PRESENTATION TO THE PORTFOLIO COMMITTEE ON COOPERATIVE

GOVERNANCE AND TRADITIONAL AFFAIRS

MEC: SM MLAMLELI

05 September 2012

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TABLE OF CONTENTSTABLE OF CONTENTS1. Departmental audit outcomes

2. Overview of municipal audit outcomes

2.1. Enhancing Good Governance

• Municipalities affected by administrative instability

• Municipal support and intervention programme

• Intergovernmental Relations

• Implementation of MTAS

• Public Participation: ward committees; service delivery protests; section 139 interventions

2.2. Financial Management

• MPACs

• Audit Outcomes

• Functionality of internal structures

• Intergovernmental Debt (Debt owed to Municipality by Government Departments)

• Compliance with Supply Chain Management

• Unfunded Mandates

TABLE OF CONTENTS (CONT.)TABLE OF CONTENTS (CONT.)2.3. Service Delivery• IDP Status

• IDP challenges and monitoring: financial management; intergovernmental Hands-on Support

2.4. Bulk Infrastructure• Water

• Sanitation

• Challenges on water and sanitation

2.5. Municipalities affected by occurrences of Maladministration, Fraud and Corruption

• Nala

• Setsoto

• Matjhabeng

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1. DEPARTMENTAL AUDIT OUTCOMES1. DEPARTMENTAL AUDIT OUTCOMESFS COGTA AUDIT

OPINIONBASIS FOR OPINION

EMPHASIS OF MATTER

YEAR: 2009 / 2010

Qualified Movable tangible capital assets, minor and intangible assets

Basis of accounting

Irregular, fruitless and wasteful expenditure

Unaudited supplementary schedules

Predetermined objectives: changes to planned performance information not approved

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DEPARTMENTAL AUDIT OUTCOMES (CONT.)DEPARTMENTAL AUDIT OUTCOMES (CONT.)

FS COGTA AUDIT OPINION

BASIS FOR OPINION

EMPHASIS OF MATTER

YEAR: 2010 / 2011

Qualified Movable tangible capital, minor and intangible assets

Restatement of corresponding figures

Irregular expenditure

Unaudited supplementary schedules

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DEPARTMENTAL AUDIT OUTCOMES (CONT.)DEPARTMENTAL AUDIT OUTCOMES (CONT.)FS COGTA AUDIT

OPINIONBASIS FOR OPINION

EMPHASIS OF MATTER

YEAR: 2011/2012

Unqualified Fair presentation Exemption from Financial Reporting Framework

Unaudited supplementary schedules

Predetermined objectives;Achievement of planned targets; adherence to policies and procedures

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2. OVERVIEW OF MUNICIPAL AUDIT OUTCOMES

2.1. ENHANCING GOOD GOVERNANCE

Municipalities affected by administrative instability In general the high turn-over rate and succession of MM, CFO and other Senior

Managers impacts negatively on administrative stability and continuity in Municipalities

In the following instances COGTA had to intervene through deployments:• Mantsopa (MM)• Mohokare (MM)• Moqhaka (MM)• Nala (MM, CFO, Manager for Corporate Services)• Naledi (MM)• Ngwathe (MM, CFO)• Setsoto (MM, Manager for Corporate Services, Manager for Technical Services)

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2. OVERVIEW OF MUNICIPAL AUDIT OUTCOMES (CONT.)

2.1. ENHANCING GOOD GOVERNANCE (CONT.)

Municipality Support and Intervention Programme In support of building administrative capacity, COGTA in collaboration with the Department

of the Premier and Provincial Treasury deployed multi-disciplinary team of experts in the following Municipalities:

• Masilonyana• Matjhabeng• Mohokare• Nala • Naledi• Phumelela• Setsoto

It is envisaged that further such deployments and programmes would be rolled-out to include other Municipalities

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2. OVERVIEW OF MUNICIPAL AUDIT OUTCOMES (CONT.)

