2019/20 MFMA audit outcomes & Covid 19 municipal expenditure

Standing Committee on Auditor General

22 June 2021
Chairperson: Mr S Somyo (ANC); Mr M Hlengwa (IFP)
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Meeting Summary

Video: Joint Meeting: Standing Committee on Public Accounts and Standing Committee on the Auditor-General

The Auditor-General briefed three Committees on the 2019/20 Municipal Finance Management Act (MFMA) audit outcomes and the Covid-19 municipal expenditure. She noted with concern that there was an over-reliance on consultants as municipalities had spent R1 billion on them. She named all the municipalities with disclaimed audit opinions. The audit report noted there was serious weakness in financial reporting, unreliable performance reporting, widespread non-compliance with legislation and that poor audit outcomes remained prevalent. Local government finances continued to worsen. There was high unauthorised expenditure of R14.61 billion and 30% of municipalities ended the year with a deficit.

Committee members said the report revealed grand theft, grand corruption and grand mismanagement. Municipalities used consultants due to lack of skills yet there were highly paid municipal staff. Something needed to be done. The Auditor-General’s new powers allowed for certificates of debt and referrals for investigation. To what extent had these matters been referred to law enforcement agencies for investigation? How many certificates of debt had been issued and how much money recovered? How many municipal managers were held accountable?

Members said that lack of accountability for mismanagement of public funds was the single biggest problem in government. People got away with it. Unless something significant was done as a matter of urgency about financial management, the country was finished. If Covid-19 was a crisis in South Africa then corruption was worse. They asked if the AG can directly open criminal cases and the relevant parliamentary committee oversee this. One of the major root causes the AG had raised was the appointment of staff who did not have the skills and could not do the job. The appointment of incompetent people had plagued the financial outcomes of municipalities. Was there a commitment by the relevant authorities in those municipalities to appoint competent people?

The three Committee Chairpersons proposed a roadmap to deal with the challenges presented in the report. Institutions from the legislative, executive and accounting spheres needed to work collaboratively to improve the administration within municipalities as well as examine the political forces at play.

Meeting report

Mr S Somyo (ANC; Chairperson of Standing Committee on the Auditor-​General) noted that Standing Committee on Public Accounts (SCOPA) and Portfolio Committee on Cooperative Governance and Traditional Affairs (COGTA) members were also present in the virtual meeting to receive the 2019/20 audit outcomes for local government for 2019/20. The Auditor-General would deliver the presentation. Apologies were noted from the COGTA Chairperson due to medical concerns. He acknowledged that Members had to meet during the constituency period when they were supposed to be performing other duties and thanked them.

Municipal Finance Management Act (MFMA) 2019/20 audits & Covid-19 expenditure
Ms Tsakani Maluleke, Auditor-General, said these audits were conducted under the most extraordinary circumstances during the pandemic lockdown. The report dealt with an analysis of 200 municipalities that the Auditor-General had completed by mid-April. The Auditor-General had been able to complete more audits since then. She detailed the over-reliance on consultants to address capacity and skills problems within municipalities and named all the municipalities with disclaimed audit opinions. These were municipalities who could not provide the Auditor-General with evidence for most the expenditure in the financial statements. The audit report revealed that there was unreliable performance reporting, widespread non-compliance with legislation and that poor audit outcomes remained prevalent. She also detailed the Covid-19 relief funding to local government and the material irregularities.

Financial Health and Reporting
Local government finances continue to worsen.
• Over a quarter (27%) significant doubt on ability to continue as going concern.
• Municipal debtors not recoverable (average 63%) resulting in creditors greater than available cash at
year end for almost half of municipalities (49%) and average creditor payment period of 209 days.
• Large portion (46%) of estimated recoverable revenue and equitable share used for salaries and council remuneration only 2% of expenditure towards maintenance.
• High unauthorised expenditure (R14,61 billion) and 30% ended year with a deficit.
• Serious weakness in financial reporting.

