Material irregularity and audit insight shared during BRRR: AGSA briefing; NT Policy to reallocate funds between provinces and metropolitan municipalities

Human Settlements

17 May 2023
Chairperson: Ms R Semenya (ANC)
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Meeting Summary

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AGSA: BRRR Presentation

In a virtual meeting, the Portfolio Committee on Human Settlements received presentations from the Auditor-General of South Africa (AGSA) on the material irregularities and Budgetary Review Recommendation Report, as well as a presentation from National Treasury on the policy to reallocate funds from the various provinces among other issues.

The AGSA indicated that the presentation was preceded by various discussions held by the entity on matters of the accountability ecosystem. The main purpose of the Proactive review was to understand the preparation and revision process of the updated five-year plans and final draft APPs, as well as the alignment to the Medium-Term Strategic Framework. Another purpose was to assess the completeness of relevant indicators relating to core functions and service delivery expectations of the citizens. The AGSA outlined some Material Irregularities and said the report on pervasive mismanagement of public funds without consequences and audit recommendations had not always received the required attention.

The Committee raised concerns over the presentation and clarity-seeking questions. It questioned the powers extended to the Auditor-General, especially in dealing with the recommended Material Irregularities and the time frames so that the public could see the outcomes whilst the matter was still ongoing. Members were concerned about the processes involving consequence management and highlighted that the presentation did not provide clear and adequate information.

The Committee Members asked for an explanation of the outcome of issuing certificates of debts, what it would mean in practical terms for the residents, and the impact on Accounting Officers.

National Treasury presented the policy to reallocate funds from province to province or from metropolitan municipality to metropolitan municipality which would impact the reallocation to the Medium Term Strategic Framework (MTSF) targets monitoring to ensure funds transferred were used for the intended purpose. The National Treasury stated that the Annual Division of Revenue Act had been with the National Treasury for 21 years, which was a requirement according to Section 2.2.7 of the Constitution. It was the only piece of legislation that the Minister tabled every year with the budget. For each type of grant, there was a conditional grant framework that worked as a basis for the AG to audit the performance of the grant.

The Committee commented on the presentation and raised concerns that the processes highlighted in the presentation did not seem to be citizen-centric. The Committee indicated the importance of Departments and officials being able to account for the money allocated to them by National Treasury.

Meeting report

There was an apology from Mr B Herron (GOOD), who was unable to attend the meeting due to the reconvening of the Section 194 Inquiry.

The Chairperson outlined the agenda and indicated that the Committee would be receiving a presentation from the Auditor-General South Africa (AGSA) on the material irregularity and audit insights shared during the Budgetary Review Recommendation Report, and a briefing from National Treasury on policy to reallocate funds from province to province or from metropolitan municipality to another.

Briefing by Auditor-General South Africa
Ms Corne Myburgh, Business Unit Leader: National AGSA, indicated that there had been a change in the team representing the Auditor General South Africa. She said that Mr Londoloza Songwevu, the Senior Manager for the Human Settlements portfolio, had been replaced by Mr Tshepo Shabangu, who also had good experience and was knowledgeable in that regard. She introduced the other members of the team representing the AGSA team.

The presentation from the AGSA came from a backdrop of various discussions held by the entity. In the previous year, the AGSA began its talks about the accountability ecosystem during its October visits, regarding the different role players in that regard. The entity also reflected on its own role in terms of the culture shift strategy, where it considered the impact of services that were delivered to citizens and their experiences, as well as coming up with ways in which the entity could work collectively with the citizens in the accountability ecosystem to ensure that there was accountability; and a positive impact with the services they received and funds were spent on the intended purposes.

She indicated some of the key focuses of the presentation, namely the material irregularities identified within the portfolio. There have been no material irregularities identified nationally as of now; however, there have been a few irregularities identified provincially and the presentation highlighted some of those.