2.1. ENHANCING GOOD GOVERNANCE (CONT.)

Municipality Finance Improvement Support Programme During April 2012 National Treasury in collaboration with Provincial Treasury

deployed financial experts in the following Municipalities: Phumelela; Setsoto; Nala; Naledi; Mohokare; Kopanong; Masilonyana; Tokologo; Moqhaka; Metsimaholo; Nketoana; Maluti-a-Phofung; Letsemeng; and Tswelopele

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2. OVERVIEW OF MUNICIPAL AUDIT OUTCOMES

2.1. ENHANCING GOOD GOVERNANCE

Functional District Monitoring and Evaluation Forums Functional District Coordinating Forums and MECLOGAAll municipalities have established their ward

committees(only 6 ward committees outstanding in Ngwathe & Metro)

Ward committees and councillors inducted in partnership with SALGA and LG-SETA

Comprehensive councillor competency assessment in progress

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IMPLEMENTATION OF MTAS

All municipalities have approved MTAS and continue to implement them After the minister directive to refocus LGTAS only ten municipalities were identified

at national level and four were refocused at provincial level. The following ten municipalities were identified at national level:• Kopanong • Letsemeng• Mohokare• Naledi• Phumelela• Setsoto• Ngwathe• Masilonyana• Nala• Tokologo

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IMPLEMENTATION OF MTAS

At provincial level, the following four municipalities were refocused:

• Maluti-a-Phofung• Metsimaholo• Moqhaka• Matjhabeng

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PUBLIC PARTICIPATION:PUBLIC PARTICIPATION: WARD COMMITTEESWARD COMMITTEES

About 311 Ward Committees were established and there are 4 and 2 outstanding in Mangaung Metro and Ngwathe respectively

All Municipalities have been inducted except Mangaung Metro and Letsemeng Local Municipality

Provincial Guidelines for establishment and functioning of Ward Committees were distributed to all Municipalities

A stipend of R 500.00 is being paid to Ward Committee Members The following Municipalities has already started to pay stipends in August 2012:• Mangaung Metro• Nala Local Municipality• Masilonyana• Maluti a Phofung• Nketoana• Letsemeng• Mohokare• Metsimaholo• Moqhaka• Mafube

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SERVICE DELIVERY PROTESTSSERVICE DELIVERY PROTESTSThe Province has established a Priority Committee of

Local Governance with other stakeholders which monitor and facilitate resolution of disputes as well as respect and promotion of Constitutional Rights of people

The Priority Committee has now approved the roll out of the Development of Complaints Management System which should be functional in the 2013/2014 Financial year

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SERVICE DELIVERY PROTESTS (CONT.)

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SECTION 139 INTERVENTIONS (2010/ 11)SECTION 139 INTERVENTIONS (2010/ 11) NALA• Section 139 was invoked in 2009/10 financial year due to inability of the

municipality to manager its own affairs in relation to administrative compliance on various pieces of legislation

• Issues of Council inability to hold regular Council meetings• Administrator was appointed to takeover the running of the day to day affairs

of the municipality until 30 June 2011• Section 139 was then lifted

MASILONYANA• Section 139 was invoked due to the collapse of the administration and the

inability of the municipality to pay its creditors• The Municipality was also unable to spend its Municipal Infrastructure Grant• Administrator was appointed to takeover the running of the day to day affairs

of the municipality till 30 June 2011

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2.2. FINANCIAL MANAGEMENT: 2.2. FINANCIAL MANAGEMENT: MPACMPAC

Final Guidelines for MPAC establishment was tabled in Executive Council

Final Guidelines was brought to the attention of all Municipalities in the Province

Final Guidelines also presented in various IGR Forums at District level

Department had various bilateral discussions on the matter with different role players

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Department had caucus with SALGA FS on 3 July 2012 on MPAC establishment

Agreement was reached on the following:• All Free State Municipalities will establish MPACs• Agreed timeframe will be 15 August 2012 – 30 September 2012• Provincial view – not establish MPACs in small Plenary Type

Municipalities – but that these Municipalities use their District Municipality MPACs

MPAC (CONT.)

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AUDIT OUTCOMESAUDIT OUTCOMES

2008/09 2009/10 2010/11

Fezile Dabi Unqualified Unqualified Unqualified UnchangedMafube Disclaimer Disclaimer Disclaimer UnchangedMetsimaholo Disclaimer Disclaimer Disclaimer UnchangedMoqhaka Disclaimer Disclaimer Disclaimer UnchangedNgwathe Disclaimer Disclaimer Disclaimer Unchanged

Lejweleputswa Unqualified Unqualified Unqualified UnchangedMasilonyana Disclaimer Disclaimer Disclaimer UnchangedMatjhabeng Disclaimer Disclaimer Disclaimer Unchanged

Nala Disclaimer Outstanding Outstanding

Tokologo Disclaimer Disclaimer Disclaimer UnchangedTswelopele Unqualified Qualified Qualified Unchanged

Motheo Qualified Unqualified Unqualified Unchanged

Mangaung Disclaimer Disclaimer Disclaimer UnchangedMantsopa Disclaimer Qualified Qualified UnchangedNaledi Adverse Disclaimer Disclaimer Unchanged

Fezile Dabi

Lejweleputswa District

Motheo District

Auditee MovementDistrictAudit opinions

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AUDIT OUTCOMES (CONT.)AUDIT OUTCOMES (CONT.)