Chairperson Somyo said that the presentation was indeed a mouthful. The presentation detailed three levels that the Committee needed to look at. The first was the implications of the audit findings for expenditure in terms of the records kept at municipal level. The second area was the expenditure on the Covid allocation. The total amount set aside and paid for local government was R20 billion. Of that there was an allocation of R16.7 billion. Thirdly, the report detailed the material irregularities which affected 57 municipalities.

Mr N Singh (IFP) said he was glad the three Committees were part of this meeting but would have liked the Finance Standing Committee present as well as it had a responsibility to play in the overall management of finances in the country. He thanked the Auditor-General for the report. The report revealed grand theft, grand corruption and grand mismanagement. This was a financial report for a year that ended almost one year ago on 30 June 2020. This report was déjà vu. It was something that Members of Parliament had been hearing over and over and over again. It sounded like a stuck record of grand mismanagement within local government. The Committees need to ask what they were going to do to turn the situation around. Otherwise, every year the Auditor-General would give the same report and point out a few successes. That was not going to help the country and it was not going to help taxpayers. Government needed to develop and train a cadre of financial officers that could be deployed to municipalities and government departments across the country irrespective of their political affiliation.

Mr Singh noted the Auditor-General had reported that local government had spent R1 billion on consultants. 68% of the use of consultants was due to lack of skills within these municipalities. It was a deplorable situation when there were a lack of skills but highly paid people in these municipalities. Government needed to do something. It needed to develop this cadre force. There was the School of Government. There was the Office of the Accountant General. That Office was supposed to manage and create capacity. There was supposed to be the building of accounting services and accounting units. Was it functioning? Who did it report to? This was a ‘people problem’ that government could resolve. Hopefully, three to four years down the line the Committees could report that it was able to achieve something by turning around these municipalities by putting competent people in place. The Auditor-General now had new powers by issuing certificates of debt and making referrals. To what extent had these matters been referred to the Hawks, the police or Special Investigating Unit (SIU) for investigation? It was common knowledge, for centuries, that countries that produced arms would deliberately create conflict in other countries so they could have a market for their arms. He believed that people were deliberately creating chaos within the financial management sphere so that people could be employed. If this situation was not arrested then MPs 50 years from now will be dealing with the same terrible reports. He appealed that the Committees plan to arresting this situation in these municipalities in the short, medium and long-term.

Mr H Hoosen (DA) thanked the Auditor-General for the very detailed and depressing report. He was not surprised by the state of finances in local municipalities. He was a little hopeful that perhaps the situation would change but unfortunately it got worse every single year without fail. What was more concerning was that very few people were being held accountable for this situation. The lack of accountability when people mismanaged public funds was the single biggest problem in government. People simply did as they pleased and they simply got away with it. The Committees had listened to the report for more than an hour and a half. It was wave after wave of corruption, crookery and chaos in municipalities. There was so little hope that Members got from these reports. That was the one thing that he wanted to highlight in this meeting. Unless there was something significant done as a matter of urgency in financial management, the country was going to be finished. If Covid was a crisis in South Africa then corruption was ten times worse because that would kill more people than Covid does.

There are high levels of unemployment and poverty and the very little resources available were being stolen by those looking after public funds. That was going to destroy the country worse than Covid would. Unless something significant was done at a senior government level this was going to get worse. He lamented that not a single Minister or MEC took an active interest to attend this meeting and discuss the concerning state of affairs. Even the Ministers did not care. If the Ministers cared then the country would be in a better situation than it was in today. All of the promises the Ministers made about taking action meant nothing. It was all just cheap words.

The next report from the Auditor-General was sure to be worse. At the time when South Africans needed government and civil servants the most, during Covid, that was the time that the crooks started working. More money was stolen during this period than ever before. It was a very depressing state of affairs. The single biggest problem in the country at local government, provincial and national government level, was the lack of accountability when people do wrong.

