The Committee convened on a virtual platform to be briefed by the Auditor-General and the Audit Committee on audit outcome of the Annual Report of the Department of Local Government for the 2020/21 financial year – this took place in a closed session. The Committee then engaged with the Western Cape Department of Local Government.
During the discussion, Members asked questions on a wide range of subjects. One question related to the Department’s oversight role in allocating grants and baselines to municipalities and seeing how they are spent.
Members also asked if the Department had a health and safety unit. Who is running that? Is it part of the corporate services? Who is reporting to whom? What is the budget? Is it a standalone unit? Where does it fall in health and safety, given the current environment that COVID-19 that created?
The Committee asked the Department to also explain with clarity why a provincial procurement policy has not been developed and implemented. If there are any challenges in this regard, what are these challenges? Has local government made any comments on that draft procurement bill, because that bill will not only repeal the Municipal Finance Management Act, but it is not putting in any alternative as to what will happen once it is repealed, and similarly all other preferential procurement methods?
Members acknowledged the existence of the Joint District and Metro Approach policy, while recognising that there is also a district development model (DDM) by national government. They asked for a clear distinction between these two models. What is the harmonisation and policy coherence risk when the Department is implementing a joint district model?
Members noted that the Department reported that lower compensation of employees was due to the delays and challenges of filling of the capacity funded from earmarked funding and resignation of officials within the Department. Given that this is a capacity constraint, what would the total amount be in order to deal with that capacity constraint? They also asked how the Auditor-General audits transfer payments and the expenditure thereof.
The Minister congratulated the Department on the job well done, getting eight consecutive audit outcomes. The provincial ministry is very proud. Although there are a lot of challenges going forward, the team is up to tackling these challenges.
[The beginning of the meeting was closed to the public as the Committee met with the Auditor-General]
When the meeting reopened, the Chairperson asked for preliminary remarks from the Minister and the Head of Department before proceeding with the session.
The Western Cape Minister of Local Government, Mr Anton Bredell, stated that they had a good year, considering the difficulties imposed by COVID-19. He asked that they take questions after the presentation.
Department of Local Government Head of Department, Mr Graham Paulse, was in agreement with the direction of the Minister.
Discussion: Part C of Annual Report
The Chairperson asked for the Members to raise questions on Part C of the presentation.
Ms L Maseko (DA) drew the Committee’s attention to page 81 of the Internal Audit and Audit Committee presentation. Of the meetings that have been attended by the Audit Committee members, Mr Muhammed attended one, and Ms Crystal attended two. She wanted to know why it seems that there is only minimum attendance to the Committee.
Ms N Nkondlo (ANC) asked a clarity-seeking question: when one looks at one of the functions of the Department to allocate a conduit for grants to some of the municipalities, is it not their responsibility to monitor that those grants are fully spent and, where they are not, what the response would be for such underspending? Is there not a risk in as far as delivery is concerned?
The Chairperson asked her to indicate part of the report she was referring to, because it seemed to have financial connotations.
Ms Nkondlo clarified that her question was based on emerging risk. She referred to page 82 for her next question regarding the two reports on the corporate government baseline, and the water risk governance. She noted that those two assignments have been completed and are ready for implementation. Can the reports of the outcomes of those assignments be shared with the Committee?
With regards to the health and safety, does the Department have a unit that exists on the matters that they have worked on, because there is an indication that they have done some health and safety assessments and they are implementing particular things. Who is running that? Is it part of the corporate services? Who is reporting to whom? What is the budget? Is it a standalone unit? Where does it fall in health and safety, given the current environment that COVID-19 that created?
On the BBBE One, she was trying to understand why the Department indicated there that, based on the interim strategy, they are not implementing, as the Department, parts of the Preferential Procurement Policy Framework (PPPFR). She asked that, as per the requirement of the PPE Act, if there are any of the provisions that a department or state entity will deviate, such an authorisation, they must be sought from the Minister of Trade and Industry. Does the Department have such authorisation? Can such be provided to the Committee?
