BRIEFING DOCUMENT ON THE INTERVENTION IN THE
1. PURPOSE
To provide a briefing report to the Select
Committee on Local Government and Administration on the intervention by the
Executive Council of the Province of KwaZulu-Natal undertaken in terms of
Section 139 of the Constitution at the Impendle Municipality and the present status
quo in the municipality.
2. LEGISLATIVE
PROVISIONS
Section 139 (1) (b) of the
Constitution, provides as follows;-
“When a municipality cannot or does
not fulfil an executive obligation in terms of the Constitution or legislation,
the relevant provincial executive may
intervene by taking the appropriate steps to ensure fulfillment of that
obligation, including-
(a) issuing a directive to the municipal council,
describing the extent of the failure to fulfil its obligations and stating any
steps required to meet its obligations,
(b)
assuming responsibility for the relevant obligation in that the
municipality to the extent necessary to –
(i)
maintain essential national standards or meet established minimum
standards for the rendering of a service;
(ii)
prevent that Municipal Council from taking unreasonable action that is
prejudicial to the interests of another municipality or to the province as a
whole; or
(iii)
maintain economic unity; or”
3. BACKGROUND
The background to the intervention
in terms of section 139 of the Constitution is briefly the following
:-
3.1
For an 18 month
period during the 2004/2005 and 2006/2007 financial years the entire senior
management of the municipality (including the Municipal Manager) were
suspended. The entire senior management
cadre of the municipality were either dismissed or resigned after a forensic
investigation and disciplinary enquiries supported by the department
3.2
Council then appointed
a Municipal Manager with departmental support. However Council failed to pass
the required resolution determining the terms and conditions of the Municipal
Manager’s appointment. The contract of
the Municipal Manager has subsequently been terminated.
3.3
The municipality
received departmental support and an amount of R2,7
million under the Municipal Assistance Programme (MAP) to undertake an number
of projects to improve the financial position of the municipality and to
enhance its administration. An absence
of senior municipal mangers and the lack of participation and commitment by the
municipality’s MAP task team has hampered the MAP
implementation and hence the implementation of the financial recovery plan.
3.4
The
Auditor-General’s reports for 2003/2004 and 2004/2005 financial years has
indicated serious deficiencies in management systems and other accounting and
financial controls, and disclaimed audit opinions were issued in both years.
3.5
The
Auditor-General’s report for 2005/2006 financial year has indicated further
deficiencies and a qualified report was issued on the following basis:-
i.
general ledger not
reconciled;
ii.
inadequate leave
pay provision;
iii.
fixed asset
register not in place;
iv.
no supporting
documentation;
v.
weak HR management
systems;
vi.
overstatement of
accounts received based on incorrect VAT calculation;
vii.
irregular
expenditure in respect of water function; and
viii.
major internal control weaknesses.
3.6
The Impendle
Council was the only council which failed to approve its 2006/2007 budget prior
to the start of the financial year in compliance with the Local Government : Municipal Finance Management Act, 2003. The budget was ultimately passed after
support and intervention by the department.
3.7
The following
constraints have been identified for the current 2007/2008 municipal budget:-
i.
the Council has a
limited revenue base and is primarily dependant on the equitable share and
grant funding;
ii.
the Council will only have a small
amount remaining in the budget once operational costs have been provided for.
An amount of R2,2 million was applied to capital projects for the 2007/2008
year, and includes funding for projects not undertaken in the current year;
iii.
the draft budget
did not cater for tariff increases and the municipality will be required to
review and reconsider its position in the light of the Municipal Property Rates
Act;
iv.
no provision has been made on the
budget for the filling of the posts of Technical Manager and Corporate Services
Manager.
3.8
The Council has
appointed a Technical Section Head on a contractual basis, but below the level
of Technical Services Manager. The Mayor
has expressed dissatisfaction that a Technical Services Manager was not
appointed. However it should be noted
that there is no budgetary provision for this position of Technical Services
Manager and the
3.9
Although a Chief
Financial Officer has been appointed, key personnel in the municipal treasury
have been suspended and there is limited capacity and no continuity.
3.10
The position of
Corporate Services Manager has been interviewed for, but the MM and CFO has
expressed concerns about affordability of the post, and that no budgetary
provision has been made.
3.11
Due to the lack of
support an interim contract has been entered into for the provision of these
services.
3.12
The failure by the
municipality to maintain a full compliment of senior management posts has
placed the municipality’s administration in a precarious position and rendered
it dysfunctional. This has not improved
despite support, financial investment and investigations undertaken.
Arising
from the above the Provincial Executive Council resolved to intervene as
follows
a) to intervene in the
b) authorises
the MEC for Local Government, Housing and Traditional Affairs to appoint a
multi-disciplinary task-team of specialists with the appropriate expertise and
knowledge in the applicable fields to assume the following obligations of the
i)
to investigate and address the
failure of the municipality to provide services in a sustainable manner to
practise good human resource management, to procure goods and services in
accordance with a system which is fair, equitable, transparent, competitive and
cost-effective;
ii) to
investigate and address the failure of the municipality to provide an economic,
accountable, effective and efficient administration;
iii) to
investigate and address areas of shortcomings in the municipal administration;
iv) to
ensure that the municipal manager is properly appointed;
v)
to ensure that senior municipal
managers are appointed within the means and requirements of the municipality;
vi) to
address the shortcomings in the municipality’s management systems and financial
systems and controls identified by the Auditor General;
vii) to
identify and address the issues of concern arising from the 2007/2008 budget;
viii) to support the administration of the
municipality;
ix) to
assist the municipality in filling key posts within the means and requirements
of the municipality;
x) to
regularise the municipality’s Human Resource and management systems; and
c) That
the Task-Team so appointed reports to the Executive Council on any action taken
in terms of their mandate.
4. CURRENT
STATUS
·
A
detailed recovery plan has been drafted and is attached at Annexure A.
·
An
acting Municipal Manager has been deployed to the municipality by the
Provincial Department and has been appointed in such capacity by the municipal
council.
·
A
financial management expert has been sourced from the DBSA and is providing the
required support.
·
Corporate
service and Human Resource expertise has been accessed from the adjacent Umgeni
local municipality to render support in these fields.