues came after the appointment of the acting MM who, together with the CFO, were requested to issue new invoices and verify old creditors. The MM had been suspended in October 2019.
The Chairperson interjected that the issue of creditors was already prevalent before the suspension of the MM. It could not be that creditors had submitted their invoices only when the acting MM came into office, when there was already previous debt. This highlighted the Mayor’s several inconsistencies.
The Mayor said that they had never received a supply chain management report. She clarified that these were additional creditors.
Ms Mmola said the MM had been suspended in October, but the last section 71 report had been received in February. How had the Mayor addressed this matter? What was the MM doing throughout that period? It could not be that for six months there had been no oversight of what the MM and CFO were doing with regard to the finances of the municipality.
The Chairperson pointed out that in terms of the MFMA, section 71 reports were submitted monthly before the 10th of each month.
Ms Molosiwa responded that they did meet to discuss the issues around reports, but it was difficult for the MM to submit reports due to system failures.
MPAC Chairperson Davids said that the committee were being suffocated because they were not capacitated. It did not receive all the section 71 and 72 reports from the numerous municipalities, regardless of several follow-ups. The MPAC met monthly, but the issue of the R134 million had never been disclosed anywhere in the council documents. That was why they had come to find out about it only during the employee strike. There had been memorandums written to the executive mayor and the MM requesting certain documents so that the MPAC could engage with them. They never received those documents, because the MM was never available.
There were three levels of assurance at municipalities. There were the internal audit committee, the audit committee and the portfolio committee. MPACs were established in terms of section 79 of the Structures Act, with their terms of reference developed by council. They had to do their work in terms of that framework.
Mr Sileku asked which political party the Chairperson of MPAC represented.
COGTA MEC Kegakilwe said the Department and COGTA had acted on this matter. Within a month that the money had been transferred, it had been picked up by the Department. He came into office in June, and in July had gone to the municipality to address the matter.
Rustenburg had been accredited for delivery of houses, so the transfer of the funds had been order for it to deliver. Gazette 7678 of the North West government, dated 3 May 2018, indicated what Local Government and Human Settlements was going to transfer to the Bojanala region/Rustenburg municipality in the next three years. The gazette even indicated the amount to be transferred. There was no gazette indicating the R134 million.
There were two officials who were below assistant director level who were given the power to sign the payment certificate for the bank. The ultimate investigation had been to find out where the money went. The money had gone to companies, so an enquiry had been made into those companies. The MM, CFO and treasury were busy overseeing that. The intent of the office of the MEC was to wait for the report before pursuing any case in order to have full information as to which direction to take.
After the money had been returned, a transfer was made by the Department of Human Settlements of the total amount directly to Rustenburg, in accordance with the Gazette. However, they had requested the money to be transferred back to the province. During this period, the Department had taken over the project of building the houses, and the contractors had been paid directly by the province.
The MEC had appeared before the legislature’s committee responsible for local government and in front of the provincial SCOPA, and had presented this particular matter.
Treasury MEC Rosho further explained that when the transfer occurred, she had been in office for only three months. It was very common for these municipalities to make transfers without gazetting them. The gazette had been issued after the money was transferred. When she was MEC at the time, she had been the person who had discovered this transfer and had confronted the HOD, saying that an incorrect transfer had occurred. They had then made an enquiry with supply chain management for proof of the transaction. It was during the election period. Before she stepped into her new role, she had given an instruction to ensure that Bajonala transferred back the money.
The issue of section 71 reports was to ensure municipalities complied. Treasury had ensured that there was compliance. In December, Bajonala was among the municipalities to which they had presented the equitable share, to ensure municipalities complied. The first round of equitable share involved nine municipalities, and Bajonala had been one of them. They had refused section 319 of the Constitution, because it was an intervention. The second option was section 216, which gave treasury powers that if they continued to adopt unfunded budgets, the equitable share would be withdrawn.
They had briefed the Portfolio Committee on Finance, advising that there was currently this issue. The HOD had given an assurance that in the next three to four weeks the report would be concluded. The report would be shared with the Select Committee. With the invocation of section 139 of the MFMA, Bajonala was among the municipalities whose budget model had been approved in the last two weeks.
Lastly, the MEC and SCOPA had gone in front of the Joint Committee of COGTA to demonstrate how the MPAC supported municipalities. There was a challenge with the MPAC.
The SCOPA Chairperson clarified that in the media they had learnt of the strike and the financial crisis of the municipality. During the hearing, they had found out about the R134 million. He would forward all the details of the case number, and who had conducted the investigation.
The case had been opened in November 2019, and on 19 December he had received a letter that the matter had been withdrawn. It had been a very quick investigation for a matter involving R134 million. He had invited the head of law enforcement to come and explain to them what occurred. He had informed them that they were not satisfied, and would follow up on this matter. Several media outlets had reported on this matter to also put pressure on law enforcement to take the matter seriously, and also to send a message not to abuse public funds, and that those responsible must be held accountable. Bajonala and Rustenburg municipality had been called by SCOPA for a public hearing on 4 March.
