ATC191202: Report of the Select Committee on Co-operative Governance and Traditional Affairs, Water, Sanitation and Human Settlements on Irregular Expenditures of Top Five Municipalities in Terms of 2017/18 Local Government Audit Outcomes, dated 26 November 2019
Report of the Select Committee on Co-operative Governance and Traditional Affairs, Water, Sanitation and Human Settlements on Irregular Expenditures of Top Five Municipalities in Terms of 2017/18 Local Government Audit Outcomes, dated 26 November 2019
1. Background and Overview
1.1 The Select Committee on Co-operative Governance and Traditional Affairs, Water, Sanitation and Human Settlements, having considered the 2017/18 Local Government Audit Outcomes, Irregular Expenditures, Financial Health and Post Audit Action Plans of the OR Tambo District Municipality, Nelson Mandela Bay Metropolitan; Mogalakwena Local Municipality and Matlosana Local Municipality, the Select Committee reports as follows:
1.2 On June 2018, the Auditor -General released the 2017/18 Municipal Performance Audit Outcomes Report of all the South African Municipalities. The General Report dealt with the audit outcomes of the South African Local Government for the financial year ended 30 June 2018.
1.3 The purpose of the General Report has been to provide the political leadership with the overview of the audit outcomes and internal control deficiencies that may have prevented the municipalities from attaining the desired audit outcomes, i.e. financially unqualified with no material findings on legislation and predetermined objectives related to key performance areas of service delivery, infrastructure development and local economic development.
1.4 As part of ensuring executive accountability and conducting parliamentary oversight, the Select Committee held briefing sessions on 8th November 2019 with the Auditor General, National Treasury, Political Officer Bearers and the Senior Managers of the Nelson Mandela Bay Metropolitan, OR Tambo District Municipality, Mogalakwena Local Municipality and Matlosana Local Municipality.
2. Objectives of the Briefing Sessions on 2017/18 Local Government Audit Outcomes
2.1 To engage with the Auditor-General on the 2017/18 Performance Audit Outcomes of the top five municipalities who are the contributors of irregular expenditures.
2.2 To engage with National Treasury on the financial health of the top five municipalities who are contributors of irregular expenditure.
2.3 To receive presentations from OR Tambo District Municipality, Nelson Mandela Bay, Mogalakwena and Matlosana Local Municipalities on the implementation of Post Audit Action Plan to deal with the concerns raised and recommendations made by the Auditor- General in the 2017/18 Local Government Performance Audit Report.
3. General Overview of the Briefing Sessions on 2017/2018 Local Government Audit
and Irregular Expenditure of Municipalities
3.1 The Auditor-General briefed the Select Committee on the 2017/18 Local Government Audit Outcomes and Irregular Expenditures of the Nelson Mandela Bay Metropolitan; OR Tambo District Municipality; City of Johannesburg; Mogalakwena Local Municipality and Matlosana Local Municipality. The presentation focused on audit outcomes; financial health; irregular expenditure; accumulated irregular expenditure and overview of irregular expenditure of each municipality.
3.2 The National Treasury briefed the Select Committee on the financial health of the above-mentioned municipalities. The presentation focused on the criteria for assessing financial health, concerns of the financial health and support provided to the municipalities respectively.
3.3 The OR Tambo District Municipality presented the Post Audit Action Plan dealing with historical and current irregular expenditures. The presentation focused on background to the District Municipality; audit outcomes; genesis of irregular expenditure; steps taken to deal with the historic irregular expenditure and remedial actions to deal with irregular expenditure.
3.4 The Nelson Mandela Bay Metropolitan presented the Post Audit Action Plan dealing historical and current irregular expenditure. The presentation focused on the reasons it has the highest extent of the UIF&W Expenditure as disclosed in its annual financial statements, 30 June 2018. The plans included on getting the institution out of the situation.
3.5 Mogalakwena Local Municipality presented the Post Audit Action Plan dealing with historical and current irregular expenditure. The presentation focused on the overview of the Municipality Audit Outcomes for the past five years; matters raised by the AGSA; progress of audit remedial actions; functionality of oversight structures; progress on reported UIF and key challenges and mitigation plans.
3.6 The City of Matlosana Local Municipality presented Post Audit Action Plan dealing with historical fruitless expenditure. The presentation focused on oversight structures and functions; unauthorized, irregular and wasteful expenditure for 2017/18 and post audit action plan to deal with accumulated irregular expenditure as identified in 2017/18 audit outcomes.
