The Committee of Enquiry concluded its investigation, and submitted its report to the MEC on 16 April 2004. In its final report the Committee recommended a turn around strategy for the Municipality to secure its administrative and financial well-being. The MEC, in terms of Section 10G(2)(m) of the Local Government Transition Act, No. 209 of 1993, instructed the Council to implement certain instructions in accordance with these recommendations. Section 10G(2)(m) allows an MEC to take any necessary steps when of the opinion that the finances of a municipality are unsound or can become unsound. The report further noted that, on the basis of the evidence presented to the Committee, there appears to be sufficient reason to take drastic action and to intervene in terms of Section 139 of the Constitution.

The Committee of Enquiry noted previous investigations into the Municipality, some of which date from as far back as 1997 and some of which are current:

• The South African Police Services are currently conducting criminal investigations into Councillors and Municipal officials. Although some of the cases relate to the conduct of persons in their private capacity, where the nature of the offence affected the suitability of the person to be a Councillor or official, it would be taken into account. SAPS has since taken further action as a result of evidence given before the Committee of Enquiry.
• The Public Protector handed files on its ongoing investigations into alleged irregularities in the Municipality to the Committee of Enquiry for use in their investigation.
• The reports of the Special Investigative Unit into activities at the Municipality before the 1999/2000 financial year were found to be useful by the Committee, particularly as related to the financial recovery plan.
• The Municipality still needs to take corrective steps with respect to a number of matters pointed out by the Auditor General’s report for the year ended 30 June 2002.

Further investigations may follow as a consequence of the findings of the Committee of Enquiry.

In terms of Section 106(2), a Committee of Enquiry was tasked with investigating:

• Maladministration;
• Non-compliance with statutory obligations or other serious malpractices by any person(s) in the Kannaland Municipality or any person(s) associated with the Municipality.

There appeared to be no prima facie evidence of fraud and corruption at the time of the Committee’s appointment.

A number of cases were submitted to the Committee of Enquiry, ranging from cases concerning poor service delivery, malpractices and non-compliance with statutory obligations.

The Committee met with representatives of the Western Cape Provincial Government on 10 February in Ladismith, to prepare for the investigation. On the same day meetings were held with councillors, officials and trade union representatives of the Municipality. On 11 February discussions were held with the Eden District Municipality and the Zader Municipal Services. Public hearings took place between 23 February to 11 March in Ladismith and Calitzdorp. Community representatives of Calitzdorp, Zoar and Van Wyksdorp as well as the Business Chamber, presented oral and written submissions to the Committee.

The final report of the Committee of Enquiry highlighted three critical areas: the need for a financial recovery plan, improving service delivery by the Municipality and addressing staffing issues.

The Eden District Municipality has provided ongoing support to the Kannaland Municipality, in terms of Section 83(3) and 88 of the Municipal Structures Act, No. 117 of 1998, towards building the capacity of the Municipality to perform their functions and exercise powers. Kannaland is one of seven local municipalities falling under the Eden District Municipality, in addition to one district management area. Within the jurisdiction of the Kannaland Municipality itself are the towns of Calitzdorp, Hoeko, Ladismith, Van Wyksdorp and Zoar. George is the seat of the Eden District Municipality.

In December 2003 the MEC for Local Government requested the District Municipality to serve on a task team that would provide support with a financial recovery plan to the Kannaland Municipality:

• Technical support was offered to the Municipality to ensure normal service delivery.
• In the 2003/04 financial year, an amount of R3,6 million was transferred from the Eden District Municipality to the Kannaland Municipality for operating aspects to ensure normal service delivery. The fund is administered by the District Municipality.

