Presentation to Select Committee on Finance (NCOP): Local Government support programmes

1
Presentation to Select Committee on Finance
(NCOP)Local Government support programmes

• PRESENTED BY MEC PAUL SEBEGOE
• MEC FOR FINANCE AND ACTING MEC FOR DEPARTMENT OF
  LOCAL GOVERNMENT AND TRADITIONAL AFFAIRS(NORTH
  WEST PROVINCE)
• Date 28 May 2013

2
PRESENTATION OUTLINE

• 1. Background
• 2. Recommendations by the SCOF on 2011 engagement
  and progress made
• 3. Local government support programmes for
  2012/13 and 2013/14
• 4. General challenges facing municipalities in
  the NW Province
• 5. Conclusion

3
Background

• The Select Committee visited the province in 2011
  and engaged with 10 municipalities, the dlgta,
  and other sector departments
• The engagement confirmed that municipalities in
  the province, especially the medium and low
  capacity ones, are experiencing challenges with
  respect to governance, financial management,
  administration, and service delivery
• A need had been identified that more intensified
  support is required in the 10 municipalities
• Three3 of the identified municipalities were
  under provincial administration in 2010 (section
  139)
• The new term of Local government had just
  commenced and the new councils were experiencing
  challenges such as community protests, expiry of
  MMs and section 56 managers contracts etc.

4
Progress made on recommendations
Recommendation Progress made Comments
All sector departments should provide a detailed report on the support they are providing to all ten municipalities identified in this report Through the LGTAS, seven out of the ten municipalities have received targeted support from sector departments such as DWA, Economic Dev, Provincial Treasury, and Human Settlements. The departments have identified and implemented sector specific projects to support the municipalities The support is ongoing and is being intensified through the current LGTAS programme in the seven municipalities. The other three municipalities receive support through other programmes including the IDP processes where sector departments commit funds and projects for implementation in municipalities
The Member of the Executive Council (MEC) for the Department of Cooperative Governance should consider submitting reports of the administrators to all municipalities that were under section 139 of the Constitution of the Republic of South Africa, and should submit same reports to the within 21 working days after the adoption of the Committee report by the NCOP The section 139 close-out reports were submitted to the offices of Mayors of Tswaing, Madibeng, Mafikeng, and Moses Kotane. Reports for the Select committee are available Some of the municipalities still say that they never received the reports, despite officials in their offices having acknowledged receipt of the reports.
5
Progress made on recommendations
Recommendation Progress made Comments
All sector departments should provide full support to the City of Matlosana Local Municipality as it has serious challenges The provincial government committed to paying all outstanding debts for services rendered to various departments. To this end, about R15 million was paid by the departments of Education and Health. The Office of the Premier also paid R16 million to ESKOM as a contribution to the arrear account The Provincial EXCO has resolved to place the municipality under section 139(1)(b) intervention given the magnitude of the challenges in the municipality, especially with respect to financial management
The Tswaing Local Municipality should again be placed under section 139 of the Constitution of the Republic of South Africa, as there has been limited work done by the previous administrator Tswaing LM has improved slightly after the appointment of an MM and CFO in 2012. The municipality receives intensified support from both the dlgta and the Provincial Treasury on various programmes including compilation of AFS and improvement thereof, Performance management, and general financial management The municipality still requires support from the provincial government and is one of the 10 prioritised municipalities for LGTAS and Financial improvement support
6
Progress made on recommendations
Recommendation Progress made Comments