Ms N Makamba-Botya (EFF) expanded on Ms Nkondlo’s question regarding page 86 of the annual report that outlines the triple B compliance performance. When it comes to the developing and implementing of provincial procurement policy, the Department responded with a big note, but the reasons given by the Department after that are very vague, The Department must also explain with clarity why a provincial procurement policy has not been developed and implemented. If there are any challenges in this regard, what are these challenges?
Mr D America (DA) stated that his question related to Part E so he would be levelling his hand.
Mr Paulse (HOD) responded on the question of the spending of the grants. He explained that the various directors are responsible for monitoring the grant. The Department goes through a due diligence process for a large part of the grants. In other words, it does proper assessments in terms of the support required. They have a constitutional mandate to provide support in a broader capacity of municipalities. Based on their engagement during the course of the year, they work with municipalities to identify the areas where support is required; this follows a due diligence process in terms of business plans being submitted, and further engagements with the municipality. There is a committee established within the Department, which does due diligence based on certain criteria. Based on that, there is a submission to him as the accounting officer; given the due diligence process, he determines whether he signs and approves those transfers to certain municipalities, based on the support required and the needs. When that process is concluded, that money flows into the adjustment budget process, and in the annual financial year it will flow to the municipalities and the provincial adjustment budget. Municipalities have more or less than six months to spend that money – that is from November until June. Although they go through the process of procurement to get service providers or provide some of the support, in some instances there is not adequate time to spend that money in six months; that is why there is a rollover request, and they then consider the rollover request. Part of the move is to say they are the main budget but they have already given an indication of the main budget, so they can have a longer period to spend the money. They have already got it right in certain areas where they transfer the money ahead of time. If they transfer the money now, it becomes applicable to their financial year. For instance, if they talk about next year, it becomes available to them on 01 July 2022.
They are trying to synchronise the processes between themselves, the municipality and the provincial municipal year. When in IGR (inter-governmental relations) meetings and engagements, they have numerous requests from municipalities to see to what extent they can align their financial years, to ensure that the budgets are actually spent. They are also considering whether they can make the allocation over the mtech instead of a single year; so, it is not necessary for municipalities to come back and to apply for a rollover. That has been subsequently stopped to say that it cannot go over a medium-term expenditure framework; it should go over an annual basis. They are trying to innovate around this so that they can minimise the underspending and the need for application for rollover in municipalities.
Ms Bhavana Singh, CFO, responded that the unit that is responsible for the occupational health and safety is within the finance directorate, and it is within their support services unit or sub-directorate. They do a lot of the occupational health and safety related to the engagements within the Department as well as within the offices of the Department. The compliance related to the COVID-19 regulations is also driven by that unit, together with the COVID-19 Compliance Committee; so that is a joint responsibility with the Department’s HOD, the compliance officer and the compliance committee, together with the Occupational Health and Safety Unit. There is not a dedicated budget for the unit. The budget falls within the ambit of finance directorate, and that falls into programme one.
On the BBBE, the legislation related to it requires that each department be compliant and have BEE certification, and that is the part of the BBBE Act that the provincial government departments or most provincial government departments in the country are not compliant with. That is because it costs about R100 000 to R120 000 to get BEE compliant. They are not actually service providers to anybody in the sense that they get services from suppliers, to the Department, and they do not offer services to anyone that somebody is paying for, that they need to allocate BEE points to them in order to adjudicate. That is the part of the non-compliance. The provincial treasury will be able to provide whatever the authority is in terms of the deviation or the non-compliance related to it. The reason it has not been implemented is that the provincial stance from the provincial treasury is that the Department will not be compliant related to the BEE certification of the department. She confirmed that, regarding the BBBEE and the points allocated to suppliers and doing business with suppliers, that is fully intact and is not negotiable. That is adhered to in terms of the Act, and there is no discretion that is exercised by overlooking any of the requirements related to BBBEE, on the side of procurement or awarding any work.
An official from the Audit Committee responded to the question regarding the attendance of the Audit Committee members. One member, Yasin Ismail, resigned during that financial year due to work commitments in Africa. Another member, Ms Crystal Abdul, was appointed, and she attended up until March 2021, where there was only one meeting she could attend, which is why there was a bit of an overlap but they did attend all the required sessions.
