Report of the Select
Committee on Appropriations on the oversight visit to Eastern Cape Municipalities
from 27-29 July 2010, 14 September 2010.
1. Introduction
The Select Committee on Appropriations (the Committee) was
established in terms of section 4(3) of the Money Bills Amendment Procedure and
Related Matters Act, No 9 of 2009. In terms of
section 4(4) of this Act, the Committee has the powers and functions conferred
to it by the Constitution, legislation, the standing rules or a resolution of a
House, including considering and reporting on:
(a)
spending
issues;
(b)
amendments
to the Division of Revenue Bill, the Appropriation Bill, Supplementary
Appropriations Bill and Adjustment Appropriations Bill;
(c)
recommendations
of the Financial and Fiscal Commission, including those referred to in the
Intergovernmental Fiscal Relations Act, No. 97 of 1997;
(d)
reports
on actual expenditure published by the National Treasury; and
(e)
Any
other related matter set out in this Act.
Furthermore, the mandate of the Select Committee on
Appropriations (henceforth referred to as the Committee) encompasses the Committee’s
functions to legislate, conduct oversight of the Executive; promote public
participation, facilitate international agreements and review matters of public
interest in relation to National Treasury and its entities, and the South
African Reserve Bank.
1.1 Delegation
The oversight visit took place from 27-29 July 2010.
Meetings were held at Queenstown (Queens Casino Hotel); Mthatha (Savoy Hotel);
and East London (Premier Hotel Regent) in the
The delegation consisted of:
Hon. Mr TA Chaane (ANC) (Chairperson
of the Committee;
Hon. Mr CJ de Beer (ANC);
Hon. Ms TM Memela (ANC);
Hon.
Hon. Mr BL Mashile (ANC);
Hon. Mr WM Makhubela (COPE); and
Hon. Mr A Lees (DA);
Eastern Cape’s
Provincial Legislature Members
Hon. Mr S. Gqobana (MEC Local
Government and Traditional Affairs);
Hon. Mr M. Matomela (Chairperson PC
on Finance);
Hon. Ms D. Komose (Chairperson PC on
Public Works);
Hon. Ms M. Qhoboshiyane (Chairperson
PC on Local Government and Traditional Affairs); and
Hon. Ms N Ponco (PC on Finance)
The parliamentary officials that accompanied the delegation
are: Mr. L Nodada (Committee Secretary), Mr. M Tau (Researcher), and Mr. S Goba
(Committee Assistant).
1.2 Terms of
reference
The visit formed part of the Committee’s ongoing interaction
with municipalities to monitor collaboration and coordination pertaining to the
provision of municipal services and support given to municipalities by provincial
and national departments. The municipalities in Eastern Cape that were
identified for the visit are: Joe Gqabi District Municipality, Maletswai Local Municipality;
Inkwanca Local Municipality; Nkonkobe Local Municipality; Mbhashe Local Municipality;
Ingquza Hill Local Municipality; Engcobo Local Municipality; Emalahleni Local Municipality;
Makana Local Municipality; Nxuba Local Municipality, Chris Hani District Municipality;
and Ngqushwa Local Municipality.
The stakeholders (including national and provincial
departments) that accompanied the Committee on this visit are: National
Department of Cooperative Governance, Eastern Cape’s Provincial Treasury, South
African Local Government Association, Department of Energy, Financial and
Fiscal Commission, Provincial Department of Public Works, Provincial Department
of Cooperative Governance and Traditional Affairs, National Department of Water
and Environmental Affairs, National Treasury, Auditor General, Development Bank
of Southern Africa, and ESKOM.
1.3 Purpose of the
Visit
The purpose of the oversight visit was to engage with the
above-mentioned municipalities along with national and provincial departments
on the following areas:
2. Auditor General’s
overall presentation on identified Municipalities
The Office of the Auditor General (AG) briefed the Committee
on the 2009/10 audit outcomes for the financial year2009/10 of the selected
municipalities in
The AG informed the Committees that key issues, on
leadership, that need attention and contributed to these audit opinion are:
instability and lack of commitment in administrative
leadership in municipalities; the correct style of leadership (attitude
towards the control environment) is not displayed; and, in most municipalities,
action plans were neither complied not followed through and monitored in order
to address financial challenges. With regard to financial management, AG
reported that there was lack of knowledge and understanding of General Recognized Accounting
Practices (GRAP); monthly management information was neither credible nor prepared;
accounting functions such as the reconciliation of key control accounts were
not performed. With regard to governance, the AG reported that the Audit and
Internal Audit Committees were not effective; risk assessment and fraud
prevention plans were not in place nor adhered to; and there was insufficient
monthly oversight by the councils.
The AG reported that their
3. Municipal
Performances and Analysis
3.1
The MLM reported that for the financial year 2008/09 it
received a disclaimer audit opinion. MLM reported that reasons for receiving a
disclaimer include non-compliance with GRAP; information not supplied to
auditors on time; valuation roll not accurate and complete.
