briefing to the select committee of finance 28 may 2013 28 may 2013 progress of free state...

BRIEFING TO THE SELECT COMMITTEE OF FINANCE

28 May 201328 May 2013

Progress of Free State Municipalities

Table of Contents

Progress made on recommendations Presentation - Free State Provincial Treasury

o MEC’s Intervention;o Municipal Budgets & IYM;o Municipal Compliance & SCM;o Municipal Revenue & Debt;o Municipal Risk & Internal Audit;o Municipal Accounting Services;o Unauthorised, Irregular, Fruitless & Wasteful Expenditure; ando Support at Nala Municipality.

Table of Contents (Cont…)

Presentation - Department of Cooperative Governance & Traditional Affairso Municipal Public Accounts Committees (MPAC’s);o Management Support Program;o Caseware and IMESA Projects;o Audit Outcomes;o Timeframes for Implementation of Valuation Rolls;o Appeals against property valuations;o Property Rates Policies & By-Laws;o Legal Services;o MIG Expenditure – 30 April 2013;o KPMG Forensic Report – Nala;o Ramathe-Fivaz Forensic Report – Matjhabeng; ando Section 106 Investigations (Selesho Commission) – Matjhabeng.

Progress made on recommendationsRecommendations Progress Made CommentThe Provincial Department of Cooperative Governance and Traditional Affairs should consult National and Provincial Treasuries as well all relevant departments before implementing any section 139 interventions

No municipalities in the province are under Section 139 interventions.

Before implementation of Section 139, implementation the Department will consultant with NT, DCOG,PT and SALGA.

The Moqhaka Local Municipality should address the issue of open toilets as a matter of urgency, as this matter impacts on the dignity of the community

1200 toilets have been completed The political leadership is visiting each household affected to improve delivery.

The Provincial Treasury and the Provincial Department of Cooperative Governance and Traditional Affairs should take appropriate actions with regard to the report that Matjhabeng Local Municipality was responsible for 50 per cent of all fruitless and irregular expenditure in the Province of Free State during the 2009/10 financial year

FS PT and COGTA have formed a task team to support 3 municipalities (Kopanong, Matjhabeng & Moqhaka) that owe 55 percent of the unauthorised, irregular, fruitless & wasteful expenditure in the Province.

PT has requested 3 municipalities to establish the Sub Committee of Council as per National Treasury Circular 68.

Progress made on recommendationsRecommendations Progress Made CommentThe provincial Department of Cooperative Governance and Traditional Affairs, the Provincial Treasury, and the South African Local Government Association should coordinate and establish a task team that will include all sector departments and assist the municipalities to deal with all challenges identified in this report.

Section 71 reports have been prepared to Provincial Legislature on struggling Municipalities .Agreement have entered with Municipalities to fasttrack payments to bulk service providers.Intergovernmental debt steering committee has reduced the government debt by 60 percent within the province.Support was provided by departments to municipalities to resolve technical audit and accounting matters.

Municipalities should take cognisance of the fact that tariff structures should account for repairs and maintenance other than provision costs only, particularly in light of the fact that municipalities are charging electricity tariffs that are below the cost of provision.

Provincial Treasury and CoGTA conducted budget bilaterals with 20 municipalities to strengthen their operational and capital budgets:•Funding mix;•Capital budget in relation to IDP priorities;•Operational budget (revenue and expenditure); and• creditability of the budget.

Bilaterals Conducted in 14-27 May 2013

National Treasury should interact with the Provincial Department of Cooperative Governance with regards to the legality of the financial assistance that the latter department gives to municipalities.

NT has conducted meeting with CoGTA. The department has noted the comments and will comply the instructions of the SCOF.

FREE STATE PROVINCIAL TREASURY

MEC’s Intervention• MEC conducted onsite meetings with the Mayors, MMC’s, MM’s and CFO’s at following municipalities

that have been identified as struggling:

• MEC conducted unannounced visits at Moqhaka and Dihlabeng municipalities during their budget public participation meetings.• MEC’s office attended budget bilaterals sessions with 22 FS municipalities on the draft budgets for the 2013/14 financial year.• Feedback letters were submitted to Mayors on draft budget evaluations on credibility, sustainability and relevance on the 22nd May

2013.

Municipality Date of Meeting

Matjhabeng 23 Apr 2013

Kopanong 25 Apr 2013

Moqhaka 29 Apr 2013

Ngwathe 21 May 2013

Phumelela 23 May 2013

Naledi 24 May 2013

MUNICIPAL BUDGETS & IYM

Municipal Budgets – Compliance

Section 21(1)b of the MFMA, requires the Mayor of the municipality to tabled in the Municipal Council a table of key deadlines for preparation, tabling and approval of the annual budget.

