Non-delegated municipalities: National Treasury briefing

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Cooperative Governance and Traditional Affairs

31 March 2021
Chairperson: Ms F Muthambi (ANC)
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Meeting Summary

Video: Portfolio Committee on Cooperative Governance and Traditional Affairs, 31 March 2021

In a virtual meeting, the Committee was briefed by the National and Provincial treasuries on their involvement and relationships with the 17 non-delegated municipalities in the country which, in terms of the Municipal Finance Management Act (MFMA), accounted directly to National Treasury for their finances. Other municipalities accounted to their respective provincial treasuries, which had a delegated responsibility to perform oversight on their financial affairs.

National Treasury confirmed that non-compliance with the MFMA was rife among the non-delegated municipalities, and this reinforced the Committee’s position on why it was necessary for this meeting to take place.

Senior officials from all of the provincial finance departments, with the exception of the Northern Cape, made presentations outlining the key challenges involved in enhancing the performance of the non-delegated municipalities. These generally involved issues such as Councils adopting and implementing unfunded budgets, lack of service delivery and maintenance of revenue-generating assets, high dependency on government grants, lack of financial management skills and increasing debt levels.

Committee Members encouraged National Treasury to increase its monitoring capacity in order to ensure compliance. It felt that the extent of non-compliance was an indictment of Treasury’s capacity to monitor and support the non-delegated municipalities.

The Gauteng, Western Cape and KwaZulu-Natal provincial treasuries were tasked to provide a comprehensive written response to specific questions in relation to cases of unauthorised, irregular, and fruitless expenditure by non-delegated municipalities in their provinces.

Meeting report

Chairperson’s opening remarks

The Chairperson commended all the provinces for making an effort to present to the Committee. The only province not present today was the Northern Cape. Initially, the Committee had invited only National Treasury, but it felt getting input from provinces would be of great help and despite the short notice, all the provinces had submitted their documents to the Committee.

Today would be an interesting meeting, since it would be the first time for the Committee to discuss non-delegate municipalities. This was after the Committee had first heard of the idea of non-delegated municipalities during its interaction with the Msunduzi, Polokwane and Mangaung municipalities regarding their financial and governance challenges.

These municipalities had invoked their non-delegated status in order to evade accountability to their respective provincial treasuries. However, they could not challenge the status quo due to their limited knowledge of what was meant by non-delegated municipalities. Not even one of the non-delegated municipalities had received a clean audit over the last two financial years, and this was worrisome, because the effective management of finances to deliver services was at the heart of local government.

The 2018/19 audit findings pointed to numerous non-delegated municipalities that had failed to prepare their financial statements in accordance with Section 122(1) of the Municipal Finance Management Act (MFMA). This seemed to indicate that the assistance provided by National Treasury to improve the quality of financial statements submitted for auditing had not proved effective.

Over the last three financial years, the non-delegated municipalities had accounted for the top five contributors to irregular expenditure due to supply chain management-related weaknesses. These municipalities also did not perform well on other key financial management indicators, such as revenue collection, asset management and financial health.

The Chairperson handed over to National Treasury for a briefing on non-delegated municipalities.

National Treasury briefing: Non-delegated municipalities

Ms Malijeng Ngqaleni, Chief-Director: Intergovernmental Relations, National Treasury, made the presentation on behalf of the Treasury.

Delegation by Minister of Finance

She said the Minister of Finance delegated the oversight responsibility for some municipalities to the provincial MECs of Finance. Delegations did not replace the accountability bestowed on the Minister of Finance as the custodian of financial and fiscal matters. Two factors were considered in determining non-delegated municipalities. These were the budget size (at that time, non-delegated municipalities constituted 71% of the total local government budget), and a targeted approach, with the aim of getting non-delegated municipalities to embrace the MFMA and associated reforms, in order to address a significant part of the challenges in local government.