The Office of the Auditor-General was the only sense of hope the country had. None of the Ministers gave any inspiration that they were serious about putting the crooks in jail rather than putting them into Parliament. The AG mentioned that there were occasions where Auditor-General South Africa (AGSA) issued a certificate of debt because corrective action had not been taken. He requested a report on how many certificates of debt had been issued and how much of that money had been recovered. How many of the municipal managers were actually held accountable? That was a tool that the AG was using to advantage. Unless those monies were recovered and people were held accountable, the situation was still going to get worse. He asked for information on that matter.

Ms H Mkhaliphi (EFF) agreed with both Members. She was not surprised by the discouraging report and by the look of things it was going to get worse especially for the poorest of the poor who was expecting the leadership, especially the ruling party, to protect the people on the ground.

On 3 June Members received media reports that one of the AGSA managers was arrested for fraudulent activity. This information that a AGSA manager had acted unethically was very disturbing. This was not the AG’s fault who had condemned what the general manager did but it was discouraging because Members had high hopes for the AG’s Office. The COGTA Portfolio Committee had relied extensively on the audit reports to direct its municipal oversight actions.

Poor audit outcomes remain prevalent despite the increase in the number of clean audits and the drastic reduction of disclaimers compared to the previous financial year. Not much could be read into the apparent improvements because 22% of the audits were still outstanding.

She asked for specific recommendations from the AG to Parliament on the key findings on Covid-19 relief funding to local government. She referred to the legislative intervention in the form of the Intergovernmental, Monitoring, Support and Intervention Bill which had been in the pipeline since the Fourth Parliament. Members also had high hopes for the Public Audit Act. In this situation, which was very demoralising, looting and corruption was the order of the day and it was even worse during the pandemic. What were the AG recommendations to curb this during these trying times? She referred to the Section 106 notice to the municipality [to provide the MEC with information about malpractice]. People at a municipality level covered up unaccounted for and wasteful expenditure. The municipal council would pass a special resolution to cover up that expenditure. Did the AG have a mandate to deal with Section 106?

Ms N Hlonyana (EFF) said that there were problems in the past where auditors from the AG’s Office were threatened. Has the situation improved? Were there still situations where auditors were threatened when dealing with auditees? The report was not only worrying but very depressing. If the situation continued like this in the municipalities which were the service delivery arm that meant the people were still going to suffer a lot. She raised the consultants that municipalities had spent R1 billion on. After spending R1 billion, municipalities still had poor quality financial statements. Was it possible for the consultants to be named and shamed so the country knew who was looting?

She was worried about Chris Hani District Municipality. There were municipalities which were under administration by the provincial government yet they still received disclaimer audit opinions which made absolutely no sense. If these municipalities were run by the provinces, they should be in a better state than previously. That matter needed to be looked into because it meant the provincial governments assisting these municipalities were not doing a good job.

Ms Hlonyana noted that the AG spoke about the accounting discipline that was not followed at all. The lack of credible financial statements was worrying. That would affect the credibility of budgets. It meant that service delivery was something that the South African people would not see in their lifetime. More disasters like Covid-19 were still to come. There would be man-made and natural disasters. With Covid, there was unbelievable looting. With another disaster, how was government going to ensure that looting on a grand scale does not recur but the people are actually assisted?

Ms V Mente (EFF) asked if there a remedy for this situation. Parliament relied on the Auditor-General to be the one policing the expenditure of appropriations by Parliament. There needed to be proper measures in place to police the expenditure of funds. She noted the Auditor-General had identified several criminal acts for referral. She did not think it was correct to leave it in the hands of those who would not do anything about it. A had mayor bought a car with money which was meant for Covid. That was criminal activity. A person was employed in an office in charge of payroll but that person had never stepped one foot in that office. That was a criminal offence. It was worse when an ineligible company was hired to render services for government. That was a criminal offence. She was very bothered about these incidents. The AG should ensure those municipalities had opened a criminal offence against those people. Was there not a way that the AG could directly open those criminal cases? Or could the AG bring those criminal cases to the relevant parliament committee to do something about it? It was not correct that those matters were interrogated a year later when those people had already resigned. Those people were nowhere to be found and did not account. It was very frustrating. What actions had the AG taken in such municipalities? The report was a very bad report yet the Committees did not see serious actions taken against these municipalities. How far was it in dealing with these matters?