Improvement in Compliance Submission - Budget TimelinesMunicipalities 2011/12 2012/13

Letsemeng Yes Yes

Kopanong Yes Yes

Mohokare Yes Yes

Naledi Yes Yes

Xhariep Yes Yes

Masilonyana Yes Yes

Tokologo Yes Yes

Tswelopele Yes Yes

Matjhabeng Yes Yes

Nala Yes Yes

Lejweleputswa Yes Yes

Setsoto Yes Yes

Dihlabeng Yes Yes

Nketoana Yes Yes

Maluti-a-Phofung Yes Yes

Phumelela Yes Yes

Mantsopa Yes Yes

Thabo Mofutsanyana Yes Yes

Moqhaka Yes Yes

Ngwathe Yes Yes

Metsimaholo Yes Yes

Mafube Yes Yes

Fezile Dabi Yes Yes

Late submissions

Municipal Budgets – Compliance

Section 16(2) of the MFMA, requires the Mayor of the municipality to tabled the annual budget at Municipal Council at least 90 days before the start of the budget year.

Dates of tabling of draft budget - Comparative over 3 Financial Years

Municipalities

2013/14 2012/13 2011/12

Date of tabling of Draft Budget



Letsemeng 28/03/13 29/03/2012 17/03/2011

Kopanong 28/03/13 28/03/2012 19/03/2011

Mohokare 28/03/13 30/03/2012 31/03/2011Naledi 28/03/13 29/03/2012 31/03/2011

Xhariep 27/03/13 29/03/2012 31/03/2011

Masilonyana 28/03/13 30/03/2012 31/03/2011

Tokologo 28/03/13 31/03/2012 31/03/2011

Tswelopele 20/03/13 28/03/2012 31/03/2011

Matjhabeng 26/03/13 27/03/2012 14/03/2011

Nala 27/03/13 30/03/2012 11/3/2011

Lejweleputswa 25/03/13 29/03/2012 23/03/2011

Setsoto 28/03/13 30/30/2012 31/03/2011

Dihlabeng 3/04/2013 29/03/2012 31/03/2011

Nketoana 26/03/13 26/04/2012 31/03/2011

Maluti-a-Phofung 27/03/13 29/03/2012 15/03/2011

Phumelela 28/03/13 31/03/2012 31/03/2011

Mantsopa 28/03/13 28/03/2012 30/03/2011

Thabo Mofutsanyana 28/03/13 30/03/2012 17/03/2011

Moqhaka 2/04/2013 30/03/2012 31/03/2011

Ngwathe 11/04/2013 13/04/2012 11/04/2011

Metsimaholo 28/03/13 30/03/2012 31/03/2011

Mafube 28/03/13 29/03/2012 13/04/2011

Fezile Dabi 28/03/13 29/03/2012 11/3/2011

Late submissions

Bilaterals & Support 2011/12

Support was provided to the following municipalities: 2011/12

Municipality Support Provided

Masilonyana Three PT officials assisted municipality to assess the budget, identify gaps and support the municipality on corrections to be made on the budget schedules.

Phumelela Two PT officials supported the municipality for two days to correct all the budget schedules

Ngwathe One PT official supported the municipal budget manager on technical matters on the budget supporting tables.

Naledi Three PT officials assisted the municipality with the completion of the budget tables and advised the CFO with regard to tariffs.

Mafube PT supported municipal BTO officials on the budget tables.

Mohokare PT supported the municipality on the budget tables.

Nala PT supported the municipal BTO officials on completion of the budget tables


Support was provided to the following municipalities:2012/13


Nala Seconded Official

One of the resolutions taken by the National Treasury in order for the municipality to receive the withheld grants was to ensure that compliance with all outstanding matters and documents is adhered to timeously. (e.g. midyear assessment report, adjustment and draft budget).

As a result a Provincial Treasury official has been seconded to Nala due to capacity challenges and shortage of staff within the Budget and Treasury Office to assist the municipality to comply with the requirements. This is to ensure that the municipality is in a position to review its mid-year performance, table and adopt the adjustment and the 2013/14 draft budget. Nala municipality is also assisted by holding weekly meetings with the Finance Steering Committee to monitor progress.

Phumelela PT officials supported the municipal BTO officials complete the budget tables.

Mafube PT officials supported the municipal BTO officials complete the budget tables.