The MLM reported 34 per cent of its operating revenue is for
salaries. With regard to
the performance of conditional grants, the MLM reported that it is doing well
in terms of complying with the grant framework as stipulated in the Division of
Revenue Act (DORA). The Committee was informed that Development Bank of Southern Africa
(DBSA) has seconded an official who is assisting the MLM to provide services at
a faster rate.
With respect to compliance with the Municipal Finance
Management Act, the MLM reported that the supply chain management policy was
developed and adopted in 2006 and is reviewed annually together with all other
budget-related policies. The MLM informed the Committee that its bid committees
namely: bid evaluation and bid adjudication are functional and members of these
committees were trained except for a newly appointed Manager for Community Services.
The MLM reported that a Budget and Treasury Office (BTO) is not established as yet,
however the Financial Management Section currently performs the functions of
the Budget and Treasury Office.
The MLM added that internal audit
function was outsourced to Price Waterhouse and Coopers (PWC) as from 2008/09
financial year. Their contract expires in 2011. The municipality claimed that
an intern is being trained to take over from PWC as soon as the contract lapses
between MLM and PWC expires.
The MLM informed the Committee that
in the 2008/09 financial year, the annual financial statements were submitted
on time. The MLM further reported that monthly budget statements (section 71
reports of the Municipal Finance Management Act (MFMA) were not submitted on
prescribed time-frame to the National Treasury due to the introduction of a new
financial management system introduced during the 2008/09 financial year.
However, according to the MLM, this matter was attended to and resolved.
Findings
After deliberations with the
The Committee recommends
the following:
·
The
MLM should establish the Budget and Treasury Office as a matter of
Urgency.
3.2 The
The Inkwanca Local Municipality (ILM) reported that, for the
2009/10 financial year its total capital budget was R6 million and the
operating budget was R27 million. Personnel costs for the same financial year
were R13.2 million. The ILM reported that it spent all funds allocated through
grants except for a variance of R675 215 for the financial management grant.
However, the ILM said that the funds are committed but are yet to be claimed.
The ILM presented that a Budget and Treasury Office (BTO) exists and is headed by
the Chief Financial Office who is supported by three accountants who are responsible
for revenue, expenditure, budget and reporting. The ILM
reported that some of the section 71 reports of the MFMA were submitted on time,
however others were submitted after the due date. The ILM reported that it is 100 per cent capital grant
dependant and 73 per cent operational grant dependant. The ILM further reported
that 49 per cent of the operational budget went to salaries.
The ILM
added that it complies with MFMA, and as a result, it has established a functioning
Internal Audit and Audit Committee. The ILM said the Audit Committee, shared
services, was established 2008/09 financial year 2008/09. The shared services
are utilised with other two local municipalities, Inxuba Yethemba and Tsolwana,
with clear terms of reference. The ILM reported that the 2008/09 annual report
was submitted on time.
With respect
to service delivery, the ILM reported that the bucket sanitary system was
eradicated and all households in the municipality have water borne toilets.
However, the households in farms have not benefited thus far.
With respect
to challenges, the ILM reported that it is struggling to employ a qualified
electrical engineer. To rectify the situation, the municipality said that it
has offered a student, who studies at Vaal University of Technology, a bursary.
That student was said to be at third-year of study. The ILM also said that the
BTO officials are inexperienced because they have less than three years
experience.
Findings
The Committee recommends that:
3.3 The
The Nkonkobe Local Municipality (NLM) reported that it
received a disclaimer for three consecutive years. As a result of this, the NLM
negotiated with with the University of Fort Hare to have a service level
agreement, the negotiations are at an advance stage. The NLM further reported
that corruption and fraud in the municipality continue to be big problem. The
Committee was informed that two previous Municipal
Managers have been charged due to allegations of corruption and fraud. The NLM
said it is still trying to recover funds lost due to mismanagement.
The NLM reported that all grant funds were spent on time.
The NLM further reported that it had established a development agency, Nkonkobe
Economic Development Agency (NEDA), in 2002 which is responsible for the
implementation of municipal projects. This agency is 100 percent financed by
Industrial Development Corporation. However, this agency has never been audited
because its Board of Directors refuses to be accountable to the NLM, therefore
they are considering closing it down. The NLM added that its Integrated
Development Plan (IDP) is aligned with the Provincial Growth Development
Strategy (PGDS) and it aims to address the six priorities of the PGDS which are
poverty eradication; Agrarian transformation and food security; infrastructure;
manufacturing diversification and tourism; human resource development; and
public sector and institutional transformation.
With respect
to the establishment of the Budget and Treasury Office, the NLM reported that
the office exists but it is not fully capacitated. With respect to the reported
the submission of Annual Financial Statements (AFS), the NLM reported that the
AFS for 2008/09 financial year were submitted late due to unskilled personnel
(Chief Financial Officer, in particular) and lack of understanding of the
financial system.
The NLM
admitted that it did not submit the section 71 reports of the MFMA for 2009/10
financial year. Moreover, the NLM reported that Internal Audit and Audit
Committee were established and are functional. The NLM acknowledged that it is
struggling to provide services to the people. The NLM explained that there is a
backlog in providing roads; construction of community halls, houses, storm
water; electrifying its jurisdiction and collecting refuse. The NLM added that
an amount of R12.2 million has been set aside for electrifying an area called
Alice Golf Course. The NLM further reported that the appointed contractor will
be introduced during the first week of August 2010.