Mr A Lees (DA) said that that the audit report was like a rerun of the most unpopular movie. The same thing was heard year after year. One of the major concerns the AG had raised was the appointment of staff who did not have the requisite skills and therefore could not do the job. Then there was an attempt to bring in consultants to fix this after the fact. This was not new. The appointment of people who were incompetent and unable to do the job had bedevilled the financial outcomes of municipalities for over a decade. Was there a commitment by the relevant authorities in those municipalities to change the way of doing business and to appoint competent and skilled people? It was encouraging to see that there were certain areas, such as the Western Cape, where there was continued good and improved performances. A clean audit was not something that should be discredited as something impossible to achieve. The report indicated that there was significant provincial support for municipalities. Was that not the case in the other provinces? Or was it something that the Auditor-General had not really looked at?

Mr G Mpumza (ANC) said the Auditor-General noted the accounting discipline was absent or weak in the local government space. Performance planning and reporting was unreliable and weak. That indicated a challenge in skills. There was procurement and contract management challenges. These were important disciplines that were absent and impacting on the control environment. The discipline of record keeping was absent in some municipalities. This report indicated that the discipline of accountability and consequence management were half-heartedly applied. How effective was the oversight function performed by the municipal committees over the administration and the executive in the municipal space? To what extent was the Auditor-General’s report speaking to the oversight function of the Committees of Parliament? How were provinces supporting municipalities to ensure that the capabilities and these disciplines were institutionalised in the municipalities?

This report indicated that municipalities relying on consultants for the compilation of financial statements did not translate to the institutionalisation of improved audit outcomes. The use of consultants did not leave any skills in the municipalities. That meant that municipalities would continue to outsource without building internal capability in compiling financial statements. This was a matter that should be looked at going forward. How would municipalities be nudged to moved away from reliance on consultants and rely instead on their internal capabilities to perform that function? To what extent were the improvements in the 2019/20 audit outcomes reliable given that a 22% of audits were outstanding? What specific recommendation did the Auditor-General have for Parliament on the findings about the Covid-19 relief fund to local government? Was there a way of shortening the material irregularity process to ensure that it is responsive to the high staff turnover of the local sphere of government?

Ms N Tolashe (ANC) said the Auditor-General presented the report in the hopes of finding a solution to take the country forward. This report indicated the country was burning. She wanted to hear more from the three Chairpersons on how the Committees could take this report to the President. As a person committed to fighting corruption, he would want to know more so that together with his Cabinet they can take this matter a bit more seriously. She was not suggesting that he did not take it seriously but this was a most serious report. After this report, it felt as if the country was about to collapse, if it had not collapsed already.

Members needed to ensure that the President was aware of this report. She asked the AG to tell the Members what else they can do in assisting her and her team in ensuring the turnaround strategy was effective as the report suggested that very little or nothing was working. There needed to be more solutions other than to just complain. The SCOPA Committee knew that it would go to the SIU to find the actual ‘warm bodies’ who had committed crimes. Led by the AG, the Committees needed to get into step very quickly so that more solutions could be found. Those who were found to be on the wrong side of the law needed to be penalised. What else could Parliament do in a very short space of time? A long-term strategy would be developed using all the tools in place but something needed to be done very quickly. What did the AG and her team think could be done in the short-term?