Ms Maseko wanted clarity on whether the Audit Committee meant that the three board members and the addition of Ms Abdul later, managed to do all the work and everything operated well. That means they only had four meetings with three people, despite all the responsibilities of the board.
An official from the Audit Committee responded that Ms Maseko was correct. The number of Committee members does not necessarily imply that there’s enhanced governance or oversight. With the three, they did the work as required.
Ms Nkondlo commented that, on the response about the BBBEE, the Department, the explanation written and the explanation given are two different responses, as she concluded that the Department does implement the preferential procurement policy. She explained why the answer provided is not appropriate for the question. Surely these books are meant for the public and to simplify things so that people can better understand, because not everyone has the opportunity to sit in a Standing Committee meeting to get more detail from a person who is a subject matter specialist. If the Department says in a question or criteria that says developing and implementing a preferential procurement policy but then when they answer they say “no, we are referring to a certificate”, she would have expected they would have then qualified that in the report, that their ‘no’ refers to the certificate but all the other implementation elements of the preferential policy they are doing. At this point it does not seem the same from what she is explaining and what is written in the report, which needs to be corrected so that they do not rely on having these kinds of meetings every time to get a better explanation of what is written and reported. She stated that she would follow-up with the individual questions because the HOD tried to explain the process of how they do the allocations and the challenges, but this matter is not placed there. How do we scope or rate what is finally regarded as a risk?
The HOD’s response indicated how the allocations are done, which, at this point, they have not managed to convince them on the flexibility of the financial system they need to manage the problem. She is raising this because it has been a problem across municipalities from the Financial Commission, regarding underspending grants. It becomes a challenge when this issue is not viewed as an issue that is a risk. If there is indeed a risk, how the matter is scope or how it is defined or how the multi-year allocations are put in place so that the purpose is not just to ‘tick the box and comply’.
She asked again for clarity on the issue of risks. There is an issue on page 62, where they speak about the joint district. Her understanding is that the Department, according to its legislative mandate, has a responsibility to interact with other spheres of government, especially national with local government. There is also a district development model (DDM) by national government. What is the harmonisation and policy coherence risk when the Department is implementing a joint district model? When a joint district model is being implemented, does it not have an impact on service delivery and their ability to ensure that there is a quicker and smoother service delivery between the three spheres of Department that must ensure the end user in the municipality does not get bogged down to all of these? These issues have been placed here and they are not necessarily placed as a risk. She, not being a specialist of the Department herself, reads that the issues as being a risk.
She raised the issue of Kannaland, which is raised as acutely being one of the challenges. What does that mean? It is a political issue. It is not emoted as a serious risk in that particular municipality and in the service delivered. She does not understand the veracity of withholding money that would have enabled the municipality, because the Department assumes as such due to political instability and administrative instability such money is not going to yield value. She is troubled about these questions, from a risk perspective before they even get to the finances. Why are they not placed as risk? Is it because they are not of major risk?
An official from the Audit Committee responded and asked Ms Nkondlo to reflect on the Joint District and Metro Approach (JDMA) and the DDM that the Member has written. On the risk issue, he stated that at this stage he has not identified the risk or lower risk. It requires a review, together with provincial treasury as to what is the best way they can manage it. It also requires further interaction with municipalities to understand some of the fundamental and contributing factors why the funding cannot be spent timeously, so that they can come up with an alternative approach around this. They thought that, sometime when they had multi-year allocations over the MDF, they could manage this, but there was a different perspective on it. From where he is sitting, it has not been identified as a risk – not even a lower risk. He agreed with Ms Nkondlo.
On the JDMA and DDM issue, he said that it is not a risk. They have made significant progress in this province around them. The provincial executive cabinet has decided that this province will follow a JDMA approach in the province, and not necessarily the DDM. He will ask another colleague present to explain the difference, what they are doing and how they are collaborating with the national government and national departments around the issue. It is not a risk. On the next day, they will be meeting with all the national departments and stakeholders on the platform of the JDMA to understand their progress and advancement that they made in terms of some of the catalytic projects. They will share some of the best practices as to how they have developed it. In terms of the JDMA, they have not instituted any additional IGR structures. The DDM requires that they have used the existing structures in municipalities, where those are the DCF, and the DCF gives expression to what they call the JDMA within the province.