Support was provided to the following municipalities:2013/14


Ngwathe PT had a work session emanating from budget bilateral with the municipality to ensure credibility of information before adoption of budget by Council (21 April 2013)

Naledi PT had a work session emanating from budget bilateral with the municipality to ensure credibility of information before adoption of budget by Council (23 April 2013)

Training Provided

Training of Service Delivery and Budget Implementation Plan was conducted during the month of August 2012 for all municipalities. There has been significant improvement with regards to submission of SDBIP as a result of the support provided to senior managers of municipalities. This resulted in an increase in submissions from 5 the previous year to 19.

Continuous technical support is provided on municipal budget returns and document Monthly Municipal infrastructure meetings (MIG ) which are arranged by COGTA are attended by the Provincial Treasury to monitor progress on infrastructure programmes

Municipal IYM - Support

• Section 71 Reporting- Provincial Treasury’s In-year Monitoring (IYM) reports are in compliance to Section 71(6) and & 71(7) of the MFMA.- Non-compliance letters and support is provided to municipalities.- Section 71 reports credible has improved since prior financial years

• Disputes – Bulk Service Providers- Provincial Treasury had dispute resolution meetings with the following municipalities:

Kopanong Matjhabeng

Nala Dihlabeng

Maluti a Phofung Mantsopa

Moqhaka Ngwathe

Mafube Naledi

MUNICIPAL COMPLIANCE & SCM

Municipal Compliance & SCM - SupportSupply Chain Management•Centralized Provincial Supplier Database Launched in Xhariep District and will be rolled-out to other districts; •SCM Toolkit in process of development;•Updating of SCM Unit and Bid Committee;•SCM information sessions conducted;•Training provided on Contract Management; Local Content; Uploading of Contracts Above R100k;•Assessment of SCM policies for alignment to Model Policy;•Reporting Formats being finalized for roll-out during quarter under review; and•Assisting municipalities with procurement plans for 2013/14.

Municipal Compliance - Support

Compliance•Supported municipalities with compliance to the Minimum Competency Regulations;•Rolled-out 30 MFMA Monitoring Indicators and municipalities have shown progress in implementation;•Rolled-out revised system of MFMA delegations to 22 of 23 municipalities;•Conducted Municipal Interns Forums to assist with capacity building of interns; and•Provincial Capacity Building Forum in place in collaboration with CoGTA, SALGA and LGSETA.•Minimum competency levels, 102 registered with SAICA, 22 modules completed and 93 is registered with DBSA and 85 registered with Wits Business (CPMD).•SMC – 22 municipalities applied to NT, Maluti a phofung is in the process of application.

MUNICIPAL REVENUE & DEBT

Municipal Revenue & Debt - Support

Intergovernmental Debt Steering Committee•Intergovernmental debt was reduced by ± 60% since the establishment of the Committee

•All municipalities are supported by the Committee

Municipal Revenue & Debt - Support

Revenue Committees (Household and Business debt has increased)•To reduce the debt position, the following municipalities established revenue committees:

– Kopanong, Mohokare, Masilonyana, Tokologo, Setsoto, Dihlabeng, Nketoana, Phumelela, Mantsopa

•The following municipalities are in the process of establishing revenue committees:– Letsemeng, Naledi, Tswelopele, Matjhabeng, Maluti a Phofung, Metsimaholo

Evaluation of policies•Revenue related policies were evaluated against minimum legislative requirements:

– Tariff – Indigent– Credit Control & Debt Collection– Rates

• Feedback provided to all municipalities

Municipal Revenue & Debt – Strategies / Initiatives• EXCO resolved that PT should support revenue and debt collection

campaigns• PT Circular 27 required municipalities to submit indigent registers, lists of

councilors, municipal officials and public servants owing municipal debt Municipal councillors• Verify that Councillors are not registered as indigents in indigent registers,Municipal officials• Verification of debt for municipal services by municipal officials and councillorsPublic Servants• Debt owed by public servants to be deducted from salaries

MUNICIPAL RISK & INTERNAL AUDIT

Risk Management Status (Xhariep. District)MUNICIPALITY RM UNIT STATUS RMC STATUS COMMENTS

Xhariep District Municipality

Established (Vacant since March 2013)

Established Newly appointed Committee that is chaired by a member of the Audit Committee;No indication when will the post be filled of the Chief Risk Officer.

Kopanong Local Municipality

EstablishedRisk Officer (Appointed 1 Nov 2012)

Established Newly appointed Committee that is chaired by a member of the Audit Committee;For the period under review there was no Committee.