At some point national government may place a province under a Section 100 intervention. Limpopo had been the first. Was the Section 100 intervention giving positive financial outcomes? At present, North West was reported as having the worst municipal audit outcomes. Was there a way Parliament could twin the North West intervention with a turnaround of municipal finances? She feared that the intervention tool was used which sometimes did not work or worked separately without talking to turnaround of finances. She wanted to see that when there was intervention in a province that every changed. Provinces needed to learn from each other to ensure that the interventions were informed by experience on the ground. There was the District Development Model (DDM). The AG spoke about those municipalities in the DDM pilot that were part of this audit mess. How could Parliament ensure that they intervene early? Something should be done as soon as possible for those that were part of the DDM pilot.

What else could Parliament do? Was there legislation that could be fast tracked? Those who were found to do wrong had to be punished. The sooner that was done the better. She agreed with Mr Singh about the production of capable people. However, in all municipalities there were qualified CFOs but there was this tendency of creating jobs for people outside the office in the name of outsourcing. The laws that governed those offices needed to be implemented. If a CFO who knew the role and responsibilities, took the institution and donated it to private companies then that was corruption. How best could the country turn the corner in ensuring a better outcome? This report was not a good report at all. It was depressing. She appreciated the work done by the Auditor-General and her team.

Mr M Hlengwa (IFP), SCOPA Chairperson, asked the AG to propose a roadmap on how the Committees should deal with these matters after her response to these questions.

Mr Somyo, SCoAG Chairperson, said that a number of areas had been covered by the Members and he handed over to the Auditor-General to respond to the questions.

Auditor-General response
Auditor-General Maluleke replied about the progress made by the Office implementing its new powers. She had referred a few matters to the Hawks, to National Treasury and to SIU on specific items. At the next interaction, she would go through the full report on these matters and give the Committees a full account on how the Office of the Auditor-General implemented these powers and provide the status on each of the matters.

This was the second phase of implementation of the Public Audit Amendment Act. The AG started with nine municipalities and to get to 57 was a significant jump. The AG was still in the process of finalising its engagements with the bodies to whom it had referred matters. The AG was also finalising the analysis of the responses from the accounting officers because that was the way the instrument worked. It required the AG to notify the accounting officer; assess the nature of the response of the accounting officer; and then decide on the appropriate course of action. The AG would compile the report, as was required by law, and have a full engagement with SCoAG on the specific status of each of the matters.

On discussions with the Executive, she wanted to provide the Committee with some comfort that the Auditor-General did share this report with the Finance and COGTA Ministers and with the Presidency. That had happened. The Executive was privy to this report and the Auditor-General had had formal engagements with them.

The individual that was arrested was a manager in one of the support service functions. He joined the Office of the Auditor-General in 2010 with what was believed to be an authentic South African identification document. The Hawks revealed, after the matter was made public, that he had been charged as the identification document was fraudulent. The Office has undertaken to look at its controls in understanding how that could have happened. This was a matter that went back over ten years. In 2011 the Office of the Auditor-General did tighten controls on the verification of the people it employed. The Office had indicated to its staff that it would be undertaking a full review and a verification of everybody who was currently employed.

The Auditor-General discussed the instances where the AG Office had hired non-South Africans. The Office employed over 3500 people on a permanent basis – 23 of those people were non-South Africans. Two of them were employed as non-South Africans on the basis of visas and work permits issued in compliance with the Immigration Act. For those two individuals the AG tracked that those permits remained valid. They were brought on board at the time the AG took on audits related to Nkonki when the AG terminated the Nkonki mandate. Those individuals were employed at Nkonki and the AG took them on at that point. The other 21 individuals who were non-South Africans either have permanent residence or are naturalised South Africans in that they have been here since before 1994. If anyone committed fraud it was an indication that ‘none of us walks among angels’. The AG had to be vigilant in applying consequences when people had done wrong. The AG had cooperated with the Hawks as it was important that there were consequences for wrong doing.