On the Kannaland municipality, he responded that, between the Department of Local Government and the Provincial Treasury, there is an allocation that the National Treasury gives them for interventions in municipalities, particularly where there are interventions in municipalities. In their case for the period under review, it was Kannaland; they had about in excess of R4 million for the interventions in the municipality but there was a financial recovery plan. At some time, Kannaland then decided that they would deviate from that financial recovery plan. It has been accepted by council for implementation there. There was an implementation manager to help, assist and guide the plan, but given some of the developments in Kannaland, they have decided to deviate from the plan in terms of procurement, the organisational structure and further financial commitments and undertakings. Given the instability at that time, there was further consultation with it, and between themselves and the provincial treasury, there was a decision to withhold that funding from Kannaland. It was not specifically earmarked for Kannaland. They also attempted to give some of that money to support other municipalities. But, just prior to the end of the financial year, there was a decision by the provincial treasury that it is in the best interests not to transfer the money to Kannaland. They have now applied for the rollover of that money, and the provincial treasury has now given them a large part of it back; they will assess the extent to which they can further assist Kannaland.
The money can also be used and applied for something different within the Department, but they are working with Kannaland. He has already made contact with the acting municipal manager there, given the fact that they need support and assist Kannaland. It does not apply that, as a Western Cape Local Government Department, they have served their relationship or stopped their support and their capacity with initiatives towards Kannaland.
He asked a fellow colleague to reflect on the JDMA.
The Department responded on the questions about JDMA. At the onset they shared the methodology and their approach with the national Department of Cooperative Governance (DCoG), and they have given them extensive information on what the linkage is between the DDM and JDMA. The Director-General of the national DCoG has written back to them to indicate that they accept the JDMA and that it ticks all the boxes in relation to the DDM. They are continuously reporting to national in respect of the JDMA. On the JDMA side, in each of the five districts they have JDMA teams comprising the three national departments senior officials from the three spheres of government and those officials meet between a monthly and a quarterly basis. They started in July, and when the Premier’s coordinating forum endorsed the JDMA, they institutionalised that particular methodology through that process. The JDMA team in each of the areas and the five districts have, together working with the district coordinating forums and the district coordinating forum, technical forum, which is the forum of the municipal managers, developed implementation plans that is the version of the one plan at national level. Those particular JDMA implementation plans have been implemented in the various districts since they were adopted between November 2019 up to February 2019, depending on the gauge of implementation. The projects vary, and with infrastructural projects and some projects that are in relation to collaboration, their national departments have come up quite strongly. Their latest partner is the Department of Justice, which has also come through. Between the 30 municipalities in the Western Cape and the 13 departments provincially, they are participating fully in the JDMA with national departments that have also come through. They are reporting on the implementation of the JDMA and have used the same methodology in other kind of projects.
In relation to drought: they have also, as a response to the three priorities in terms of the recovery plan, utilised the same methodology based on the successes they have had in the five districts.
The Chairperson asked for the Members to raise questions on Part E of the presentation.
Mr America said that the HOD, with his elaborate explanation of the transfers of the municipalities, had largely covered the question.
He referred to the AG’s Office. He congratulated the Department on its eight clean audit, saying that it is a remarkable achievement. What do they attribute this clean audit success to? Are there any elements thereof that they can learn and make applicable to other departments?
Ms D Baartman (DA) referred to page 134, which speaks of capacity constraints under bullet point number two, and specifically speaks about lower compensation of employees due to the delays and challenges of filling of the capacity funded from earmarked funding and resignation of officials within the Department. Given that this is a capacity constraint, what would the total amount be in order to deal with that capacity constraint? Every department that comes before any committee would probably need more money but she would like it to be quantified. How much more money would be able to assist with the capacity constraint?
She noted that page 135 speaks about the financial and operational sustainability model for municipalities, and how Stellenbosch University assisted with putting together those alternative revenue streams and minimal level of services rendered to people. Is this similar to the research question that Ms Nkondlo asked? If not, how far is research in terms of ongoing process?
