ATC151020: Budgetary Review and Recommendations Report of the Portfolio Committee on Co-Operative Governance and Traditional Affairs, dated 20 October 2015

Cooperative Governance and Traditional Affairs

BUDGETARY REVIEW AND RECOMMENDATIONS REPORT OF THE PORTFOLIO COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS, DATED 20 OCTOBER 2015

 

The Portfolio Committee on Cooperative Governance and Traditional Affairs, having considered the performance and submission of the Departments of Cooperative Governance and Traditional Affairs to National Treasury for the medium term period, reports as follows:

 

1. Introduction

 

1. Mandate of Committee

 

As a Committee of the National Assembly, as provided in Chapter 4 of the Constitution of South Africa, and in accordance with the Rules of the National Assembly, the Committee is mandated to:

 

• Consider, amend, approve or reject legislation;
• Consider and approve budgets and monitor expenditure of the Department and entities reporting to it;
• Consider progress reports from line-function departments, and provincial and local government authorities and entities on their respective mandates;
• Ensure that all appropriate executive organs of state are held accountable for their actions; and
• Conduct oversight over the national executive authority and any other organ of state.

 

1. Description of core functions of the Department.

 

The aim of the Department of Cooperative Governance and Traditional Affairs is to improve cooperative governance across the three spheres of government in partnership with institutions of traditional leadership to ensure that provinces and municipalities carry out their service delivery and development functions effectively.

 

In accordance with the Intergovernmental Relations Framework Act (2005), the Municipal Property Rates Act (2004), the Municipal Systems Act (2000) and the Municipal Structures Act (1998), the Department is mandated to:

 

• Develop, monitor and support the implementation of national policy and legislation, seeking to transform and strengthen key institutions  and mechanisms of governance to fulfil their development role;
• Develop, promote and monitor mechanisms, systems and structures to enable integrated service delivery and implementation within government; and
• Promote sustainable development by providing support to and exercising oversight over provincial and local government.

 

The Department’s aim and mandates underpins its three strategic priorities over the medium term, which are to:

 

• Strengthen accountability, governance and oversight of provincial and local government;
• Facilitate local economic development and improve access to basic services; and
• Develop a policy platform for a differential approach to municipalities.

 

The Department also oversees the following entities:

 

• The Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities, which promotes and protects cultural, religious and linguistic rights.
• The Municipal Demarcation Board, an independent authority responsible for determining municipal boundaries and also mandated to declare district management areas, delimit wards for local elections, and assess the capacity of municipalities to perform their functions.
• The South African Local Government Association, which is mandated by the Constitution to assist in the comprehensive transformation of local government
• The Municipal Infrastructure Support Agent, which is mandated to render technical advice and support to municipalities, as well as strengthen their capacity to provide access to basic services.

 

1. Purpose of the BRR Report

 

The Money Bills Procedures and Related Matters Amendment Act (Act 9 of 2009) sets out the process that allows Parliament to make recommendations to the Minister of Finance to amend the budget of a national department. In October of each year, Portfolio Committees must compile Budgetary Review and Recommendation Reports (BRRR) that assess service delivery performance given available resources; evaluate the effective and efficient use and forward allocation of resources; and may make recommendations on forward use of resources. The BRRR are also source documents for the Standing/Select Committees on Appropriations/Finance when they make recommendations to the Houses of Parliament on the Medium-Term Budget Policy Statement (MTBPS). The comprehensive review and analysis of the previous financial year’s performance, as well as performance to date, form part of this process.

 

1. Method

 

This Report assesses the service delivery and financial performance of the Department of Cooperative Governance and Traditional Affairs and its entities for the 2014/15 and 2015/16 (until October 2015) financial years. This assessment is informed by committee briefings and other sources of information.

 

1. Outline of the contents of the Report

 

The rest of the Report proceeds as follows: section 2 provides an overview of key policy focus areas on cooperative governance and traditional affairs during the period under review; a summary of previous key financial and performance recommendations of the Portfolio Committee on COGTA is presented in section 3; section 4 provides an overview and assessment of reported financial and service delivery performance for 2014/15 and 2015/16; Section 5 presents the Portfolio Committee’s observations and responses on COGTA’s technical, governance, service delivery and financial performance issues; a summary of additional reporting requests by the Portfolio Committee is tabulated in section 6; and recommendations in section 7 conclude the Report.

 

1. Overview of the key relevant policy focus areas

 

Government’s medium term strategic framework (MTSF) for the period 2014 – 2019 sets down the priorities for structural reform over this period. As articulated in the 2014 Medium Term Budget Policy Statement (MTBPS), these include:

 

• Building the capacity of the public sector, particularly at local government level, through the ‘back to basics’ approach, focused on improving service delivery, accountability and financial management; and
• Reshaping South Africa’s urban environment through integrated spatial planning and expansion of the municipal debt market.

 

The MTSF priorities give expression to the key priorities of the National Development Plan, whose achievement depends on an economy that is growing rapidly over an extended period of time. Public spending is the necessary foundation for this growth, and in this regard government is focusing on several policy goals. These include creating dynamic cities by fostering well-planned and well-managed urbanisation and reforming the structure and conditions of infrastructure grants to local government. Government is providing support to enable cities to promote growth and urban transformation by means of:

 

• A project preparation facility that helps municipalities prepare plans that are ready for implementation;
• An infrastructure delivery mechanism that is being expanded from provinces to large cities; and
• Technical assistance that will support the review of municipal borrowing strategies.

 

Over the next three years, R560 billion (inclusive of the local government equitable share) has been made available for service delivery and municipal infrastructure development, among other things. Strong spending growth is also envisaged for the Community Work Programme (CWP), which will be rolled out to every municipality by 2017. All these policy thrusts are fundamental to, and impact directly on, the mandates of the Department of Cooperative Governance, the South African Local Government Association, the Municipal Demarcation Board and the Municipal Infrastructure Support Agent.

 

1. Summary of previous key financial and performance recommendations of Committee

 

1. 2013/14 BRRR recommendations and responses by the Department

 

During the 2013/14 financial year the Committee made the following recommendations to the Department:

 

• The local government funding model, and in particular the equitable share allocations, should be reviewed.
•  An instrument to monitor expenditure on the MIG should be developed and a report on this should be provided to the Committee on a quarterly basis.
• More effort should be put on ensuring that the performance indicators implemented by the Department and its entities are Specific, Measurable, Achievable, Reliable and Time-bound.

