ATC111122: Report on Consideration of Termination of Intervention in Umhlabuyalingana Local Muncipality & Extension of Interventions in Indaka, Okhahlamba & Msunduzi Local Municipalities

NCOP Economic and Business Development

REPORT OF THE SELECT COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS ON CONSIDERATION OF THE TERMINATION OF INTERVENTION IN UMHLABUYALINGANA LOCAL MUNCIPALITY AND THE EXTENSION OF INTERVENTIONS IN INDAKA, OKHAHLAMBA AND MSUNDUZI LOCAL MUNICIPALITIES    – DATED 22 NOVEMBER 2011    

 

1.         Introduction and Background

 

1.1              The Select Committee on Co-operative Governance and Traditional Affairs, having considered the directive of the National Council of Provinces (NCOP) to consider and report on the notice of termination in Umhlabuyalingana Local Municipality and the extension of interventions in Indaka, Okhahlamba and Msunduzi Local Municipalities, reports as follows:

 

1.2              On the 24 November 2009, the Provincial Executive Council (PEC) of KwaZulu-Natal resolved to intervene at Indaka, Okhahlamba and Umhlabuyalingana municipalities in terms of section 139(1)(b) of the Constitution, as a result of failures to fulfill various executive obligations.

 

1.3       The MEC of Co-operative Governance and Traditional Affairs was authorized to appoint Administrators to undertake the functions in terms of section 51 of the Local Government Municipal Systems Act (Act 32 of 2000), and to establish and organize the administration in a manner that would enable the municipalities to achieve the objects of local government as set out in section 152 of the Constitution.

 

1.4       On the 10 March 2010, the PEC resolved to intervene at Msunduzi Municipality in terms of section 139(1)(b) of the Constitution and authorized the MEC to appoint an Administrator as was the case with the aforementioned municipalities. In terms of the PEC resolution dated 06 October 2010, all the aforementioned interventions were to end on 30 June 2011.

 

 

 

 

2.         Report on the Termination of Intervention and the Extension of Interventions in Selected Municipalities

 

2.1       On the 25 October 2011, the MEC presented reports on the termination and extension of interventions in selected municipalities. The presentation focused on the  progress made as a result of the interventions, particularly in respect of transformation and organisational development, service delivery, financial management, governance and public participation and the forensic investigation in terms of section 106 of the Local Government Municipal System Act.       

 

3.         Umhlabuyalingana Local Municipality  

 

3.1       The Municipality has made progress in developing a recovery plan which addressed mainly governance systems, financial systems and institutional review. All the performance targets have been met, except the review and adoption of a delegation framework and workshop on the monitoring and evaluation systems.

 

3.2       By April 2010, there has been a complete financial turnaround in the Municipality. All creditors had been paid off. The municipal bank balance was sufficient to cover all conditional grants to allow for the implementation of the programmes of the grants. At the end of June 2010, the Municipality closed the financial year with a cash balance in the bank of R8.3 million for the first time in five years.

 

3.3       There has been a total stabilisation of finances of the Municipality with a bank balance of more than R58 million at the end of May 2011, in which provision is made for R11 500 000 for service delivery in 2010/11 and R16 900 000 for service delivery in the 2011/12 financial years. Civil recovery is underway with regard to recovery of approximately R15 300 000 from the former Municipal Manager and Chief Financial Officer (CFO). The Municipality is financially stable, and has appointed a Municipal Manager who is able to undertake the implementation of the exit strategy.

 

3.4       In the event that further or additional support is required by the Municipality as identified by the Council after assessing the exit strategy, then the Department will provide such support. Based on the progress with regard to the intervention, the PEC terminated the intervention at Umhlabuyalingana as at 30 June 2011.

 

4.         Okhahlamba Local Municipality  

 

4.1       The Municipality has stabilized with regard to its financial position, which improved from a R16 300 000 deficit, to an anticipated R4 200 000 surplus by the end of the financial year. Considerable progress has been made with regard to putting in place various financial systems and controls, governance and institutional systems.

 

4.2       In terms of the exit strategy, there are still matters that require continuity and for this purpose, it is pertinent to note that the Municipal Manager has recently been suspended. Although considerable progress has been achieved at the Municipality with regard to the intervention, it is critical that the Municipality to be focused and and have a strategic direction as well as the expertise to implement the exit strategy.

 

4.3       Prior to 30 June 2011, the Municipality was without a Municipal Manager as he had been suspended, and the position of the Director Corporate Services was vacant. A new Council was elected, and this Council was not aware of the nature, complexities and dynamics of the intervention that played a pivotal role in the development of the Municipality, a mere presentation to the council on the exit strategy would not have been sufficient.

 

4.4       Considering the capacity constraints and the newly appointed Council, the PEC resolved to extend the intervention for a period of six months ending 31 December 2011. The Administrator is implementing the exit strategy and reporting on the performance indicators as identified in the strategy. The Municipal Manager has since been dismissed by the new Council.

 

5.         Indaka Local Municipality  

 

5.1       The Municipality has made some progress in certain focus areas in terms of the recovery plan, however, this progress was masked with non-co-operation by the Council and administration with regard to the implementation of the intervention. The current Administrator has identified various matters in the exit strategy that are yet to be addressed, including the adoption and implementation of key governance, financial and institutional systems.

 

5.2       The Municipality’s failure/neglect and or refusal to adhere and implement controls and measures put in place by the Administrator, more specifically an expenditure control system, resulted in the PEC having to resolved on the 30 March 2011 to extend the Administrator’s terms of reference in undertaking the function assumed by the PEC. This included the fiscal and financial management function, specifically to replace the Acting-Municipal Manager and the CFO as signatory on the municipal banking account.