Mohokare Local Municipality

Established Risk Officer (Appointed 1 August 2012)

Established Newly appointed Committee that is chaired by a member of the Audit Committee;The municipality was assisted by the CRO from the district as it was a shared service.

Letsemeng Local Municipality

Not Established Not Established No commitment form the municipality on the appointment of the Risk Officer and the Committee and non availability hampers with the work of the internal Auditor( No risk Based Audit Plan)

Naledi Local Municipality Not Established Not Established No commitment form the municipality on the appointment of the Risk Officer and the Committee and non availability hampers with the work of the internal Auditor( No risk Based Audit Plan).

Risk Management Status (Lejwe. District)MUNICIPALITY RM UNIT STATUS RMC STATUS COMMENTS

Lejweleputswa District Municipality

Established Not established - Manager: Risk Management permanently placed by lateral transfer to SCM unit.

- An official from SCM appointed as Manager: Risk Management.

- Technical competency a challenge.

Matjhabeng Local Municipality

Established (SNR Accountant Risk Management)

Not established - MM committed to establish RMC obtained.- Risk Officer Reports to Manager Internal Audit

Tswelopele Local Municipality

Not established Not established - Commitment to establish RMU and RMC obtained from both the Mayor and the Municipal Manager during an entry meeting.

Masilonyana Local Municipality

Not established Not established - MM commitment to establish RMU and RMC obtained.

Tokologo Local Municipality

Vacancy Established(June 2012)

- Risk Officer resigned.- Could not obtain commitments- Risk Management Committee not assessed yet.

Nala Local Municipality

Established(October 2012)

Not Established - Manager Internal Audit post upgraded to Manager Internal Audit and Risk

- No Risk Management Functions performed for period under review

Risk Management Status (TM District)MUNICIPALITY RM UNIT STATUS RMC STATUS COMMENTS

Thabo Mofutsanayana District Municipality

Not established Not established - Risk Officer: advertisement placed. Shortlist stage.- Manager Internal Audit used to perform function for

Risk.- MM committed to establish RMC obtained.

Maluti-A-Phofung Local Municipality

Established (Chief Risk Officer)

Not established - MM committed to establish RMC obtained.- Chief Risk Officer appointed in January 2013

Phumelela Local Municipality

Established (Chief Risk Officer)

Not established - Commitment to establish RMC obtained.

Nketoana Local Municipality

Established(Risk Officer)

Established(March 2013)

- Risk Officer reports to manager: internal audit- RMC comprise of management only, no independent

person appointed.

Dihlabeng Local Municipality

Established(Chief Risk Officer)

Established - Chief Risk Officer is functional- Risk Management Committee did not seat for the

period under review.

Setsoto Local Municipality

Established(Risk Officer)

Established (November 2012)

- RMC appointed in November 2012 and hasn’t seat for the period under review

Mantsopa Local Municipality

Dissolved Not established - Risk Officer was permanently placed by lateral transfer to IAU.

Risk Management Status (FD. District)MUNICIPALITY RM UNIT STATUS RMC STATUS COMMENTS

Fezile Dabi District Municipality

EstablishedRisk Officer

Established (Using Audit Committee)

Risk management unit is effective.Audit Committee is currently performing the functions of the Risk Committee. Appointment of the Risk Management Committee is pending.

Metsimaholo Local Municipality

EstablishedRisk Officer

Established Newly appointed Committee that is chaired by a member of the Audit Committee.

Ngwathe Local Municipality

EstablishedActing Risk and Compliance Manager

Not Established No review of the work of the Acting Manager.

No commitment form the municipality on the appointment of the Committee and non availability hampers with the work of the internal Auditor( No risk Based Audit Plan).

Moqhaka Local Municipality

Not Established Not Established No commitment form the municipality on the appointment of the Risk Officer and the Committee and non availability hampers with the work of the internal Auditor( No risk Based Audit Plan)23 Score was based work done by PT.

Mafube Local Municipality EstablishedRisk Officer (Appointed 1 March 2013)

Not Established There is commitment from the municipality to appoint before the new financial year.

Internal Audit Status (Xhariep. District)

MUNICIPALITY IA UNIT STATUS AUDIT COMMITTEE STATUS

COMMENTS

Xhariep District Municipality - 1 x Chief Auditor- 1 x Internal Auditor- 1 x Intern

4 X Members (Shared) - Both unit and audit Committee are effective.

Kopanong Local Municipality

- 1 x Chief Auditor- 1 x Internal Auditor- 1 x Internal Audit Clerk

4 X Members (Shared) - Both unit and audit Committee are effective.

Mohokare Local Municipality

Outsourced 4 X Members (Shared) - Both unit and audit Committee are effective.