Municipal governance oversight

Interventions in non-delegated municipalities were led by provinces. Irrespective of whether it was a non-delegated municipality, the MFMA allowed the province to intervene. The challenge was the reluctance of the provincial Executive to intervene. Many municipalities were faced with challenges which required support and intervention, and governance failures had been a major factor limiting the effectiveness of oversight.

Non-delegated municipalities’ fiscal landscape

The non-delegated municipalities were Nelson Mandela Bay, Buffalo City, O.R. Tambo, Mangaung, City of Ekurhuleni, City of Johannesburg, City of Tshwane, eThekwini, Msunduzi, uMhlathuze, Polokwane, City of Mbombela, Sol Plaatje, Mafikeng, Rustenburg, George and Cape Town.

Non-delegated municipalities represented 63.9% of local government (LG) expenditure budget allocations, and delegated municipalities 36.1%.The operating expenditure was 65.8% and capital expenditure 52.4%. Metropolitan municipalities occupied 2.4% of the land area, constituted 40% of SA’s population, employed 50% of the workforce and contributed 50% to the gross value added (GVA).

Early warning and monitoring system

Several early warning systems were already built into Treasury’s processes and were at their disposal as a preventative measure. These were currently under-utilised and severely under-exploited. There were a number of opportunities to identify potential financial troubles before they escalated.

Ms Ngqaleni directed Members to slide 8, figure 1, to illustrate how the system worked.

Collaboration between National Treasury and Provincial Treasuries

  • National Treasury had a centralised financial reporting system in the sphere of local government in the form of the local government database and reporting system.
  • Budget and benchmark assessment engagements were conducted for the 17 non-delegated municipalities by National Treasury and for all delegated municipalities by the Provincial Treasuries.
  • Mid-year budget and performance assessments were conducted for the 17 non-delegated municipalities by National Treasury and for all delegated municipalities by the Provincial Treasuries, which reported on the findings.
  • Provincial Treasuries published the Section 71 information monthly in terms of Section 71.6 of the MFMA, including the information from non-delegated municipalities.
  • The MEC for Finance had to submit a consolidated report 45 days after each quarter in the provincial legislatures, including the non-delegated municipalities within a province.

Findings on the practice of Section 139

  • Extensive evidence of severe financial crises in a number of municipalities.
  • Very low success rate for S139 interventions since 2004 in terms of multiple indicators due to serious problems in LG not being matched with envisaged constitutional remedies.
  • Several court cases, with applicants asking for the national government to be compelled to intervene in the municipalities as the relevant provinces had chosen not to intervene.

Conclusion

Non-delegated municipalities constituted a significant percentage of the LG expenditure budget and made substantial contributions to the national economy and growth. The oversight of the MFMA was designed to ensure that there was collaboration between the provincial and national government -- all had access to early the warning system and a responsibility for municipal support and intervention. National Treasury’s continued responsibility for non-delegated municipalities was to enable oversight and support to provinces. The major challenge was poor governance, resulting in discontinuity in the performance of municipalities and an increasing number of municipalities in financial distress and service delivery failure.

The Chairperson asked all provinces present to not repeat what National Treasury had already mentioned. They should give short summaries, as Members had already read the presentations. They needed to focus only on the challenges and issues they were currently experiencing with National Treasury. Since Gauteng and the Western Cape had indicated that there were no issues, the Committee would allow them to make short comments.

North-West briefing on non-delegated municipalities

Ms Motlalepula Rosho, MEC of Finance, North West, said that of the 22 municipalities in the province, only two were non-delegated municipalities – Mahikeng and Rustenburg. She handed over to Mr Israel Kunene, Head of the Finance Department, North West, to give the presentation.

Financial management challenges

Mr Kunene said both Rustenburg and Mahikeng local municipalities were experiencing challenges with regard to the implementation of key financial management processes. Failure to implement these processes had resulted in these municipalities experiencing:

  • The Councils adopting and implementing unfunded budgets for the 2020/21 financial year.
  • Challenges relating to the delivery of key services to the communities, such as water, and the maintenance of revenue generating assets.
  • High dependency on government grants to provide basic services and infrastructure provision.
  • Lack of capacity in financial management skills, with a reliance on consultants to perform financial management and reporting functions.
  • Increasing debt levels.