The report of the Committee of Enquiry made the following recommendations with respect to the assistance provided to the Kannaland Municipality:

• The District Municipality should give greater preference and priority to Zoar and Van Wyksdorp in the short term, given the needs of these two communities. This would relieve the pressure on the Kannaland Municipality. Should such assistance not produce results, the District Municipality could consider allowing Zoar and Van Wyksdorp to be declared district management areas, directly under the control of the district municipality.
• The MEC should initiate and negotiate a Tripartite Agreement between the Western Cape Provincial Government, the Kannaland Municipality and the Eden District Municipality. The Agreement should make provision for the conditions under which the provincial government and the District Municipality would assist the Kannaland Municipality with administrative, technical and financial aid as well as to implement the recommendations contained in their report. Regular reports would allow the MEC to monitor progress.

The Committee recommended that the financial recovery plan should focus on the revision of the 2003/04 budget as well as provide assistance and guidance to the Municipality for drawing up the 2004/05 budget. Community participation in the drawing of the 2004/05 budget should be encouraged.

The Committee focussed on the following weaknesses in the area of financial control:

• It appeared that insufficient budget control was exercised by the Municipal Manager, Accounting Officer and Municipal Treasurer and they also did not fulfil their statutory obligations with regard to the Municipality’s financial statements. The requirements of the budget control policy of the Municipality were not complied with.
• It appeared that the Municipality was using capital funds to finance operating expenditure, as a result of its budget deficit. This gave rise to some of the Municipality’s financial problems. In August 2003 the National Treasurer wrote a letter to the Municipality restricting its expenditure in the 2003/04 financial year and requiring it to distinguish between capital and operating budget.
• The Council approved an amount of R6000 per Councillor for upliftment work. However, no directives for the utilisation of the funds could be ascertained.
• Initially an amount of R35 000 was budgeted for the Mayor’s fund for 2003/04. However, by November/December 2003 the amount had gradually been increased to R100 000. In many cases, the funds were used for unauthorised purposes or the required vouchers were not available.
• Although the Municipality had established an Audit Committee by 23 January 2003, the Committee only met for the first time on 5 March 2004 and was not functioning properly. Although an Audit Committee Charter exists, the composition of the Committee is still flawed.

• In terms of Section 16(1)(a)(iv) of the Municipal Systems Act, systems and mechanisms must be created to enable the local community to participate in the running of the Municipality, including the preparation of the budget.
• Separation of the capital and operating accounts.
• Financial statements should be drawn up and audited.
• Disciplinary steps should be taken against the Municipal Manager, his assistant and the Municipal Treasurer for their failure to fulfil their obligations in respect of budget control as well as non-compliance with other statutory obligations. Action should also be taken against certain Councillors for their contravention of the Code of Conduct for Councillors.
• Directives for the use of upliftment funds should be drawn up and applied.
• There should not be a separate Mayor’s and Deputy Mayor’s Fund. There should be one fund only, with specific amounts earmarked for the Mayor and Deputy Mayor, based on approved programmes for which they are respectively responsible. With respect to the size of the fund, a realistic limit should be imposed on the amounts.
• The Credit Control and Debt Collection Policy must be reviewed. A policy on customer care and management must be considered, as referred to in Section 98 of the Municipal Systems Act. By-laws, as referred to in Section 98 of the Systems Act, should be drafted.
• Steps must be taken to ensure that the Audit Committee functions properly.
• The composition of the Audit Committee should include members of the community, Business Chamber and the ratepayers’ associations.
• A suitable person with the necessary skills and expertise should be appointed in the post of internal auditor.
• A Preferential Procurement Policy for the Municipality should be drawn up, approved and implemented.
• A tariff policy must be drawn up and adopted.
• Statutory payments must be processes and paid promptly.

Communities complained of poor service delivery by the Municipality. However, following the technical and financial support provided by the District Municipality, there has been visible progress in the water situation in the Municipality. Problems relating to water infrastructure, pipes, purification, and so forth, are being addressed.

The Committee recommended that:

• Short-term steps would have to be taken to ensure water supply to Zoar. However, the best way to comprehensively address the water problems would be to draw up a Water Services Development Plan for the Kannaland Municipality. The Plan would become part of the Municipality’s IDP.