The NLM further
admitted that it did not spend 100 percent budget for indigent households. With
respect to achievements,
the NLM reported that it spent all funds that were transferred for the
Municipal Infrastructural Grant; Municipal Finance Management Grants; and
Municipal Systems Improvement Grants.
Furthermore, the NLM informed the Committee that it is
experiencing some challenges. These are that the municipality has a low revenue
base due to its rural nature; it is struggling to attract and retain skilled
technical and financial personnel; the road Infrastructure construction and
maintenance is a challenge due to the shortage of engineers; there is no full
participation of sector departments in IDP processes; there are limited funds
for implementing infrastructural projects; the municipality is not GRAP
compliant and fails to submit Section 71 reports of the MFMA.
Findings
The Committee recommends
that:
3.4 The
The Mbhashe Local Municipality (MBLM)
reported that it has collected 93 percent of the planned revenue collection.
The MBLM further reported that it is 80 percent grant dependent; 30 percent of
its operating budget was spent on salaries; 68 percent was spent on repairs and
maintenance; the total capital grant in comparison to the total capital budget
is 91 percent. MBLM reported that, through Integrated National Electrification
Programme Grant (INEP), 38 villages (3512 household) are to be electrified and
a sum of R10 million has been set aside. The MBLM said that electrification
project is divided into phases, the first phase targets 700 households, of these
500 household have been give access to
electricity and the remaining 200 are to be given access to electricity by 07
August 2010. Futhermore , the MBLM said that the Municipal Infrastructure Grant
funds have been spent but there is a variance of R104 054 872.47; the Municipal
Systems Improvement Grant has a variance of R290 495.00; and the Financial
Management Grant has a variance of R34 571 which is committed to travelling and
accommodation.
With respect to backlogs, the MBLM reported that Vision 2012
of Electricity Universal Access and 2014 of Passable and Trafficable Road Network
may not be achieved. The MBLM argued that the latter is mainly due to slow
process in appointing a service provider to quantify access roads backlog.
Furthermore, the MBLM reported that it has capacity constraints because it is
unable to attract people with requisite skills. The MBLM further reported that
competing with well-established municipalities for resources (namely: plant
hire, service providers etc) is a huge challenge because funding is not enough.
With regard to electricity, the MBLM said that it does not have a dedicated
unit for electricity and electrification projects are outsourced and not
monitored.
With respect to compliance with the MFMA, the MBLM reported
that supply chain management policy is in place and is reviewed annually. The MBLM
added that all three bid committee and the BTO are in place; and monthly
reports and annual financial statements were submitted on time to the relevant
offices. The MBLM further reported that audit and internal audit committees are
in place.
With respect to intergovernmental relations, the MBLM
reported that sector departments are involved in the IDP processes and they
participate. However, the MBLM said that there is inconsistency
in attendance during planning meetings; departments delegate junior officers
who loose track of decisions taken and their implementation. Furthermore, the MBLM
highlighted that, through its various departments, it liaises directly with the
government agencies such as Development Bank of Southern Africa (DBSA),
Eastern Cape Development Cooperation (ECDC), National Development Agency (NDA),
Small Enterprise Development Agency (SEDA), and ESKOM.
Findings
Department of Justice and Constitutional
Development; and Department of
Basic Education) owe the MBLM payments for rates.
that financial records were not in
place.
The Committee recommends that:
3.5 The
The Joe
Gqabi District Municipality (JGDM) reported that all grants funds were spent
and there were no deviations to be reported. With respect to budget
performance, the JGDM reported that its total operating budget of R 322 million was
under-spent by 17.46 percent. The JGDM added that with respect to planned
revenue collection it underperformed because it collected 24 percent less than
its budgeted revenue collection. The municipality further reported that it is
86 percent capital grant dependent; it is 87 percent operational grant
dependent; and 27 percent of the operational budget was used to pay for salaries.
The JGDM further reported that 7.7 per cent was spent on repairs and
maintenance.
With respect
to compliance with the MFMA, the JGDM reported that its supply chain management
policy has been revised and was still to be approved by the Council. The JGDM further reported that the
three bid committees (Bid Specification, Bid Evaluation, and Bid Adjudication),
as required by the MFMA and stipulated in the Supply Chain Regulations, are
properly established. The JGDM explained that members of these three bid
committees were appointed by the municipal manager. The JGDM reported that the
BTO was established in May 2010 and it by
the Chief Financial Officer and has three sections namely: Financial
Accounting, Income and Expenditure, and System Administration. The annual financial
statements of the JGDM were submitted to the Auditor-General.
With respect to service delivery and capacity constraints,
the JGDM reported that the costs of eradicating water and sanitation backlogs
are R445 million and R247 million, respectively. The JGDM added that, in light
of limited and insufficient funds to eradicate backlogs, the targets are always
shifted to later years. The JGDM further reported that roads are in poor
conditions and they require huge maintenance costs. The JGDM reported that the
commercial farming community as well as the urban areas, have access to access
to electricity, however rural arrears have limited access to electricity. The
JGDM reported that challenges
persist in as far as collection and disposal of waste is concerned. The
JGDM reported that it has managed to maintain good spending patterns on the
Municipal Infrastructure Grant (MIG). The JGDM added that MIG grant has helped it
to address backlogs on water and sanitation over previous 6 years.
