Department Annual Report: briefing

Meeting report

PROVINCIAL AND LOCAL GOVERNMENT PORTFOLIO COMMITTEE
19 October 2004
DEPARTMENT ANNUAL REPORT: BRIEFING

Chairperson: Ms R Ntsulana-Bhengu (ANC)

Documents handed out:
Department of Provincial and Local Government Annual Report 2003/4: Overview of the Accounting Officer PowerPoint presentation
Department of Provincial and Local Government Annual Report 2003/4: Overview of the Accounting Officer
Department of Provincial and Local Government Annual Report 2003/4 (available at http://www.dplg.gov.za)
Department of Provincial and Local Government Annual Report 2003/4 PowerPoint presentation
Department of Provincial and Local Government Financial Results 2003/4
Department of Provincial and Local Government Administration Report: Programme One
Department of Provincial and Local Government Governance and Development: Programme Two
Department of Provincial and Local Government Institutional Reform and Support: Programme Three
Department of Provincial and Local Government Legislative Work: 2003/2004

SUMMARY
The Committee was briefed by the Department on its Annual Report for 2003/04. The Department highlighted that it has been able to provide a meaningful assistance to the local authorities and those top performing municipalities were awarded with certificates. Furthermore, the various bills processed through Parliament during the financial year, had since been promulgated into law. It appreciated that the Commission on the Promotion and Protection of the Rights of Cultural and Linguistic Communities, a Section 185 Commission, has finally been launched. The Department had received an unqualified audit report from the Auditor-General, with under-spending of 0.3%.

During the course of the discussion, Members, raised that municipalities should not be used as fiscal dumping sites; that local municipality projects should not be politicised; .the reporting structures and the need for uniformity in reporting styles; and the importance of providing training to municipal councillors

MINUTES
the Chairperson welcomed especially the Members of the Angolan Fourth National Assembly Commission led by Dr Anna Maria de Oliveira, who were visiting South African Parliament for the first time. Others in her team were MPs, Mr S Antonio, Mr E Matunga and Mr S Alexander.

Department of Provincial and Local Government Annual Report 2003/4
The Department delegation included Ms L Msengana-Ndlela, Director-General; Mr E Africa, Deputy Director-General: Governance and Development; Mr C Clerihew, Chief Finance Officer; Ms T Mketi, Chief Director: Human Resource Management; Dr P Bouwer, Manager: Legal Service and Ms M Jacobs, Corporate Governance

Ms L Msengana-Ndlela (Director-General) took the Committee through the report and gave an overview of the Department's achievements and lessons learned. These achievements were measured against strategic objectives, outputs and services delivery indicators developed by the Department. In the financial year 2003/4, the Department had received an unqualified audit report from the Auditor-General and it had an under-expenditure of 0.3%. On the legislative side, the Department had processed three important bills through Parliament and those Bills had since been promulgated into law, namely the Traditional Leadership and Governance Framework Act, Municipal Property Rates Act and Municipal Systems Amendment Act. She expressed the Department's delight that the Commission on the Promotion and Protection of the Rights of Cultural and Linguistic Communities has finally been launched as required by Section 185 of the Constitution. Noting that the focus was on providing capacity to the municipalities whenever necessary, the Department had thus launched the Vuna Awards for municipalities with excellent performances in service delivery. She thereafter called on her delegation to take the Committee through their individual programmes.

Discussion
Mr P Smith (IFP) was concerned about the late transfer of moneys to the municipalities, noting that this amounted to fiscal dumping.

Mr C Clerihew (Chief Finance Officer) said that the Department aimed to provide the National Treasury at the beginning of every year, with all payment schedules of conditional grants and this would be reflected in the Department's monthly report. This was in line with the requirements of the Division of Revenue Act that required that all money transferred should be accounted for, before any transfer could be withheld.

Mr S Mshudulu (ANC) asked whether the Department had experienced any problems with regard to the transfer of money from the districts to the municipalities.