The Minister of Cooperative Governance and Traditional Affairs and the Premier should investigate the matter of a service provider which collects debts on behalf of the Ventersdorp Local Municipality and receives 80 per cent of the collected amount and give the Municipality 20 per cent of the collected amount The contract was perused by the legal division in the department and it was discovered that the contract is legal however not beneficial to the municipality (the municipality should have considered this before signing, as advised by the department). The possibility of terminating the contract was going to result in litigations against the municipality The current status of the contract is that The service provider stopped working in December 2011 after the community rejected the meters that were installed due to some complications with the cards The matter is now in the court between the municipality and the service provider
7
Recommendation Progress made Comments
The National and Provincial Treasuries should look at the leases that the Ventersdorp local Municipality has entered into and determine its legalities The municipality is supported by Provincial Treasury in terms of MFIP 1,3 nd 3 as outlined below and the issue raised is dealt with in the programme None
The Kgetlengrivier Local Municipality should consider taking the matter between themselves and rate payers association to court in order to recover the municipal rates funds that are kept in the trust The municipalities must establish bid committee structures The matter of the rate payers association has been dealt with by the Courts.   Provincial Treasury is awaiting documents from the municipality to further engage and support the municipality.   The municipality has established all bid committees in terms of regulations. The matter is closely monitored by both the Provincial Treasury and the Provincial Local Govt and Traditional affairs departmwent
8
Recommendation Progress made Comments
The Moretele Local Municipality should review the internal audit unit Moses Kotane Local Municipality should improve its filing system The municipality has an approved risk management policy. The municipality has identified, discussed, assessed and documented all the risks facing the components of municipality in the risk register. The register in due for review.   The municipality is using the Shared Audit Committee, shared between the District (BPDM) and two (2) other local municipalities. The shared Audit Committee was appointed by the Council of the District Municipality. Approved Audit Committee Charter in place and was approved on 27 August 2012.  Moses Kotane Local Municipality   Council approved the 2011/12 Audit Action Plan in January 2013  Number of findings as per the management report 110 Number of findings resolved 79 Provincial Treasury to monitor implementation
9
Recommendation Progress made Comments
The Mamusa Local Government should establish governance structures The Mamusa Local Government should ensure appointment of qualified staff Municipal Manager , Chief Financial Officer, Director Corporate Services, Director Community Services, Director Technical Services position interviews to be before end of May. Capacity of Key Personnel  Municipal Manager Experience in Local Government 9 yrs, Bachelors Degree and CPMD enrollment. Director Corporate Service Experience in Local Government 8 yrs, Bachelors Degree, CPMD completed. Chief Financial Officer Experience in Local Government 13 yrs, B Tech , CPMD completed. BTO structure reviewed positions to be filled in the new year. Risk Management- An official has been identified for risk management. Risk Management policy and Anti Fraud and Corruption strategy have been tabled in council and undergoing the relevant workshoping. Risk assessments have been done. Audit Committee The Audit Committee is functional, is a shared service with the district municipality and the Audit Committee Charter is in place.Internal Audit Function is shared with the district municipality.
10
Recommendation Progress made Comments
The Maquassi Hills Municipality should forward an action plan on how they would address the Auditor Generals findings Audit Action plan for 2011/2012 has been approved by Council 2012/2013 AFS compiled together with the Consultants Sediesey who provides on the job training. Submission target date 31 July 2013. IMQ and TMDG appointed by Province for GRAP17 unbundling - they committed to supply all data at the middle of July 2013. Audit file will be presented to Internal Audit and Audit Committee 10 days after the finalisation of the AFS. All source documents are filed and kept in the safe. Memorandum of understanding has been signed with our Bulk suppliers in order to avoid fruitless and wasteful expenditure. Progress monitored by Provincial Treasury
11
Local government support programmes for 2012/13
and 2013/14