On page 177, under note number five which is goods and services, one of the items is legal services and legal services between the two years has almost halved. She knows that this Department uses quite a bit of legal services due to the nature of the departments. Did they need fewer lawyers? Are they going to court less? Does this include legal advice to municipalities? Is there a reason that it is reduced so drastically? She is not complaining that they are not paying money to lawyers.
On page 177, she noted that it speaks on the operational expenditure and to the forensic investigators. She commented that R2 million seems quite little for a Department of this nature. What was that for? What would the quantifiable amount be more or less for having adequate finances in order to capacitate forensic services?
She referred to page 182, under the note regarding prepayments. It speaks of a pre-payment of a training amount of R500 000, which unfortunately had to be postponed, due to the national lockdown. What was that money for? Whose training was it for? Is the training still going to happen? Is it going to rollover?
On page 200 and 201, it speaks to the different transfers and grants to municipalities. One of her questions to the Auditor-General previously at the end was not answered. She offered context to the Department so they are also in the “same WhatsApp group” to that question. Her original question was: how does the Auditor-General (AG) audit transfer payments and the expenditure thereof? The AG has wonderfully, for the first time in probably almost three years, quite frankly, really transferred the payment going out to municipalities, by the Department, but ensuring that the expenditure of the transfer gets audited at a municipal level. She noted that the HOD spoke about the alignment of local government as well as the Department. How do we then synchronise that receipt of information on the money, which we have transferred to municipalities as well as the auditing of those expenses? She wanted the Auditor General as well as the HOD to assist them with it, because the example she provided is that what they ideally would like to see is, when a municipality spends R5 000, they would ideally also like to see the audit of the R5 000 in the municipality. This would be so that one can know when the next budget cycle commences, despite them spending half of their money mid-year because of different cycles - whether or not one should be giving that municipality extra money or perhaps they should just say “Sorry, babe. You are on your own.”
Ms Nkondlo expressed that she would really be interested in the question asked by Ms Baartman because, for that particular issue, where the money is paid and where it gets to be accounted for and audited – if there is no streamlining, it leaves their oversight responsibility a bit hazy.
On page 141, what would have triggered the dip in the allocation for the previous financial year and the one reporting on the development planning programme? Going further down, one would see an example of municipal infrastructure programme 3.1 and 3.2. There has been less budget to those municipalities. What would then be an impact in that infrastructure that would have triggered economic development in those municipalities, given the environment that the country is in? She wanted to understand the rationale of that budgeting.
On page 144, on corporate services in the MEC’s office, she wanted to understand what would have been the additional spent from the 47 to almost 51.7 in this financial year. What would have been the extra demands from the MEC’s office in terms of their corporate services responsibility? Looking at the budget information, they would have observed some spikes in the advertising and communications budget. What is the difference between the two, because both have increased quite significantly? How do they measure what that investment yielded whatever the intended outcome was?
On page 177 there is something called ‘Zutari’. What is that? How long is the firefighting contract of about R13 million? What areas is it meant to be working? Could they please provide context for a lay person on it, and why the Department needed such technology?
On page 162: if the supplier that could not, at this point, deliver the IT equipment as part of their goods and services and machinery is the same supplier that is being referred to, why was there a delay? Is it something that was agreed upon by the Department? Was it not anticipated, because she sees that the money would have to be rolled over?
What is this leave that has moved from 56 from the previous financial year to almost 462? On page 187, she asked for the notes that explain the irregular expenditure, because she can see a smaller part of it that has been condoned but it has also increased from the previous year quite significantly to the current year, without explanation. What is it? It says it is a supply chain issue, and there is a part of it that is with National Treasury, and that the Provincial Treasury has already condoned a part of it, which is a smaller component. She, however, is interested in understanding what the basis of that is, because, under normal circumstances, in the annual report they would see just information that gives more detail about what would have happened.
Ms Makamba-Botya referred to page 147. On the table under the sub programme 1.2 under corporate service and under households, the final appropriation and expenditure, there is 34 000. What exactly was the amount spent?
On page 149, where it speaks about more than R16.6 million that was spent as a form of social contribution, she asked Department to explain what these social contributions entail.