 

 

At the time of this report, the Committee had not yet received the Department’s formal response to these recommendations.

 

1. Overview and assessment of financial performance

 

1. Financial and service delivery performance 2014/15

 

Department of Cooperative Governance:

 

Sixty three (R63.4) billon was allocated to the Department of Cooperative Governance and Traditional Affairs (COGTA) during the 2014/15 financial year. The main appropriation or the 2014/15 financial year was R63.2 billion. During the Adjusted Estimates of National Expenditure, an additional appropriation of R241.1 million was received. The increase related to the introduction of a new grant, the Municipal Demarcation Transition Grant, as well as the roll-over of Municipal Infrastructure Grant funds that were not spent during the 2013/14 financial year. Additional funding for post-disaster reconstruction and rehabilitation of municipal infrastructure in some disaster-stricken provinces also contributed to the increase.

 

Virement and shifts were effected in respect of compensation of employees and in respect of goods and services. Six (R6.3) million was shifted from Programme 6: Infrastructure and Economic Development to increase the compensation of employee allocation in Programme 1: Administration (R2 million), Programme 2: Policy, Research and Knowledge Management (R737 000), Programme 3: Governance and Intergovernmental Relations (R326 000), Programme 4: National Disaster Management Centre (R110 000) and Programme 5: Provincial and Municipal Governance Systems (R550 000). The 6.3 million from Programme 6 also contributed to increasing Goods and Services allocations in Programme 1 (R983 000), Programme 4 (R1.3 million) and Programme 5 (R330 000). An additional R102 000 was shifted from Programme 6 to increase Goods and Services allocation in Programme 5 (R65 000) and Programme 1 (R37 000). All virements were approved by the Directors-General, and National Treasury and the Executive Authority were duly informed.

 

Between April and September 2014, the Department had spent R23.4 billion (or 36.5 per cent) of its allocation. Actual expenditure amounted to R59.4 billion by 31 March 2015, indicating an under expenditure of R3.9 billion (or 6.4%). Roll-over of funds from the 2014/15 financial year was approved in respect of Goods and Services and Transfers and Subsidies. The Community Works sub-programme in Programme 6 requested the National Treasury to roll over funds to the value of R216.4 million, as there was a delay in the commencement of the process to procure tools, material and protective clothing for the Community Work Programme (CWP) Implementing Agents. An unspent amount of R2.8 million in respect of the Local Government Equitable Share Grant in Programme 3, and a Municipal Infrastructure Grant amount of R18.6 million in Programme 6 that was not transferred to the Ditsobotla Local Municipality, were requested from National Treasury to be rolled over to the 2015/16 financial year.

 

The Department incurred R155.3 million in irregular expenditure. This was due to non-compliance with Supply Chain Management. As at 31 March 2015, the Department’s contingent liabilities amounted to R877 000. No unauthorised or fruitless and wasteful expenditure was incurred.

 

All the programmes, bar the administration programme, achieved or partially achieved all the targets planned for the 2014/15 financial year. However, there were findings by the Auditor-General in respect of the reliability, specificity and measurability of some targets. The total vacancy rate of the Department was 12.6% during the period under review. The total staff turnover rate was 16.6% - the majority of resignations (52%) relating to the expiry of contracts.

 

 

Programme 1: Administration

 

Summary:

 

This programme is meant to provide strategic leadership, management and support services to the Department. It was allocated R242 million in 2014/15. Actual expenditure amounted to R241.6 million, leaving a balance of R397 000 in under expenditure.

 

Expenditure:

 

Table 1: Programme 1: Administration

Sub-programme	Budget 2014/15		Over/underspending	Variance
R million	Final Appropriation	Actual Expenditure
Sub-programme 1: Ministry	33 305	33 305	-	-
Sub-programme 2: Management	16 673	16 668	5	0.3%
Sub-programme 3: Chief Operating Officer	12 181	11 905	276	2.3%
Sub-programme 4: Corporate Services	85 476	85 360	116	0.2%
Sub-programme 5: Financial Services	22 013	22 013	-	-
Sub-programme 6: Communication and Liaison	9 321	9 321	-	-
Sub-programme 7:Legislation Review and Drafting	11 130	11 130	-	-
Sub-programme 8:Internal Audit and Risk Management	8 619	8 619	-	-
Sub-programme 9:Office Accommodation	43 307	43 307	-	-
Total	242 025	241 628	397	0.02%

 

Performance:

 

Under this programme there were four (4) targets planned for 2014/15: Managing and consolidating information into a single database; supporting provinces with the implementation of a Performance Management System (PMS); designing a Monitoring and Reporting System for Local Government; and finalising Local Government indicators. Only the target relating to the implementation of the PMS was achieved. The Auditor-General did not identify any material findings on the usefulness and reliability of the reported performance information for the Programme. The underspending of 0.02% is immaterial, but raises the question of what the money was spent on if the programme only managed to meet a quarter of its targets.

 

Programme 2: Policy, Research and Knowledge Management

 

Summary:

 

The Policy, Research and Knowledge Management programme provides support services to the Department in the areas of research and knowledge management; policy formulation; monitoring and evaluation; information, communication and business technology. The Programme received a total budget allocation of R20.2 million in 2014/15, which was earmarked for, among other things, producing four (4) quarterly reports dealing with the status quo and profiles of District municipalities, options/strategies to strengthen them, and implications for district reform. Actual expenditure amounted to R18.4 million, leaving a surplus of R1.7 million in under expenditure.

 

Expenditure:

 

Table 2: Programme 2: Policy, Research & Knowledge Management

Sub-programme	Budget		Over/underspending	Variance
R million	2014/15	Actual Expenditure
Sub-programme 1: Management: Research and Policy	4 151	3 404	747	18%
Sub-programme 2: Policy and Research Methods	7 792	6 759	1 033	13.2%
Sub-programme 3: Knowledge and Information Management	8 308	8 308	-
Total	20 251	18 471	1 780	8.7%

 

Performance:

 

Under this Programme there were seven (7) targets planned for 2014/15. All the targets were achieved or partially achieved. However, the Auditor-General found that the targets were not reliable when compared to the source information or evidence provided. This was attributed to inadequate monitoring of management with respect to the completeness of source documents in support of actual achievements. The underspending of 8.7% related to a delay emanating from the implementation of the 2014/15 Procurement Plan.