With respect
to audit issues, the JGDM reported that the internal audit function was
outsourced and the procurement procedures were followed. The JGDM added that
the audit and oversight committees were established and are operational The
JGDM assured the committee that an Audit Action Plan exists and was approved by the Council in
January 2010 in response to the previous audit report. The JGDM added that
weekly monitoring of the action plan was done by the internal audit with the
intention to unblock delays, ensure focus on audit improvement and, monitor
performance of staff and service providers.
The JGDM reported that intergovernmental relations framework
was developed and adopted by the Council. Furthermore, the JGDM said that the Public
Participation Strategy and Communication Strategy were both adopted in October
2008 and reviewed in 2009. These strategies encourage that community outreached
programmes be held twice per financial year; and that the Integrated
Development plan includes budget community outreach programmes. The JGDM assured
the Committee that stakeholders fully participated in the IDP process and that its
IDP is aligned with PGDP.
Findings
The Committee recommends that:
capacitate
its own employees in the internal audit unit and refrain from out
sourcing
that function because doing so does not improve the audit outcomes.
3.6 The
The Ingquza
Hill Local Municipality (IHLM) reported that it performed very well in terms of
spending on the conditional grants. The IHLM submitted that all grants funds
(Financial Management Grant, Municipal Systems Improvement Grant, and Municipal
Infrastructure Grant) were spent in full. However, the IHLM added that the
Tshoya Electrification Programme Phase 1 is completed but Phase 2 of this
programme is not complete. The IHLM reported that FMG grant funds have been
utilised to employ four interns; train supply chain management employees; and
convent to GRAP reporting
system.
With respect
to intergovernmental relations, the IHLM reported that good relations are in
place. The IHLM added that DBSA has supported it financially and by seconding personnel
(Engineer and Planner); Department of Energy through Eskom is electrifying Tshonya
(R20 million). The IHLM further reported that Department of Rural Development and
Agriculture has implemented various projects; and that Provincial COGTA has
assisted with General Valuation that amounted to R 700 000.00. The IHLM added
that its IDP is aligned with the PDGP.
With respect
to service delivery the IHLM’s focus is on refuse removal and roads. The IHLM informed
the Committee that refuse
removal, which is done daily, is focused on peri-urban areas and performance
regarding this item is good. The IHLM further reported that the challenge is the non-availability
of suitable or legal land-fill sites. The current land-fill sites are operating
illegally and the IHLM is in the process of identifying suitable land for
land-fill sites. The other constraint reported by the IHLM is that the refuse
collection unit is driven by technical people who have no environmental
management background. With respect to roads, the IHLM reported that the construction of 9
roads that has costed IHLM R22.5 million is completed and was financed through MIG funding.
The Committee was told that the extent of backlogs is high that the impact made
by the construction of these new roads is minimal. Most of the roads are not maintained
due to lack of funding.
With regard to compliance with the IHLM reported that the supply
chain management policy was developed and adopted by the Council in July 2007. The
Council monitors the policy and exercises their oversight role through monthly,
quarterly, half yearly and annual reports. The IHLM added that the bid committee and
BTO were established in terms of the MFMA. The latter is headed by the CFO. The
IHLM reported that the annual financial statement and Section 71 reports of the
MFMA had been submitted to the relevant offices. The IHLM added that the Audit
Committee (AC) has been established and is fully functional. The IHLM submitted that the Internal Audit function
is shared the with
The IHLM
reported that 72 percent of its operational expenditure budget was used to pay
for salaries. 2 percent was used to pay for repairs and maintenance and 26
percent was spent on general expenditure. The IHLM concluded that it needs
financial support because its revenue base is low. The IHLM added that it has
developed partnerships with international partners and it was assisted by COGTA
and the
Findings
The Committee recommends that:
3.7 The
The Engcobo Local Municipality (ELM) reported that its
budget has grown by 5.7 percent. The ELM said that the salary budget has
increased by 10 percent. The ELM reported that it is 98 percent capital grant
dependent and 89 percent operational grant dependent. The ELM further reported
that 42 percent of its operational budget was used to pay for salaries. On
grant spending the ELM reported that all grants were 100 percent spent.
With respect to internal controls, the ELM reported that the
internal control unit was newly developed and the staff members to be placed on
the unit were being trained on internal control for the 2010/11 financial year.