The Chairperson proposed that at the meeting next week, an hour would be reserved for Members to reflect on this discussion. In the interim, the case number and any outstanding documents must be sent to the Committee by Friday.
City of Johannesburg post audit action plan
The Chairperson said that on 8th November 2019, the top five municipalities in terms of irregular expenditure had been invited to appear before the Committee. Four municipalities had honoured the invitation, but Johannesburg had not. The Committee had been notified a day before the meeting that they could not make it because of a cyber attack.
Based on the outcomes from the Auditor General about irregular expenditure that had amounted to R3 billion over the past three years, Johannesburg was important because it was the economic hub of the country.
Mr Geoffrey Makhubo, Executive Mayor of Johannesburg, agreed with the Chairperson that unfortunately, as the successor, he had to inherit the good and the bad and account for it, even though it had occurred in his absence. Johannesburg was ranked number four for irregular expenditure. The city manager would do the presentation. The forensic unit was here for any further questions.
Dr Ndivhoniswani Lukhwareni, City Manager of Johannesburg, went into the background, remedial issues and the way forward. The presentation covered all the outcomes of the municipality in the previous financial years.
The MPAC Chairperson added that when MPAC did its strategic planning in July, the office of the Auditor General and National Treasury had been invited. The Treasury had added a lot of value to the concerns. A resolution was taken to have a sub-committee that would be dedicated to dealing with unauthorised, irregular, fruitless and wasteful (UIFW) expenditure, and the matter was taken to council for terms of reference. It took time for it to be approved. The new mayor had elevated the matter to put it on top of the agenda. They were working hand in hand with the municipality to address issues and reduce them. Furthermore some issues may be dealt with by the city manager involving consequence management.
The City of Cape Town and Ethekwini were identified by the Treasury as municipalities that MPAC could shadow, but they had not yet had an opportunity to do so.
Ms Shaikh said this presentation indicated that there seemed to be a lot of effort going into government structures, investigations, etc. However, it did not mention anything about internal controls, especially in the financial management systems to be put in place, to ensure that issues did not recur. The presentation also did not indicate what impact this had had on service delivery. When looking at operating versus capital expenditure, there was a need to look into what goes into compensation and what goes into service delivery.
The audit opinion of the AG showed there were only two entities with clean audits in 2018/19, and in 2016/17 there had been other entities that had declined from clean to unqualified, with findings. She asked for an explanation for such a decline.
Regarding the AG’s findings in 2018/19, the issue that the AG had raised was that not all cases had been investigated, and no disciplinary board had been established. All UIFW expenditure was currently being investigated through internal audits. Could this be unpacked? Did it include the 69% that had already been finalised?
Ms Ncitha said that where gaps in financial management control had been identified, what action was being taking in terms of ensuring that they contributed to resolving the challenges faced now. The gap in terms of supply chain needed to be attended to as a matter of urgency. There would be a report from MPAC by 30 June 2020. She asked if the mayor could assist with the investigation, and if there would be consequence management.
Ms Mmola referred to the AG’s findings on UIFW expenditure, and said this had not been investigated to determine if any person was liable. The report said the 2014/15 UIFW investigation was now completed -- were any people suspended? Secondly, the council had not always approved the terms of reference (TOR) of each investigation. To date, the TOR for investigation had been approved by the council in 2017/18 -- was there a timeframe for the investigation? Regarding the failure to investigate the UIFW expenditure, what was meant by “a dedicated team to deal with UIFW?” Did it mean that previously there had been no team dedicated to UIFW? Where did the team come from now? Were they from the municipality, or outsourced?
Mr Sileku asked when the forensic team had been established. The amounts had continued to increase throughout the years, and he wondered what had been happening in those years. Had the expenditure changed the lives of the people on the ground? He had a concern about the state of local government.
Mr Zandamela said that the report was too summarised it needed to be broken down more. R4 billion was a lot of money. The new mayor had to account, regardless of when he entered into office. Why had there been no investigation? MPAC should clarify its role, because the understanding was that they ought to investigate and table a report to council. There was confusion on why MPAC had to seek approval from council for terms of reference, and they should clarify that matter. What was Johannesburg doing about the issue of electricity in Soweto?
Mr Gxoyiya asked about the structural changes that had been effected after the realignment of the council in response to the challenges raised by the AG. Had the UIFW expenditure not been properly broken down because there may have been justifications in certain scenarios? The amounts needed to be broken down.
What were the reasons for the write-offs, in particular for amounts of money that were owed to the municipality? Regarding consequence management, there were 403 cases investigated and 349officials were implicated, but there had been only 41 dismissals in 2018/19 and only 10 criminal cases had been opened. There was no consistency in the figures. This created the impression that not enough had been done. It must also be clarified who the people were who were dismissed, because junior or administrative staff were often dismissed for the actions of senior executives.
Mr Mfayela was interested in the UIFW investigations because there had been progress to date, meaning that there was something that had been done with regard to the problems raised by the AG. The progress to date must not be window dressing. The City of Johannesburg had to update the Committee as far as the progress report was concerned, in order to see if it was working or not. If the following year’s report had not improved, it meant that they were not doing their job. The Committee wanted to know if the remedy was working or not.