2008/09 2009/10 2010/11

Thabo Mafutsanyana Disclaimer Unqualified Unqualified UnchangedDihlabeng Disclaimer Qualified Qualified UnchangedMaluti-A-Phofung Disclaimer Disclaimer Disclaimer UnchangedNketoana Disclaimer Qualified Unqualified ImprovementPhumelela Disclaimer Disclaimer Adverse RegressionSetsoto Qualified Qualified Adverse Regression

Xhariep Disclaimer Qualified Unqualified ImprovementKopanong Disclaimer Disclaimer Disclaimer UnchangedLetsemeng Disclaimer Adverse Disclaimer ImprovementMohokare Adverse Disclaimer Disclaimer Unchanged

Thabo Mafutsanyana District

Xhariep District

Auditee MovementDistrictAudit opinions

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AUDIT OUTCOMES (CONT.)AUDIT OUTCOMES (CONT.)

2008/09 2009/10 2010/11

Centlec (Pty) Ltd Disclaimer Disclaimer Disclaimer UnchangedLejweleputswa Dev. Agency Qualified Outstanding Unqualified ImprovementFezile Dabi DM Trust Disclaimer Outstanding Unqualified ImprovementMetsimaholo Mayoral Trust Disclaimer Disclaimer Disclaimer UnchangedKrynaaulust Farming Trust Outstanding Outstanding OutstandingMaluti-A-Phofung Water (Pty) Ltd

Disclaimer Disclaimer Outstanding

Summary 2008/09 2009/10 2010/11Adverse 2 1 2Disclaimer 22 16 15Qualified 3 7 3Unqualified 3 5 8Outstanding 1 2 3Total 31 31 31

Municipal Entities

Auditee MovementDistrictAudit opinions

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FUNCTIONALITY OF INTERNAL STRUCTURES

IA Unit Number of

Functioning effectively?

AC Number of staff

Functioning effectively?

Mangaung Metro Municipality Yes 12 Yes Yes 3 Yes

Fezile Dabi District Municipality

Yes 2 No Yes 4 No

Lejweleputswa District Municipality

Yes 1 No Yes 4 No

Thabo Mofutsanyane District Municipality

Yes 1 No Yes 3 No

Xhariep District Municipality Yes 2 No Yes (shared)

4 Yes

AuditeeAUDIT COMMITTEESINTERNAL AUDIT UNITS

Metro Municipalities

District Municipalities

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FUNCTIONALITY OF INTERNAL STRUCTURES (CONT.)

IA Unit Number of

Functioning effectively?

AC Number of staff

Functioning effectively?

Dihlabeng Local Municipality Yes 1 No Yes 5 No

Kopanong Local Municipality Yes 3 No Yes (shared)

4 Yes

Letsemeng Local Municipality Yes 1 No Yes (shared)

4 Yes

Mafube Local Municipality Yes 4 No Yes 3 No

Maluti - A - Phofung Local Municipality

Yes 4 No Yes 4 No

Mantsopa Local Municipality Yes 1 Yes Yes 3 Yes

Masilonyana Local Municipality

No 0 No No 0 No

Matjhabeng Local Municipality Yes 7 No No 0 No

AuditeeAUDIT COMMITTEESINTERNAL AUDIT UNITS

Local Municipalities

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FUNCTIONALITY OF INTERNAL STRUCTURES (CONT.)

IA Unit Number of

Functioning effectively?

AC Number of staff

Functioning effectively?

