Question NW2005 to the Minister of Cooperative Governance and Traditional Affairs

Reply:

1(a) The following list of municipalities constitute the 7% well performing municipalities:

			Audit opinion
Municipality	Province	District	2016-17	2015-16	2014-15	2013-14
Senqu	EC	Joe Gqabi	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Midvaal	GP	Sedibeng	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
King Cetshwayo District	KZN	uThungulu	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
uMhlathuze	KZN	uThungulu	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Umzumbe	KZN	Ugu	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Ehlanzeni District	MP	Ehlanzeni	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
ZF Mgcawu District	NC	ZF Mgcawu District	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Breede Valley	WC	Cape Winelands	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Cape Agulhas	WC	Overberg	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Cape Winelands District	WC	Cape Winelands	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Drakenstein	WC	Cape Winelands	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
George	WC	Eden	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Hessequa	WC	Eden	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Langeberg	WC	Cape Winelands	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Mossel Bay	WC	Eden	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Overstrand	WC	Overberg	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Swartland	WC	West Coast	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Theewaterskloof	WC	Overberg	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
West Coast District	WC	West Coast	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings
Witzenberg	WC	Cape Winelands	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings	Unqualified with no findings

All of these municipalities obtained an unqualified audit report with no findings for at least the past 4 years.

(b) Over the past few years it has become clear that there could be three root causes for distress in local government:

(i) A municipality that finds itself in distress due to failures in governance, financial management and administration (i.e. The institutional performance context), and

(ii) A municipality that finds itself in distress because it spatially and socio-economically was and always will be a financially non-viable entity (i.e. the socio-economic context);

(iii) A municipality that finds itself in distress as a result of systemic issues around powers and functions, fast growth in urbanization with expansion of capital infrastructure to fulfil increasing demand and an inability to grow operational revenue concurrent to ensure sufficient maintenance and operation of the infrastructure.

The manifestation of these root causes is however complex and often difficult to pinpoint. Distress could be a result of all three root causes or a combination of any two.

Whilst the above list focuses on sound financial management practices, it happened that a municipality such as Langeberg, for example, finds itself in the well-performing list with regard to financial management practices (audit outcomes), but simultaneously reflected on the distressed list of 87 because the Municipal Infrastructure Agent identified it as part of the 55 municipalities that are struggling to spend its Municipal Infrastructure Grant (MIG).

2) Yes, the Department has signed a Memorandum of Understanding with the National Treasury. Municipalities will be monitored continually and receive joint support from the National Treasury in the form of:

(i) Financial Recovery Plans - the Municipal Financial Recovery Service (MFRS) was established in 2007 as a Directorate in the National Treasury within the Office of the Accountant- General, Chief Directorate MFMA implementation in line with section 157 of the MFMA. In terms of section 158, the functions of the unit include:

• Preparation of financial recovery plans;
• Monitoring the implementation of the recovery plan;
• Assisting municipalities to identify the causes of and potential solutions to the financial problems;
• Information is collected on municipal financial problems and on best practices in resolving such problems.

Assistance is based on requests received from the municipality or the province and provided in a collaborative and coordinated way with other national or provincial departments. In order to support municipalities with financial recovery, National and Provincial Treasuries use the Financial Management Capability Maturity Model (FMCMM)

(ii) The Financial Management Capability Maturity model (FMCMM) is a tool (comprising 21 modules) to drive improvements in the financial, institutional and capacity disciplines in municipalities. The objective is to ensure that support is directed to areas most in need, with changes resulting in progressive maturity assessment improvements.

The project involves NT working in conjunction with Provincial Treasuries to promote actions to support, monitor and report on FM issues in specific municipalities. Actual reviews/ reassessments will be conducted through the Provincial Treasuries, who will ensure the preparation and implementation of action plans to address remaining areas of weakness. (FMCMM support is included in the MFIP Technical Advisors activities.) Assistance, where required and requested, will be provided by NT in the re-assessment process to support the development of appropriate action plans and to monitor progress within established timelines.

(iii) DCoG has identified a strategic intervention aimed at enhancing the municipal revenue management and debt collection system in local government. The intervention comprises the following stages:

• Implementation planning and conducting an “As Is’’ assessment
• Development of an improvement plan (municipal-specific simplified revenue plan)
• Implementation of the municipal-specific simplified revenue plan

(iv) The Department of Cooperative Governance’s Provincial coordinators will provide support in the form of coordination of the technical task teams that work with municipalities to address the challenges identified.