Provincial Treasury strategy to address financial management challenges.

National Treasury engaged Provincial Treasuries in different forums, such as the MFMA Coordinators’ meeting, the Technical Committee on Finance (TCF) and the Budget Council, to discuss and agree on a uniform approach to address financial management challenges within municipalities in the province. The Provincial Treasury had developed a provincial strategy to address municipal finance management challenges. The strategy was shared with National Treasury.

The following support was provided to these two non-delegated municipalities in the province to complement the support provided by National Treasury.

  • Implementation of contract management.
  • Capacity building initiatives -- training of budget and Treasury officials on financial management reforms such as the Municipal Standard Chart of Accounts (mSCOA), generally recognised accounting principles (GRAP), supply chain management (SCM) and internal audit.
  • Temporary provision of human capital support -- availing Provincial Treasury officials for secondment as Chief Financial Officers (CFOs) and Municipal Managers by the municipalities.

The Provincial and National Treasury conduct a joint session when engaging non-delegated municipalities on budget benchmarking and mid-term budget performance. The Provincial Executive had resolved to implement mandatory interventions in municipalities identified as facing a severe financial crisis, which referred mainly to the Mahikeng LM. The mandatory interventions would be implemented in terms of Section 139(5) of the Constitution, read together with Section 139 of the MFMA. The interventions would be resourced through a multi-disciplinary team comprising the Provincial Treasury, the Department of Cooperative Governance, Human Settlements and Traditional Affairs, as well as National Treasury.

The Provincial Treasury had strengthened its capacity to implement the resolution of the Provincial Executive Committee in relation to mandatory interventions. It was therefore on the basis of the above that Provincial Treasury had concluded that there was sufficient capacity to assist National Treasury in monitoring non-delegated municipalities in implementing key financial management processes.

Monitoring, support and oversight challenges

A strategy had been developed to address financial management challenges that had been identified in all the municipalities, including the non-delegated municipalities. There was minimal participation of non-delegated municipalities in the roll-out of the Provincial Strategy Programme, and the Provincial Treasury was continuously engaging the National Treasury on the need for maximum participation by non-delegated municipalities.

Requests for information from non-delegated municipalities by the Provincial Treasury remained a challenge, as they considered it a duplication given their submissions to National Treasury. Exercising monitoring and evaluation on the implementation of key financial management processes was done by National Treasury, and PT relied on information provided by the NT.

Recommendations

Notwithstanding the fact that the municipalities were non-delegated, the Provincial Treasury provided the necessary support to these municipalities in order to complement the National Treasury efforts. The Provincial Treasury was continuously working with National Treasury to address all the communication gaps that were experienced with regard to the monitoring of the non-delegated municipalities.

Free-State briefing on non-delegated municipalities

Ms Gadija Brown, MEC of Finance, Free-State, said that unfortunately the Free-State would not be able to give their presentation today as they had just completed their Departmental budget speech, and her whole team was still on the road. Her Department would provide a full presentation to the Committee’s secretariat.

She said there was only one non-delegated municipality in the Free-State, which was Mangaung municipality, and it was currently under a Section 139 intervention. The Provincial Treasury was working very well with National Treasury. There were two critical issues that needed to be addressed. One was that the memorandum of understanding (MOU) between the Treasury and COGTA needed to be finalised in terms of the delegation of duties, while the other was related to direct financial reporting, where Treasury needed to finalise the processes of reporting.

Mpumalanga briefing on non-delegated municipalities

Mr Vusi Mkhatshwa, Finance MEC, Mpumalanga, said there was only one non-delegated municipality in Mpumalanga, which was Mbombela. There were no challenges between the Provincial Treasury, Mbombela and National Treasury. He said the Head of the Treasury in Mpumalanga, Ms Gugu Mashiteng, would give an overview.