The Auditor-General discussed the recommendations on the Covid-19 Relief Fund. Much of it was about going back to the notion of internal controls and preventative controls. This would allow an organisation to detect if things were going wrong. It could prevent this from happening. It could detect them and then continue to improve controls. For as long as there were weaknesses in the internal control environment then those weaknesses would be exploited. The AG could think of no other recommendation on this matter other than to strengthen controls, to ensure that they were maintained at the appropriate level and continually strengthened.

The Auditor-General replied about whether AGSA could act when there were interventions by provincial and national government. All the various bodies had to play a role and collaborate as best as possible so that a functioning local government sphere could be achieved. She noted a number of Members had asked for recommendations on what should happen going forward. She said it was the type of leadership that was appointed and deployed to specific roles that was going to define how an institution ran. That leadership would employ competent people, ensure they were given space to do their work and hold them accountable when they did not do their work. If consultants were hired and there was no effective spend of resources, that leadership would hold them accountable and ensure that that was avoided in the future. It was that leadership who would set the tone of what was appropriate and inappropriate. Without dealing with the quality of leadership in charge of institutions, government was not going to get this situation right. That was the view of the AG. That was why the report concluded with a call for leadership that was going to operate in a manner consistent with the principles of Section 195 of the Constitution.

The Auditor-General replied that there had not been incidents of threats to the AGSA staff in the recent period. Over the past year the limitations of lockdown have had the benefit of protecting the staff from people intimidating them. AGSA was not yet complacent. The threat may still be in the environment. It was fortunate that it did not experience anything worth mentioning in this meeting. There was no bad news but the AG would remain vigilant.

If AGSA named and shamed these consultants this time around, next year there would be new consultants venturing into the same space with the same sort of behaviour. She was not saying it was a bad thing to name and shame. She believed that the critical thing was to know who was paying and appointing these consultants and on what basis. It was the people entrusted with acting as stewards over the public purse that needed to be behaving appropriately.

The AG would share a report with SCOAG on how it dealt with its new powers. She responded to whether AGSA could report matters directly to law enforcement. Matters were referred to the Fusion Centre and then the relevant bodies within the Fusion Centre would take on these matters in a manner consistent with their mandate. The AG would see if this way of working was actually effective. If it was then the AG would carry on with it; if it needed to be adjusted then it would be. The AG was in the process of evaluating the effectiveness of that approach. She suspected that it might even be easier than the AG directly opening criminal cases as an outcome of an audit.

On whether there would be action in the appointment of competent municipal staff, Auditor-General Maluleke replied that in many instances she raised this topic and there were leaders who understood her message. It remained the view of the AG that the appointment of staff up to the task in the areas they were appointed needed to be a feature across government. There were other provinces offering support to municipalities – it was not just the Western Cape that was offering support to municipalities within its province. There were other provinces that did that. The question was about how effective, how consistent that support was. It was an ongoing process. The AG was seized with putting in controls and discipline that were consistent. Limpopo was a province where the provincial leadership had been unequivocal in a commitment to ensuring there were improvements and they had set about doing that. The Gauteng Province similarly offered support to their municipalities on the review of financial statements and were driving improvements in that area. The AG commended the Western Cape because it had been able to offer support on a consistent basis and the impact was visible for all to see.

On Mr Mpumza’s comments about the role of oversight, much of the oversight would be ensuring that controls were institutionalised at each level. It was one thing to have effective support at the level of the province. It was a different thing to ensure that at the point of transactions within the municipality there were appropriate controls institutionalised and monitored on a regular basis.

On whether there was a way to shorten the Material Irregularity process, that was a set of reflections that the AGSA would want to engage SCOAG on once it had completed its own analysis. If there were instances where AGSA needed to shape differently the regulations that underpin the Public Audit Act, then the AG would engage with SCOAG on that. This was the first time the Act was implemented on a bigger range of municipalities so the AG would have to look at the lessons learned and what it needed to fine-tune going forward.