The ELM added that a fraud prevention policy is yet to be developed. As a
result of an audit report which is a disclaimer of opinion, a service provider
has been appointed to assist in it. The ELM further reported that a complete
audit action plan has been adopted by the Council and is due to go to the audit
committee; the audit committee was established in 2007; the audit unit had been
established comprising of a 3 member committee shared with the
The ELM reported that, with respect to revenue collection, a
new valuation roll has been fully implemented. The ELM revealed government
debtors with balances over 120 days as follows: Department of Agriculture for
rates totaling R286 875.33 and for services is R47 674.79; Department of Public
Works rates totaling R23 620.00 and for services R5 157.14. The ELM reported that business and residents
with balances over 120 days as follows: Residents are rates R1 086 536.00 and for
services is R1 319 575.00; and business rates are R661 445.00 and for services
is R810 582.50. The ELM said the total amount owed by debtors was R4.5
million.
The ELM further reported that, for the purposes of giving
support to indigents, indigent policy and indigent register, which is reviewed
quarterly, are in place. The ELM added
that 107 beneficiaries are given to 6 kilolitres of free water and waterborne
sanitation monthly. Furthermore, 596 beneficiaries are given access to free 50
kilowatts of electricity.
With respect to compliance with the MFMA,
the ELM reported that the supply chain policy exists; all bid committees with
capacitated and competent members; the BTO has not be establish due to staff
shortages and capacity constraints in the finance department; the 2008/09 AFS
was submitted 30 days later than the legislated time; the ELM is not fully GRAP
compliance; section 71 reports of the MFMA were submitted latter that expected.
The ELM further reported that it has good relations with sector departments and
its IDP is aligned with the PGDP.
With respect to service delivery and
capacity constraints, the ELM reported that refuse is collected from all
businesses, residents and hospitals. The ELM added that it is looking into
upgrading its landfill site and has a permit. However, the ELM reported that
there are some constraints in relation to refuse removal. These include
promulgation of by-laws; ineffective law enforcement and negative attitude of
the community towards change. The ELM further reported that 11 540 households
have been given access to electricity and an additional 1647 households are
awaiting Eskom final inspection before being given access to electricity. In
addition, the ELM reported that 1977 households have infrastructure and are to
be given access to electricity in the 2010/11 financial year. With respect to
water services and sanitation, the ELM reported that it is a water services
provider. With respect to sanitation, the ELM reported that 7 645 households
have sanitation; 27 215 households have no sanitation; 19 625 households have
no RDP standard water and 15 595 households have Reconstruction and Development
Programme (RDP) standard water.
With respect to roads, the ELM reported that it has huge
backlogs on access roads and road classification has not yet been completed.
The ELM added that in the 2009/10 financial year, a total of R15 million was
spent on access roads and, for 2010/11 financial year the ELM has budgeted
R17.2 million for transport infrastructure. The ELM reported that there are
four housing projects. The ELM reported that it does not have a distribution
licence for rural electrification but it has qualified professional employees.
Findings
The Committee recommends
that:
as a matter of urgency and further
capacitate the TBO.
3.8 The
The Makana Local Municipality (MALM) reported that a total
of R50.1 million was received in the form of grants but only R44.8 million was
spent. These funds were for FMG, MSIG, MIG and Neighbourhood Development
Partnership Grant. With respect to participation of sector departments in IDP
process, the MALM reported that an integrated IDP Process Plan and
Budget Time Table were drawn annually, and thereafter, a comprehensive public
participation programme take place under the leadership of the Executive Mayor.
The MALM added that in strengthening intergovernmental collaboration, it has
planned to develop an Intergovernmental Relations Framework and establish a
Makana Intergovernmental Relations Forum in the 2010/11 financial year.
With respect
to compliance with the MFMA, the MALM reported that the Council
approved Supply Chain Management Policy and the three Bid Committees were
established. Furthermore, the MALM reported that BTO exists; the 2009/10 AFS
was in the process of being finalised; Internal
Audits and Audit Committee exist but are share services with the Cacadu
District Municipality (CDM). The MLM further reported that the alignment
of the Budget to the PGDS is currently undertaken through the CDM.
With respect
to service delivery and capacity constraints, the MALM reported that 80 of
percent households have access to electricity; however, MALM, old
infrastructure leading to electrical outages and losses. With regards to water,
the MALM said that 98 percent of Makana households have access to basic water
service and 85 percent of households are living in informal areas have access
to basic water up to RDP standard with individual water connections. With regard
to sanitation the MALM reported that 70 percent of households have access to
basic sanitation toilets and the bucket system has been eradicated in all
formal areas. The MALM added that there is a challenge with regard to the
provision of sanitation in rural areas. The MALM reported that refuse removal
services are provided to 15 178 properties out of 16 162 properties. The MALM
added that approximately 1 999 households (mainly in informal areas) receive
communal waste collection services. However, the MLM reported that it has old equipment/vehicles
that are used to offer this service. With respect to roads, the MALM
reported that 170 kilometres of roads are gravel and there is a
programme of tarring major taxi routes which is underway (namely: Project
Faki'Tar).
With regard
to budget performance, the MALM reported that it has spent 100 percent of its
total budget. The Committee was told that 38 percent of the total budget was
spent on salaries and 6 percent was spent on repairs and maintenance. The MALM
further reported that it is 82 percent dependent on capital grants and 20
percent dependent on operational grants.
Findings
The Committee recommends that:
matter of urgency.
in rural communities and farming lands..