 

Programme 3: Governance and Intergovernmental Relations

 

Summary:

 

The bulk of the Department’s spending over the medium term is concentrated in the Governance and Intergovernmental Relations Programme, which transfers the equitable share to fund basic services, free basic services and the general operational costs of municipalities. The Programme was allocated a total budget of R44.6 billion in 2014/15, which constituted 70.5 per cent of the Department’s total allocation for the financial year ended in March 2015. The bulk of this budget related to the Local Government Equitable Share (LGES) and, to a lesser extent, transfers to Departmental entities. The spending focus of the Programme in 2014/15 was to be on assisting 100 per cent of those municipalities spending less than 80 per cent of the Municipal Infrastructure Grant during the 2013/14 financial year. Actual expenditure amounted to R41.7 billion, leaving a balance of R2.9 billion in under expenditure.

 

Expenditure:

 

Table 3: Programme 3: Governance and Intergovernmental Relations

Sub-programme	Budget		Over/underspending	Variance
R million	2014/15	Actual Expenditure
Sub-programme 1: Management: Governance and Intergovernmental Relations	15 466	15 466	-	-
Sub-programme 2: Intergovernmental Relations Coordination	6 319	6 319	-	-
Sub-programme 3: Intergovernmental Fiscal Relations	12 425	12 425	-	-
Sub-programme 4: Governance and Public Participation	2 977	2 977	-	-
Sub-programme 5: South African Local Government Association	26 904	26 904	-	-
Sub-programme 6: Municipal Demarcation Board	44 230	44 230	-	-
Sub-programme 7:South Africa Cities Network	6 071	6 071	-	-
Sub-programme 8:United Cites and Local Government of Africa	5 594	3 209	2 385	42.6%
Sub-programme 9:Local Government Equitable Share	44 490 145	41 592 070	2 898 075	6.5%
Total	44 610 131	41 709 671	2 900 460	6.5%

 

Performance:

 

All the eleven (11) targets planned under this Programme were achieved or partially achieved. However, the Auditor-General found that the targets were not reliable when compared to the source information or evidence provided. This was attributed to inadequate monitoring of management with respect to the completeness of source documents in support of actual achievements. The underspending of 6.5% was mainly due to the withholding of the Local Equitable Share from some municipalities which did not perform according to requirements of the Division of Revenue Act. The under-expenditure is also reflective of delays in the transfer of funds to the United Cities and Local Government of Africa sub-programme.

 

Programme 4: National Disaster Management Centre

 

As a Programme within the Department of Cooperative Governance, the NDMC was allocated an amount of R831.4 million in 2014/15. Actual expenditure amounted to R385.9 million, leaving a surplus of R445.5 million. There were no reported Virement and shifts in respect of this Programme.

 

Expenditure:

 

Sub-programme	Budget 2014/15		Over/underspending	Variance
R million	Final Appropriation	Actual Expenditure
Sub-programme 1: Management: Head of Disaster	19 740	17 1851	1 889	9.5%
Sub-programme 2: Legislation, Policy and Compliance Management	5 021	5 021	-	-
Sub-programme 3: Planning, Coordination and Support	41 619	41 619	-	-
Sub-programme 4: Intelligence and Information Systems Management	9 830	9 830	-	-
Sub-programme 5: Disaster Relief Transfers	560 952	121 483	439 469	78.3%
Sub-programme 6: Municipal Disaster Recovery Grant	194 253	190 102	4 151	2.1%
Total	831 415	385 906	445 509	53.5%

 

Performance:

 

The NDMC has achieved 100 percent of the targets planned for the 2014/15 financial year. The Auditor-General did not identify any material findings on the usefulness and reliability of the reported performance information for the NDMC. The underspending of 53.5% is mainly due to uncertainty with payment of disaster relief grants, as such grants are paid only when disasters are declared and approved by National Treasury.

 

Programme 5: Provincial and Municipal Governance Support

 

Summary:

 

This Programme provides oversight, support systems and regulatory mechanisms for provincial and municipal government and associated entities. Two hundred and eighty nine (R289.5) million was allocated to the Programme in 2014/15. Actual expenditure of R289.4 million was recorded.

 

Expenditure:

 

Table 4: Programme 5: Provincial and Municipal Governance Support

Sub-programme	Budget 2014/15		Over/underspending	Variance
R million	Final Appropriation	Actual Expenditure
Sub-programme 1: Management: Provincial and Local Government Support	6 945	6 945	-	-
Sub-programme 2: Provincial Government Support and Intervention	4 459	4 405	54	1.2%
Sub-programme 3: Local Government Support and Intervention	13 844	13 844	-	-
Sub-programme 4: Development Planning	12 133	12 133	-	-
Sub-programme 5: Municipal Systems Improvement Grant	252 152	252 152	-	-
Total	289 533	289 479	54	0.01%

Performance:

 

All fourteen (14) targets planned under this Programme have been achieved or partially achieved. However, the Auditor-General found that 29% (4/14) of the targets were neither specific, measurable nor reliable.

 

Programme 6: Infrastructure and Economic Development

 

Summary:

 

This Programme is meant to support Provincial and Local Government Programmes and Systems that promote economic and infrastructure development. It was allocated R17.3 billion for the 2014/15 financial year, of which R2.2 billion was earmarked for the Community Work Programme (CWP), and the rest (approximately R15 billion) for the Municipal Infrastructure Grant (MIG). The CWP - which aims to address poverty and provide livelihood support for poor households by providing participants with a minimum of regular days of work to supplement existing livelihoods - is the third largest spending area for the department, after the Equitable Share and the MIG. The MIG, on the other hand, supports municipalities to deliver municipal infrastructure and is the Department’s second largest spending sub-programme, after the Equitable Share. Actual expenditure amounted to R16.7, billion leaving a balance of R627.9 million in under expenditure.