Mr Tshepo Shabangu, Senior Audit Manager: Human Settlements Portfolio, AGSA, took the Committee through the presentation of the AGSA. He took the Committee through the proactive review of the 2023/24 Annual Performance Plan, and he highlighted that it was done nationally in February before being submitted to the Portfolio Committee.

He said the purpose of the Proactive review was to understand the preparation and revision process of the updated five-year plans and final draft APPs, as well as the alignment to the Medium Term Strategic Framework. Another purpose was to assess the completeness of relevant indicators relating to core functions, mandates, and the service delivery expectations of citizens. For that portfolio, there were no irregular misstatements in the previous year in terms of the Audit of Performance Information. Those enabled insights to the Accounting Authority and executive authorities through discussions of the pro-active findings, and would, in turn, empower the Minister before the approval of the plans.
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The presentation also provided a high-level observation from the review of the 2023/24 APPs across the Human Settlements Portfolio. (More detailed observations found in the presentation)

He also provided the Committee with a summary of the Human Settlements APP review at a national level.

He took the Committee through the Human Settlements Material Irregularities. The AGSA had reported on pervasive mismanagement of public funds without consequences and audit recommendations had not always received the required attention. There had been an increased outcry for accountability and transparency, which saw calls from parliamentary oversight structures, civil society, organised labour, media, and the public at large for the AGSA to be empowered to hold accounting officers entrusted with public funds accountable for their actions. “Material Irregularity” referred to any non-compliance, or contravention of legislation, fraud, theft, or a breach of a fiduciary duty identified during an audit performed under the Public Audit Act that resulted in material financial loss, or the misuse of public resources. The overall mandate of the AGSA was to instil a culture of accountability; improve the protection of resources; Enhance public sector performance and encourage an ethical culture; and strengthen public sector institutions to better serve the people of South Africa.

He outlined the various MIs that had been issued and indicated that the Accounting Officers in the Northern Cape agreed with the MIs. However, appropriate actions were not implemented to resolve the MI.

In conclusion, the Material Irregularities identified could have been prevented by basic disciplines and processes. He also highlighted some of the internal control weaknesses and tracked improvements to prevent recurrence.

(More details can be found in the presentation)

Discussion
Mr C Malematja (ANC) welcomed the presentation from the AGSA. He outlined that the presentation noted findings that had no impact and were later corrected. He said that a finding remained a finding and it would be appreciated if the AGSA spook on all its findings so that the Committee was aware and kept in the loop on the measures taken to ensure that the findings were presented. He commended the entity for its work on the misalignments that seemed to be improved.

He said it had to be emphasised that the public would like to see actual results. He questioned the powers extended to the AGSA, especially in terms of dealing with the recommended Material Irregularities and the time frames thereof so that the public could see the outcomes whilst the matter was still ongoing. He said the delays resulted in the public losing trust in the organisations and the relevant authorities working with those organisations. He said there had to be a sense of urgency when addressing those matters to restore the trust of the general public.

Mr L Mphithi (DA) welcomed the presentation from the AGSA and said the presentation rightfully outlined that there had been misalignments in terms of the targets in the EPP, which he had raised in the previous Committee meeting. He asked for further clarity on the matter. He stated that it would be interesting to unpack what exactly was referred to in terms of the TIDs, particularly for the Department of Human Settlements.

He expressed that it was surprising that the responsible officials and disciplinary processes had been reported as zero because there were clearly individuals who had benefited in an inappropriate manner and there were individuals who had breached the policies and had obviously failed in their duties. He asked for clarity on the figures reported and asked why those were at zero. He questioned whether the Department had not been able to use its resources and abilities to find those individuals and pursue consequence management. The report did not indicate any form of consequence management implemented by the entity.

He asked for further clarity on the section of the presentation that referred to payments made to contractors with poor service delivery, in terms of poor-quality houses. He asked for expansion on the matter, providing further clarity.

Ms M Makesini (EFF) commended the presentation from the entity. She also asked for clarity on the targets the AGSA had missed to enable the Committee to assist the Department.