She replied that the Limpopo Section 100 intervention was quite a while ago. AGSA did provide some indication of what it saw working and what it thought could be fixed so there was a bigger impact from interventions. The current North West Section 100 intervention was being reflected on in Parliament. The different bodies involved needed to figure out how it compared notes – looking at the work Parliament does, the work the province does, the work that the National Executive is seized with specifically National Treasury and COGTA, and the work the Auditor-General did. Together a set of responses could be formulated. That would be part of the roadmap that Mr Hlengwa had asked for. Much of these issues were dependent on the leadership. Even if the Office was effective in implementing the Public Audit Act and fine tuning the instrument and ensuring that it worked with the law enforcement agencies, there needed to be a step change that happened. There needed to be a change in how public finances were managed and how performance was planned, monitored, reported on. There needed to be a change in how compliance happens and how effective delivery happened. All of that would rest with the nature of the leadership and how they focus on building capability in those institutions. The AG’s instrument was one that was complementary. More needed to be done at the crux of the issue.

Chairperson Somyo thanked the Auditor-General for her responses. He hoped Members had taken note of the areas she had covered. The intention of inviting a number of Committees as part of this presentation was to afford the Committees an opportunity to engage with the overall audit outcome. This did not negate each Committee's independent right to deal with these matters.

Mr Singh noted that the report was presented to Parliament and to the Executive. To what extent was this report presented to the Director General or the person responsible for local government in COGTA, to National Treasury, to the Office of the Accountant General? Somebody needed to facilitate that meeting. Collectively a technical report needed to be made on the way forward which should be shared with the Committees so something could be done about this unhealthy situation.

Chairperson Somyo said that that question should be directed to the Members of Parliament. How have the platforms which were both within the Executive and accounting parameters received and implemented the recommendations for audit improvement? Municipalities could not be made solely accountable. They were accountable for the bulk of what was happening but at the same time there were other institutions which coordinate and oversee such operations. The Committees need to ensure that these institutions were consciously aware that this would come back and haunt them. Mr Singh’s comments could be directed to Parliament. What was it Parliament could do to make this matter remain on their radar screen for local government? He handed over to Mr Hlengwa who wanted to make a proposal.

Mr Hlengwa, Co-Chairperson, said that as much as Members may be lamenting that this was a repeat story heard over years, it was necessary to thank the AG for the persistence and consistency in presenting this narrative and these findings. This was indicative of a failure and a collapse of the necessary framework by the municipalities in their audit action plans. The legislative sector needed to take a fair amount of responsibility and accountability on this. These repeat findings were happening on Members’ watch. Parliament needed to respond to these matters in a far more constructive and sustainable manner as opposed to shot-gun interventions and oversight.

The roadmap he was proposing was that the three Committees meet to target the interventions and be more specific in how it wanted these done. There was a necessity, particularly in the worst performing provinces, that Parliament engage with the provincial legislature SCOPA. Ordinarily those Committees were the first point of call for oversight. If the province was instituting a Section 139 intervention then the provincial legislature committee responsible for COGTA should be hands-on. Parliament needed to relook at the legislative oversight modalities which were currently at play to turn this situation around.

When the Committees had met with the municipalities in 2019 it had begun something similar but it was interrupted by Covid. It could not be that the Committees' lamentations ended here. The legislative sector needed to say what it would do. The stakeholder engagement on these matters had to be a very serious consideration. The Committee might be meeting with SALGA, AGSA, SIU, the Hawks, NPA and the relevant Department. The one piece of the puzzle the Committee was not interacting with was the political leadership. The Committees needed to find a way of interacting with political parties. They had been entrusted with the public purse. They were a key and integral stakeholder in the management of these municipalities. There had been a failure to separate municipality and political party. This prevailed largely across the spectrum. It was an area that had not been looked at and this might be an oversight on the part of the legislature. There needed to be constructive ways in dealing with this. Attention needed to be drawn to the responsibility of governance which was on their shoulders and the impact this had on the financial management. Something had to give. He did not have the creativity now how this could be done, but this could not proceed without that kind of intervention.