 

Expenditure:

 

Table 5: Infrastructure & Economic Development

Programme	Budget 2014/15		Over/underspending	Variance
R million	Final Appropriation	Actual expenditure
Sub-programme 1: Management: Infrastructure	3 382	2 047	1 335	39.4%
Sub-programme 2: Local Economic Development Planning	11 751	11 729	22	0.18%
Sub-programme 3: Infrastructure Development	13 482	13 417	65	0.48%
Sub-programme 4: Municipal Infrastructure Grant	14 764 049	14 745 445	18 604	0.12%
Sub-programme 5: Community Work Programme	2 257 840	1 649 965	607 875	26.9%
Sub-programme 6: Special Purpose Vehicle	294 162	294 162	-	-
Total	17 344 666	16 716 765	627 901	3.6%

 

Performance:

 

One hundred per cent of the targets planned under this Programme were achieved. However, targets relating to the CWP were found by the A-G to be unreliable when compared to the source information or evidence provided.  The under-expenditure of 3.6% was, as noted earlier, mainly due to the withholding of MIG funds for the Ditsobotla local municipality, as well as delays in the payment of invoices by the CWP sub-programme.

 

Department of Traditional Affairs:

 

A total of R115.8 million was allocated to the Department of Traditional Affairs (DTA) during the 2014/15 financial year. Actual expenditure as at 31 March 2015 amounted to R111.7 million, indicating under expenditure of R4.1 million (less than 1 per cent). No Virement was effected during the period under review. The Department incurred R6.5 million in irregular expenditure and R2.2 million in unauthorised expenditure during the year under review. As stated in the Annual Report: All irregular expenditure incurred by the Department were unavoidable as they emanated from the previous Nhlapho Commission, and the previous Commissioners are the only ones that can account for why the Department could not follow supply chain management processes. It should be explained to the Committee what this means.

 

During the year under review the Department planned 47 performance targets. Forty three targets were achieved, indicating a performance rate of 91%. The Auditor-General did not identify any material findings on the usefulness and reliability of the reported performance information for the Department’s three Programmes. The Department had a vacancy rate of 10% and a turnover rate of 1% for the period under review.

 

Programme 1: Administration

 

Summary:

 

This programme provides strategic leadership, management and support services to the Department of Traditional Affairs (DTA).

 

Expenditure:

 

Table 1: Programme 1: Administration

Sub-programme	Budget 2014/15		Over/underspending	Variance
R million	Final Appropriation	Actual Expenditure
Sub-programme 1: Ministry	4 000	3 129	871	21.7%
Sub-programme 2: Management of Traditional Affairs	10 482	17 069	-6 587	-62.8%
Sub-programme 3: Corporate and Financial Services	6 531	1 700	4 831	74%
Sub-programme 4: Internal Audit	531	375	156	29.3%
Total	21 544	22 273	-729	-3.3%

Performance:

 

Ninety-five percent (19/20) of the planned targets were achieved under this Programme. The target not achieved related to the Gazetting of the DTA Promotion of Access to Information Act (PAIA) Section 15 Notice. There was significant over expenditure amounting to R6.5 million (63%) in respect of sub-programme 2: Management of Traditional Affairs. This amount corresponds with the total amount of irregular expenditure incurred by the Department during the period under review. There is also significant under expenditure amounting to R4.8 million (74%) under sub-programme 3: Corporate and financial services.

 

Programme 2: Research, Policy & Legislation

 

Expenditure:

 

Table 2: Research, Policy & Legislation

Sub-programme	Budget 2014/15		Over/underspending	Variance
R million	Final Appropriation	Actual Expenditure
Sub-programme 1: Management	3 347	4 075	-728	-21.8%
Sub-programme 2: Policy and Legislation	3 265	3 404	-139	-4.3%
Sub-programme 3: Research and Information Management	7 261	6 750	511	7%
Total	13 873	14 229	-356	-2.5%

 

Performance:

 

Eighty per cent (8/10) of the planned targets were achieved under this Programme. The targets not achieved related to the development of a consolidated report on implementation of the Framework for the participation of traditional leaders in municipal councils in eight provinces, as well as consulting six Kingships/Queenships on the formula for the determination of the number of members of Kingship/Queenship councils. Only one Kingship was not consulted on the formula due to unavailability. In short the Programme over-spent, but underperformed.

 

Programme 3: Institutional support and coordination

 

Expenditure:

 

Table 3: Institutional support and coordination

Programme	Budget 2014/15		Under/overspending	Variance
R million	Final Appropriation	Actual Expenditure
Sub-programme 1: Management	1 958	1 913	45	3.3%
Sub-programme 2: Institutional Building and Capacity Development	6 020	4 811	1 209	21%
Sub-programme 3: Intergovernmental Relations and Partnerships	6 146	5 784	362	5.9%
Sub-programme 4: National House of Traditional Leaders	18 627	15 069	3 558	19.1%
Sub-programme 5: Commission for the Promotion and Protection of the Rights of Linguistic, Religious and Cultural Communities	34 973	34 973	-	-
Sub-programme 6: Commission on Traditional Leadership Disputes and Claims	12 723	12 700	23	0.2%
Total	80 477	75 250	5 197	6.4%

 

Performance:

 

Ninety four per cent (16/17) of the planned targets were achieved under this Programme. The target not achieved related to the capacitation of all eight Provincial Houses of Traditional Leaders through information sharing sessions. Cost containment measures prevented the implementation of this target as originally envisaged. Why the target was not budgeted for in the first place is unclear.

 

South African Local Government Association:

 

For the 2014/15 financial year, SALGA had a total revenue of R489.6 million. Four hundred and twenty nine (R429.1) million of this amount was obtained from Membership Levies and R26.9 million from the national fiscus. The entity also recorded an operating surplus of R18.7 million during the year under review, which is 52 per cent less than the R39 million recorded in 2013/14. This decrease in operating surplus is attributed to an increase in programme costs – costs incurred for service delivery to SALGA’s membership in pursuance of the organisation’s mandate, as well as improving SALGA employees’ conditions of service with the introduction of employee benefits. There were no material findings in respect of SALGA’s financial statements, except for the fact that the entity was a defendant in a law suit where there was no provision for the liability that may result.

 

As indicated in the Annual Performance Plan (APP) tabled to the Portfolio Committee at the beginning of the 2014/15 financial year, SALGA had identified priorities that would inform its work for the financial year ending in March 2015. These were:

 

• Implementing the first phase of SALGA’s Leadership Academy and executive coaching for target municipalities as part of the support programme for improved audits;
• Delivering input on the review of the local government fiscal framework to the Budget Forum;
• Developing and refining positions on the review of legislation that compromises or impedes local government at both National and Provincial Legislature levels;
• Implementing an anti-corruption programme based on the resolutions of the SALGA anti-corruption summit;
• Developing a small town regeneration programme to unlock rural economies;
• Disseminating local government data and knowledge products;
• Profiling local government service delivery successes; and
• Initiating a quality management programme for SALGA and local government.