She referred to the project of G Hostel in Welkom and the projects in Kroonstad concerning the issue of overpayment. She asked how far the AGSA had gone in its investigations, as the projects were started almost 10 to 12 years ago. She asked for a detailed report on the matter. She asked for a progressive report on the matter of the dispute between the accounting officers about the 23 million rands in the Eastern Cape. She said the AGSA had to provide the Committee with the timeframes of the matter between itself and the Department in the Eastern Cape.

Mr A Tseki (ANC) highlighted that in the presentation, it was indicated that if there was no focus on improving the public sector culture, there would be no change in the public sector. He asked for an update regarding the improvement of the public sector culture.

He said the current report from the AGSA did not speak to the Department's performance, which would be received as an annual report in the future. He asked where the AGSA had received its information because those had been repetitive issues that the Department had committed to, and the Department had not yet presented the annual report. The APP had to seek to correct the previous issues committed by any institution and it had to be addressed by National Treasury.

He asked for clarity on the last resorts used to address the issues of Material Irregularities. He asked for actual examples used as the last resort.

He asked for further clarity on the remedial phase mentioned in the presentation. Had any form of action been taken against the individuals in the Eastern Cape regarding the R23 million saga?

Dr N Khumalo (DA) asked when the AGSA started getting the powers to recover resources lost to the state and taxpayers. She asked for clarity on the general outcome of the material findings referred to the public bodies for investigations, in terms of the timeframe, impact, and the impact it had had.

She asked the AGSA about the remedial actions taken in case of failure to implement recommendations made to the Department and other entities.

She asked for an explanation of the outcome of issuing certificates of debts, what it would mean in practical terms for the residence, and the impact it would have on accounting officers.

Response from AGSA
Ms Myburgh referred to the question on the delays of the referrals. She said the material irregularity process defined that the AG had to start by identifying that there was indeed a material non-compliance fault or theft. There was financial loss, and after that, notifying the auditees that those MIs had been identified. The auditees had enough time to respond and the AGSA had time to assess the responses and determine whether they were efficient. In looking at the sufficiency, the AGSA looked at the Public Finance Management Act, which was very specific in saying that where there were MIs, there had to be an investigation and individuals had to be held accountable following the necessary processes to improve the irregularity and prevent it from going forward. If the responses were insufficient and the Department did not implement the recommendations, the AGSA took steps such as seeing whether the recommendations would be included in the audit report, which made it enforceable, or whether the AGSA would have to refer the matter. The latter happened when there was an indication of fraud or when a specific area where a public body was better positioned. The processes were currently being refined between the various bodies in question. She agreed that there had been delays in the referrals and the AGSA had been in talks with the public bodies to figure a way forward to respond accordingly to the referrals.

She explained that the public sector culture referred to integrity, accountability, and transparency; it was a culture where processes were followed accordingly even when no one was overseeing them. The AGSA began with those strategic objectives it was working towards in the previous year and the current year only served as a baseline to assess those objectives. Auditees were being engaged and the evaluations would assist in monitoring the improvements. At the current stage, the AGSA was not able to say whether it was performing well but hoped that by 2030 30% of the auditees would be doing well.

Mr Shabangu highlighted that all findings were important, and, in his presentation, he did not mean to imply that some of the findings were not important.

He addressed the question about the misalignment and the targets which the AGSA had set out. He said in Programme 5, the National Implementation plan for blocked projects, while the target was about the development of the national implementation, it was not consistent with the indicator. Indicators were measured qualitatively, and the percentage was a quantitative measure.

He said the AGSA was still in the process of gathering information on the disciplinary hearings from the various provinces. He highlighted that the number indicated did not mean it was at zero, because not all the information had been gathered.

He addressed the concerns about payments made to contractors who delivered poor services. He said the AGSA had not yet finalised the process to confirm the MIs, specifically in the Limpopo area. He said there were still consultations with the technical unit.