4. Presentation by the Auditor-General on the 2017/18 Local Government Audit Outcomes and Irregular Expenditure of Top Five Municipalities
4.1 The Nelson Mandela Bay Metropolitan was qualified in 2017/18 for completeness of irregular expenditure. The AGSA was unable to determine the full extent of the irregular expenditure. Irregular expenditure incurred during the 2017/18 financial year cut across all service offerings and support services of the Municipality. In the majority of cases, irregular expenditure stemmed from procedural non-compliance with the SCM policy.
4.2 The main areas of non-compliance related to the bid adjudication committees not constituted in terms of the SCM regulations. Bidders whose tax matters had not been declared by the South African Revenue Service to be in order. Bidders who did not score the highest points awarded bids without substantiating action with valid reasons.
4.3 The R2,71billion was irregular expenditure incurred in 2017/18, of which R2,58 billion represents irregular expenditure incurred on ongoing multi-year contracts awarded in previous years. The R0,040 billion relates to USDG. Around R8,1 billion of the irregular expenditure recognised for 2016/17 was as a result of the Municipality trying to determine the full extent of the previous year’s irregular expenditure incurred and address the previous year qualification. The Municipality did not investigate all instances of the prior year’s irregular expenditure.
4.4 The OR Tambo District Municipality irregular expenditure in 2017/18 was due to awards made contrary to SCM procedures on awarding of contracts with the main areas of non-compliance related to bids that were evaluated by bid adjudication committees not constituted in terms of the SCM regulations. Bids that were advertised for less than the required number of days; contracts awarded to providers whose tax matters had not been declared by the South African Revenue Service; contracts awarded to bidders based on points given for criteria that differed from those stipulated in the original invitation for bidding.
4.5 The irregular expenditure mostly related to water and sanitation services (basic services). R0,994 billion was irregular expenditure incurred in 2017/18. The R0,28 billion and R0,01 billion relates to MIG and RBIG respectively. In 2016/17, R2,4 billion of the irregular expenditure was due to correction of prior year irregular expenditure in order to address the prior year qualification.
4.6 Matlosana Local Municipality’s main contributor to irregular expenditure incurred during 2017/18financial year was the incorrect composition of the bid adjudication committee. The second biggest contributor was various contracts entered into using Regulation 32. However correct process had not been followed by the Municipality. The current Municipal Manager stopped all procurement through Regulation 32, since his appointment in 2017/18.
4.7 During the 2016/17 financial year the Municipality had vacancies at senior manager level, where only the Municipal Manager and CFO positions were filled. The bid adjudication committee was constituted of assistant directors that were not formerly delegated to act as senior managers in the Municipality, resulting in all awards made during this period being irregular. The remaining R210 million of 2015/16 and preceding years represent various SCM non-compliance and payments made without following the correct SCM processes.
4.8 In previous years the controls that enabled correct SCM processes were circumvented resulting in all awards of the Municipality being made to only certain individuals and/or suppliers.
4.9 The City of Johannesburg Metropolitan incurred irregular expenditure of R868 million in 2017/18, of which R628 million (72%) related to prior year contracts. The majority of the irregular expenditure incurred related to the procurement of fleet services and information technology services through invalid extensions and deviations instead of a competitive bidding process.
4.10 The prior year contracts related to ICT infrastructure contracts, security services contract and housing contracts. The irregular expenditure R705.9 incurred in 2016/17 related to various non-compliance with SCM regulation with lack of following competitive bidding process recording the highest instances. The prior year contracts were the significant contributors to the irregular expenditure incurred in 2016/17.
4.11 The irregular expenditure of R155, 6 for 2015/16 and preceding years related to various non-compliance with SCM regulation with high instances where competitive bidding process were not followed.
4.12 Through Group Forensic and MPAC, the City prioritized the investigation of some of the instances of irregular expenditure. Thus, irregular expenditure to the value of R561 million was investigated, leaving R2,163 billion not investigated and the investigation included some of the legacy contracts. Some of these investigation was completed during the year under review, and some are in progress. Challenges still remain with regards to the City’s implementation of the recommendations emanating from the investigations and some of the investigations are inconclusive.