 

 

Priority: Support programme for improved audits

 

In terms of this priority the entity has:

 

• Established and launched a Centre for Leadership and Governance which, in the medium- to long-term, is expected to result in, among other things, improved audit reports from the Auditor-General. The Centre reportedly secured R14 million from the Local Government Sector Education and Training Authority (LGSETA) during the financial year under review.
• Assisted 22 municipalities with disclaimer/adverse audit opinions and audits that were not finalised by the legislated deadline. Nine (9) of these were successfully migrated from this red zone.

 

Priority: Input on the review of the local government fiscal framework

 

Performance:

 

• The entity reports that it had successfully lobbied for R139 million towards a municipal demarcation transition grant, which is intended to subsidise additional administrative and administrative costs arising from boundary changes to take effect subsequent to the elections of 2016.[1]
• The entity also reports on having ensured that the issue of renewal (refurbishment, rehabilitation, and overall asset management) was included in the scope of the infrastructure grant review process. This review process seeks to find ways of maximising existing resources via reforms to capital grants to municipalities, rather than seeking solutions that require additional funds or significant reforms to operating or capacity building grants.[2]

 

Priority: Anti-corruption

 

The following performance milestones are noted:

 

• Dissemination of the resolutions of SALGA’s anti-corruption summit to all municipalities.
• Assisted Umvoti, Mandeni and Ntambanana municipalities with the development and adoption of their anti-corruption policies;
• Supported Gert Sibande, Chief Albert Luthuli, Prince Albert, Kannaland and Beaufort West municipalities on the revival of the anti-corruption strategy;
• Developed an assessment on the state of fraud and anti-corruption measures in municipalities.

 

Priority: Small town regeneration

 

The entity reports on having:

 

• Created awareness among municipal officials on how and why small town regeneration should be prioritised; provided a platform to share good practice on small town regeneration approaches; and reconfigured small town regeneration in a way that would easily find expression in municipal Integrated Development Plans (IDPs).
• Developed a small town regeneration programme and rolled it out in the North West, Eastern Cape and KwaZulu-Natal.

 

Priority: Dissemination of local government data

 

The following performance milestones are noted:

 

• Developed and completed a Local Government Knowledge Hub to enable easy access to the sector’s data and knowledge resources.
• Developed an annual knowledge and information publication profile of municipal innovations, excellence and partnerships.
• Developed municipal profiling reports providing analysis of the socio-economic environment of district and local municipalities.
• Concluded a 15-year review local government study.

 

Municipal Demarcation Board:

 

For the financial year ended in March 2015, the MDB was allocated a budget of R44.2 million. Actual expenditure amounted to R52.2 million, resulting in a deficit of R7.2 million. The entity incurred irregular expenditure amounting to R3 million, which related to contracts that were extended without the approval of a properly delegated official, and to deviations that were approved by the accounting officer and management, even though it was not impractical to invite competitive bids. The MDB is also defendant to various lawsuits involving the Midvaal municipality and the re-determination of boundaries affecting this municipality. No provision for any liability that may result from this lawsuit has been made.

 

The MDB’s budget allocation was earmarked for:

 

• Planning and implementing a process to delimit wards in 100% of local and metropolitan municipalities by mid-2015;
• Producing a national report on municipal capacity, comparative reports for all district and local municipalities and qualitative municipal capacity reports for all district and metropolitan municipalities; and
• Achieving a clean audit.

 

The entity overspent on its total budget by R7.2 million or 16.2%.

 

Municipal Infrastructure Support Agent:

 

The entity received, as a transfer from the Department of Cooperative Governance, a final appropriation of R294.1 million in 2014/15. Income from other sources amounted to R9.9 million, increasing the entity’s total revenue to R304.1 million. Actual expenditure as at end March 2015 amounted to R300.8 million, indicating a surplus of R3.2 million. The entity incurred R73.2 million in irregular expenditure and R6.6 million in unauthorised expenditure. The irregular expenditure related to deviations from Supply Chain Management regulations. No disciplinary action had yet been taken at the time of writing this report. Five hundred and twelve thousand (R512 303) in fruitless and wasteful expenditure was also incurred. This related to penalty and interest from the South African Revenue Service (SARS), and salary overpayment and medical payment to a resigned employee. No disciplinary action had yet been taken at the time of writing this report.

 

Programme 1: Administration

 

Summary:

 

The purpose of this Programme is to provide direction and support, leadership, management and effective and efficient administrative support services to the entity.

 

Expenditure:

 

Programme	Budget 2014/15		Over/underspending	Variance
R million	Final Appropriation	Actual Expenditure
Total	70 600	76 600	-6 000	-8.4%

 

Performance:

 

Eighty eight (88.2%) (15/17) of the planned targets under this Programme were achieved or partially achieved. The targets not achieved related to the development of Human Resources (HR) and Human Resources Development (HRD) plans, and the implementation of a MISA communication and marketing strategy. The HR and HRD plans were not developed on account of the principal Department’s planned shared services model on human resources management, and a decision was taken not to develop a separate strategy for MISA, but to adopt one for the entire portfolio of the Cooperative Governance and Traditional Affairs ministry.

 

Programme 2: Municipal and Sectoral Technical Support

 

Summary:

 

The aim of this Programme is to provide technical support to target municipalities toward the improvement of municipal infrastructure planning, implementation, as well as operations and maintenance.

 

Expenditure:

 

Programme	Budget 2014/15		Over/underspending	Variance
R million	Final Appropriation	Actual Expenditure
Total	163 500	181 800	-18 300	-11.1%

 

Performance:

 

Eighty one (81.2%) (13/16) of the planned targets under this Programme were achieved or partially achieved. The targets not achieved related to the inability of MISA to support the whole number of targeted municipalities due to capacity and budgetary constraints. However, the claim regarding budgetary constraint is inconsistent with the surplus of R3.2 million recorded during the period under review. The Auditor-General found that 94% of the targets under this Programme were neither specific, measurable nor well-defined. Significantly, important targets were not reliable when compared to the source information or evidence provided. The reported performance information was also found to be invalid, inaccurate and incomplete when compared to the source information or evidence provided.

