Committee Reports on Adjustments Appropriation Bill, Local Government Turnaround Strategy, Division of Revenue and Conditional Allocation to Provincial and Local Spheres of Government

Meeting report

The Chairperson took the Committee through each of the Draft Reports page by page encouraging members to effect changes where necessary.

Adjustments Appropriation Bill [B32-2012] Draft Report
The Chairperson tabled the report for consideration. He noted that the Bill had been referred to the Committee as a section 77 Bill. The Committee had also been briefed on the Bill and had subsequently agreed to the Bill without amendments. 

The Committee adopted the Draft Report unamended.

Proposed division of Revenue and Conditional Allocation to Provincial and Local Spheres of Government Draft Report
The Chairperson tabled the report for consideration.

Grammatical changes were effected and the draft Report was adopted as amended.

Progress on Local Government Turnaround Strategy Draft Report
The Chairperson tabled the report for consideration.
Mr B Mashile (ANC, Mpumalanga) referred to page 9 and said that South Africa’s auditing and financial management capacity had been downgraded of late. The ability to produce credible public financial reports was lacking. The Auditor-General’s (AG) Office had also pointed out that South Africa had serious challenges with regards to financial skills and governance issues. Notwithstanding the comments made by the AG’s Office, arguments were made that South Africa had high auditing standards. The AG had raised a multitude of issues with regards to financial statements of public entities.  He added that international organisations were questioning how South Africa could have high auditing standards when the audit outcomes by the AG’s Office proved otherwise. The financial statements of public institutions were not up to scratch. He suggested that the Department of Co-operative Governance and Traditional Affairs (COGTA) should re-evaluate its local government turnaround strategy target of 2014. Financial skills could not be improved overnight. The 2014 target was unrealistic. Only when all internal controls were in place could credible financial statements be produced. Financial skills were not the only problem. In some municipalities financial information was also lacking. He felt that talks of having a clean audit by municipalities by 2014 were unrealistic.

The Chairperson said that perhaps the Committee could recommend that COGTA review its 2014 target.

Mr Mashile agreed but added that the 2014 target should be re-evaluated and processes should be relooked at whilst taking into consideration the concerns raised by the Auditor-General’s Office.

The Committee agreed to the recommendation.

On page 10, the Chairperson suggested that paragraph 6.1.3 be deleted.

The Committee agreed.

The Committee adopted the Draft Report as amended.

Fourth Quarter Report on Social Sector Expanded Public Works Programme Incentive Grant to Provinces Draft Report
The Chairperson tabled the report for consideration.

Mr Mashile referred to the columns in page 3 of the Draft Report and asked how one should differentiate between under or over expenditure figures. As it was reflected one could not differentiate between these two. He suggested the use of brackets to differentiate the one from the other.

The Committee agreed that brackets be used on over expenditure figures. It would make it easier to distinguish over expenditure figures from under expenditure figures.

Mr Mashile on page 6 referred to the findings of the Committee and noted that in paragraphs 8.3 and 8.4 specific mention should be made of the four provinces in question.  Findings of the Committee needed to be clear and precise.

The Committee agreed to the suggestion that the four provinces should be expressly mentioned.

The Draft Report was adopted as amended.

Oversight Visit to Gauteng Municipalities Draft Report
The Chairperson tabled the report for consideration.

The Chairperson pointed out that the Draft Report included both interactions of the Committee with Gauteng Province. The Committee had received a petition from a ratepayers association in Tshwane and it had been forwarded to the Mayor of Tshwane to be dealt with. The Committee would in 2013 prioritise a meeting to follow up on the issue as to what progress had been made.

Mr Mashile referred to Randfontein Municipality and pointed out that the Mayor and Municipal Manager of the Municipality were in disagreement over whether the Municipality had received a clean audit. The Mayor had apparently stated that a clean audit was unachievable. The Municipal Manager on the other hand boasted that whilst under his leadership it was the first time that the Municipality had financial statements. He felt that the disagreement over the issue eventually became a constraint. The issue needed to be captured in the Committee’s Draft Report.

The Committee agreed to Mr Mashile’s suggestion.

Mr Mashile highlighted bullet three on page 8 which dealt with the AG’s proposal that the audit committee needed to schedule an additional four meetings on a quarterly basis. He noted that the proposal held financial implications for budgets of municipalities as audit committee members would now claim for attending four additional meetings.

The Chairperson was convinced that the financial implications of scheduling four extra meetings would be taken into consideration. The Committee noted the point made by Mr Mashile. If the four additional meetings would strengthen financial controls it was up to the relevant municipality whether it was willing to bear the additional costs. 

Mr S Montshitsi (ANC, Gauteng) referred to page 11 and stated that the Gauteng Province Treasury Bill would to be amended so that municipalities could be assisted with their finances. The problem was that nowhere was it stated that one of the functions of the structure would be to train personnel.

The Chairperson suggested that Mr Monshitsi draft a recommendation in this regard and that it would be included as one of the recommendations of the Committee in the Draft Report.

Mr Monshitsi agreed to the suggestion by the Chairperson.

Mr Mashile asked how the Committee related to the Gauteng Municipal Financial Management Act.  Was it only the Gauteng Province which could ensure compliance by municipalities? What could the Committee do to ensure compliance?

The Chairperson was unsure whether the Committee could ensure that municipalities complied. He said it was best that the Committee obtain a legal opinion over the issue.

The Committee agreed to obtain a legal opinion over the issue.

Mr Mashile on page 24 asked what was meant by the term “defective equipment”. He asked that the sentence be amended in order for it to be clearer.

The Committee agreed to the suggestion.

Mr S Mazosiwe (ANC, Eastern Cape) referred to paragraph 8.6 on page 26 and asked what the paragraph was trying to say. He suggested that the paragraph be redrafted.

Mr Mashile assisted and suggested that the two issues of “unauthorised expenditure” and “water and electricity” in the paragraph be separated.

Mr A Lees (DA, KZN) pointed out that municipalities tend to condone unauthorised expenditures after the fact. It was common practice. He suggested that the Auditor-General’s Office should enlighten the Committee on what the process of condonation entailed. Members should also be informed as to what type of unauthorised expenditures could or could not be condoned.

Mr Monshitsi forwarded a draft of his earlier made recommendation to the Chairperson who read it out verbatim to the Committee.

The Committee agreed to the recommendation made.

The Committee agreed to delete paragraph 9.2 on page 27. 

Mr Mashile noted that National Treasury had the authority to withhold allocated funds of municipalities where they were underspending. He felt that there should be limits set as to how much funds could be withheld by National Treasury. The problem that arose where funds were withheld was that public entities could not deliver services to people. There was a need to set levels of underspending which would necessitate funds to be withheld. He suggested that the Committee discuss the issue.

The Chairperson stated that the appropriate time to discuss the issue was when the Committee dealt with the Division of Revenue Bill in 2013.

The Draft Report was adopted as amended.

Draft Committee Minutes
The Chairperson tabled the minutes for consideration.

The Committee adopted unamended minutes dated 13 November 2013.

The meeting was adjourned.