5. Presentation by the National Treasury on Financial Health and Irregular Expenditure of top five municipalities
5.1 The Financial Health of Mogalakwena Local Municipality cash coverage = 2; cash balance = 1; reliance on capital grants = 1; overspending operational = 1; underspending capital = 1; growth in debtors = 2; debtors % of own revenue = 3 and creditors % of cash = 1. The concern relates to the increase in growth of outstanding consumer debtors and % of own revenue. this indicates that the Municipality must collect outstanding amounts billed or address its tariff and indigent policy or reduce spending on operations to ensure balance.
5.2 Provincial Government was supporting the Municipality, however, details were not available at the time of preparing the presentation. Other support: priority areas through the financial management grant framework capacity building (training for minimum competencies); appointment of Interns; Implementation of Audit Action Plans and preparation of AFS.
5.3 The Financial Health of the Nelson Mandela Bay Metro contains cash coverage = 1; cash balance = 1; reliance on capital grants = 2; overspending operational = 1; underspending capital = 1; growth in debtors = 2; debtors % of own revenue = 3; creditors % of cash = 3. The concerns relate to increase in outstanding consumer debtors; % debtors to revenue (a sign that the Municipality must implement measures to collect revenues, review tariffs and indigent policies to bring balance and delays in paying creditors) matter to be addressed by council.
5.4 The National Treasury has provided both hands-on and advisory support to the Municipality. Post 2016 LG Elections, a training session for Municipal Public Accounts Committee (MPAC) councillors and administration was provided. The committee was given a picture of UIF&W and guided on the role of the MPAC/ Municipal Council in processing UIF&W, consistent with section 32(2) of the MFMA.
5.5 In December 2017, engagements were held with the CFO and team, including chairperson of the MPAC and representatives from the Office of the Auditor-General to discuss outstanding audit issues on UIF&W. The National Treasury attended various CFO Forums hosted by the EC Provincial Treasury to present on, amongst others, the state of UIF&W in the province and measures to be taken by municipalities. The Chief Financial Officer of the Municipality was also in attendance.
5.6 Recommendations were to be taken to council for final decision making and processing by the administration. The impact of the guidance and additional training may only be seen post the conclusion of the 2018/19 municipal audit cycle. Priority areas supported through the financial management grant framework. Capacity building (training for minimum competencies) and appointment of Interns.
5.7 Financial Health of OR Tambo District Municipality contains cash Coverage = 2; cash Balance = 1; reliance on capital grants = 3; overspending operational = 1; underspending capital = 3; growth in debtors = 3; debtors % of own revenue = 3; creditors % of cash = 3. The concerns are the heavy reliance on infrastructure grants to finance capital programmes, underspent on capital projects, growth in outstanding consumer debtors, delayed payments to creditors.
5.8 The National Treasury provided both hands-on and advisory support to the District. After LG Elections, National Treasury trained all MPAC councillors in the District and Local Municipalities in April 2017. The leadership for all the municipalities were given a picture of the state of UIFW and guided on the role of MPAC and the Municipal Council in processing UIF&W, consistent with section 32(2) of the MFMA.
5.9 The municipal council is required to take final decisions on recovery or write-off. In July 2017, National Treasury met with the administrative leadership of the District as a follow-up to the previous training to discuss the role of the administration in reducing UIF&W.
5.10 The National Treasury attended various CFO Forums hosted by the EC Provincial Treasury to, amongst others, discuss status of UIFW in the province. The CFO of ORT was in attendance. During January to March, the National Treasury undertakes the mid-year budget assessment visits to the metros and secondary municipalities to discuss issues in terms of section 72 of the MFMA, the District is one of these municipalities. UIF&W is a standing item on the agenda for these sessions. The last session was held in February 2019.
5.11 The MEC for Finance and Local Government hosted a session with all Mayors and Municipal Managers in April 2019, to highlight the urgency in addressing UIF&W and negative audit outcomes in East London. Priority areas supported through the financial management grant framework; capacity building (training for minimum competency) and appointment of Interns.
5.12 The Financial Health of the City of Johannesburg contains financial information that shows that the Municipality cash coverage = 3; cash balance = 1; reliance on capital grants = 2; overspending operational = 1; underspending capital = 2; growth in debtors = 1; debtors % of own revenue = 3; creditors % of cash = 3. The Municipality reported cash coverage of less than 1 month. The growing concerns relates to outstanding consumer debtors, delay in payment of creditors.