Metsimaholo Local Municipality

Yes 2 Yes Yes 4 No

Mohokare Local Municipality Yes 1 No Yes (shared)

4 Yes

Moqhaka Local Municipality Yes 1 No Yes 5 No

Nala Local Municipality Yes 1 No Yes 5 No

Naledi Local Municipality No 0 No Yes (shared)

3 Yes

Ngwathe Local Municipality Yes 2 No,although the internal

No 0 No

Nketoana Local Municipality Yes 1 No No 0 No

Phumelela Local Municipality Yes 1 No No 0 No

Setsoto Local Municipality Yes 6 Yes Yes 4 Yes

Tokologo Local Municipality Yes 1 No Yes No

Tswelopele Local Municipality Yes 2 No Yes 3 No

AuditeeAUDIT COMMITTEESINTERNAL AUDIT UNITS

Local Municipalities

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INTERGOVERNMENTAL DEBT (DEBT OWED TO MUNICIPALITY BY GOVERNMENT DEPARTMENTS)

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INTERGOVERNMENTAL DEBT (CONT.)(DEBT OWED TO MUNICIPALITY BY GOVERNMENT DEPARTMENTS)

Intergovernmental Debt Steering Committee

The Free State intergovernmental debt has regressed significant from R436 million in August 2011 to R295 million as at June 2012, a decline of R141 million;

The Committee will be conducting another 5 verification sessions in September 2012;

Public Works is verifying and updating its assets register with all government properties;

The Land Property Indicators (LPIs) at all municipalities are completed at 100 per cent with the exception of Maluti a Phofung at 87 percent and

Public Works requested the Council at Maluti a Phofung to revisit the tariff on government property, Council reduced the tariff by one cent from the 0.0951.

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COMPLIANCE WITH SCMFollowing challenges of SCM were identified:• Awards to state officials• Awards to close family members of state officials• Uncompetitive and /or unfair procurement processes• Inadequate contract management• Inadequate SCM controls

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UNFUNDED MANDATES

Libraries in municipalities still remain unfunded mandates

Health remain one Ageing infrastructure (unaccounted for water)

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2.3. SERVICE DELIVERY

DETEA will provide support for LED strategies

Mohokare, Setsoto and Naledi have expended their rollover fund

National Treasury has not approved the rollover funds of Nala and Ngwathe

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2.3.SERVICE DELIVERY (CONT.) Infrastructure Maintenance and operations : Eskom is committed

supporting municipalities upon submission of an action plan to acquire artisans, clerks of works, Project Coordinators, Project Manager, technicians and engineers, and a plan to get them trained and accredited

Eskom is establishing a technical training facility in Welkom which will be for Eskom use, contractors and Municipalities will also be accommodated in this training facility with their own resources, planners, to develop Master Plans and Network Development Plans (electricity, water, sanitation)

Eskom will only help with their training (practical 1 & 2 for technicians) and municipalities should have their own engineers in training, pupil technicians and artisans,

Adopt a Municipality Initiative is provided by Eskom to guide municipalities in improving their performance, subject to their (municipalities’) request

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IDP STATUSIDP STATUS

NO NAMEHARD

COPIESCD

ADOPTION DATE

DATE OF SUBMISSION

ASSESSMENT RATING

1 DC 16 XHARIEP 2 2 29/05/2012 01/06/2012 High2 FS 161 LETSEMENG 2 0 31/05/2012 19/06/2012 High3 FS 162 KOPANONG 2 2 08/06/2012 21/06/2012 Medium4 FS 163 MOHOKARE 2 2 30/05/2012 29/06/2012 Medium5 FS 171 NALEDI 2 2 15/06/2012 29/06/2012 Medium6 FS 172 MANGAUNG METRO 1 1 15/06/2012 27/06/2012 High7 DC 18 LEJWELEPUTSWA 1 1 07/06/2012 18/06/2012 High8 FS 181 MASILONYANA 2 2 30/05/2012 14/06/2012 Medium9 FS 182 TOKOLOGO 2 2 07/06/2012 15/06/2012 Medium

10 FS 183 TSWELOPELE 2 2 30/05/2012 08/06/2012 High11 FS 184 MATJHABENG 2 2 29/05/2012 02/07/2012 High12 FS 185 NALA 2 2 31/05/2012 26/06/2012 High

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IDP STATUS (CONT.)IDP STATUS (CONT.)

