1 Municipal Public Accounts Committees (MPACs) Training (2012) Critical Provisions of the 1. Municipal Structures Act; 2. Municipal Systems Act; and 3. Municipal Finance Management Act NORTHERN CAPE APRIL 2012

Outline of Presentation (1/2) 2  Key provisions of the Municipal Structures Act and Municipal Systems Act  Investigations relating to fraud and related matters  Committees of a municipal council  Privileges and immunities of municipal councilors  Code of conduct for councilors

Outline of Presentation (2/2) 3  Key provisions of the Municipal Finance Management Act  Annual reports and financial statements  Requirement for development of audit remedial action plans  Unauthorised, irregular, fruitless and wasteful expenditures  Financial misconduct.

Key Provisions of the Municipal Structures Act and Municipal Systems Act 4  Amongst other, the Municipal Structures Act provides for:  the establishment and disestablishment of municipalities;  the division of powers and functions between categories of municipalities;  The regulation of the internal systems, structures and office-bearers of municipalities;  Instituting of investigations relating to fraud, etc;  Committees of a Municipal Council  The key provisions of the Municipal Systems Act (including its 2011 amendment) that has a bearing on local government oversight are captured in Schedule 1: Code of Conduct of Councilors.

Investigations Relating to Fraud and Related Matters (1/2) 5  The first call of providing support to municipalities is the provincial departments responsible for local government (LG), thus, both the Municipal Structures Act (1998) and Municipal Systems Act (2000) provides the MEC responsible for LG with various functions or responsibilities.  Section 18(c) of the Local Government Laws Amendment Act (2008) states that the “Minister may request the MEC to investigate maladministration, fraud, corruption or any other serious malpractice which, in the opinion of the Minister, has occurred or is occurring in a municipality in the province”

Investigations Relating to Fraud and Related Matters (2/2) 6  Continued –  Section 18(c) further states that the “MEC must table a report detailing the outcome of the investigation in the relevant provincial legislature within 90 days from the date on which the Minister requested the investigation and must simultaneously send a copy of such report to the Minister, the Minister of Finance and the National Council of provinces.”  While the primary responsibility to investigate and recommend appropriate action regarding a Councilor’s breach of the “Code of Conduct for Councilors” lies with the municipal council, the Local Government Laws Amendment Act (2008) enables the MEC to appoint a person or a committee to investigate any alleged breach of the Code and to make a recommendation as to the appropriate sanction if a municipal council does not conduct an investigation and the MEC considers it necessary.

Committees of a Municipal Council (1/3) 7  Section 79 of the Municipal Structures Act enables the establishment of committees of a municipal council (which includes the Municipal public Accounts Committees).  A municipal council must meet at least quarterly.

Privileges and Immunities of Municipal Councilors (1/3) 8  Section 28 of the Municipal Structures Act states that a provincial legislation in terms of section 161 of the Constitution must provide at least –  that councilors have freedom of speech in a municipal council and in its committees, subject to the relevant council’s rules and orders.  (subject to the Municipal Systems Amendment Bill’s clause 14 - “voting at meetings”) that councilors are not liable for civil or criminal proceedings, arrest, imprisonment or damages for – - anything that they may have said in, produced before or submitted to the council or any of its committees; or - anything revealed as a result of anything that they have said in, produced before or submitted to the council or any of its committees.

Privileges and Immunities of Municipal Councilors (2/3) 9  Section 28 of the Municipal Structures Act further states that until the said provincial legislation has been enacted the privileges referred to in the previous slides will apply to all municipal councils in the province concerned.  As of April 2010 only the Gauteng and Free State provincial legislatures have passed the legislation contemplated in Section 28 of the Municipal Structures Act.  The Free State’s Privileges and Immunities of Municipal Council Act (2002) is in line with the Municipal Structures Act subject to the said matters being “in the public interest”.  The Gauteng Privileges and Immunities of Councillors Act (2002) is in line with the Municipal Structures Act subject to the said matters not being “unlawful”.

Privileges and Immunities of Municipal Councilors (3/3) 10  Section 14 of the Municipal Systems Amendment Act (2011) regarding “Voting at meetings” states that “A councilor may not vote in favour of or agree to a resolution which is before the council or a committee of the council which conflicts with any legislation applicable to local government”.