 

Programme 3: Capacity development programme

 

Summary:

 

This Programme advises and supports municipalities on building institutional technical capacity through the development of technical skills for the delivery of sustainable infrastructure that would result in effective and efficient service delivery in the long term.

 

Expenditure:

 

Programme	Budget 2014/15		Over/underspending	Variance
R million	Final Appropriation	Actual Expenditure
Capacity development	60 000	42 600	17 400	29%
Total	60 000	42 600	17 400	29%

 

Performance:

 

Seventy-two (72.7%) (8/11) of the planned targets under this Programme were achieved or partially achieved. The targets not achieved related to the number of Apprentices supported, the number of municipal officials under mentoring, and the number of strategic partnerships established and operationalised. All these were below the envisaged targets due to weakness in the appointment of service providers and other personnel relate challenges. The Auditor-General had found that, for 50% of the targets, no reasons were given for the variances between planned and actual achievements. However, this seems to have been rectified in the Annual Report. Thirty-three percent (33%) of indicators were also found to be neither well-defined nor verifiable. The reported performance information was also found to be invalid, inaccurate and incomplete when compared to the source information or evidence provided.

 

Programme 4: Strategic Support Programme

 

Summary:

 

This Programme is aimed at providing comprehensive generic strategic support to the Technical Support and Capacity Development Programmes that will allow them to focus exclusively on their core functions.

 

Expenditure:

 

The Annual Report provides no account of expenditure under this Programme.

 

Performance:

 

Fifty-seven (57.1%) (4/7) of the planned targets under this Programme were achieved. The three targets not achieved related to the compilation of project evaluation reports and reviews of the impact of MISA’s programmes. The explanation given for this is that the entity had insufficient internal capacity and inadequate resources to achieve these targets.

 

CRL Rights Commission:

 

The entity had a total budget allocation of R34.9 million, transferred from the Department of Traditional Affairs. Other income received amounted to R179 000, increasing the total revenue to R35.1 million. Expenditure as at 31 March 2015 amounted to R35 million, leaving a surplus of R100 000. A surplus of R2.5 million was also rolled over from the previous financial year.

 

There were no significant findings as far as irregular, wasteful and fruitless expenditure is concerned. There were also no contingent liabilities detected. However, the Audit Committee was not satisfied with the content and quality of quarterly financial statements prepared and issued by the Accounting Officer of the Commission.

 

Due to financial constraints the Commission reduced its staff component from 43 posts to 35 posts during the year under review.  The vacancy rate was 20% (7/35) and positions that had become vacant cannot be filled. This impacts negatively on the ability of the Commission to fulfil its constitutional mandate. All the targets planned under the Commission’s Programmes were achieved or partially achieved. There were no material findings on the usefulness and reliability of the reported performance information. However, the Annual Report provides no account of how the Programmes incurred their expenditure. This makes it impossible to link programme performance to expenditure.

 

1. Auditor-General Reports

 

Department of Cooperative Governance:

 

For the financial year under review the Department has received an unqualified audit opinion with findings. According to the Auditor-General (A-G), intervention was required around the quality of submitted financial statements. There were also concerns around supply chain management, human resource management and information technology. Instability or vacancies in key positions was also found to be among the root causes for under-performance.

 

With respect to the findings for the 2013/14 financial year, the COGTA Minister had committed to performing quarterly audits, in line with the CWP implementation manual. He also undertook to communicate non-compliance and/or matters of concern identified to the accounting officer and the executive authority on a quarterly basis. The Minister further committed to ensuring that irregular expenditure reports are compiled on a monthly basis by unit heads, who will declare if any irregular expenditure was incurred and sign off on the reports. The internal audit unit would validate the monthly reporting to the accounting officer. The A-G has found that none of these commitments were implemented during the year under review.

 

Department of Traditional Affairs:

 

The Department received an unqualified audit opinion with findings. The A-G drew attention to the following, among other things:

 

• The budget for compensation of employees was increased without the approval of National Treasury.
• Effective steps were not taken to prevent unauthorised and irregular expenditure.
• Contractual obligations and money owed by the Department were not settled within 30 days.

 

South African Local Government Association:

 

The entity has maintained high performance outcomes, resulting in the achievement of a ‘clean’ (unqualified with no findings) audit for the third consecutive year.

 

Municipal Demarcation Board:

 

The entity received an unqualified audit opinion with findings. Some matters raised by the Auditor-General (AG) during the 2013/14 financial year were also not resolved fully. These were the implementation of a 30 days payment register to monitor all payments not made within the stipulated period, and the preparation and approval of quarterly reports within 30 days of the end of each quarter.

 

Municipal Infrastructure Support Agent:

 

MISA received an unqualified audit opinion with findings. The Auditor-General found a number of deficiencies regarding the entity’s key controls. The effectiveness of leadership, risk management and internal audit were found to be concerning. The entity’s oversight responsibility, effective human resource management, policies and procedures, audit action plans and ICT governance were found to be requiring intervention. Also found to be requiring intervention were issues around proper record keeping and daily and monthly controls. Instability or vacancies in key positions was also found to be among the root causes of under-performance.

 

CRL Rights Commission:

 

The Commission received an unqualified audit opinion with findings. Among the matters of emphasis raised by the Auditor-General was that the Accounting Officer did not exercise adequate oversight responsibility regarding financial reporting and compliance with laws and regulations and related internal controls. Financial statements were also not always reviewed prior to submission for audit.

 

1. Financial performance 2015/16

 

• Quarterly spending trends

 

The main appropriation for the Cooperative Governance and Traditional Affairs Ministry for the 2015/16 financial year amounted to R69.3 billion. For the first quarter – from April to June 2015 – the Department had spent R1.9 billion or 2.9 percent of this amount. This is up from 1.1 percent in 2014/15. The Department has spent more than scheduled due to approved advances transferred to municipalities for the local government equitable share to provide for outstanding municipal service accounts. Spending was expected to return to required levels in the 2nd quarter and therefore it does not present an issue for the Department.