In the presentation, it had been indicated that the Free State matter was currently in the remedial stages, which meant that the accounting officer was unable to meet the timeframes set out by the AGSA, and the implemented actions were not satisfactory. The AGSA had to move to the recommendation phase, where the accounting officer was still unable to meet the timelines set out once again. The current phase meant that it was no longer a recommendation but rather, they needed to enforce the actions and failing that, the AGSA would move to the certificate of debt stage where the money would be recovered.

He was not able to commit to any timelines regarding the Eastern Cape matter because the issue was still in consultation due to the disagreements between the AGSA and the accounting officers. He would come back to the Committee with an update on that.

He said that the AGSA was merely reviewing the APP for 2023/24, therefore it had not assessed the performance. It was just looking at the usefulness of the indicators included in the 2023/24 APP. This was a value-add exercise. The portfolio of the national department of human settlements did not have any material findings on the usefulness of indicators when the AGSA presented in the previous year during the Budget review and recommendation.

He referred to the issue about the G Hostel in Welkom and Kroonstad and indicated that everything else had failed. Therefore, the AGSA found itself at the remedial stage where the recommendations were no longer just that but rather, they were now binding. The last resort would be the certificate of debt where money would be recovered from the responsible accounting officer.

The AGSA was trying to enforce consequence management in its MIs.

Follow-up discussion
Ms N Sihlwayi (ANC) expressed her concern with the AGSA and said she did not know the powers which the AGSA had. The legal brief of the entity was to address the issues of the impact that needed to be re-evaluated from different Departments and municipalities as that was about creating value for money. She said the absence of that resulted in several other issues such as those with the SIU and NPA. There were some discrepancies with the contractors who had not delivered their services adequately and yet they were still getting more contracts. The AGSA had to be able to address all those irregularities.

She said without understanding what SISOS was doing, the AGSA would not be able to understand the indicators that drove them. She asked for clarity on the matter.

She asked for further details and clarity on the official who had overpaid a contractor.

She asked how the CFO would be able to disagree with an authoritative body that had identified an erroneous action and not address the matter. She said that the country had a crisis of corruption and the AGSA was the first point of call in those issues. However, the processes did not indicate the capability of the entity dealing with unethical conduct. The 2030 target of 30% was unreasonable, and it did not make sense that the AGSA would drag the process for such a long period.

Mr Mphithi reiterated his question regarding page 17 of the presentation. He said the question was not ventilated. He asked how the AGSA had responded to the finding of zero officials being identified in the disciplinary process. He said that it could not be that for a matter of financial loss, no processes had begun, as that did not inspire any confidence. He asked for more details on the matter.

The Chairperson said the AGSA had addressed the matter in its response, saying that upon coming to the meeting, the entity had not yet engaged with the Department to receive the answers on that matter. The entity would have relevant information when it came back to the Committee.

Mr Mphithi was not satisfied as he felt the report was incomplete.

Dr Khumalo asked for an update on the successes regarding the accounting officers disciplining the employees in question. She asked whether there had been cases where accounting officers themselves had been held accountable and the outcomes thereof. She asked if there were certificates of debt issued in the departments since the previous year. How strong were the relations between the AGSA and law enforcement authorities that they worked together regarding the monitoring capacity over the cases which the AGSA referred? She asked whether the AGSA had been following up on those cases and to what extent their powers reached those cases regarding monitoring them and the timelines adhered to.

Ms N Tafeni (EFF) said the AGSA had come before the Committee without adequately preparing for the engagement. She highlighted that there were plenty of loopholes in the presentation and the AGSA needed to come prepared in their next presentation.

Mr Tseki said the Committee needed to be careful not to put the faults of the Department on the AGSA, but rather the AGSA had to be used as a guide to empowering the Committee to do adequate oversight of the Department.

Responses to follow-up discussion
Ms Myburgh apologised to Mr Mphithi regarding the missing information, and she requested that the AGSA be given time to get back to the Committee with detailed information in its next presentation.