On page 150, under the economic classification of training and development, the adjusted appropriated fund accounting to R413 000 that were shifted – she wanted to know why they were shifted and where they were shifted to.
On page 180, on point 6.2 under debt written off – if there is debt owed by the Department by any individual and the person later passes on, it is normal practice for the Department to claim the amount from the deceased estate?
On page 183, under recoverable expenditure, there is a theft and damages of assets amounting to R19 000. What was stolen and damaged, and what actions were taken by the Department regarding to those incidents?
The Chairperson expressed that he is always last to suggest they interfere with affairs of local government except where it is money lent by them, where they must be held accountable. On the previous pages relating to Kanaland, it is seen that they were able to spend some of the money; on other pages it is said that it has been paid in fill. What informs the reason for them to withhold those monies from them? What was the real reason, because on some they were given money and they spent it in full but then when it comes to another the money is withheld, citing that it is due to the political instability? Is the instability such that it affects the use of funds or perhaps through fraud or they are mismanaging the money? What was the rationale? He is raising the issue because Kanaland is one of the smallest municipalities, and withholding the money might create more problem for the municipalities than actually assisting the problem?
An official from the Audit Committee responded to the questions on the forensic unit, firstly the one regarding specifically why the amount came down from the previous financial year into the year that they are reporting about. One of the grants that they have, which was discussed earlier in the meeting, is called the municipal or local government support block. As one of the outstanding projects inside the grant, they made provision for additional funding to be able to carry some of the work that the forensic unit must be doing; it includes both for the investigations as well as some of the legal work associated with it to be funded, not through that specific line itself, but they created a second source of funding through the local government support grant, which is one of the grants that they are responsible for. Those two amounts roughly works out to more or less the same as the previous financial year, just to indicate and confirm that it is a second source of funding that they made available to be able to carry the expenditure.
On the question around the R2 million, she made a distinction that, just over R2 million was specifically in cases where they have designated investigators to undertake formal section 106 investigations in terms of the Systems Act. Out of these cases, there were allegations made by off-road corruption. There was reasonable belief that they were (implicated) in these allegations. Therefore, the Minister designated investigations to undertake a formal investigation in terms of the System’s Act in the year under review. There were three municipalities in which the reports were also concluded, and the cost associate there too for that year was R2 million. It is difficult for them to make a determination about the specific amount that may be required so that on one side they have their internal investigators, and those are the funding that they received for three years from treasury to appoint their own investigators that are in-house and on contract appointments. At the moment, when they designate investigators, it needs to come from a different source of funding, as these investigators are not working in the Department. They designate them from outside of the Department in terms of the provisions of the Systems Act and cannot determine beforehand the number of investigations that will actually result in a formal investigation in terms of section 106.
An official from the Audit Committee said that the aerial firefighting is from the disaster management centre. The risk assessment that they do on the province is one of their biggest risks – the risk of wildfires. They have approximately 2 200 fires a year, which they have to deal with from a wildfire perspective. They have made use of the national contract whereby they contract aircraft for the period from December to about the end of April. They contract between themselves the Cape Winelands District and the City of Cape Town is for approximately 30 aircraft, consisting of mostly helicopters but also fixed-wing aircraft with bigger capacity to drop water. The programme is throughout the entire province so they do an assessment at the beginning of the year and look at what their most fire prone areas possibly will be, and do an allocation of placing the aircraft in different positions. They have a rapid attack programme. They have found that delaying a response to a fire causes must more damage, so they attempt to attend to the fire as soon as it breaks out in a high risk area. In so doing, they prevent a lot more damage, loss of life and property. What goes together with the aerial support is specialised firefighting teams, so they train firefighters to a very high level that they can actually lift them with helicopters and take them into mountains to protect specific sensitive areas. It is a programme they have been running for around that last 11 years. They try to control a fire within the first hour of it breaking out, and they thereby do not have an ongoing disastrous incident. They have achieved a success rate of between 90 and 95% of being able to control the fire in the first hour.
Ms Singh (CFO) responded to the issue of prepayments. She said that the prepayments of the R500 000 were for mediation training for counsellors, and that training was subsequently completed when hard lockdown was finished, and the invoice was paid for as well.