Ms Msengana-Ndlela acknowledged that such concerns had been raised by local municipalities about district municipalities. Government should look at its policies to ensure that it develops the latter institutions. The Department would be issuing a paper to clarify the role of the district municipalities versus the local municipalities.

The Chairperson raised concerns about the 'politicisation' of municipal projects. She also asked the Department to look into the transfer of rural water schemes from the water boards to the municipalities and to involve the Department of Water Affairs and Forestry in this. As the transfers would no longer be done via the provinces, but directly to municipalities, were these the district or the local municipalities?

Mr Clerihew responded that in terms of the equitable share formula, all the transfers would have to go directly to each local municipality. However, as the MIG grants would go to the local municipalities via the district municipalities, the Department would have to formulate an allocation schedule in terms of the Revenue Act. The Minister of Finance would gazette such in respect of each municipalities.

Mr Smith (IFP) noting that there were public entities that the Committee oversaw through the Department. He thus asked how these entities were funded - were they funded through the Department or did they receive direct funding?

Mr Clerihew responded that it depended on the content of the programme, the arrangements of national government, and the donor concerned. Some entities received direct funding, as was the case with provinces.

Ms L Mashiane (ANC) asked whether there were any guidelines that the Department had issued to its entities on uniformity in reporting style.

Mr Clerihew responded that some of those entities were 'constitutional institutions' required to comply with the same reporting requirements as the Department as laid down in the Public Finances Management Act (PFMA). However, in regard to other entities, the only requirement was that they provide their financial statements in a transparent manner. Should there be any discrepancies in those reports, the Department could take up the matter with the relevant CEOs to ensure full disclosure.

Mr M Swathe (DA) asked the Department to elaborate on the vacant posts, projects and MIG pilot transfers, that were apparently causes for under-spending.

Mr Clerihew responded that that filling government posts was not a quick process as there were complex processes to be followed filled. Any advertised post has to go through an evaluation system about whether it met the level of the government prescripts. The Department would supply the Committee with an exact figure of posts that had been filled thus far. The delays in the finalisation of the projects have been due, in one of the municipalities, to the tendering process and as the result the Department had to involve the public in the evaluation process in order to ensure that there was no mismanagement of government funds. The delay in the MIG pilot transfers affected two municipalities to whom the Department had decided not transfer money until it was sure that the conditions of those projects would be met. However, after it was satisfied that the funds would be rightly utilised for the project, it then transferred the funds to the relevant municipalities.

Mr Mshudulu (ANC) asked whether the Department envisaged any future possibility of the National House of Traditional Leaders running its own finances.

Mr Clerihew responded that the Traditional Leadership and Governance Framework Act did not give the National House of Traditional Leaders any authority over its own administration or accountability, except in so far as employment of the CEO was concerned. The other staff of the National House of Traditional Leaders had to be seconded by the Department. The Director-General remained the an Accounting Officer for the House.

The Chairperson explained that although the Committee was not dealing with the National House of Traditional Leaders report, it was important for the Committee to get clarity because its finances were missing from its report. The Committee felt that the Department official responsible for the accounts of the National House of Traditional Leaders should have prepared such report accordingly.

Ms Msengana-Ndlela noted that this would need further deliberation since any change on the reporting structure of the National House of Traditional Leaders would have an implication of its enabling legislation. She thus asked the Committee to also look at the reporting structure of the Commission on the Promotion and Protection of the Rights of Cultural and Linguistic Communities when considering this matter, since the Commission was also required to report through the Department.

Mr Mshudulu (ANC) asked the Department to provide the Committee with guidelines on the Local Economic Development (LED) and on its Municipal Infrastructure Grant (MIG) rollout plan, as they would be useful in helping Members engage local government authorities during their constituency periods.

Mr E Africa (Deputy Director-General: Governance and Development) welcomed this and said the Department would provide such guidelines.

Ms M Gumede (ANC) noted that the report stated that the Local Government Capacity Building Grant supported only 180 municipalities out of 280. What about the others?