 

1. Key reported achievements

 

Department of Cooperative Governance and Traditional Affairs:

 

The period under review marked twenty years of democratic government, and fifteen years of democratic local government in South Africa. This period has seen an impressive record of expansion of service delivery. As some academics have noted ‘basic service delivery has been extended to the marginalised to a degree that is unprecedented in South Africa’s history, at a pace that is noted and commended internationally.’[3] A ‘close of term report presented to Cabinet reveals that households with access to water now stands at 95 per cent, up from 92 per cent in 2009.’[4] Eighty six per cent of households now have access to electricity, though this remains short of the targeted 92 per cent by the end of 2014.

 

South African Local Government Association:

 

Key highlights for the entity are as follows:

 

• The entity has departed from a disclaimed audit opinion in 2007 to a clean administration characterised by ‘clean’ audit opinions during the last three financial years.
• Established a Centre for Leadership and Government to develop in local government officials leadership capacity in the areas of governance, media and stakeholder engagements, and ethics.
• Launched the Municipal Audit Support Programme to provide hands on support to municipalities with adverse or disclaimed audit opinions.
• Successfully lobbied the Budget Forum for the introduction of the demarcation transition grant.

 

Municipal Infrastructure Support Agent:

 

• MISA deployed 53 Engineers to 121 municipalities across the country;
• Eight Town Planners were deployed at provincial level to support municipalities with the implementation of the Spatial Land Use Management Act (SPLUMA);
• 48 artisans were deployed to provide support to five municipalities in Limpopo. All of them have recently been absorbed by the municipalities.

 

CRL Rights Commission:

 

The Commission reports that it had achieved increased visibility during the period under review, which answers to some of the questions raised in the Kader Asmal Report with respect to the low visibility of the organisation.

 

Municipal Demarcation Board:

 

During the period under review, the Board has been on a learning curve but is now empowered to make more meaningful inputs into shaping the demarcation legislation. It is also building up its organisational capacity with the appointment of a Chief Executive Officer and a Chief Financial Officer, after having operated for 20 and 6 months, respectively, with these key vacancies.

 

1. Key reported challenges

 

Department of Cooperative Governance:

 

• Households’ access to reliable and quality basic services remains a challenge, despite the achievements made since 1994;
• Medium Term Strategic Framework targets for sustainable and reliable access to basic services are unlikely to be met;
• Municipalities are facing infrastructure maintenance and operations challenges. Water interruptions are common in some municipalities.     
• Municipal electrification distribution networks are often not properly operated and maintained.

 

Department of Traditional Affairs:

 

Despite the institutionalisation of traditional leadership, key challenges remain around:

 

• The participation of traditional leadership in government structures,
• The working relationship between the institution of traditional leadership and local government structures,
• Court litigation on leadership claims and disputes,
• The inadequate capacity of the structures of traditional leadership to perform their roles and functions, and
• The formal recognition and affirmation of Khoi and San leadership, structures and communities.

 

South African Local Government Association

 

The issue of concluding a memorandum of understanding between Eskom and SALGA with respect to electricity reticulation was raised as a problem. This service level agreement was needed to enhance a collaborative relationship between the two institutions and to deal with operational challenges that impede the provision of electricity services. The absence of a formal agreement was resulting in much instability in municipalities.

 

Municipal Infrastructure Support Agent:

 

As found by the Auditor-General,

 

• The usefulness and reliability of reported performance information by MISA was inadequate;
• Implementation of adequate information systems for monitoring progress towards achieving predetermined objectives was questionable;
• A Human Resource Plan was not in place and vacant positions not filled within 12 months; and
• Financial reports were not supported and evidenced by reliable information.

 

CRL Rights Commission:

 

The CRL Rights Commission remains under constraints in respect of financial resources. The Commission has a vision to expand services and improve on response times, as well as increase its scope of delivery. This vision requires financial resources to create sufficient capacity and deliver services.

 

Municipal Demarcation Board:

 

The MDB reported the following challenges:

 

• The entity’s strategy and mandate is not compatible with its current resources and capabilities. The Board has a very lean organisational structure with only 35 approved posts, which results in over-reliance on consultants and a slow adaptation to the local government sector dynamics;
• Negative public perception remains a challenge for the Board;
• The Board also lacks a provincial footprint and this creates a disconnection with the public.
• A funding shortfall from the 2017/18 financial year is also expected.

 

1. key committee observations

 

Governance and operational issues

 

• Appreciation was expressed for the work undertaken by the Department of Cooperative Governance and Traditional Affairs, the Municipal Demarcation Board, the South African Local Government Association and the CRL Rights Commission during the year under review.
• A concern was raised that the Department and the Office Auditor-General did not seem to always share the same understanding with respect to expected standards of compliance with reporting requirements. As a way to foster a shared understanding, it was advised that the A-G’s briefing to the Committee on the BRRR process should be done in the presence of the Department.
• Gender representation in the Department of Cooperative Governance and Traditional Affairs ministry was also raised as a matter of concern.
• A proper report needed to be provided to the Committee on the dismissal of the previous Chief Executive Officer of the Municipal Demarcation Board. The Board promised to despatch the report to the Committee immediately. The Report was despatched.

• The Committee noted that there was no annual reporting provided to the Committee by provinces. The Committee will work this out for the next financial year when they have obtained a legal opinion regarding the appropriate accountability reporting lines.

 

Service delivery performance

 

• South African Cities Network: A concern was expressed that the South African Cities Network was not reporting to the Committee despite there being a budget allocated to it by the Department of Cooperative Governance. The Committee was then informed that the SACN was not an entity reporting directly to the Department. It was rather a separate legal entity with its own Independent Board. However, the Committee was advised that it may independently call the SACN to Parliament to account, if that is deemed necessary.

 

• Community Works Programme: The Committee noted that the administration of the CWP was problematic and this was one of the key barriers preventing the Department from obtaining a clean audit. The Department acknowledged this and pointed out that the procurement of goods and services, which is the root of the problem, has always been the responsibility of the CWP Implementing Agents, some of which struggle to comply with the regulations of the Public Finance Management Act. The Committee was informed that the Department was introducing a fundamental change in the functioning and operation of the Programme, based on investigations it had carried as well as recommendations by the Department of Monitoring and Evaluation in the Presidency. The Department of Public Service and Administration had also approved a new organisational structure for the Department, which will see the CWP reflecting as a branch within the Department. This will facilitate better administration of the Programme. Furthermore, the Department was soliciting the assistance of National Treasury in terms of strengthening administrative and financial systems for the CWP. The number of CWP Implementing Agents has also been streamlined and drastically reduced in number and this is expected to contribute towards minimising the administration burden.

