Chairperson, the oversight visit of the Select Committee on Finance to the Northern Cape forms part of the ongoing interaction with municipalities in order to monitor collaboration and co-ordination pertaining to the provision of municipal services, and support given to municipalities by the provincial and national departments.
Local municipalities that were visited in the Northern Cape were Sol Plaatje, Siyancuma, Thembelihle, Kgatelopele, Dikgatlong, SiyaThemba, Phokwane, Emthanjeni, Richtersveld, Kamiesberg, Karoo Hoogland, and Mier, as well as the Siyanda District Municipality.
Several stakeholders accompanied the committee on this visit, namely the national Departments of Treasury, of Co-operative Governance and Traditional Affairs, of Water and Environmental Affairs and of Energy, and the provincial departments of treasury, of co-operative governance and traditional affairs, and of human settlements, as well as other stakeholders such as Eskom, the Development Bank of Southern Africa, DBSA, Salga, the Auditor-General and the Financial and Fiscal Commission, FFC.
The purpose of the visit was to engage the above-mentioned municipalities and the national and provincial departments, in terms of section 154 of the Constitution, in regard to the following areas: development and implementation of municipal budgets; municipalities' compliance with the Local Government: Municipal Finance Management Act, MFMA; spending and performance with regard to conditional grants; municipalities' relations and collaboration with various national and provincial departments and vice versa, capacity constraints; the extent to which municipal services are provided, and the alignment of municipalities' integrated development programmes with the provincial growth and development strategy.
The provincial Auditor-General's opinion indicated that 11 municipalities received disclaimers, and that the audit outcome for the 2008-09 financial year did not change. The 11 municipalities that received disclaimers have not implemented basic accounting practices. Of great concern to the committee were the failure by chief financial officers, CFOs, to ensure adherence to basic accounting principles; a lack of proper document management systems, resulting in municipalities not being able to provide documents to support transactions processed in their accounting records; and the ineffective utilisation and management of consultants. The 11 municipalities with disclaimers of opinion used consultants during the 2008- 09 financial year for day-to-day accounting functions and to compile annual financial statements.
The lack of effective monitoring in the implementation of action plans to address prior year findings is largely due to municipalities not having effective internal audit and audit committee structures capable of monitoring management's implementation of action plans and reporting to those charged with governance. A lack of technical support from provincial treasury and the department of co-operative governance and traditional affairs is due to capacity constraints and skills shortages.
Sir, 7 out of the 11 municipalities did not have an audit committee in operation throughout the year, and 6 of the 11 municipalities did not have an internal audit function throughout the year. The effectiveness is hampered by capacity constraints and inadequate scope of work. The internal audit should include responsibilities to assist with providing assurance in the financial statements and other reporting processes to those charged with governance. The key findings of the select committee were the following: smaller municipalities seriously lack capacity, which makes them rely on the use of consultants; municipalities in the rural areas are experiencing a skills flight and shortage in the fields of finance and engineering; the DBSA is assisting struggling municipalities, but it is a massive task to be carried out by a single entity; most municipalities are spending more funds on salaries rather than on operational programmes; municipalities appointed people to positions without relevant skills; national and provincial departments owe monies to municipalities for services rendered by those municipalities on behalf of the provincial and national departments; not all sector departments attend integrated development plan, IDP, meetings of municipalities, or they send junior officials to attend the IDP meetings; most municipalities, especially the low-capacity municipalities, are struggling to convert to the generally recognised accounting practice, GRAP, reporting systems due to both financial and human resource capacity constraints; and almost all water systems or facilities are outdated and water is being lost due to daily water pipe leakages.
The Select Committee on Finance recommends that the National Council of Provinces considers the following, and I quote:
. That the national Department of Co-operative Governance and Traditional Affairs, the National Treasury, and the national Department of Labour should monitor and evaluate the skills of people employed at municipalities in order to ensure that people with relevant skills are employed in key positions in the areas of finance, engineering and other technical fields;
. That the national Department of Co-operative Governance and Traditional Affairs and the National Treasury should contribute to the Municipal Turnaround Strategy by developing tools that are going to assist municipalities to comply with all provisions of the Local Government: Municipal Finance Management Act;
. That the national Department of Co-operative Governance and Traditional Affairs and the Presidency should develop rules and procedures on how the provincial and national departments must fully and actively participate in the integrated development plans, IDPs, of the municipalities and ensure that IDPs are aligned to the provincial growth and development strategy, PGDS;
. That the National Treasury and the national Department of Co-operative Governance and Traditional Affairs should develop programmes aimed at assisting municipalities ... with the conversion from the Institute of Municipal Finance Officers to the generally recognised accounting practice ...
That is a serious problem in all provinces. The committee further recommends: . That the national Department of Co-operative Governance and Traditional Affairs and the national Department of Public Service and Administration should ensure that municipal and other government officials are banned from doing business with any municipality in the country;
. That the National Treasury and the national Department of Co-operative Governance and Traditional Affairs should contemplate creating a conditional grant aimed at providing municipalities with funds to acquire skills and finance water pipe replacement projects;
. That the national Department of Co-operative Governance and Traditional Affairs and the national Department of Labour should review the use of consultants by municipalities with an aim of finding solutions to capacity constraints of municipalities;
. That the national Department of Co-operative Governance and Traditional Affairs and the National Treasury should ensure that the plans to establish internal audits, audit committees, and budget and treasury offices are included by municipalities in their municipal turnaround strategies; and
. That the national Department of Co-operative Governance and Traditional Affairs, in consultation with relevant stakeholders, should review salaries, qualifications and experiences, and the number of employees in scarce skills areas and other areas with an aim to determine if the appropriate number and skills of officials are employed at municipalities.
We liaised with the Select Committee on Co-operative Governance and Traditional Affairs and recommended that in future, when we do follow-ups on these different municipalities in the different provinces, we do them together. In terms of section 154 of the Constitution we will also do a follow-up to see if the national and provincial departments are assisting these local municipalities.
Hon Chairperson, the Select Committee on Finance tables this report in the House for consideration. Thank you. [Applause.]
Debate concluded.
Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.