5.13 In July 2016, discussions were held with the CFO and the Budget and Treasury Office team to highlight levels of UIF&W, and measures to be implemented to address gaps identified. Post the 2016 LG Elections, National Treasury trained the MPAC councillors. Committee was given a picture of the state of UIF&W and guidance was provided on the role of the MPAC and the Municipal Council in processing UIFW -consistent with section 32(2) of the MFMA.
5.14 The final decision rests with the municipal council to recover or write-off. In March 2018, National Treasury met with senior management from the Budget and Treasury Office and the Forensic Investigations team at the municipality to address the high levels of UIFW and actions required.
5.15 In July 2019, National Treasury presented at a strategic planning session of MPAC, the leadership was informed of the high levels of UIF&W again and guidance was provided to address outstanding matters. The senior management was in attendance, led by the Municipal Manager. The impact of the guidance and training may only be seen post the conclusion of the 2018/19 municipal audit.
5.16 Matlosana Local Municipality financial health contains financial information that shows that the Municipality cash coverage = 3; cash balance = 1; reliance on capital grants = 3; overspending operational = 2; underspending capital = 2; growth in debtors = 3; debtors % of own revenue = 3; creditors % of cash = 3.
5.17 The National Treasury concerns are: reported cash coverage of less than 1 month, heavy reliance on infrastructure grants, underspending of operational and capital programmes, growth in outstanding consumer debtors and delayed payment to creditors.
5.18 The Provincial Treasury, Provincial CoGTA, and SALGA conducted a workshop on the 6 September 2019 with the municipality’s MPAC on the process of dealing with UIF&W. The roles of the MPAC and Finance Committee were clarified, using the toolkit and guide. Continuous MPAC support through a dedicated facility in the form of a helpdesk (helpline) for assistance was provided.
5.19 Continuous support to the Finance Committee was provided by Provincial Treasury. The responsibilities of Mayor and Council to address UIF&W was also highlighted, Municipal Finance Improvement Programme Technical Advisor was placed at the Municipality to assist with financial management reforms. Priority areas supported through the financial management grant framework; appointment of Interns; upgrade of financial systems, and AFS preparations.
6. Presentation by O.R Tambo District Municipality on Irregular Expenditure and Post
Audit Action Plan
6.1 The O.R Tambo District Municipality had an accumulated amount of R4.2 billion for unauthorised, irregular, fruitless and wasteful expenditure for the years 2013 to 2016.
6.2 Over the years limited effort was put into trying to investigate the unauthorised irregular fruitless and wasteful. Much that the recurring unauthorised, irregular, fruitless and wasteful was somehow quantified in 2013, it can be traced as far back as earlier than that. This emanates from various reasons elaborated below amongst others.
6.3 The causes of the irregular expenditure included the administrative instability within the Municipality, non-existence of bid specification committee, constitution of bid committees, lack of capacity within the SCM Unit, mis-alignment of PFMA & MFMA contracts.
6.4 The Municipality has developed remedial action plan to deal with the root causes of the irregular expenditure. The Municipality has filled all its senior management positions, as well as most middle management and key critical posts. All committees are in place with capable officials and the Municipality had inculcated functionality as criteria for job scoping and evaluation. The bid adjudication committee has a dedicated SCM Practitioner.
6.5 SCM positions have been filled and others are currently in the process of recruitment and training of the SCM practitioners on the procurement systems and Regulations. The management took a resolution to discontinue the utilisation of Regulation 32. The term contracts approach has been introduced for operations and consultancy services.
6.6 The Municipality has initiated forward planning and ensured that all adverts are in line with the SCM regulations, conducted the vetting of the key senior management, introduced the culture of compliance, developed and prepared quarterly irregular expenditure report and midyear financial statements.
6.7 The Municipality had initiated a culture change awareness processes to the staff of the organisation. Already there are subsequent consequences for those transgressing the procedures. The Municipality had already established the Municipal Disciplinary Board to deal with all matters relating to financial misconduct in line with the Regulations. The Municipality has an Audit Committee that is currently functional, and reporting directly to the council.
6.8 The Municipality has initiated the term contracts as means to ensure that emergencies are addressed on a call-down bases. Cost containment measure policy has been developed, and tabled to council. The management is forging relations with AGSA to rollout awareness on the Public Audit Act as amended.
7. Presentation by Nelson Mandela Bay Metro on Irregular Expenditure and Post Audit Action Plan
7.1 Numerous interactions with the National Treasury in the presence of the Auditor General were held on 12 December 2017 and June 2019. The Municipality has developed the UIF&W Expenditure Policy guiding the process. The developed UIF&W Expenditure Register which is continuously being updated; Identifying the UIF&W Expenditure from the source and updating disclosure into. the UIF&W Expenditure Register; Section 32 Reports being presented to MPAC which also covers issues of consequence management, etc.