3.9 The
The
Emalahleni Local Municipality (EMLM) reported that it has spent 96 percent of
its budget. The EMLM further reported that its funding of capital is mainly
through grants. With respect to revenue collection, the EMLM, said it is collecting less
than 30 percent of its own revenue. The EMLM further reported that 27.5
percent of it operating budget was spent on repairs and maintenance.
With respect
to the MFMA compliance, the EMLM reported that the supply chain management policy
was implemented in 2007 and is reviewed every year and approved by the Council.
The EMLM added that all three bid committees are established. Furthermore, the
Committee was informed that the BTO was established in 2009 and is supervised
by the CFO. The EMLM added that the AFS was submitted on time. However, the EMLM
informed the Committee that there are two outstanding annual reports to be
submitted to the National Treasury. The EMLM further reported that an Internal
Audit (IA) exists; Audit Committee services are shared services with the
Lukhanji and
With respect
to service delivery and capacity, the EMLM reported that the plan to address
electrification backlog and maintenance of infrastructure in rural areas is in
good progress (phase 8). However, the EMLM, has limited resources to accelerate
the progress of this project. The EMLM added that a bilateral meeting with all
stakeholders (EMLM, the Department of Mineral and Energy, Eskom and
communities) involved was convened to address the service
delivery backlogs; and to further strengthen communication
between different role players. With respect to provision of water and
sanitation, the EMLM reported that the water services function was transferred
to itself in August 2009 with limited resources. The EMLM added that it is
suppose to provide water and sanitation services to 32 314 households but only
29 352 (81 percent) households have access to water; and only 13 108 (41
percent) of these households benefit from sanitation services.
The EMLM
reported that it has experienced some capacity constraints and these include: old
infrastructure in
With respect
to roads, the EMLM reported that the classification of roads is a challenge
because there are no clear lines of responsibilities between district and
municipal roads. The EMLM added that the majority of municipal roads are in a poor
condition since 2007 disaster. The EMLM claimed that, due to budget constraints
and shortage of big machinery, it is unable to maintain all roads. The EMLM
added that the only source of funding for capital projects is MIG and it is not
enough to address road infrastructure backlog. Furthermore, the EMLM reported
that refuse removal is only done in urban areas due to shortage of staff, vehicles,
and as a result, rural communities are using illegal ways of disposing refuse.
Finding
The Committee recommends that:
3.10 The
The Nxuba
Local Municipality (NXLM) reported to the Committee that it has appointed
technical staff to increase its capacity and moreover, the DBSA has deployed a
technical expertise to increase the capacity within the NXLM. Furthermore, the
NXLM reported that 5 finance interns have been appointed to capacitate the BTO.
With respect to intergovernmental relations, the NXLM reported that it has good
relations with all sector departments and parastatals. However, the NXLM
reported that participation by sector departments in the IDP is not as expected
but inputs of those that participate are captured. With respect to the
alignment of the IDP with the PGDP, the NXLM informed the Committee that the
IDP is aligned with the PGDP.
With respect
to service delivery and capacity constraints, the NXLM reported that 90 percent
of Nxuba households have access to electricity.
With respect to the provision of water, the NXLM said that its bulk
water provision is problematic with consequential differing level of service in
different communities. The NXLM added that existing dams are inadequate and
there is proposal for the construction of the new dam, the Department of Water
Affairs committed itself to construct a dam.
With regard to the provision of sanitation, the NXLM reported that
bucket eradication projects were implemented until 2008 but could not be
completed when it was realised that the capacity of the sewerage treatment
works will not be able to handle the increased work load. The NXLM added that,
due to this capacity constraint 20 percent of residents are still using the
bucket system. However, environmental assessment studies are being conducted.
Furthermore,
the NXLM reported that it collects refuse from all households, hospitals, schools and businesses
except the farm areas. The NXLM added that its old refuse vehicles are
characterized by constant breakdowns and are un-roadworthy. With respect to backlogs, the NXLM said that it
has a total backlog of approximately 150 kilometers of road network; and 3000
housing backlog.
The Committee was told that, in compliance with the MFMA,
all three bid committees are functional but there are capacity constraints with
respect to the evaluation committee; the BTO is functional; AFS was submitted
to the Auditor-General on time; section 71 reports of the MFMA were submitted
on time; Internal Audit unit are shared with the Amathole District Municipality
but the arrangement is dysfunctional; the audit committee has been established
and is operational with four members, however is not efficient due to the non
existence of the Internal Audit; the NXLM is in the process of converting the
AFS from Institute of Municipal Finance Officers (IMFO) to GRAP in order to
comply with the requirements of Section 122 (3) of the MFMA;
With respect to capital grant dependency, the NXLM reported
that 18 percent of the total budget is for capital and is solely funded through
MIG. The NXLM further reported that 52
percent of operating expenditure is funded from grants and only 48 percent from
own revenue and this is due to low revenue collection. With regard to revenue collection rates and
debtors, the NXLM reported that 70 percent of the rates funds has been
collected which is not that much as most property owners in the valuation roll
are farmers of which have rebates. The NXLM further reported that salaries amount
to 48 percent of the operating budget. This percentage is high.