NO NAMEHARD

COPIESCD

ADOPTION DATE

DATE OF SUBMISSION

ASSESSMENT RATING

13 DC 19 THABO MOFUTSANYANA 1 1 31/05/2012 11/06/2012 High14 FS 191 SETSOTO 0 1 30/05/2012 16/07/2012 High15 FS 192 DIHLABENG 2 2 31/05/2012 20/06/2012 High16 FS 193 NKETOANA 2 2 31/05/2012 20/06/2012 Medium17 FS 194 MALUTI A PHOFUNG 2 1 31/05/2012 19/06/2012 Medium18 FS 195 PHUMELELA 1 2 30/05/2012 26/06/2012 High19 FS 173 MANTSOPA 1 1 13/06/2012 02/07/2012 High20 DC 20 FEZILE DABI 2 2 31/05/2012 11/06/2012 Medium21 FS 201 MOQHAKA 2 2 31/05/2012 29/06/2012 Medium22 FS 203 NGWATHE 2 1 31/05/2012 29/06/2012 High23 FS 204 METSIMAHOLO 2 2 06/06/2012 29/06/2012 High24 FS 205 MAFUBE 0 1 31/05/2012 07/07/2012 Medium

Year Hard copy Soft copy2011/2012 42 402012/2013 37 36

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IDP CHALLENGES AND MONITORINGIDP CHALLENGES AND MONITORING Financial Management• Budget principles not followed accordingly• Revenue collection rate and dependency on Grants• An alignment of IDP and Budget continued to be a challenge• Allocation not clearly indicated (despite DORA allocation) and some

Municipalities use old allocations Intergovernmental – Hands-on Support• Quarterly District-based IDP Monitoring sessions together with the

sector Departments will be performed

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2.4. BULK INFRASTRUCTURE

Water:• 598 799 households provided with water until the

end of July 2012 which presents 98% of the 2014 target of 615,909 (backlog)

Sanitation:• 594,482 households provided with sanitation until

the end of July 2012 which presents 96% of the 2014 target of 615,909 households (backlog)

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CHALLENGES ON WATER AND SANITATION Most Municipalities are entirely dependant on grant funding to address infrastructure

backlogs, however, the MIG is not sufficient to address these backlogs Lack of technical capacity within Municipalities results in the slow implementation of

infrastructure projects Some Project Management Units (PMU’s) lack capacity to do proper planning and project

management of infrastructure projects and do not have necessary skills and knowledge to manage consultants

MIG funds are used for operations in some Municipalities and therefore Service Providers are not paid in time who then abandon sites

Slow procurement processes result in service providers not being appointed after completion of the tender evaluation procedure.

Tenders sometimes expire before appointment and some Municipalities then nominate contractors without the necessary CIDB ratings and following SCM procedures

Municipalities are not properly managing appointed service providers which leads to completion dates of projects not adhered to, over expenditure on projects occur, poor project management, consultants not Provincially based and therefore not readily available

Limited resources available within Municipalities for operation and maintenance of infrastructure

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2.5. MUNICIPALITIES AFFECTED BY OCCURRENCES OF 2.5. MUNICIPALITIES AFFECTED BY OCCURRENCES OF MALADMINISTRATION, FRAUD AND CORRUPTIONMALADMINISTRATION, FRAUD AND CORRUPTION

NALA• Forensic investigation for 2010/11 financial year• Allegations of fraud and corruption reported to the department• Appointment of forensic firm to conduct forensic investigations• Report handed over to Hawks and Commercial Crime Unit• MM internally charged and finally dismissed• Technical Manager charged and subsequently resigned• Prosecution processes are underway SETSOTO• Appointment of forensic firm to investigate the allegations• Section 106 investigations reveal possible fraud and corruption on bucket eradication

programme• Forensic revealed fraud and corruption to the value of R80m on bucket eradication

programme• Report handed over to police for possible prosecution• MM, CFO, Director for Corporate Services and Director for Community Services

dismissed

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2.5. MUNICIPALITIES AFFECTED BY OCCURRENCES OF 2.5. MUNICIPALITIES AFFECTED BY OCCURRENCES OF MALADMINISTRATION, FRAUD AND CORRUPTION (CONT.)MALADMINISTRATION, FRAUD AND CORRUPTION (CONT.)

MATJHABENG • Section 106 investigations revealed possible fraud and corruption in the

municipality• Forensic firm appointed to investigate the allegations• All reports presented to the Council and handed over to the MM to approach

law enforcement agencies and internal disciplinary processes• The Municipality has not yet implemented the recommendations of the report

According to the SAPS Operation Clean Audit Provincial Stakeholders Steering Committee law enforcement agencies experience little or no cooperation from Municipalities in dealing with fraud and corruption cases

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CONCLUSIONCONCLUSION It is imperative that all spheres of government should work

together to help municipalities to gain public confidence

It is also important that we accept that a lot of good work is being done at local level to change the lives of our communities for the better

It is want to implore all public representatives to acknowledge and applaud pockets of excellence that are being realised at local government level

THANK YOU38