• The department implemented the following support
  programmes under the Local Government Turnaround
  Strategy in 2012/13
• Records management support
• Revenue enhancement
• Provincial Infrastructure grant projects
• MPAC support

12
Records management

• Initiated the project in 2011 and formed a
  partnership with Provincial DSAC to address the
  issue of loss of documents and unavailability
  of records as raised by the AG
• Conducted workshops for 81 municipal officials on
  records management
• Provided training to 57 officials charged with
  the responsibility of records management (mainly
  registry clerks)
• Dlgta provided 11 (including Moretele, Mafikeng,
  Kgetleng, Ventersdorp, Tswaing, and Maquassi
  Hills) municipalities with equipment to improve
  document management and records management
  (computers, scanners, printers, faxes,
  stationery)
• The department is continuing to implement the
  records management project to instil a culture of
  proper document management and record keeping in
  the prioritised municipalities

13
Revenue enhancement

• The department initiated and implemented a
  revenue management project in 2011/12 in five
  municipalities (including Mafikeng, Ventersdorp,
  and Tswaing LMs) to address
• meter installation and rehabilitation,
• data management,
• meter readings,
• billing, receipt management,
• credit control, debt management,
• indigent management,
• customer care

14
Revenue enhancement cont.

• Part of phase 2 of the project included meter
  rehabilitation in two municipalities(Tswaing and
  Naledi LM)
• The two municipalities received grant funding to
  the tune of R294 000 each to replace faulty
  meters
• The project is still in implementation phase and
  will be completed before the end of the municipal
  financial year
• The focus in the current financial year is on
  providing support on revenue enhancement to six
  municipalities (Tswaing, Naledi, Ventersdorp,
  Lekwa-Teemane, Mahikeng, Madibeng, Ditsobotla,
  Maquassi Hills and Matlosana)
• The improvement on collection has improved in
  Mafikeng and Naledi LMs significantly and
  slightly in the other municipalities

15
Provincial Infrastructure grant projects

• The department receives an infrastructure grant
  on an annual basis for water and sanitation
  support to municipalities.
• The funds are transferred to targeted
  municipalities that are water services
  authorities to implement water and sanitation
  infrastructure projects (to eradicate backlogs)
• The department provides planning and technical
  support to municipalities to implement
  infrastructure projects through PIG and MIG
• The allocations for the past five years are as
  follows

16
PROVINCIAL INFRASTRUCTURE GRANT (PIG) ALLOCATIONS
FROM 09/10-11/12
Name of municipality Allocation 09/10 000 Allocation 10/11 R000 Allocation 11/12 R000 Allocation 12/13 R000 Allocation 13/14 R000
Moretele LM 2 500 7 000 5 000 R14 000
Madibeng LM 5 000 3 000 -
Kgetleng Rivier LM 5 000 3 500 9 000 R12 500 R13 480
Moses Kotane LM 10 000 3 000 4 800
Maquassi Hills LM 12 500 7 500 - R7 665
Ventersdorp LM - - 4 200 R17,465
N.M.M. DM (includes Tswaing) - 12 000 12 000 R37 500
DR.S.M. DM (includes Mamusa) 15 000 14 000 15 000
17
MPAC support

• Dlgta supported the establishment of all 23 MPACs
  by November 2011
• MPAC functionality is at varying levels (only 3
  MPACs are not fully functional Tswaing,
  Maquassi Hills, and Kgetleng, though they are
  receiving attention)
• Dlgta in partnership with PT, AG and PPAC, APAC,
  conducted orientation and training programmes for
  all MPACS to empower them to execute their
  functions
• The dlgta and PPAC established Provincial and
  District MPAC forums that are convened on a
  quarterly basis to review progress, address
  challenges, and share best practices

18
MPAC support

• 67 Female MPAC members (out of a total of 119
  females and 83 males) were trained by the
  National Democratic Institute on negotiation
  skills, conflict resolution, and communication
• The dlgta continuously monitors and supports the
  functionality of MPACs through regular
  engagements and workshops
• 9 MPACs (priority municipalities) received office
  equipment on 24 May 2013 (computers, faxes,
  scanner, printers, and stationery) to assist them
  with effective management and execution of their
  roles)

19
General challenges facing municipalities in the
NW Province

• Governance related problems in municipalities
  political instability affects the impact of
  provincial support programs
• General non-compliance to legislation and
  regulations by municipalities
• Escalating levels of uncollected debt from
  consumers currently estimated at R4.5 billion
• High vacancy rate in key positions and high
  turnover rate affect the impact of municipal
  support programmes
• Lack of skills and expertise in municipalities
  impact negatively on sustainability of municipal
  support programmes

20
SUPPORT PROGRAMMES BY THE NORTH WEST PROVINCIAL
TREASURY

• The purpose of this document is to provide a
  detailed report on the assistance and support
  provided by the provincial Treasury to all
  municipalities in the Province.
•  
• We highlight in the report the Provincial
  Treasury tailor made support to specific
  municipalities in the Province which has been
  identified as lowest in terms of capacity and
  also the worst in terms in terms of the Auditor
  Generals Reports.. PART 1
•  
• PART 2 deals with other support provided by
  Provincial Treasury to all municipalities,
• The report further covers issues and
  recommendations raised by the Select Committee on
  Finance

21
 PART 1 DETAILED REPORT ON THE SUPPORT PROVIDED
BY PTROVINCIAL TREASURY

• Due to the North West Province municipalitys
  history of non submission of annual financial
  statements to the Auditor General and poor audit
  outcomes, the Department realised that the
  municipalities are in dire need of assistance
  with the annual financial statement preparation
  and close process.
• The Department appointed a panel of 15 service
  providers to assist with the preparation of
  annual financial statements at the Municipalities
  that the Department indentified to require
  immediate assistance.
• The Municipal Financial Management Support
  Programme (MFMSP) was launched on the 21st June
  2012 where the political and administrative
  leadership of all municipalities were invited, as
  a result of the continuous negative audit
  outcomes of municipalities in the Province,
  coupled with non/late submission of Annual
  Financial Statement for audit to the Auditor
  General.