Although it was found that a staff establishment did exist in the Municipality, no post levels were allocated, job descriptions were incomplete, no core performance areas were indicated and so forth. It also appeared that appointments were not done according to the staff establishment and certain officials were promoted without the necessary experience and qualifications.

The Committee of Enquiry recommended that the drafting of staffing policies be completed to enable the Municipal Manager to exercise his powers in terms of Sections 55 and 66 of the Municipal Systems Act. The Committee also recommended that a number of staff establishment and staff related matters required further investigation and action. These include the following

• The finalisation of a policy framework for staff matters.
• The revision of the staff establishment and the review of incorrect appointments at too high service levels, in order to establish an effective administration and to bring expenditure to affordable levels.
• The revision of the equity plan.
• The role of the Labour Forum must be limited to the task description agreed on by the Bargaining Council.
• Defects in the leave system must be rectified.
• All disciplinary matters should be dealt with as soon as possible. The Committee recommended that disciplinary action be taken against the Municipal Manager, the Municipal Treasurer, the Assistant Municipal Manager, the Head: IDP, the Head: Technical Services, and that they be suspended with pay until the disciplinary hearings are finalised.

The Committee expressed the opinion that the post of Assistant Municipal Manager is not justified in a small municipality such as Kannaland. With the restructuring of the staff establishment, the Committee recommended that all departmental heads be made directly responsible to the Municipal Manager and that performance agreements be concluded with all of them.

The Kannaland Municipal Council consists of an Executive Mayor system with nine councillors – five ward councillors and four proportionally elected councillors.

The Committee of Enquiry recommended that the system of Executive Mayor be reviewed. The MEC should restore a full Council Executive System, using Section 12 of the Municipal Structures Act. This will lessen the concentration of power in the Mayor and also be more suited to such a small Municipal Council, which only has nine members. The Committee recommended that the MEC submit a copy of their report to the Speaker of the Kannaland Municipality and on the basis of the report’s findings, order an investigation in terms of Item 13, Schedule 1, Code of Conduct for Councillors, into the improper interference in the administration of the Municipality by the Mayor. The Committee thought it would be appropriate if the Mayor resigns from the Municipality, both as Mayor and Councillor.

The MEC, having considered the report by the Committee of Enquiry, authorised by his predecessor, in terms of Section 10G(2)(m) of the Local Government Transition Act, No. 209 of 1993, instructed the Council to take a number of steps before 30 September 2004.

These steps include the following:

• The current recovery plan must continue.
• The process of cash management, started in November 2003, must be continued to ensure compliance with the budget and prevent further outflow of resources.
• All outstanding audit queries on the financial statements for the 2002/03 financial year must be addressed.
• Council must approve the cash funded budget prior to the commencement of the 2004/05 financial year.
• Council must develop, revise and/or adopt, where necessary, the manuals, plans, policies and by-laws noted in the recommendations.

The provincial Department has undertaken to make funds available to the Kannaland Municipality, via the Eden District Municipality, for the implementation of these instructions. The Department has undertaken to maintain a visible presence at the Municipality during the initial stages of the implementation of the recovery plan. It has suggested that a Department official may be placed with the Municipality for a period.

In addition, the Council should appoint a Steering Committee to oversee the recovery plan and the relevant timeframes, including any adjustments to the timeframes.

In his correspondence with the Municipality the MEC noted that, should the Council fail to comply with any of his instructions and the timeframes, he would take the necessary steps to ensure that sound financial health is restored to the Municipality.

Provincial Department of Local Government. Report by the Committee of Enquiry on the Section 106 investigation into alleged maladministration at the Kannaland Municipality

C:\Documents and Settings\labrahams\My Documents\2004 Papers\Summary and Analysis of the Section 106 investigation report into the Kannaland Municipal Council.rtf