In the roadmap, moving forward, the reporting that the Committee would require from the AG on this needed to run parallel with the matters referred to law enforcement agencies. Those agencies need to indicate to the Committees how they are processing these matters. Otherwise, the AG would not be empowered if the referrals were not processed. The law enforcement agencies were key to this as well. The Fusion Centre and Anti-Corruption Task Team needed to provide the Committees with updates on the local government space. Operation modalities need to be developed. This was a matter SCOPA had raised with COGTA as well.

For Section 139 interventions into a municipality, there was the absence of a framework to guide and gauge whether an intervention had been successful and how long an intervention should continue. There was a vacuum there and that was problematic. There were municipalities which were not performing well, financially, and therefore unable to deliver services but there was no intervention. It had become a discretionary tool as opposed to one which was based on principles and legislative guidance was needed on how it was dealt with.

The Committees needed to, as a matter of urgency, deal with the municipalities which had disclaimers and then move on to those with adverse opinions. The chaos that defined municipalities with disclaimers continued to thrive as there was no means of gauging the extent of the problem except to say that they were disclaimed. It became a sea of chaos. The three Committees needed to collaborate and find time in their schedules to work with these municipalities.

He noted that these were the 2019/20 audit findings from a year ago. The current financial year 2020/21 was ending in two weeks’ time. The Committees might be shooting in the dark but the audit outcomes required them to act. He suggested that the Committees start with the disclaimers. He thanked the AG for the thorough work. Parliament owed it to this Chapter 9 institution to respond positively to the findings. It needed to move beyond the lamentations so that the situation was actually turned around.

Chairperson Somyo thanked Members for their comments. He noted the comments made by Mr Singh about the other institutions within the accounting sphere that ought to be included such as the Accountant General. These proposals needed to be sifted properly. The research units for the all the Committees ought to bring heads together and look at areas which need thorough actioning. While the Committees were looking painstakingly into these hard matters, it needed to be appreciated that there were 27 municipalities who were doing very well facing a similar environment. The AG had highlighted how these municipalities were able to thrive in similar environments to other municipalities who were not performing well and had disclaimers. The Committees needed to take that environment into consideration. There were municipalities in various provinces which have consistently maintained the best audit performance. A statement should be made about that while the Committees also focus on those municipalities which did badly. The Committees were talking about rands and cents. AGSA had struggled to find appropriate accounting standards in these municipalities. This report came at the sunset of the local government term 2016-2021. Local government elections were very soon.

Parliament needed to give itself time to look into these things and to include the NCOP platform. That platform was created about a year or two ago where people had come together to discuss what was happening at local government level with the intention to improve functionality. The Committees needed to give itself time to learn from those sorts of interactions. He noted the comments made by Mr Hlengwa about matters that related to the political platform. That was critical as well. At times the Committees ventured into critique on administrative matters which were more of a political nature. The good audit outcomes were encouraged by stability. That stability was created by political interests. In the majority of instances, political interests were at play. The Committees’ sense of an oversight model would stick more to the administrative platform rather than looking at the political connotations in those institutions. More than anything else politics was the factor at play that bedevils the functionality in a local government space. In the end political influences could destroy whatever administrative capacity was there.

It was clear after hearing the comments and proposals by Members that these Committees needed to come together and fine tune the way forward. It was a matter of urgency. What would come in local government's future also needed to be acknowledged. He hoped he had the ear of the Committee Chairpersons. The Committees needed to look at how it would move forward in convening a session which would provide an outcome on a programme approach on how this report could assist the Committees in going forward with local government. The future ought to be brighter and that was something that needed to be worked towards. He thanked the AG for the report and Members for their inputs and their interest to ensure that local government functioned appropriately based on the investments made by the national fiscus. Local government needed to provide effective services to the population.

The meeting was adjourned.

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