7.2 The Disciplinary Board established in line with the requirements of the Regulations must be urgently concluded (the lifespan of the previous board has lapsed and is in the process being reviewed).
7.3 The Municipality has ccentralized all SCM related filing system and improved contract management function under the SCM Unit.
7.4 Stabilize the institution by appointing senior leadership in order to implement internal control systems. The appointment of Executive Directors, COO, CFO, and addressing the City Manager’s position is key in being able to administratively conclude on these matters. Without these key positions being filled, there would be a challenge.
7.5 Interactions held with AGSA relating to the introduction of the PAAA, and these were held with EXCO members and all other key officials for them to understand the impact. There is excellent working relations with MPAC Chairperson and her Committee.
8. Presentation by Mogalakwena Local Municipality on Irregular Expenditure and Post Audit Action Plan
8.1 The irregular expenditures have been reported to council. The council referred the matters to the council committee (MPAC) for further investigations and consideration. MPAC investigations is still in progress, and no reports were made to council for consideration.
8.2 The Municipality reported that except for the Supply Chain Manager who was subsequently moved from the position as recommended by AGSA in the 2017/18 audit, no further action was taken against municipal officials about the above irregular expenditure pending finalisation of the investigations by council.
8.3 In the current year the Municipality developed inspection sheets to indicate whether meters are functional or not functional. This will also assist to determine the technical and non-technical losses. This finding has been resolved.
8.4 A proper statement of comparison has been prepared and submitted to the AGSA in order to address finding on the differences between statement of comparison of budgeted and actual amounts.
8.5 A proper cash flow statement with workings has been prepared at 30 June 2019 and submitted for audit, including schedule for 2016/17, 2017/18 and 2018/19.
8.6 For 2017/18 financial year job cards were submitted to the AG as proof that the Municipality was following up on water losses, but this was considered insufficient by the AG. The UIF&W has been recalculated and disclosed on the AFS. A report has been submitted to council and waiting for the council committee to finalise the investigations.
9. Presentation by Matlosana Local Municipality on Irregular Expenditure and Post Audit Action Plan
9.1 Senior Managers were appointed and therefore the finding is addressed. The quorum at every bid adjudication committee meeting includes the four (4) senior managers in terms of SCM Regulation 29(2). Currently the only vacant position is that of the Chief Financial Officer. Centralization of SCM to address order splitting.
9.2 Established a committee to adjudicate all procurements below R200 000.00. The committee ensures correct pricing verification if all relevant documents are attached. Established a check list to ensure that all the documents are correctly completed.
9.3 The Municipality is in the process of upgrading its document management system(Orbit) to have adequate capacity to accommodate scanning of documents by all units. The verification of tax status of the service providers is done through the Central Supply Database (CSD). Any service provider who is not registered on the CSD is not considered.
9.4 All irregular expenditure for 2017/18 were reported to council. The council appointed a Disciplinary Board. Seventy-three percent (73%) of the Municipality’s irregular expenditure is a result of missing documents.
9.5 During the period 2010 to 2017 a total amount of R1.7 billion was included on the irregular expenditure register, as a result of missing documents. Alternative methods were used to verify the expenditure and we placed the reliance on the asset register since there were no major findings raised by the Auditor General on the asset register. Payments of projects has been traced to the asset register and contract register of the Municipality.
9.6 The council wrote off an amount of R716 061 369 (R610 355 402 & R105 705 966) relating to the above transactions. However, the AGSA indicated that the writing off, of irregular expenditure cannot be accepted as no proper investigations were done. The Municipality is currently investigating irregular, fruitless and wasteful expenditure.
9.7 An amount of R1,4 million relates to concluded fraud cases. The responsible municipal officials were convicted and sentenced jail term. This amount could not be recovered as the affected employees resigned before the internal disciplinary action could be conducted.
10. Observations of the Select Committee: AGSA and National Treasury Presentations
10.1 The Select Committee has noted that the National Treasury continues to support financial management and financial governance improvements in municipalities, along with the Provincial Treasuries as mandated by the MFMA. The National Treasury works collaboratively with the National and Provincial Departments of Cooperative Governance on municipal issues.
