1. PRESENTATION TO THE PORTFOLIO COMMITTEE ON COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS MEC: SM MLAMLELI 05 September 2012 1

2. TABLE OF CONTENTS 1.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

3. 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 3

4. 1. DEPARTMENTAL AUDIT OUTCOMES FS COGTAAUDIT OPINION BASIS FOR OPINION EMPHASIS OF MATTER YEAR: 2009 / 2010 QualifiedMovable 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 4

5. DEPARTMENTAL AUDIT OUTCOMES (CONT.) FS COGTAAUDIT OPINION BASIS FOR OPINION EMPHASIS OF MATTER YEAR: 2010 / 2011 QualifiedMovable tangible capital, minor and intangible assets Restatement of corresponding figures Irregular expenditure Unaudited supplementary schedules 5

6. DEPARTMENTAL AUDIT OUTCOMES (CONT.) FS COGTAAUDIT OPINION BASIS FOR OPINION EMPHASIS OF MATTER YEAR: 2011/2012 UnqualifiedFair presentationExemption from Financial Reporting Framework Unaudited supplementary schedules Predetermined objectives; Achievement of planned targets; adherence to policies and procedures 6

7. 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) 7

8. 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 8

9. 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 9

10. 2. OVERVIEW OF MUNICIPAL AUDIT OUTCOMES 2.1. ENHANCING GOOD GOVERNANCE  Functional District Monitoring and Evaluation Forums  Functional District Coordinating Forums and MECLOGA  All 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 10

11. 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 11

12. IMPLEMENTATION OF MTAS  At provincial level, the following four municipalities were refocused: Maluti-a-Phofung Metsimaholo Moqhaka Matjhabeng 12

13. PUBLIC PARTICIPATION: WARD COMMITTEES  About 311 Ward Committees were established and there are 4 and 2 outstanding in Mangaung Metro and Ngwatherespectively  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 13

14. SERVICE DELIVERY PROTESTS  The 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 14

15. SERVICE DELIVERY PROTESTS (CONT.) 15

16. 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 16

17. 2.2. FINANCIAL MANAGEMENT: MPAC  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 17

18.  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.) 18

19. AUDIT OUTCOMES 19

20. AUDIT OUTCOMES (CONT.) 20

21. AUDIT OUTCOMES (CONT.) 21

22. FUNCTIONALITY OF INTERNAL STRUCTURES 22

23. FUNCTIONALITY OF INTERNAL STRUCTURES (CONT.) 23

24. FUNCTIONALITY OF INTERNAL STRUCTURES (CONT.) 24

25. INTERGOVERNMENTAL DEBT (DEBT OWED TO MUNICIPALITY BY GOVERNMENT DEPARTMENTS) 25

26. 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. 26

27. COMPLIANCE WITH SCM  Following 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 27

28. UNFUNDED MANDATES  Libraries in municipalities still remain unfunded mandates  Health remain one  Ageing infrastructure (unaccounted for water) 28

29. 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 29

30. 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 30

31. IDP STATUS 31

32. IDP STATUS (CONT.) 32

33. IDP 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 33

34. 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) 34

35. 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 35

36. 2.5. MUNICIPALITIES AFFECTED BY OCCURRENCES OF MALADMINISTRATION, 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 36

37. 2.5. MUNICIPALITIES AFFECTED BY OCCURRENCES OF 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 37

38. CONCLUSION  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 YOU 38