PROVINCIAL INTERVENTIONS

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PROVINCIAL INTERVENTIONS KWAZULU-NATAL Report to
the Select Committee on Local Government 04
March 2008
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CONTENT

• Purpose
• Report on New Interventions
• Amajuba Umzinyathi Districts and Newcastle
  Local Municipalities
• Impendle Local Municipality
• Greater Kokstad Municipality
• Progress Report
• Emadlangeni Municipality
• Abaqulusi Municipality
• Background
• Status

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PURPOSE

• To provide the Select Committee with a report on
  interventions by the Provincial Executive of
  KwaZulu-Natal in Municipalities in terms of
  Section 139 of the Constitution
• Five interventions

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Amajuba Umzinyathi Districts and Newcastle
Local Municipalities
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BACKGROUND

• On 5 December 2007 the Provincial Executive
  Council resolved to intervene in terms of section
  139(1)(b) of the Constitution in the Amajuba
  District, the Umzinyathi District and the
  Newcastle Local Municipalities and to assume the
  responsibility for their municipalities water
  service authority functions.

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REASONS

• Long outstanding resolution of issues raised in a
  forensic investigation
• Lack of commitment by parent municipalities to
  address findings
• Community dissatisfaction with service delivery
• Allegations of maladministration, fraud and
  corruption
• Non-compliance with various legislative
  imperatives
• MFMA Non-submission of AFS
• MFMA Transfer of Assets Liabilities
• M Systems Act Provisions related to municipal
  entities
• Companies Act Registration etc.
• Disjuncture between parent municipalities and the
  entity
• Budgets
• Reporting
• Communication
• Shareholder and Board decision making

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MEC MANDATE

• Appoint a multi-disciplinary task team of
  specialists to undertake a forensic investigation
  and a comprehensive assessment of the operations,
  management and finances of uThukela Water (Pty)
  Ltd.
• Undertake the section 78 assessments in the
  respective municipalities and to prepare
  recommendations for the future provision of basic
  water supplies to the respective communities.
• Undertake any actions necessary to ensure the
  provision of basic water supplies to the
  communities of the respective water services
  authorities.
• Appoint a multi-disciplinary task team of
  specialists to manage uThukela Water (Pty) Ltd
  pending the outcome of the above assessments.
• Suspend or recall all Directors of uThukela Water
  (Pty) Ltd as contemplated in the Local
  Government Municipal Systems Act, 2000 as
  necessary.
• In the execution of the above mandate the MEC is
  to ensure the adoption and implementation of
  outcomes by the three water services authorities
  and must also devise an exit and handover
  strategy to the future water services provider as
  determined through the intervention.

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INTERVENTION ACTIVITIES

• Meeting with WSAs 29 February 2008
• Meeting with Board of Directors 03 March 2008
• Appointment of Administrator, Mr D Naidoo of
  Umgeni Water, to perform the functions of the
  Board of Directors as per section 93H of the
  Municipal Systems Act.
• Technical Support by Mr Frank Stevens of
  eThekwini Metro in the management of uThukela
  Water (Pty) Ltd, to ensure service delivery, as
  well as to do an assessment of the operational
  structures, procedures, systems and policies of
  the entity.
• Ngubane Co have been appointed as the preferred
  service provider, to do the performance review
  and forensic investigation originally intended by
  the parent municipalities.

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OBJECTIVES OF PERFORMANCE REVIEW FORENSIC
INVESTIGATION

• Undertake a performance review in terms of
  section 93C of the Municipal Systems Act read in
  conjunction with section 87(5)(d) of the
  Municipal Finance Management Act.  This review is
  necessary to determine the performance of the
  entity against its objectives and indicators. 
• Evaluate the financial situation and actions
  taken by the Board to correct the financial
  situation to establish action to be taken in
  terms of section 109 of the MFMA.  Consider the
  annual budgets submitted by UThukela Water, (the
  municipal entity), to parent Municipalities
  taking cognizance of increases thereto in
  relation to the improvement or extension of water
  services with a view to reviewing whether the
  originally anticipated economies of scale were
  being realised or not.
• To audit and review general compliance with the
  legislative and policy prescripts which may point
  to possible maladministration or non-performance
  such as the non-submission of annual financial
  statements for auditing to the Auditor-General
  since the establishment of the entity as a result
  of which the Auditor General has been issuing
  qualified reports to the parent municipalities.
• To investigate a number of issues which came from
  the first forensic to determine whether
  recommendations have been implemented.
• To investigate certain specific new issues.

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SCOPE OF PERFORMANCE REVIEW

• To review the business structure through the
  assessment of the current legal status, form of
  organizational structure, staffing, other
  statutory status and its constitutions
  Memorandum and Articles of the Association.
• To review institutional arrangements and
  interactions and reporting to the parent
  municipalities through an assessment of all
  contracts and commitments by parties.
• To review the business's financial health based
  on a detailed examination of financial
  information including budgets, statements,
  reports to the board of directors and an analysis
  of the existing asset base. Assess performance
  with regard to current cash flow and financial
  status/sustainability of UTW.
• Verify and confirm assets, liabilities, revenue
  and expenditure of the entity and the ability of
  the entity to meet payment obligations.
• The future potential of the business reflected in
  the strengths of its service delivery and the
  probability of reduced financial burden on the
  part of the parent municipalities over the
  medium- to long-term.
• To review the mechanisms for service delivery
  including the detailed assessment regarding the
  roles, functions, influence and value-added by
  any external service providers to the entity,
  their role in the organization and including
  agreements concluded with them.
• To assess the tariff related to the compliance of
  the status quo with the objectives of SP2030 and
  the original business plan submitted to DWAF in
  2004 Shareholders Meeting No. 7 dated 09
  December 2004.
• The compliance with laws and regulations
  governing the municipal entity the MFMA, the
  Companies Act, the Municipal Systems Act and the
  PFMA have detailed compliance issues which the
  entity must comply with. Verify and report the
  extent to which such requirements have been met,
  which will include the review of the minutes of
  the board of directors.
• Such assessment should deal generally with any
  anomalies and inconsistencies found in the
  management and decision making of the
  organization and the board.