On how they synchronise the receipt of the money in the municipalities on the examinations for payments, compared to the expenditure of the Department, she responded that it would be more difficult to answer quickly because the financial years are not aligned. As a result, the closest they can come to an alignment is quarter three expenditure reports from the municipality being the final figures that they put into their annual financial statements at this stage, unless there is a call by national to have the financial years aligned, in which case it makes it a lot easier.
On the reason for the programme three decrease – on the infrastructure side, relating specifically to grant funding related to drought, that was no continued support that came into the baseline for the Department. On the question around programme one, she said it was the incorrect line looked at in terms of the MEC; it is actually related to the programme within the Department, and that specifically related to the compliance related to COVID regulations and the additional capacity that was required for COVID, as well as the awareness campaigns related to the support that was needing to be rendered to the Department and the wider support to the municipalities.
On the communications and advertisements issue: the substantial increase of the R200 000 is related to the cell phones and classification of it. When cell phones are in contract, they are under lease, and when they are out of contract they go into communication. As such, they will see there was a decreased in the lease amount and an increase in the communications.
On advertisements, she responded that it is specifically related to the awareness campaigns that were rendered due to COVID awareness. On the question about Zutari, she explained that it is a firm of contractors or consultants that have been appointed by the infrastructure directorate to assist with the 15-year integrated plan, and that was done through open tender process. The reason for the rollover of IT equipment was that the order was placed in the financial year but, due to the hard lockdown, laptops were not able to enter the country and were stuck at customs. They were not cleared; the supply was only able to deliver them in the new financial year. As such, they paid for them when they received them in the new financial year. They required the IT equipment in order to support the remote working of the staff as well, so it was crucial to place the order.
On the irregular expenditure on page 188: it relates specifically to two items that are on page 285 and is related to non-compliance on SEM and the delegations; that is in response to DHL to manage the donations on the COVID side. The R34 000 is related to career IT, and that is also on a contract management side; both those are related to contract management and the extension. So, while appointments were made in terms of the normal SEM processes, the contract date has expired and work had continued past the contract. The non-compliance to a financial delegation is related to R150 000, and that is on a transfer to the Beaufort West Municipality in support of a centre, and the paperwork not being adequately completed and authorised.
On the issue of households: the amount in households is related to leave gratuity or leave pay-outs of people who have left, resigned or any leave that was owed that needed to be paid out. Social contributions is medical aid and pensions of the staff and the pay over to the respective GPF and medical aid funds.
On the issue on the 413 on training: it was moved out of training because with the staff working remotely a lot of the in-house on-site training was not completed, and it was moved into consultants. A lot of the training did happen but it happened remotely, so the venue costs and a lot of the facilitator costs would have reduced related to debts. In the case of where somebody is deceased, they do attempt to recover any debts that are owed to the department. They attempt to do it from the pension pay-out or before the pension is paid out to the deceased’s estate, but there are instances where that does not happen. They attempt to recover from the deceased’s estate; only in the event that they are not able to get success or on the advice of legal services, is that written off. But they have not had any instance of that for many years now.
On the issue of thefts on page 183: of the R19 000, that is actually their disallowance account and there are still thefts that are under investigation. As such, they have not determined whether somebody is liable to for the money to be recovered or whether it needs to be written off, at this point.
An official from the Audit Committee responded to the capacity issue, saying that they are in discussions; there is the Khoi San legislation that was enacted to implement that in the province. When looking at the programme four, there is only R1000 so they are looking at that. There is capacity just in terms of infrastructure as well as the forensic capability within the Department, but they now have councils. The kind of oversight and sort of the instability that that creates, from a governance perspective, would probably require additional capacity in that regard.