 

• Municipal Infrastructure Support Agent: The Committee noted that problems abound in MISA, despite this being a relatively new entity. The Committee was informed that the Department was reconstructing MISA and cleaning it up, and this has involved taking some tough decisions, including the dismissal of some members of Senior Management within the entity.

 

• South African Local Government Association: As in the previous financial year, a concern was once again expressed in relation to the high increase in the remuneration of the Chief Executive Officer of SALGA, from R3.5 million in 2013/14 to R4.4 million in 2014/15. A further concern was raised regarding the inequitable remuneration gap between the CEO and the next highest paid official in the organisation. The Committee resolved to engage with SALGA’s Independent Remuneration Committee, in order to better understand the rationale and logic behind the entity’s remuneration practices.
• Demarcation Transition Grant: It was noted that the Demarcation Transition Grant was not sufficient for the envisaged merging and amalgamation of municipalities. A briefing from the Department and SALGA is needed on the cost of merging municipalities, and the how the figure on the grant was arrived at.
• Filling of vacancies: The Committee noted that senior management vacancies in the Department and entities to needed to be filled as a matter of urgency.
• Disclaimed audits: Consecutive disclaimers in municipalities is a problem which the Committee will need to examine systematically.

 

 

Financial performance including funding proposals

 

• Underspending on the Municipal Infrastructure Grant was once again raised as a concern. The Committee was informed that municipalities were directly responsible for this challenge, not the Department. It was integral to the job of the Municipal Managers and Mayors to ensure that the relevant processes and procedures are in place towards effective spending of the MIG. The Committee was urged to pursue this matter in the course of its oversight visits.

 

1. table of committee’s reporting requests

 

Reporting matter	Action required	Timeframe
Progress report on the withholding of the equitable share	Provide an answer to the following questions: What led to the withholding of the equitable share? What measures have been put in place to prevent this from occurring?	Immediately
Suspension of the MDB CEO	Formal report to  be provided to the Committee on the matter	Immediately. Report was provided
Remuneration of SALGA CEO	The Independent Remuneration Committee of SALGA to provide a report to the Committee on the salary structure of SALGA, its rationale for the increase of 36% in the 2014/15 remuneration package of the CEO and the impact of this on the entity’s budget in the short and long term, as well as a report on the ‘personal to holder’ justification used by SALGA to explain its remuneration practices.	Immediately
MISA	A progress on the implementation of the post-audit action plan	End of this quarter
Previous Committee BRR Recommendations	Department should furnish Committee with responses to BRR Recommendation of the previous financial year	Immediately
Department of Traditional Affairs	Explain to the Committee the findings on the irregular expenditure related to the Nhlapho Commission	Immediately

 

 

1. Recommendations

 

• Communication between the Department of Cooperative Governance and the Office of the Auditor-General needs to be improved. It is recommended that the Department should meet with Auditor-General to ensure that they share the same understanding with respect to the expected standards of compliance with reporting requirements. The Department agreed to this recommendation.
• Minister of Cooperative Governance and Traditional Affairs and National Treasury to review Supply Chain Management processes and regulations within the Department of Cooperative Governance and Traditional Affairs and its entities.

 

1. Appreciation

 

For fruitful, cordial and constructive engagements the Committee thanks the Departments of Cooperative Governance and Traditional Affairs, SALGA, the Municipal Demarcation Board, MISA, the CRL Rights Commission, the Office of the Auditor-General, and National Treasury, among others. The contributions of Committee Members, as well as Committee Staff, are also gratefully acknowledged.

 

Report to be considered.

 

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•  

 

Auditor-General. (2015). Report of the Auditor-General to Parliament on Vote 3: Department of Cooperative Governance and Traditional Affairs. Office of the AG. Pretoria.

 

Auditor-General. (2015). Report of the Auditor-General to Parliament on the Municipal Infrastructure Support Agent. AGSA. Pretoria.

 

Auditor-General. (2015). Report of the Auditor-General to Parliament on the Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities. AGSA. Pretoria.

 

Auditor-General. (2015). Report of the Auditor-General to Parliament on Vote 3: Department of Traditional Affairs. AGSA. Pretoria.

 

Auditor-General. (2015). Report of the Auditor-General on the Municipal Demarcation Board. AGSA. Pretoria.

 

Auditor-General. (2015). Report of the Auditor-General to Parliament on the South African Local Government Association. AGSA. Pretoria.

 

CRL Rights Commission. (2015). Annual Report 2014/15. CRL. Pretoria.

                                                                                                                                                                              

Department of Cooperative Governance. (2015). Annual Report 2014/15. DeCoG. Pretoria.

 

Department of Cooperative Governance. (2014). ‘Annual Performance Plan.’ DeCoG. Pretoria.

 

Department of Cooperative Governance and Traditional Affairs. (2014). Annual Report 2013/14. COGTA. Pretoria.

 

Department of Planning, Monitoring and Evaluation. (2014). Medium Term Strategic Framework 2014 -2019. DPME. Pretoria.

 

Department of Traditional Affairs. (2015). Annual Report 2014/15. DTA. Pretoria.

 

De Visser, J. (2009). ‘Developmental Local Government in South Africa: Institutional Fault Lines.’ Commonwealth Journal of Local Governance. Vol.2

 

Municipal Demarcation Board. (2015). Annual Report 2014/15. MDB. Pretoria.

 

Municipal Infrastructure Support Agent. (2015). Annual Report 2014/15. MISA. Pretoria.

 

National Disaster Management Centre. (2015). Annual Report 2014/15. DeCoG. Pretoria.

 

South African Local Government Association. (2015). Annual Report 2014/15. SALGA. Pretoria.

 

Standing Committee on Appropriations. (2015). 1st Quarter Expenditure Report: 2015/16 financial year. Parliament. Cape Town.

 

The Presidency. (2012). National Development Plan – Our future: Make it work. National Planning Commission. Pretoria.

 

Zuma, J. (2014). ‘State of the Nation Address.’ Parliament. Cape Town.

 

 

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[1] SALGA (2015).

[2] Ibid.

[3] De Visser (2009).

[4] COGTA (2014).