Mr Africa explained that the purpose of this Grant was to assist mainly those municipalities that had been identified by the provinces an the Department, as requiring specialised support. However, notwithstanding the fact that only 180 municipalities had been assisted in terms of this grants, every municipality had also received funding under the Municipal System Improvement Grant.

Ms Gumede (ANC) noted that the Local Government: Municipal Property Rates Act was not yet in operation, and asked when would this take place.

Mr Africa responded that before this Act could be put into operation, there were still some issues that needed to be finalised by the Department and the Treasury to ensure that when it came into operation, they could roll out its provisions complementarily with each other.

Mr I Mogase (ANC) commended the Department on providing training to the councillors, noting that this was very necessary for government service delivery.

Mr Africa agreed and noted that this was one reason why the Department was pushing for the establishment of a Local Government Leadership Academy, so the Department would be able to develop the councillors and senior officials in municipalities. However, while the Academy was still being finalised, they believed that there were other projects which could, in collaboration with other role-players such as SALGA, be employed usefully to benefit councillors.

Mr Mogase (ANC) asked about the results of the individual performance assessments.

Ms T Mketi (Chief Director: Human Resource Management) responded that the Department had been able to achieve most of its outputs for 2003/4 in the over-roll of more than 80%. This was mainly due to a number of factors, such as inputs, support and hard work from the staff. A large number of the staff were rewarded for this.

Mr Smith (IFP) noted that the report stated that the Intergovernmental Relation Bill would be introduced in the forthcoming financial year. He asked the Department to clarify the status of this Bill.

Mr Africa responded that the Intergovernmental Relation Bill remained a priority, as was noted by the President in his State of the Nation address. An extended Cabinet workshop had been convened to discuss it, and a subsequent version was drafted. In the coming weeks, the Cabinet would be holding its second workshop to consider the revised version of the Bill.

Mr Smith (IFP) thought it would not be necessary to consider legislation on cross-boundary municipalities as the Cabinet has decide to do away with it. He asked that the Committee be provided with the copy of a report on cross-boundary municipalities compiled by the Municipal Demarcation Board, as commissioned by the Department.

Mr Africa said they would be submitting a memorandum to the Cabinet as they have finalised their report on cross-boundary municipalities. While the Department acknowledged that the final decision lay with Cabinet, it however believed that their proposals would not necessarily fragment the existing local municipalities, and the existing local municipalities would remain intact and undivided. The Department only foresaw changes relating to the separation of the local municipalities within the current cross-boundary municipalities.

Mr Smith (IFP) asked for comment on the concerns raised about the annual Vuna Award, and also to clarify the workings of the point system and adjudicator awarding the Award to a municipality

Mr Africa responded that the Department was also wondering whether it was necessary to hold the event annually. As far as the point system and the adjudicators were concerned, the Department had significantly revised its previous criteria to ensure a balance between the quantitative and qualitative aspects.

The Chairperson said there was a financial dispute between the Municipal Demarcation Board (MDB) and the National Treasury (NT) regarding the allocation of funds to the Board. She asked the Department to share its experiences and state whether this was reluctance in relation to the Board's mandate, or a result of its non-compliance with the provisions of the PFMA.

Mr Clerihew responded that the MDB was a constitutional institution and had direct accountability to Parliament. The Department Director-General was not accountable for the Board, although it was her duty to ensure that the funds voted by Parliament did reach it. The MDB had engaged Treasury for additional funding to carry on with its demarcation process. Treasury was unhappy with the quantum processes having put a curb on the MDB budget increase in the past. Among the reasons they put forward was that the MDB was exceeding its mandate.

Mr Smith (IFP) asked what role the Department had played in resolving the financial crisis faced by the Municipal Demarcation Board.

Mr Clerihew noted that the Department has done much to assist the MDB, ranging from preparation of the memorandum for submission to the Cabinet Committee of the National Treasury, to ensuring that the Minister also supported this in Cabinet meetings.

The meeting was adjourned.