Key challenges

Ms Mashiteng said the Provincial Treasury was aware of the challenges in City of Mbombela, which were similar to those in delegated municipalities;

  • It had been observed that effective oversight, performance management and lack of consequence management by senior management and Councils continued to be a contributing factor that impeded on the effectiveness of municipalities.
  • There were weak internal control environments which impacted negatively on the audit outcomes.
  • There were challenges with regard to financial management, which contributed to a deterioration of finances.
  • The City of Mbombela was also challenged with the escalation of Eskom debt, which was as a result of its inability to collect revenue in areas were Eskom supplied electricity.
  • Eskom debt as of January 2021 was R564 million -- R417 million in capital and R62 million in interest.
  • Eskom debt had increased by R144 million in the last 12 months.

The revenue challenges had impacted negatively on their financial sustainability. Mbombela was surrounded by areas classified as deep rural, and these areas had high numbers of indigent consumers. There was an inability to budget adequately for repairs and maintenance at 8 %, and the renewal of existing assets at 40% of the capex budgets. The use of grant funding remained a big challenge -- the municipality had underspent the conditional grants for the past few years. This indicated poor planning as well as inadequate oversight on budget performance. In this regard, the Department of Cooperative Governance continuously needed to support it with accelerated plans to improve its grant spending.

There was a memorandum of understanding between the PT and COGTA for Treasury to oversee the municipal finances and for COGTA to execute their service delivery mandate. The MOU was currently under review to be in line with the National MOU between Treasury and COGTA.

The Provincial Treasury had a responsibility in terms of the MFMA to report to National Treasury on MFMA compliance to applicable local government legislation and related frameworks.

Gauteng briefing on Non-delegated municipalities

Ms Nomantu Nkomo-Ralehoko, MEC of Finance in Gauteng, said the City of Tshwane and Johannesburg were the only non-delegated municipalities. Emfuleni was once part of the non-delegated municipalities, but had been re-categorised. She handed over to Ms Nomfundo Tshabalala, Head of the Finance Department in Gauteng.

Ms Tshabalala said her presentation would be very brief and said that generally, the provincial treasury had a good relationship with the mentioned municipalities and National Treasury.

Status quo and possible challenges

The PT had a responsibility in terms of the MFMA to report to National Treasury on MFMA compliance, and compliance to applicable local government legislation and related frameworks. The Gauteng PT, however, participated in the chief financial officer (CFO) forum for non-delegated municipalities led by NT, whilst the metros’ representation at the Gauteng PT CFO forum meetings were also very good. COGTA in Gauteng worked with all the municipalities, not just with the delegated municipalities. The same may be true for SALGA.

Current engagements with metros

GRAP training was provided to all municipalities, including the metros. Internal audit workshops and training was provided to all, including metros. Operation Clean Audit engagements were attended by all municipalities. mSCOA support was provided to the metros by the National Treasury.

KwaZulu-Natal briefing on Non-delegated municipalities

Mr Farhad Cassimjee, Chief Director: Municipal Finance, Provincial Treasury, gave the presentation on behalf KZN, and referred to the following key challenges observed:

1.         MFMA reporting (monthly reports and budgets)

The incorrect use of the mSCOA and municipal counting practices by municipalities. Municipalities were not budgeting , transacting, and reporting directly from their core financial systems. Instead, they prepared their budgets and reports on Excel spreadsheets and then imported the spreadsheets into the system.

2.         UIFW expenditure

Poor expenditure control, with some budgets not locked into the system, non-compliance with SCM regulations and poor internal controls, and inadequate contract management leading to irregular expenditure.

3.         Municipal supply chain management

Shortage of staff resulting in inadequate segregation of duties, poor performance and accountability. There were also major issues around poor procurement, poor contract management and poor supplier management.

Limpopo briefing on Non-delegated municipalities

Mr Gavin Pratt, Head of Department for Finance in Limpopo, gave the presentation. He said he would be very brief, because Polokwane had only one non-delegated municipality and most of the issues had been raised by other treasuries.