Finding
The Committee recommends that:
those that are suppose to. Legal
action should be undertaken where there is resistance.
3.11 The
The Chris Hani District Municipality (CHDM) reported that it
received grant funds for six grants: MIG, Regional
Bulk Infrastructure Grant, Water Services Operating Subsidy Grant, Rural
Transport Services Infrastructure Grant, MSIG, and FMG. With respect to intergovernmental
relation, the CHDM reported that participation in IDP is improving but
commitments made are seldomly implemented at the required time. The CHDM
further reported that the IDP is always aligned with the PGDP.
With respect
to the MFMA compliance, the CHDM reported that supply chain management policy
is in place; the BTO exists and it consists of five sections (Revenue
/ Income, Expenditure, Financial Reporting and Budget, System administration,
and Supply Chain Management). The CHDM reported that AFS was submitted to AG on
time, however the section 71 of the MFMA were not submitted on time. The CHDM
reported that an Internal Audit and Audit Committee are established and
functional and that the former has four people. The CHDM added that the Audit
Committee is shared with nine municipalities. The CHDM reported
that it has been a challenge to complete
annual reports on time due to audit
reports not being completed on time. With regard to the Internal Audit unit,
the CHDM reported that it is established and functional. However, the CHDM added
that certain tasks of internal audit unit are outsourced it shares its resource
with local municipalities.
On service
delivery, the CHDM reported that there are water backlogs in different areas that
are mostly rural. The CHDM further
reported that an estimates amount of R4.2 billion is needed to in order to address
water backlog. With regard to sanitation, the CHDM
added that an estimate of R680 million is needed in order to address sanitation
backlog. The CHDM commented that, with the only source of funding being MIG and
RBIG, the 2014 target cannot be achieved.
The CHDM further reported that there is water crisis in
With respect
to growth in Budget and contributing factors, the CHDM reported that its
capital programs are 100 percent dependent on grant funding and operation
programs are 90.3 percent dependent on grant. With respect to revenue
collection, the CHDM reported that revenue collection on water and sanitation
is happening at local municipalities. Furthermore, the CHDM reported that 42
percent of operating budget was spent on salaries and water services
expenditure totalled R30.9 million.
Findings
The Committee recommends that:
3.12 The
The Ngqushwa Local Municipality (NGLM) reported that its
budget has increased by 25 percent from the 2008/07 financial year to the 2009/10
financial year, because the increase in the equitable share and the increase in
collection of property rates. The NGLM reported that the AFS and section 71
reports are submitted on time to the National Treasury. The NGLM further
reported that it is 65 percent capital grant dependent; 3.4 percent operational
grants dependent; the employee-related costs amount to 47 percent of the
operational budget and, repairs and maintenance costs was 0.05 percent of the
operational budget. The NGLM further reported that all bid committees exist.
The NGLM reported that intergovernmental relations meetings takes
place regularly and there is participation by ESKOM. However, the NGLM complained
that there is huge challenge of non-participation by sector departments in the IDP
processes. The Committee was assured that the IDP is aligned with the Provincial
Growth and Development Strategy but to a limited extent due to the fact that the
NGLM does not provide water and sanitation.
With respect to service delivery, the NGLM reported that it
is not a water service authority and therefore they are not involved in water
and sanitation matters. This function is the responsibility of the
The NGLM
reported that limited funds received through Municipal Infrastructure Grant are
proportionally allocated on the roads rehabilitation programme (gravel roads)
and the building of community halls. The NGLM further reported that, due to
poor maintenance and the poor condition of the roads that fall under the
Department of Roads and Public Works, NGLM is forced to work on
district Roads. This, the NGLM said, resulting in the focus being shifted away
from their real responsibility of access roads and minor roads.
Finding
The Committee recommends
that:
4. Comments by
Stakeholders
4.1 National and
Provincial Treasury
The National Treasury told the Committee that municipalities
are not showing any signs of improving and as a result, these municipalities
keep on receiving adverse and/or disclaimer audit opinions. The Committee was
further told that basic accounting skills are being offered to CFO but there is
no change in the Auditor General’s (AG) report. The National Treasury questioned
the credibility of the figures that were presented by municipalities. The
reason given for this was that presented figures did not match the figures that
were submitted by municipalities to the Provincial and National Treasuries.
On the other hand, the Provincial Treasury commented that the
majority of the presentations reflect a lot of information that is not captured
in the reports submitted to it by municipalities. Provincial Treasury added
that training has been and is being provided to all municipalities. Furthermore,
the Provincial Treasury informed the Committee that municipalities do not
provide/keep documentation for perusal during the audit report process.
The Provincial and National Treasuries assured the Committee
that municipalities will be provided with programmes that seek to empower them
to comply with GRAP. The National Treasury informed the Committee that
Provincial Treasury and AG are available to provide financial skills to
municipalities but in most cases, municipalities are not requesting help and
help can not be forced to them.