22
Continued

• The audit outcomes for the 2010/11 financial year
  showed that municipalities in the Province
  performed very poor and there was not much
  improvement on the 2011/12 outcomes either.
• A Technical Project Steering Committee was
  established, consisting of officials from the
  department and the lead service provider which
  monitored the implementation of the project.
• Coupled to the above, the Project Political
  Oversight Committee was also established,
  consisting of the Mayor, the Speaker, and MEC for
  Finance and Chairperson of MPAC of the identified
  municipalities, and chaired by the MEC for
  Finance.
• The first phase of the programme entailed giving
  basic support i.e. deployment of service
  providers and trained graduate to municipalities
  and technical support for assistance with
  preparation and review of AFS and ensuring that
  all 23 municipalities in the province submit
  their AFS in compliance with MFMA, furthermore,
  ensuring that all prior years outstanding AFS
  were also submitted. In total 39 sets of annual
  financial statements was submitted to the Auditor
  General of South Africa for 23 municipalities.

23
continued

• This was indeed a great success as all
  municipalities managed to submit the AFS by 31
  August 2012 including prior years AFS, all the 23
  municipalities signed a Commitment Charter that
  committed them to submit AFS within the
  legislated timeframe in future, and to improve
  the quality of the statements so as to achieve
  the 2014 Clean Audit objectives.  
•   
• The Department of Finance decided to provide
  ongoing support to all the eight municipalities
  identified in phase One to achieve sustainable
  improvement in financial management and
  governance that will yield clean audit opinions
  by 2014.

24
The eight municipalities benefiting from Phase
2 initiatives are

• Kgetlengrivier Local Municipality
• Ventersdorp Local Municipality
• Tswaing Local Municipality
• Kagisano Molopo Local Municipality
• Ditsobotla Local Municipality
• Moretele Local Municipality
• Mafikeng Local Municipality
• Maquassi Hills Local Municipality

25
continued

• After the completion of phase 1 the Department
  realised that in order for this project to reap
  sustainable results at the municipalities, focus
  have to be placed on ensuring the reliability of
  underlying data and information contained in the
  annual financial statements.
•  
• To this extend the appointed service providers
  will continue to assist municipalities in
  updating their records and completing all the
  necessary reconciliations up to the end of June
  2013.
•  
• They are further expected to prepare the
  2012/2013 Annual Financial Statement for the
  submission on the legislated date.
•  
• The audit process will be supported until we
  receive the audit outcome in November 2013.
•  
• We anticipate that all the municipalities
  supported will improve from disclaimer audit
  opinions to at least qualifications at the end of
  November 2013
•  
•  

26
GRAP 17 IMPLEMENTATION

• The audit outcomes for the 2011/12 financial year
  showed that municipalities in the Province where
  predominately disclaimed or qualified on the
  basis of lack of implementation of GRAP 17 and
  the unbundling of infrastructure assets .
• We have identified 4 municipalities to assist
  with the unbundling of infrastructure assets.
• The project is currently fifty percent to
  completion and it will be concluded before the
  end of the municipal financial year end 
• The municipalities currently assisted are 
• Greater Taung Local Municipality
• Ventersdorp Local Municipality
• Kagisano Molopo Local Municipality
• Maquassi Hills Local Municipality 
• We believe that in at the end of the audit period
  none of these municipalities will be disclaimed
  on assets.

27
OTHER SUPPORT INITIATIVES BY PROVINCIAL TREASURY

• Municipal Financial Health Check questionnaire
• Analysis and Assessment of the 2011/12 Audit
  Action
• Engagement with municipalities on financial
  management assessments
• MECs Engagement with Municipalities to assess
  their readiness towards clean audit 2012
• Capacity Building
• Training on MFMA reforms
• Quarterly CFO Forum

28
Conclusion

• The Provincial EXCO has resolved to place three
  local municipalities under section 139(1)(b)
  intervention and progress would be provide on the
  impact of the intervention on a continous basis.