10.2 The Select Committee has further noted that coordination of meetings had been held with provinces to align support measures, engagements with mayors; joint sessions with provincial legislatures. However, the impact depends on the absorption capacity of municipalities, the commitment of political leadership and municipal officials to implement the reforms diligently, timeously and effective oversights by the Provincial Legislatures, South African Local Government Association and the National Council of Provinces.
10.3 The Select Committee has noted with great concerns that irregular expenditure of previous years was not properly dealt with through investigation, and followed by condonement, recovery or write-off of the expenditure. The top 5 contributors to the accumulated irregular expenditure (constitutes 32% of R71,107 billion) which also did not investigate all instances of the prior year’s irregular expenditure were: Nelson Mandela Bay Metro (EC) –R12,379 billion; OR Tambo District (EC) –R3,151 billion; City of Matlosana (NW) –R2,748 billion; and City of Johannesburg Metro (GP) –R2,724 billion and Mogalekwena (LP) –R1,718 billion.
10.4 During the engagement with the Auditor-General and National Treasury, the Select Committee has noted with great concerns that all the top five municipalities did not investigate all instances of the prior year’s irregular expenditure, and there has been lack of consequence management on matter related to financial mismanagement, corruption and fraud.
10.5 Select Committee is of the opinion that acceptable level of municipal performance should include strong political and administrative leadership; political stability; functional council and oversight structures; regular report back to communities; low vacancy rates; collection rates above 80% on average; spending on capital budgets above 80%; continuity in the administration; consistent spending of capital budgets; consistent unqualified audit outcomes; responsive to service delivery needs; evidence of good administrative and financial management; and performance driven by Integrated Development Plans, budgets compliance and innovation.
11. Observations of the Select Committee: O.R Tambo District Municipality
11.1 The Select Committee has noted that the council of O.R Tambo District Municipality mandated MPAC to further investigate the remaining balance as at the end of 2017/18 financial year. The MPAC was mandated by Council to investigate unauthorized; irregular and fruitless and wasteful expenditure. The council successful investigated the remaining unauthorized, irregular and fruitless and wasteful expenditure made of the following: unauthorized expenditure R1 005 909. fruitless and wasteful expenditure R24 697 735. Irregular expenditure R3 151 477 633.
11.2 Upon investigation of the remaining unauthorized; irregular, fruitless and wasteful expenditure by MPAC, the council resolved on the following: unauthorized expenditure for 2016/17 amounting R1 005 909, 00 be condoned. An amount of R6 200 035, 77 fruitless and wasteful expenditure from 2016/17 and 2017/18 be written-off, as this relates to state institutions ignoring the requirements of the PFMA and MFMA (interest of Telkom, Eskom, KSD and etc).
11.3 An amount of R3 551 218 190 irregular expenditure supported by supporting documentation be written-off, as the Municipality obtained value for money from these transactions.
12. Recommendations of the Select Committee: O.R Tambo District Municipality
12.1 Having considered the post audit action plan of the O.R Tambo District Municipality, the Select Committee recommends to the House as follows:
12.1.1 The District Municipality should establish a committee in terms of section 32 of the Municipal Finance Management Act, to investigate historical irregular expenditure and ensure the implementation of consequence management.
12.1.2 The Eastern Cape Provincial Department of Cooperative Governance and Traditional Affairs should monitor the implementation of the establishment of the section 32 Committee.
12.1.3 The Select Committee on Cooperative Governance and Traditional Affairs, Water, Sanitation and Human Settlements should, during the 2020 parliamentary second term conduct a proactive oversight visit to the Municipality to monitor progress in respect of the implementation of the municipal Post Audit Action Plan.
13. Observations of the Select Committee: Nelson Mandela Bay Metropolitan
13.1 The Select Committee has noted that the Municipality has opened discussion with authorities for an establishment of a Technical Section 32 Committee, which the council has not considered and adopted for implementation.
13.2 The Select Committee has further noted that the “ground-work” regarding historic irregular expenditure has already been done, but what requires to be undertaken is an independent analysis to cover consequence management.
13.3 The Municipality was in discussion with authorities for procuring “independent / external” forensic auditor to “unpack” the historic irregular expenditure, cover issues of value for money / consequence management.
14. Recommendations of the Select Committee: Nelson Mandela Bay Metropolitan
14.1 Having considered the municipal post audit action plan of the Nelson Mandela Bay Metropolitan Municipality, the Select Committee recommends to the House as follows:
14.1.1 The municipal council should consider and resolved the procurement of external forensic auditor to unpack the historic irregular expenditure, focusing on value for money and consequence management.