4.2 Eskom
Eskom reported that they participate in the IDPs of all
municipalities because Eskom must provide municipal electrification needs. Eskom
further reported that it is finding difficult to address electrification
backlogs in the former
4.3. Department of
Water Affairs
The Provincial Department of Water Affairs reported that it
is continuously inspecting rivers to avoid water contamination that may be
caused by spillages due to old infrastructure. The Department explained that
samples of water are taken to laboratories for testing. The Department said that
this is done through the Blue Drop Assessments. The Department of Water Affairs
further reported that regular bilateral meetings are held with municipalities.
4.4 National Department
of Cooperative Governance and Provincial Department of Local Government and
Traditional Affairs
The National Department of Cooperative Governance (DCoG) proposed
a hands-on-approach to address the challenges that municipalities are faced
with. The National Department reported that there is lack of fraud prevention
and internal controls in municipalities.
The Provincial Department of Local Government and
Traditional Affairs reported that it has subsidized municipality for audit fees
and for compensation of employees’ fees, but the audit opinions are not
improving. As a result of this, the Provincial LoGTA said, a financial recovery
plan is being developed by it. The Department of LoGTA added that there is over
reliance on consultants who add no value based in terms of the AG reports. The Department of LoGTA further reported that
forensic investigations are considered in all municipalities and these
municipalities will be visited to discuss forensic fees. With respect to audit
fees, Department of LoGTA explained that fees were paid on behalf of the
municipalities that had challenges.
4.5 The Development
Bank of
The Development Bank of South Africa (DBSA) reported that,
through the Siyenza Manje programme, it has assisted municipalities by
seconding staff (qualified officials) to municipalities. The DBSA reported that
seconded staff are assisting municipalities to convert to GRAP. The DBSA
assured the Committee and the municipalities that they intend to provide
support to municipalities until such time there is improvement in all areas of
corporate governance in municipalities.
4.6 Fiscal and
Financial Commission
The Financial and Fiscal Commission (FFC) commented that it
is reviewing the Local Government Equitable Share formula. The FFC advised
municipalities to forward submissions to the South African Local Government
Association. The FFC commented that the number of bailouts should be controlled
because bailing out should be followed by the plan to address the challenges.
With respect to municipalities who are investing their equitable share funds,
the FFC commented that the interest portion was expected to be returned to
government coffers but municipalities are now allowed to use it on operational issues.
5. Further Findings
The Select Committee on Appropriations, after careful
consideration of the service delivery and financial performance of the
above-selected municipalities in the
mandate without service level
agreements in place;
(GRAP) compliant and record keeping
is very poor. Non-compliance with GRAP is the main cause of the negative audit
opinions that were received by municipalities. The evaluation of assets is the
most contributing factor for municipalities not to comply with GRAP;
adding value due to the capacity constraints;
accumulates interest, the poor are
deprived of services that were promised by
the leadership of the country;
on towns and neglect rural areas.
Municipalities provide services such as refuse
collection and
eradication of bucket systems only in towns;
Provincial Treasuries;
6. Further recommendations
The Select Committee on Appropriations, after careful
consideration of the service delivery and financial performance of the
above-selected municipalities in the
6.1 The National
and Provincial departments, especially the National and Provincial
Departments of Public Works, that
owe municipalities property rate fees should
ensure that they pay them
accordingly; and report to the House that they have
paid all outstanding amounts and
this report should be submitted to the House
within three months after the
adoption of this report by the House.
6.2
The
South African Local Government Association should advise municipalities
not to perform provincial functions
because this compromises service delivery at
a local sphere of government;
6.3 The Councils
should strengthen their oversight roles;
6.4 The National
Treasury and the National Department of Cooperative Governance
and Traditional Affairs should
develop programmes aimed at assisting municipalities (especially low-capacity
municipalities) with the conversion from the
6.5 The
National Treasury and the Development Bank of
6.6 The National
Treasury and Provincial Treasury should monitor how municipalities
spend the accumulated interests from
the municipal investments;
6.7
Municipalities
should extend provision of services to every rural areas under their
jurisdiction and not only concentrate in urban areas;
6.8
The
South African Local Government Association should, at all time, sensitize
municipalities about the importance
of observing legislations that govern Local Government;
6.9 The National and Provincial Department
of Cooperative Governance, Auditor
General, Provincial and National Treasury should contribute to
the Municipal
Turnaround Strategy by developing tools that are going to
assist municipalities to
comply with all provisions of the Municipal Finance
Management Act;
6.9
The
Department of Cooperative Governance and Provincial Department of Local Government
and Traditional Affairs together with the Department of Rural Development and
Land Reform should assist municipalities in servicing communities in rural
areas especially because almost all municipalities are failing to service
communities living in rural areas. These two Departments should report to the
House every quarter on progress made in the 2010/11, 2011/12 and 2012/13
financial years;
6.10
The Select Committee on
Appropriations, together with the Select Committee on Co-operative Governance
and Traditional Affairs, should do a joint follow-up visit to the
municipalities in the Province of North West to ascertain progress made by
sector departments as per commitments they made during this oversight visit and
that this follow-up visit be made three months after the adoption of this
report; and
6.11
As
per provision of Section 182 of the Constitution, the Public Protector should
investigate misappropriation of funds by municipalities that were visited and
report to Parliament within three months after the adoption of this report by
the House.
Report to be considered.