 

5.3       Notwithstanding the resolution of the PEC, the Municipality failed to take any steps to implement this resolution. The Bank was also reluctant to take any steps without the consensus of the Municipality, which it did not provide. It was therefore necessary for the Department to approach the High Court for an order, compelling all interested parties to effect the necessary changes in line with the resolution of the PEC dated 30 March 2011.  The order was granted, and it was pursuant thereto that the signatories be amended. Some controls are therefore being implemented and the expenditure is being regularised in this regard.

 

5.4       The Department conducted a forensic investigation in terms of section 106 of the Local Government Systems Act, as a result, various senior officials were suspended including the CFO, Senior Accountant, Manager for Supply Chain Management and the Manager for the Integrated Development Plan (IDP).

 

5.5       The Acting-Municipal Manager confirmed that the disciplinary hearings have taken place during June 2011, and that these matters are proceeding. The Municipal Manager was suspended since September 2009 on various allegations of maladministration and misconduct. Disciplinary action was initiated, however, there were many delays including the death of the Presiding Officer of the hearing.

 

5.6       It was clear from the above, that the Municipality did not have the capacity or expertise to implement the exit strategy and much was yet to be done in this regard. Considering the reasons for the intervention, the objectives which has yet to be met and the capacity at the Municipality, the PEC resolved on the 29 June 2011 to extend the intervention for a period of six months, ending 31 December 2011.

 

5.7       The Administrator resigned as at 13 July 2011, and Mr. Bamba Ndwandwe, the former Administrator at Umhlabuyalingana LocalMunicipality was appointed at Indaka Local Municipality as at 22 July 2011.

 

6.         Msunduzi Local Municipality  

 

6.1       Considering the financial status of the Municipality, the non-compliance with various statutory obligations relating to financial, institutional and governance matters and the lack of oversight by the Municipal Council prior to the intervention by the PEC, it was reported that the Municipality has improved in many respects.

 

6.2       The Municipality has adopted a 2011/12 operating and capital budget and the IDP. A number of policies have been adopted including budget, tariff, rate and credit management policies to support the budget process. Grant funding is now cash-backed and a grants register has been developed to track developments and account for each grant.

 

6.3       The Municipality’s revenue collection rate has also stabilised to a large extent. It is evident that progress has been achieved with regard to the recovery plan for Msunduzi. However, there were various concerns with regard to the implementation and the achievement of all outcomes as is reflected in the Administrator’s exit strategy.

 

6.4       The Administrator highlighted the fact that critical strategic positions have not been filled, that a draft organizational structure has been developed but no agreement has been reached with the labour unions,. Funding has is to be secured from the Development Bank of Southern Africa (DBSA) to ensure that the capital budget for 2011/12 is cash-backed, the current level of consumer debtors must be reduced. There is a need to review the strategic and operational risk profile of the Municipality, and to develop mitigating strategies at the beginning of the 2011/12 financial year. 

 

6.5       It is important to note that the Municipal Manager resigned and that criminal charges have been instituted against him with regard to maladministration. The contract of the CFO was settled subsequent to the disciplinary action instituted against him. The Manager for Corporate Services is currently on suspension, whilst the disciplinary hearings have been protracted by the various technical points raised by his legal representatives.

 

6.6       The Acting-Manager for Public Safety has been dismissed. The Manager for Community Services is also currently on suspension. The Procurement Unit is without a Manager, as he has resigned during the course of his disciplinary process. Various other officials of junior and middle management levels have been suspended and are subject to disciplinary actions.

 

6.7       The positions of the Municipal Manager, CFO, City Engineeand other critical positions within the Finance Department have been advertised in May 2011, with the objective that they will be filled by August and September 2011. Notwithstanding this initiative, it is evident that the Municipality currently lacks the capacity and expertise to ensure the implementation of the exit strategy. The magnitude and complexity of Msunduzi’s recovery is clearly identified by the Administrator, and it is for this reason that the PEC resolved to extend the intervention for a period of six months ending, 31 December 2011.

 

7.         Committee Observations 

 

7.1       The Committee has observed that the Department of Co-operative Governance and Traditional Affairs is committed on providing technical and financial support to the identified municipalities. Furthermore, the Committee has also observed that the decision to terminate and extend the interventions in the municipalities had received the support of the respective municipal councils.       

 

7.2       The Committee hereby reaffirm that corruption, fraud and unethical conduct in municipalities undermines our democracy and the local government strategic objectives.

  

7.3       Noting the commitment of the Provincial Government to provide support to the municipalities, the Committee urges the South African Local Government Association (SALGA), councillors, municipal managers, management and all municipal officials and other role players to assist towards ensuring clean, transparent, effective and efficient governance, financial management and service delivery.          

 

8.         Recommendations 

 

8.1       The Select Committee on Co-operative Governance and Traditional Affairs recommends as follows:

 

8.1.1    The NCOP to approve the termination of intervention in Umhlabuyalingana Local Municipality.

 

8.1.2    The NCOP to approve the extension of interventions in terms of section 139 (1)(b) of the Constitution in Indaka, Okhahlamba and Msunduzi Local Municipalities. That the interventions be extended for a period of six months, ending 31 December 2011.

 

8.1.3    Further recommends that the KwaZulu-Natal Provincial Department of Co-operative Governance and Traditional Affairs to table the forensic investigation report to the NCOP, once it has been approved by the Msunduzi’s Municipal Council.    

 

            8.1.4    The Select Committee, in collaboration with the relevant Provincial Portfolio Committee in the KwaZulu-Natal Legislature, should conduct a joint follow-up visit to the respective municipalities during the first-term of the 2012/13 financial year, to verify and observe the extent of progress in those municipalities.

 

Report to be considered.