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 /20/20151

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 10/20/20152

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 Three[3] 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. 10/20/20153

Progress made on recommendations RecommendationProgress madeComments 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. 10/20/20154

Progress made on recommendations RecommendationProgress madeComments 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 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 10/20/20155

Progress made on recommendations RecommendationProgress madeComments 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 10/20/20156

RecommendationProgress madeComments 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 10/20/20157

RecommendationProgress madeComments 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 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 10/20/20158

RecommendationProgress madeComments 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. 10/20/20159

RecommendationProgress madeComments 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 IMQ and TMDG appointed by Province for GRAP17 unbundling - they committed to supply all data at the middle of July 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 10/20/201510

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: 1.Records management support 2.Revenue enhancement 3.Provincial Infrastructure grant projects 4.MPAC support 10/20/201511

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 10/20/201512

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: 1.meter installation and rehabilitation, 2.data management, 3.meter readings, 4.billing, receipt management, 5.credit control, debt management, 6.indigent management, 7.customer care 10/20/201513

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 R 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 10/20/201514

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: 10/20/201515

PROVINCIAL INFRASTRUCTURE GRANT (PIG) ALLOCATIONS FROM 09/10-11/12 Name of municipality Allocation 09/10 ‘000 Allocation 10/11 R`000 Allocation 11/12 R`000 Allocation 12/13 R’000 Allocation 13/14 R’000 Moretele LM R Madibeng LM Kgetleng Rivier LM R R Moses Kotane LM Maquassi Hills LM R7 665 Ventersdorp LM R17,465 N.M.M. DM (includes Tswaing) R DR.S.M. DM (includes Mamusa)

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

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) 10/20/201518

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

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 10/20/201520

PART 1 DETAILED REPORT ON THE SUPPORT PROVIDED BY PTROVINCIAL TREASURY PART 1 DETAILED REPORT ON THE SUPPORT PROVIDED BY PTROVINCIAL TREASURY Due to the North West Province municipality’s 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. 10/20/201521

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. 10/20/201522

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 /20/201523

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 10/20/201524

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 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 We anticipate that all the municipalities supported will improve from disclaimer audit opinions to at least qualifications at the end of November /20/201525

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. 10/20/201526

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 MEC’s Engagement with Municipalities to assess their readiness towards clean audit 2012 Capacity Building Training on MFMA reforms Quarterly CFO Forum 10/20/201527

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. 10/20/201528