Ms Mmola said she failed to understand how investigations could have gone wrong when a former police officer, Mr Sibiya, had been involved. What was his position in the City of Johannesburg, and when had he been appointed?
The Chairperson commented that what the City of Johannesburg had presented was post audit plan. The 13 entities under Johannesburg were doing well in respect of the audit outcomes. Most of them had unqualified opinions. This needed to be sustained and improved so that others could reach that particular level.
He concurred with the statements of Mr Mfayela regarding the statements of 2018/19. What the National Treasury had presented did not cast a good reflection on the municipality. Their capital expenditure was dropping -- at some point it had been R10 billion, and now it was R7 billion. There was less expenditure on capital infrastructure than on operations. The operations budget was increasing, and CAPEX was going down, and that signalled a problem.
Regarding the UIFW issues, why had Johannesburg had to apply regulation 32 of the MFMA Act? When using this regulation, they needed to demonstrate why they were using it? There were preconditions to it, in terms of the scope of the work undertaken. He also expressed his confusion as to why Johannesburg was taking contracts from other municipalities, when their municipal budget was bigger than that of the North West Province. The onus was on the municipality to attend to those particular issues.
Maj Gen Shadrack Sibiya responded that he had been appointed Head of Johannesburg’s Anti-Corruption Unit on 8 November 2016, and his role was to investigate maladministration, fraud and corruption, and UIFW expenditure. There was a list of all the cases with the police and the Director of Prosecutions.
Mr Khamusi Ramulifho, Acting Chief Audit Executive, dealt with questions on financial issues that had been raised. In the presentation, there had been a consolidation on slide 29 of all the UIFWs, but then they had been further broken down in the slides. The effectiveness of the internal control system showed most of the findings were repeat findings, which suggested that perhaps the law was not the problem, but it was actually the implementation. Regulation 10 of the SMA provided for an effective demand earning process, and regulation 11 provided for an effective acquisition earning process. It was then suggested that there needed to be a review of the control environment to check whether the current demand earning process was effective. Currently there was a budget adjustment, and it was an opportunity to address the demand planning that they had initially, to ensure that the budget adjustment was also aligned.
Regarding the financial position of the city, it was accurate that in 2017/18, the surplus was R2 billion, but in 2018/19 the surplus was at R6 billion. The cash and cash balances in 2017/18 were R2 billion, and 2018/19 it was R5.3 billion.
The City of Johannesburg employee cost was 24% of total budget of R66 billion, which was R15 billion.
Ms Thandi Nothenga, Chairperson: MPAC, Johannesburg), said the committee was supposed to conduct investigations, but there had been disagreements with council, and that was why Treasury had been engaged. In order for MPAC to have a sub-committee, they needed the approval of council. MPAC was also not happy with the time it took for investigations to be concluded. In their terms of reference with council, investigations were given three months to be concluded.
Dr Lukhwareni supplemented his presentation, and added that there were eight ratios that were monitored in terms of the City’s liquidity. With regards to the audits, the issues were known and were being addressed. For improvement on supply chain management issues, everyone on his team had to be vetted. Employees doing business with the state had decreased so significantly that it was not worth mentioning. There would be an upgrade March, and it would improve the capabilities. The impact of capital expenditure was an issue that the mayor had also raised. Certain services were already being rolled out, such as immunisation, mobile clinics, etc.
Mayor Makhubo said the depletion of the capital expenditure was a reflection of the financial state of the city. The more capex there was, the less service delivery there was, and then one had to pull back from elsewhere, or there would be an unfunded budget and a reduction in capex. Some of the decisions taken by government on in-sourcing, for instance, increased the operating expenditure. It depended on the government of the day as to where they emphasised expenditure. Their focus was on impact spending.
The irregular expenditure numbers had doubled from 2015/16, which had been R5 million. There was no indication of improvement in the 2017/18 figures. There were several issues in council, and the council was unstable.
The forensic investigation capability had always been there, but it was under the unit: Group Risk and Assurance Services. When Maj Gen Sibiya was appointed, the forensic unit had then been separated. The investigative units had all been combined to make one unit.
Regarding Eskom, the city had two suppliers of electricity -- City Suppliers for certain areas in the north, suburbia and Alexandra, and the rest of the townships were supplied by Eskom. The municipality had been engaging with Eskom for the past three years over Soweto. With regard to the historical debt, people were willing to pay, but there needed to be an upgrade in infrastructure. They were now trying to deal with issue of historical debt and Eskom separately. There had been various discussions on what to do about Soweto, and whether to take it on. However, there was the issue of historical debt. There was electricity in Soweto, but it was not reliable.
The Chairperson adjourned the meeting.
- Media Statement: Urgent Consequence Management Necessary for Erroneous R134 Million Bojanala Transfer
- PPAC North West presentation
- City of Johannesburg: Post Audit Action-Plan 2017/18
- North West COGTA: Erroneous Payment of R134M
- Bonajala Platinum District Municipality: Financial Management challenges
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