On the research work done – they do it on an annual basis whereby they do an assessment of how the rates are charged so that you will find in the smaller municipalities the rates are actually of the highest. What they have also done subsequent to that is a basket of services, looking at the affordability of certain services in municipalities – whether it is affordable to citizens. They have also worked together with the University of Stellenbosch on the sustainability of municipalities in a COVID environment, and the idea was to determine to what extent did COVID-19 impact on the on the cash flow and on the sustainability of municipalities. One of the findings was that larger municipalities were more buoyant and resilient. They are putting this work together to influence what they call a financial model. The Minister is of the view that the financial model in four municipalities must be reviewed, but this is ongoing research work. They are going to see to what extent they can influence the financial modelling of municipalities with their national colleagues in the national Department of Cooperative Governance as well as National Treasury.
On Kannaland: the money was earmarked, and given the instability around it, they usually transfer ahead of time and the municipality use it as they implement the project. What they have found is that, when the money is transferred into a municipal account, the money is intended for other purposes. Given the instability around that in Kannaland, where there was a deviation of the approved financial recovery plan, as an accounting officer, he deemed it appropriate to retain the money. Previously, they transferred the money for the authentication initiatives in Kannaland. It is still a high risk area regarding drought. Their engineers and hydrogeologists are working very closely with the municipality to ensure there is compliance with the project plan. They monitor it when, for instance, boreholes are drawn and fitted with pumps. The engineers sign off this verification that the stuff works and it is then paid. With certain municipalities now, they do not pay the grants in advance. The memorandum of understanding or agreement is crafted in this way – that, although they allocate the municipality funding, they do not transfer it ahead of time, given the risks, but they work with the municipality.
Ms Baartman asked whether it is the Department’s or the Western Cape government’s position for the two financial periods, both the provincial/national period for financial statements as well as for municipalities to be aligned, so the Committee would then get information at the same time. If so, what would the challenges be, in that regard, because, while she sees the benefits for them in terms of getting all the financial information at the same time, she does not know what the pitfalls are in that situation?
Ms Singh responded that she does not have a position – she does not advocate for either side. There would be lots of pros and cons associated with it, and whoever decided to keep the financial years the way that they were when it all started in terms of the PFMA and the MFMA had reasons for it. She is not at liberty to give a hypothesis around it because she does not know any of the information surrounding it.
An official from the Audit Committee, on the alignment of the financial year, said that it it has been raised sharply at the various national structures – the budget forum, the budget council, at MINEC and the technical MINEC and there has been work done into this but there seems to be not a final decision on aligning the financial years. The department with SAGA also petitioned and often with they meet municipalities in IGR structures the municipalities also ask them to make an appeal to see to what extent they can have it aligned. There has not been a final decision to what extent they can align the financial year. They have worked with MFA as far back as 2004.
Ms Baartman commented that, given that the draft procurement bill was introduced by the national minister of finance in 2020, she knows the provincial treasury has made some comments on that particular draft bill. Has local government made any comments on that draft bill, because, to her knowledge, that bill will not only repeal the Municipal Finance Management Act (MFMA), but it is not putting in any alternative as to what will happen once it is repealed, and similarly all other preferential procurement methods? It is not that the public officer will be repealed. Essentially, the new regulator will be instituted but many of those type of powers will then lie with the national Minister of Finance. Much of those provisions in the bill are seemingly left to either the new regulator or for the Finance Minister to essentially put into regulations and not for it to be legislated when actually section 217, 2 and 3 of the Constitution specifically speak about a legislator framework, and for legislation in this regard.
An official from the Audit Committee responded that, given the fact that there’s a MOU between them and the provincial president, the understanding is that the provincial treasury and the Minister of Finance in the provincial sector is responsible for local government. Finance, although part of it, especially around the annual financial statements, is the responsibility of the Minister of Local Government. There is a MOU that regulates it, so the provincial treasurer has given a comment on it from a financial perspective, and, given the fact that the Department is responsible for governance, they have not because the work from treasury was a provincial input into it.
The Minister congratulated the Department on the job well done, getting eight consecutive audit outcomes. The provincial ministry is very proud. Although there are a lot of challenges going forward, the team is up to tackling these challenges.
The HOD thanked the Committee Members for the oversight role they play, as well as the Minister and the work of the entire team Department.
The Chairperson asked for any members of the public who would like to ask any questions.
There was no indication of engagement from the public or any attendance from the public.
The Chairperson thanked everyone for their attendance and participating in the meeting.
The meeting was adjourned.
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