The Limpopo Provincial Treasury worked with National Treasury to provide support to the Polokwane Municipality. The following key challenges were observed during the midyear engagements led by National Treasury:

  • Cash holding of less than a month may lead to financial distress if the situation was not turned around.
  • Bottlenecks persisted in the conclusion of SCM processes and delayed the commencement of infrastructure projects, and the higher level of irregular expenditure reflected the City’s failure to comply with the legal prescripts that governed the procurement of goods and services.
  • Misconduct cases were not referred to the disciplinary board for investigations of irregularities, and this was evidenced by a higher level of irregular expenditure incurred over the past years.
  • Lack of progress in resolving the historical unauthorised, irregular, fruitless and wasteful (UIFW) expenditure.
  • The deterioration of infrastructure was a cause for concern.

The Chairperson said Northern Cape was not present, and would not be presenting.

Western Cape briefing on Non-delegated municipalities

Mr Steven Kenyon, Chief Director: Local Government: Public Finance, Western Cape Provincial Treasury, gave an overview on non-delegated municipalities in the province.

He said the National and Provincial Treasuries cooperated closely through a variety of intergovernmental structures and shared information in their oversight of non-delegated municipalities;

  • National Treasury invited Provincial Treasury to all engagements they had with non-delegated municipalities in the province.
  • Provincial Treasury was also invited to national forums where non-delegated municipalities were engaged. In turn, the Provincial Treasury invited National Treasury to all provincial forums.
  • City of Cape Town and George participated actively in provincial intergovernmental relations (IGR) coordination structures.
  • The National Treasury city support programme provided additional capacity building to the City of Cape Town.

Mr Kenyon listed the challenges facing non-delegated municipalities.

For the City of Cape Town, these were:

  • Growing service delivery demands.
  • Impact of the COVID-19 pandemic (direct and indirect effect on the organisation).
  • Financial pressures due to the economic situation and the decisions needed to ensure institutional resilience.
  • Community unrest appeals over issued tenders, and contractor performance on infrastructure projects impeded from being delivered on time and within budget.
  • Misalignment of infrastructure planning and implementation between the three spheres of government.

For the George Local Municipality, these were:

  • Impact of the COVID-19 pandemic (direct and indirect effect on the organisation).
  • Financial pressures due to the economic situation.
  • Growing service delivery demands.
  • Vacancies in important positions.
  • mSCOA reporting challenges and related problems with the credibility of financial data reported.

Eastern Cape briefing on Non-delegated municipalities

Ms Bulelwa Nqadolo, Chief Director: Municipal Financial Governance, Eastern Cape Provincial Treasury, gave the presentation, and said the presentation would be very brief.

She listed the key challenges in non-delegated municipalities as:

  • Increased operating deficits.
  • Poor performance against the capital budget.
  • Declining cash and cash equivalents.
  • Underfunded mandates.
  • Budgeting and transacting on cash flow and conditional grants.

To provide structured support, annual mid-year and Integrated Development Plan (IDP)/budget engagements took place to improve performance, and the annual medium term budget policy statement was used to inform local government policy making. Provincial Treasury had also provided support to specific areas to identify the root causes of mismanagement in non-delegated municipalities.

Discussion

Mr C Brink (DA) said there was not a problem with the MFMA and its oversight functions on non-delegated municipalities, so he did not know why certain provinces had identified it as a problem. He said these were excuses, considering the information was all on the system and available to everyone, including the public. An MEC for local government advising the provincial cabinet had far more power to fix what was wrong in a mismanaged municipality than an official sitting at the provincial treasury. The mandatory interventions when a municipality ran into financial trouble constituted a failure to fulfil its executive obligations, and the province had to intervene. The problem was that provinces did not intervene or took too long to intervene, and when they did intervene, they did not do the right thing.