She said concerning the MIs the entity had not received its powers in the previous year, the first year was in 2019/2020 in a phased-in approach. She said in the first year, it was fewer than 20 PFMA auditees and a phase-in of the definitions where the AGSA only looked at the financial losses and after that, it looked at fraud and harm elements. The phased-in approach had assisted the AGSA in building capacity, but the processes had to be fully implemented by now and they were at a maturity level.

The organisation has not issued any certificate of debt to date. In terms of the processes, there were auditees up until the remedial process and the AGSA was assessing the implementation of the remedial action. The PFMA gave the accounting officer the responsibility of managing the entity or the department and the responsibility of implementing corrective measures and disciplinary actions where necessary, as well as recovering money where it was appropriate.

The responsibility of the AGSA was to give the notification and assess the way the corrective measures were being implemented. If the remedial actions had not been implemented, it was then the duty of the AGSA to issue the certificate of debt to the accounting authority, who then became responsible for the financial loss as it was concluded that the AA had failed to do its duties according to the PFMA. The process was lengthy.

The remedial actions included the accounting officer quantifying the financial loss, concluding an investigation and identifying the individuals involved, and improving internal actions where necessary. She said everyone needed to play their respective roles in ensuring the work was being done.

The Chairperson commended the organisation for its good presentation. She said that when the department came back to present its second and third quarter reports, the Portfolio Committee Members had to use the same report to engage the department on those provincial matters. The AGSA had equipped the portfolio with information on the core issues of the department.

Dr Khumalo indicated that one of her questions had not been answered.

The Chairperson requested that it be responded to in writing through the Committee Secretary because the AGSA time had gone by.

Briefing by National Treasury
Mr Jan Hattingh, Chief Director, National Treasury, responded to a question that had been asked in the previous discussion under the AGSA. He began by introducing the team from National Treasury and gave an outline of the presentation and the key points that would be addressed during the presentation.

In addressing the question, he said the PFMA indicated three processes that any department went through simultaneously. Firstly, the department was currently closing the books of the previous financial year, which would be submitted to the AGSA for auditing. He indicated that the department was implementing the financial year and preparing for the next budget cycle. The design of the PFMA was done in a way that equipped the AA, provincial and national departments, and municipalities so that by the time they concluded their budget and strategic plans, the APPs would have been informed with the most relevant information possible.

He provided a few opening remarks about the legislative background. He said the annual Division of Revenue Act (DORA) had been with National Treasury for 21 years, which was a requirement according to section 2.2.7 of the Constitution. It was the only piece of legislation that the Minister tabled every year with the budget. For each type of grant, there was a conditional grant framework that worked as a basis for the AG to audit the performance of the grant. It was also important to note National Treasury had clearly understood that policy formulation was the department’s responsibility. However, fiscal arrangements were the mandate of National Treasury which often caused challenges. Provincially there were 24 conditional grants and 23 on the local government side.

He mentioned that financial years differed on a national scale and on a municipal level. Those differences were critical because of the quarter lag. Therefore, when National Treasury shared information, the resulting specific lag was relevant to the municipal information.

He outlined the policy decision for stopping reallocation. He said historically, there had been a lot of complaints from Parliament and various other clients who indicated that the DoRA was quite rigid. When there were unspent funds, they automatically reverted to the National Revenue Fund, and Parliament requested a solution on the matter. He shared with the Committee the policy choice presented before Parliament. He said that the change had been implemented about 15 years ago and it was deliberate because if institutions did not spend money allocated for service delivery, the money reverted to the NRF. There was an institutionalised process to safeguard the funding for provinces and sectors.

(More information found in the presentation)

Mr Emmanuel Pillay, Director: Provincial Budget Analysis, National Treasury, took the Committee through the provincial conditional grant process in relation to stopping and reallocation. He stated that the stopping and reallocation process was always, in most cases, a process of last resort. It was implemented when all other channels had been exhausted.