14.1.2 The Eastern Cape Provincial Department of Cooperative Governance and Traditional Affairs should monitor the implementation of the appointment of the external forensic investigator.
14.1.3 The Municipality should urgently fast-track the filling of critical and senior management positions, because instability and prolonged vacancies in key positions caused a capacity gap in the Municipality.
14.1.4 The Select Committee on Cooperative Governance and Traditional Affairs, Water, Sanitation and Human Settlements should during the 2020 parliamentary second term, conduct a proactive oversight visit to the Municipality to monitor progress in respect of the implementation of the municipal Post Audit Action Plan.
15. Observations of the Select Committee: Mogalakwena Local Municipality
15.1 The Select Committee has noted with concern the murder of the Chairperson of MPAC and investigation by SAPS are continuing.
15.2 Even though MPAC has been established, the Select Committee has noted that MPAC reports have not been successfully considered by council in the previous two years, hence investigation reports on UIF for the previous four years has not been considered.
15.3 The Municipality has been operating for years without appointed section 57 managers, and has in the previous year managed to fill all senior management positions, except for Community Services Department.
16. Recommendations of the Select Committee: Mogalakwena Local Municipality
16.1 Having considered the Post Audit Action Plan of Mogalakwena Local Municipality, the Select Committee recommends to the NCOP as follows:
16.1.1 The council of Mogalakwena Local Municipality must fast-track the process of considering and adopting the report of the MPAC.
16.1.2 The Municipal Manager of the Municipality should implement the resolutions of the council, including the recommendations of the report of the MPAC.
16.1.3 The Eastern Cape Provincial Department of Cooperative Governance and Traditional Affairs should monitor the implementation of the council resolutions and recommendations of the MPAC.
16.1.4 The Select Committee on Cooperative Governance and Traditional Affairs, Water, Sanitation and Human Settlements should during the 2020 parliamentary second term, conduct proactive oversight visit to the Municipality to monitor the progress in respect of the implementation of the municipal Post Audit Action Plan.
17. Observations of the Select Committee: Matlosana Local Municipality
17.1 The Municipality attempted to write off irregular expenditure of R808 million in the 2017/18 financial year, but had to write it back as they had not followed the correct process of investigation to determine whether officials could be held liable for the expenditure and whether the Municipality had suffered any financial loss as a result. Some of the tender documentation relating to contracts awarded prior 2016/17 are missing, and the Municipality has been engaging National Treasury on how to best address these.
17.2 The Select Committee has noted that the Provincial Treasury appointed Open Waters Forensic Investigations Company which recommended that disciplinary actions be instituted against certain officials.
17.3 An official was charged with fruitless and wasteful expenditure and an amount of R135 000,00 is recoverable in R1 050,00 monthly deductions from his salary.
17.4 A criminal case was registered against another official, who was found guilty and an amount of R65 000.00 was recovered from him. The final report from Open Waters is still outstanding to finalise disciplinary processes against other officials.
18. Recommendations of the Select Committee: Matlosana Local Municipality
18.1 Having deliberated on the Post Audit Action Plan of Matlosana Local Municipality, the Select Committee recommends to the NCOP as follow:
18.1.1 Open Water Company appointed by the National Treasury should fast track the process of finalising disciplinary process against other officials accused of incurring irregular expenditure for the Local Municipality.
18.1.2 The Municipal Public Accounts Committee must investigate previous irregular expenditures and table the report to the council. The National Treasury should assist the Municipality on how to address the missing of tender documents awarded during 2017/18 financial year.
18.1.3 The North West MEC for Cooperative Governance and Traditional Affairs should in collaboration with the South African Local Government Association, monitor the progress of the investigation conducted by the MPAC.
18.1.4 The Auditor-General should use the legislative powers to recover money lost by the Municipality as the result of irregular expenditure, non-compliance with legislation and allegation of fraud and corruption.
18.1.5 The leadership of the Municipality should implement consequence management for those officials who deliberately or negligently resulted the Municipality incurring fruitless, wasteful and irregular expenditure, and other cases of financial misconduct.
18.1.6 The Municipality should not use consultants for the compilation of annual financial statements, unless an assessment of the needs and requirements confirms that the Municipality does not have the requisite skills or resources in its full-time employ to perform the function.
Report to considered.
No related documents