He said National Treasury needed to be more assertive and proactive in “basket case municipalities,” which were most of the municipalities in the Eastern Cape, North West and KZN, by recommending direct intervention to the Cabinet and the Finance Minister. National Treasury must also insist and pressure municipalities to provide credible information.

He asked about municipalities that were not paying their pension contributions over to pension funds. They deducted money from employees but failed to pay it over, which led to so many problems. At the end of the day, it was ratepayers and community members that suffered. What was National Treasury doing to fix this issue?

Ms P Xaba-Ntshaba (ANC) said the City of Mbombela did not prepare its 2018/19 financial statements in accordance with the requirements of the MFMA. The city had incurred an irregular expenditure of R208.9 million as a result of its failure to follow proper procurement procedures, and she asked what the cause of this was.

Ms H Mkhaliphi (EFF) said her question was directed at National Treasury and the Eastern Cape. She said the issue of capacity needed to be clarified by National Treasury, because in the 2018/19 financial year, Buffalo City, OR Tambo and Nelson Mandela Bay did not properly prepare and submit their financial reports for auditing. All three non-delegated municipalities had received qualified audit opinions based on uncorrected material statements, and were also among the highest contributors to irregular expenditure due to weak internal controls and no proper procurement and supply chain processes. The Auditor-General had also found that these municipalities did not have effective systems for internal revenue and revenue collection, which was in contravention of the MFMA.

Mr B Hadebe (ANC) said Rustenburg was part of the top five irregular expenditure municipalities in the country, and this was mostly because of payments made in contravention of supply chain management procedures and the PFMA. He asked whether these issues had been addressed at the municipality. What were the consequences for municipalities which passed unfunded budgets?

Mr I Groenewald (FF+) said governance failure had been the major factor hampering oversight. He asked why provincial treasuries did not take steps to intervene before municipalities failed, and why National Treasury did not take steps to implement corrective measures when Provincial Treasury failed. If the administrative model at municipalities was not working, why was National Treasury not doing something about it? He asked if National Treasury could explain the collection rate, based on their budgets and the debt incurred by municipalities. Who was making sure councils were compliant when entering into contracts?

Mr K Ceza (EFF) said the City of Cape Town and George had both incurred irregular expenditure of R620 million, and asked whether a forensic investigation would be done on this matter. There was a public protector report that the CFO and DA politicians in the George local municipality had unduly interfered in the appointment of senior officials at the municipality.

Mr Hadebe said this matter was concerning, and local government legislation required that the accounting officer take all the necessary steps to make sure those involved were made to account. He asked the Western Cape whether they had taken reasonable steps to ensure these matters were investigated and if measures were in place to ensure it would not happen again. Was there a team responsible for investigated irregular expenditure within the City of Cape Town?

Ms R Direko (ANC) said both Tshwane and Johannesburg metros had submitted their 2018/19 financial statements, but these were not in line with the PFMA. There was a lack of progress in revenue at Tshwane, and this was despite the city hiring consultants at a cost of R230 million to verify the fixed asset and liability register. She asked what these consultants were doing if the same problems which they were meant to fix persisted.

Responses

National Treasury

Mr Jan Hattingh, Chief Director: Local Government Budget Analysis, National Treasury, said Treasury set the norms and standards, and was also responsible for monitoring and oversight. The one thing that it did not do was set and approve municipal budgets -- they could only provide advice. Treasuries also did not run municipalities, and that in itself was a complication. He said issues raised by Members were difficult to deal with, and unfortunately it took one day to destroy a municipality but took years to fix it. South Africa had a very advanced and transparent budgeting process but one of the weaknesses was that the money allocated in the budget did not go to the poorest of the poor. That was why the Office of the Chief Procurement Officer (OCPO) had been established. There was also a central supplier database (CSD) which was aimed at making sure all suppliers were registered, and all spheres of government levels had to use only suppliers on this database. All these were progressive steps to fix issues around procurement and supply chain management. National Treasury would soon table a progressive Bill which would seek to intensify government’s efforts to curb irregular expenditure.