In terms of Section 10(5) of the Division of Revenue Act (DoRA), the transferring officer of a Schedule 5 grant was responsible for the monitoring of the financial and non-financial performance of provincial departments based on monthly and quarterly reports received from the DoRA. Section 12 required provincial departments to submit monthly and quarterly (financial and non-financial) reports to the Department of Human Settlements (DHS), which detailed progress on implementation.

In between reviews, the department regularly engaged with provinces deemed to be at risk to improve their performance, with provinces given an opportunity to demonstrate how their performance could be improved.
If the DHS was not convinced by the departments' plans, it invoked Section 17 of the DoRA, which provided for transfers to provinces to be withheld for 30 days. He provided a high-level overview of the stopping and reallocation that the National Treasury had approved in the Department of Human Settlements in the last five years.

(More details on the stopping and reallocation process are found in the presentation)

Mr Sello Mashaba, Chief Director: Conditional Grants and Monitoring, National Treasury, took the Committee through the Municipal Conditional grant process. He said that the municipalities mostly followed the same processes as the provincial sector in dealing with stopping and reallocation.

Discussion
Ms Makeseni highlighted that it was unacceptable that only five out of nine provinces had their funds stopped and reallocated. She said that the Free State province had had a very low allocation. Yet, it had the highest amount of funds being stopped, indicating a high deficiency, and that the provincial government was not assisting the National Treasury. She asked for clarity on the measures being implemented to capacitate the Free State province to be able to use the allocated funds accordingly. She addressed the issue of the Gauteng province, Limpopo, and the Free State that had had funds stopped for the informal settlements while citizens were still struggling to receive basic services. The matter needs to be addressed. She appreciated the performance of the Northern Cape concerning its informal settlements.

Mr Tseki addressed the issue of consistency. He asked National Treasury to confirm that it had consistently ensured the provinces and municipalities were accounting for their expenditure. He said provinces often had unspent funds, and some were even late in that regard. He asked whether the Committee would be able to support the Northern Cape in its request for funding.

Dr Khumalo welcomed the presentation from National Treasury. She asked for the Provisional Grant framework to be shared with the Committee. She expressed her concern with the extent to which consultations were inclusive of citizens because the fact of the matter was that there were adequate resources to deliver on projects in the country; however, often, projects were stopped at the expense of citizens. There was no remedial action for the lives suffering due to officials not doing the work they were meant to do.

She said everything done in government had to be citizen-centric. It had been disturbing to hear that there were Accounting Officers who had alerted Treasuy that there were funds they may not be able to spend. The Mangaung municipality, which voluntarily surrendered funds,m was also quite alarming. She asked for a direct answer on the matter. She asked for a detailed response on how and where the money for the various grants was derived from.

Ms Sihlwayi commented on the decisions taken concerning the DoRA. She said the criteria for the two grants were based on the economic hub of the municipalities. However, she was of the view that the population of other municipalities in rural areas also needed to be investigated. She stated that the rural municipalities also needed to be upgraded, not only when there was an overload of communities. She asked for more clarity on the issue and timeframes for upgrading those areas.

Mr Mphithi asked how National Treasury dealt with the processes of funds being allocated towards the end of the year because allocations at the end of the year did not provide much time for the funds to be used as planned and for processes to be followed.

The Chairperson appreciated the work being done by National Treasury. She suggested that perhaps the implementation part of the strategies needed to be strengthened to ensure that citizens were benefitting. She highlighted that the President emphasised the importance of spheres of government working together to maximise the implementation processes and coordination of Government work. She asked how National Treasury had been working together with other government entities to ensure that they capacitated various spheres of government per the Constitution of the country. She asked for clarity on hoNational Treasury could ensure that it had enough individuals to build capacity in the different municipalities. She used the example of Mangaung, and how the NT worked together with government to ensure that the funds allocated were used adequately.