Code of Conduct for Councilors (1/3) 11  Some of the critical provisions are the following:  Perform the functions of office in good faith, honestly and a transparent manner.  At all times act in the best interest of the municipality and in such a way that the credibility and integrity of the municipality are not compromised.  Section 14 of the Municipal Systems Amendment Act (2011) regarding “Voting at meetings” states that “A councilor may not vote in favour of or agree to a resolution which is before the council or a committee of the council which conflicts with any legislation applicable to local government”.  Attendance of each meeting of the municipal council and of a committee of which the councillor is a member (sanctions for non-attendance may be instituted which may include removal from office).

Code of Conduct for Councilors (2/3) 12  Some of the critical provisions - continued:  Disclosure to the municipal council or its committee of any direct or indirect personal or private business interest that the councillor, or any spouse, partner or business associate of that councillor may have in any matter before the council or its committee. - withdrawal from the proceedings if there are such interest.  A councillor may not use the position or privileges of a councillor, or confidential information obtained as a councillor, for private gain or to improperly benefit another person.  No councillor may be a party to or beneficiary under a contract for the provision of goods or services to any municipality or any municipal entity established by a municipality.

Code of Conduct for Councilors (3/3) 13  Some of the critical provisions - continued:  A councillor may not request, solicit or accept any reward, gift, of favour for influencing a council or committee decision.  A councillor may not without the permission of the municipal council or a committee disclose any privileged or confidential information of the council or committee to any unauthorised person.

Annual Report Consideration 14  Section 21 of the Municipal Finance Management Act (MFMA) requires that the council of a municipality within 9 months after the end of each financial year has to deal with the annual report of the municipality and any municipal entity under its sole or shared control.  Section 129 of the MFMA requires the Council to adopt an oversight report containing the Council’s comments on the annual report, which must include a statement whether the Council (a) has approved the annual report with or without reservations (b) has rejected the annual report; or (c) has rejected the annual report back for revision of those components that can be revised.

Annual Financial Statements 15  Section 126 of the MFMA requires the accounting officer of the municipality to prepare the annual financial statements of the municipality and, within two months after the end of the financial year to submit these to the Auditor-General for auditing.  In terms of the MFMA section 122, the annual financial statements must fairly represents the state of affairs of the municipality or its entity, its performance against its budget, its management of revenue, expenditure, assets and liabilities, its business activities, its financial results, and its financial position at the end of the financial year.

Requirement for Development of Audit Remedial Action Plans 16  Section 131 of the MFMA requires a municipality to address any issues raised by the auditor-General in an audit report.  Section 131 of the MFMA requires the MEC for local government to assess all annual financial statements of municipalities in the province, the audit reports on such statements and any responses of municipalities to such audit reports, and determine whether municipalities have adequately addressed any issues raised by the Auditor- General in an audit reports.  In terms of performance management, section 47 of the Municipal Systems Act also requires the MEC for local government to identify municipalities that under-performed during the year, and propose remedial action to be taken.

Unauthorised, Irregular, Wasteful Expenditure 17  In terms of section 32 of the MFMA a municipality must recover unauthorised, irregular, fruitless and wasteful expenditure from the person liable for that expenditure unless the expenditure – (a) In the case of unauthorised expenditure, is unathorised in an adjustment budget; or certified by the municipal council, after investigation by a council committee, as irrecoverable and written off by the council; and (b) In the case of irregular or fruitless and wasteful expenditure, is, after investigation by a council committee, certified by the council as irrecoverable and written off by the council.  The writing off any unauthorised, irregular, or fruitless and wasteful expenditure as irrecoverable, is no excuse in criminal or disciplinary proceedings against a person charged with the commission of an offence or a breach of the MFMA relating to such matters.

Financial misconduct 18  In terms of section 171 of the MFMA the accounting officer of a municipality commits an act of financial misconduct if that accounting officer deliberately or negligently, among others, -  Makes or permits, or instructs another official of the municipality to make, an unauthorised, irregular or fruitless and wasteful expenditure; or  Provides incorrect or misleading information in any document which in terms of a requirement of this Act must be submitted to the mayor or the council of municipality, or the Auditor- General, the National Treasury or other organ of state; or made public.  The same applies to the accounting officer of a municipality in terms of section 172 of the MFMA. thank you