He said the issue of municipalities not paying over pension fund money was a criminal offence, and Treasury had written to municipalities asking them to explain. The biggest issue at the local government level was consequence management. Various interventions were being considered going forward, and Treasury was working with COGTA to finalise them. There was a team of advisers at Treasury which assisted provincial and local governments with capacity building, but often the advice was not taken.

Ms Ngqaleni said Mr Hattingh had given a good explanation of the main issues. She said the intervention framework was used by National Treasury to report and see whether municipalities were in financial crises, and this was usually the last response. When National Treasury intervened, it would mean that the council would get dissolved, an administrator would be appointed, and this would create two centres of power which would also have consequences politically. Provincial government interventions were usually advised, but provincial governments were reluctant to take steps.

Gauteng

Mr Owen Witbooi, Chief Director: Municipal Governance, Gauteng Department of Finance, said that from an intervention perspective, there was a financial recovery plan in place in Gauteng and there had been an improvement in reporting. Technical support had also been given to municipalities to improve financial statements and audits. There was also an action plan in place which directly addressed the issues raised in audits.

Mpumalanga

Ms Mashiteng responded that the city of Mbombela had had to amend their financial statements because of irregular expenditure that had been identified through the audit process, which the municipality had not initially disclosed. The audit process had also identified which contracts had been the cause of this expenditure. The municipality also had a problem of over-projecting their cash, and which led to the municipality being unable to fulfil all its obligations.

North West

Mr Kunene said there were technical advisors available to municipalities in the province. He could confirm that Rustenburg had developed an Unemployment Insurance Fund (UIF) deduction plan in an effort to minimise the problem from happening again. Corrective measures were being put in place to address the issue of unfunded budgets in the two municipalities.

Limpopo

Mr Pratt said the accounting system had been successfully changed in Polokwane to meet the norms and standards of National Treasury. The municipalities that were amalgamated into Polokwane were low revenue generating municipalities, and this caused financial distress within the municipality. It also had a high cost of infrastructure maintenance, and there were issues regarding roll-overs which impacted the municipality negatively.

Western Cape

Mr Kenyon said the irregular spending in the Western Cape was no different from other provinces. The Western Cape reviewed all irregular expenditure through the Medium Term Expenditure Committee (MTEC), and those structures would determine which of the spending was honest oversight, and which needed to be referred for further criminal investigation. Some of the spending identified had been referred for further investigation, and these were ongoing. Unfortunately these investigations took time, but it was important for the provincial government to follow all the processes when conducting these investigations. He said it would not be appropriate to comment on the ongoing investigations or on the Public Protector’s report, which had been handed to the Premier.

Eastern Cape

Ms Nqadolo said non-payment of pension deductions by municipalities was being followed up, and they had since started paying the money owed. There was also a payment plan in place which would stop this issue from happening again. She said there were both political and administrative problems which hindered the implementation of audit plans within non-delegated municipalities. Senior positions within these municipalities were also vacant, which contributed to the poor financial performance of these municipalities

Kwazulu-Natal

Mr Cassimjee said the AG had made severe findings on non-delegated municipalities in the province. There was an issue of internal controls, and this had been flagged by the AG for the past two financial years. There was an audit and recovery plan in place, but this had been implemented slowly because of administrative issues. The Premier had resolved to establish a service delivery war room for the municipality, and there had been improvements in their cash flow.

Concluding comments

The Chairperson said there needed to be a follow up on this meeting, because some of the questions had not been answered. She said the Western Cape, Gauteng and KwaZulu-Natal had been asked specific questions which they had failed to answer comprehensively. She asked them to submit written responses to the Committee’s secretariat within a week.

She said Mpumalanga had mentioned amalgamation, which was another matter which needed to be discussed by the Committee.

The Chairperson thanked the National and Provincial Treasuries for their presentations. She said the meeting had provided more clarity on the notion of non-delegated municipalities, and had equipped the Committee with the necessary information needed to exercise effective oversight on them.

The meeting was adjourned.

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