Responses
Ms Ogalaletseng Gaarekwe, Chief Director, National Treasury, agreed with the Committee that the stopping and reallocation was not an ideal situation however, as mentioned previously in the presentation, it was an option used as a last resort. NT did not advocate for the situation, but the stopping and reallocation had assisted the entity in retaining funds to be spent within the sector. If funds remained unspent, they had to be surrendered to the National Revenue and reallocated to other sectors. She agreed that stopping funds from a province did not take away the need for the money in those areas. NT had put in place monitoring mechanisms to ensure the smooth sailing of those processes, such as quarterly meetings with the sectors and continuous engagements of their progress.

She said even if money was given to the Northern Cape province ten days before the close of the financial year, they were most likely to spend due to the pressure of the backlog which they experience. The province had seemingly been able to build capacity from which the Free state province could learn. There were consultations ahead of time when funds were allocated towards the end of the year and sectors committed to being able to spend the money. In most cases, there were already procurement plans that needed to be addressed, and sectors would apply for a rollover which would likely be approved if the necessary plans were provided for how the money would be spent.

She said all government departments submitted expenditure reports to NT quarterly, and NT was required by the Section 32 of the PFMA to publish expenditure reports for provincial departments, including the conditional grant spending. Before publishing, the report was sent back to NT, confirming the information and the HOD signed off on it. The grant framework was within the DoR Bill recently approved by Parliament and was readily accessible. She agreed with the Committee that all citizens had the right to shelter.

Mr Pillay added that provinces had the option of applying for a rollover if the fund had been committed. NT had not been very comfortable with the issue concerning late applications from departments. NT was receiving applications to stop and reallocate too late in the year, and by the time the funds were processed, they ended up going to provinces too late in the financial year, which was quite unreasonable. NT had implemented a cut-off date regarding when departments could apply for the stopping and reallocation of funds.

Mr Mashaba addressed the question about the consistency of municipalities and how they accounted for expenditure. He said NT received monthly and quarterly reports; however, the concern was related to reducing R1.6 billion. The presentation indicated that, in general, all municipalities were underspending, and it was, therefore, in the interest of the grant itself to push the metropolitan municipalities through the letter as a way of indicating to them that if there were no plans to improve the acceleration, NT could stop the funds. The metropolitan municipalities had been given an opportunity to scale up their performance instead of implementing the stopping process. Recommendations signed off by the Accounting Officers would indicate to NT, the plans the municipalities had and how they planned to accelerate on their committees.

He said that the stopping and reallocation was a cash management tool within a period, the DoRA money was quite time bound and entities were required to spend the money within a certain timeframe. Even if there were good plans in place, if the project cash management suggested that the money could only be spent later, the best option was to surrender the money. The cash on the ground would stay in the bank account even if it was not spent and often, it would be used to cover debts.

In his response to Dr Khumalo, he highlighted that some projects were continuous, and a contractor would already be onsite. Because they were already aware of DoRA, they would move faster. He said that in most cases, the sector would indicate that there was no money and, therefore could continue with a project that was perhaps going to start in July and save the contractor money. There was again an opportunity for rollover and urgent needs that could not wait for procurement. A municipality such as Mangaung could be directed to use that money allocated for fixing spilling sewerages onsite.

Mr Hattingh responded to the concerns raised about consulting civil society. He said that in the municipal space, it was a legal requirement in terms of a systems act and in the Municipal Finance Management Act. When a Municipality tabled its budget by 31 March as per the law and adopted it by 30 June, that created a window to consult the community. Not all provinces did the process eloquently. It could be argued that the public was consulted and engaged ahead of the annual budget through such an instrument. In its efforts to be transparent, the NT website hosted (annually) the consolidated budget information for all 57 principalities and all other necessary reports. All the information regarding budget reports was readily available.

The Chairperson thanked National Treasury for honouring the engagement and urged the department to continue working with the various departments to perform its oversight duties and guide the departments accordingly.

Meeting adjourned.
 

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