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PERIOD UNDER REVIEW

• The performance assessment will cover the period
  since establishment of the entity from 2004 to
  date.
• The forensic investigation will cover the
  financial years 2005/2006, 2006/2007 and the
  current 2007/2008 to date.

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TIMEFRAMES

• The draft report is required to be submitted
  within two months of engagement.
• A final report is to be submitted within three
  months of engagement.
• Maximum period of intervention is six months.

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Impendle Local Municipality
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REASONS

• Suspension of senior management team for an
  extended period of 18 months
• Failure to implement provisions of the MSA
  relating to contracts for Section 57 employees
• Lack of progress on support programmes due to a
  lack of commitment
• Serious deficiencies in AG report for the past
  three financial years
• Failure to approve budget in terms of MFMA and
  serious shortcoming on budget
• Failure by council to appoint senior management
  including
• MM
• CFO
• Technical Services Manager
• HR Manager

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MEC MANDATE

• Appointment of a multi-disciplinary task-team of
  specialists with the appropriate expertise and
  knowledge in the applicable fields to assume the
  following obligations of the Impendle
  Municipality
• to investigate and address the failure of the
  municipality to provide services in a sustainable
  manner to practise good human resource
  management, to procure goods and services in
  accordance with a system which is fair,
  equitable, transparent, competitive and
  cost-effective
• to investigate and address the failure of the
  municipality to provide an economic, accountable,
  effective and efficient administration
• to investigate and address areas of shortcomings
  in the municipal administration
• to ensure that the municipal manager is properly
  appointed
• to ensure that senior municipal managers are
  appointed within the means and requirements of
  the municipality
• to address the shortcomings in the municipalitys
  management systems and financial systems and
  controls identified by the Auditor General
• to identify and address the issues of concern
  arising from the 2007/2008 budget
• to support the administration of the
  municipality
• to assist the municipality in filling key posts
  within the means and requirements of the
  municipality
• to regularise the municipalitys Human Resource
  and management systems and
• Task-Team so appointed to report to the Executive
  Council on any action taken in terms of their
  mandate.

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PROGRESS

• A detailed recovery plan has been drafted
  incorporating
• Organisational review
• Recruitment of staff
• Operational systems, policies and procedures
• Compliance
• MFMA Financial Management
• Annual Report
• SDBIP
• SCM
• Internal Audit
• Budget Review
• Councillor Allowances
• MSA
• IDP
• Performance Management
• Employment Contracts
• An acting Municipal Manager has been deployed to
  the municipality by the Provincial Department and
  has been appointed in such capacity by the
  municipal council
• A financial management expert has been sourced
  from the DBSA and is providing the required
  support
• Corporate service and Human Resource expertise
  has been accessed from the adjacent Umgeni local
  municipality to render support in this functional
  area

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TIMEFRAMES

• Six month duration or until senior management has
  been appointed
• Individual projects/activities as per the
  recovery plan
• Monthly reporting to provincial department

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Greater Kokstad Local Municipality
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REASONS

• Failure to meet creditor obligations Eskom
• Poor cooperation and inability to achieve
  objectives of support programmes run jointly by
  various stakeholders including
• DLTGA
• DPLG
• DBSA
• Sisonke District
• Failure to comply with statutory timeframes for
  budgetary process
• Disclaimed audit opinion
• Poor financial management systems
• Lack of controls
• Debt Management
• Asset Management
• HR Matters
• Negative performance audit opinion from AG

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REASONS

• Failure to fulfill specific executive
  obligations
• IDP not reviewed annually
• PMS not adopted
• Service delivery performance
• No internal audit reports
• No PMS report.
• Annual report

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MEC MANDATE

• Directive
• Greater Kokstad Municipality to appoint a
  multi-disciplinary task team in consultation with
  and upon instruction of the MEC to
• Review affairs, administration and financial
  management
• Refine a turnaround strategy
• Municipality to
• Cooperate
• Undergo capacity empowerment
• Report to Executive Council
• MEC to take such steps necessary to give effect
  to resolutions

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PROGRESS

• Provincial department providing support on
  matters arising from AG report
• Financial and technical expertise from DBSA
• Draft turn-around strategy received
• Awaiting confirmation of details of
  multi-disciplinary task team

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TIMEFRAMES

• Individual projects/activities as per the
  recovery plan
• Specific request to Department to assist in
  addressing audit issues Audit readiness
  programme by June 2008
• Monthly reporting to provincial department

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Emadlangeni Local Municipality
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PROGRESS

• Previously reported to Select Committee on 23
  October 2008
• Special Committee fieldwork complete
• Disciplinary hearings concluded
• Final Report to MEC in one week for review

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PROGRESS

• Acting MM
• Recovery Plan developed and being implemented
• MFMA Financial Management
• Revenue Enhancement and Debt Recovery
• Systems, policies and procedures
• Audit issues
• Asset Management
• VAT
• LED Game Park
• Organisational Structure and HR matters
• Acting CFO
• Departmental Funding

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Abaqulusi Local Municipality
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PROGRESS

• Background
• Council dysfunctional
• In-fighting
• Removal from office of councillors
• No quorum
• Status
• Intervention has ended
• Election of new council March 2006
• MM and Section 57 employees in place

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• THANK YOU.