Letsemeng Local Municipality

1 Auditor 4 X Members (Shared) - The municipality is in the process of outsourcing the Internal Audit Activity.

Naledi Local Municipality 1 Auditor 4 X Members (Shared) - The municipality did not provide evidence to substantiate KIP responses.

Internal Audit Status (Lejwe. District)


COMMENTS

Lejweleputswa District Municipality

1 x Internal Auditor2 x Audit Clerks (new)

4 x Members - Unit was non functional. But ad hoc assignments were performed.

- Audit committee is stable.

Matjhabeng Local Municipality - 1 x Chief Audit Executive- 1 x SNR Internal Auditor- 2 x Clerks- 2 x Vacancies

5 x Members - Unit is effective.- Audit Committee is newly appointed.

Tswelopele Local Municipality 1 x Internal Auditor1 x Intern

3 x Members - Internal audit unit is effective.- Audit Committee is stabilizing

Masilonyana Local Municipality

1 x Chief Audit Executive1 x Internal Auditor

4 x Members - Newly established unit.- No IA engagements conducted. - Audit Committee newly appointed.

Nala Local Municipality 1 x Manager: Internal Audit and Risk Management

3 x Members - Both the unit and the committee are not effective.

Tokologo Local Municipality 1 x Internal Auditor(Co-sourcing)

4 x Members - No risk based engagements conducted.- Audit Committee is stabilizing

Internal Audit Status (TM District)

MUNICIPALITY IA UNIT STATUS AUDIT COMMITTEE STATUS COMMENTS

Thabo Mofutsanayana District Municipality

- 1 x Chief Audit Executive- 1 x Internal Auditor- 1 x Intern

3 x Members (Shared) - Inexperienced internal auditor and intern. Heavy reliance on CAE.

- Audit Committee stabilizing but needs more skills and experience mix.

Maluti-A-Phofung Local Municipality - 1 x Chief Audit Executive- 1 x SNR Internal Auditor (new)- 4 x Audit Clerks (new)

3 x Members (Shared) but now opting out.

- Unit was non-functional . New appointments have been made.

- Due to appoint own audit committee.

Phumelela Local Municipality 1 x Manager: Internal Audit (Vacant)1 x Internal Auditor

3 x Members (Shared) - PT audit team has been deployed to assist with the execution of 2012/13 audit plan.


Nketoana Local Municipality - 1 x Manager Internal Audit and Risk Manager.

- Internal Auditor- Risk Officer

3 x Members (Shared) but now opting out.

- Unit not effective but improvements have been noted.


Dihlabeng Local Municipality - 1 x Chief Audit Executive.- 2 x Internal Auditors

4 x Members - Unit not effective but improvements have been noted.

- Audit Committee is stable.

Setsoto Local Municipality - 1 x Chief Audit Executive- 4 x Internal Auditors

4 x Members - Unit is effective.- Audit Committee is effective.

Mantsopa Local Municipality - 1 x Chief Audit Executive- 2 x Internal Auditors

3 x Members - Unit is newly established and effective.- Audit Committee newly appointed.

Internal Audit Status (FD. District)


COMMENTS

Fezile Dabi District Municipality

1 Chief Auditor 1 Auditor1 Intern

4 Members - Both unit and audit Committee are effective.

Metsimaholo Local Municipality

1 Audit Manager 1 Auditor1 Intern

3 Members - Both unit and audit Committee are effective.

Ngwathe Local Municipality

1 Audit Manager 2 Audit Clerks1 Intern

Advertised - No risk-based engagements conducted during the period.

Moqhaka Local Municipality

1 Auditor1 Intern2 Vacancies

5 Members - No risk-based engagements conducted during the period.

- Audit Committee was non-functional during the period.

Mafube Local Municipality

1 Auditor1 Vacant

3 Members - No risk-based engagements conducted during the period.

Risk management and Internal Audit Support• All Municipality’s Internal Audit and Risk Management activities were evaluated and

recommendations were communicated to address each municipality to improve the compliance rate.

• Trainings for both Audit and Risk Management were conducted.

• Audit Committee chairpersons’ forum was established to address their in effectiveness.

• PFMA Audit Team has been seconded to the following Municipalities to adress backlog Audits.

Phumelela Local Municipality Masilonyana Local Municipality

Risk management and Internal Audit Support

• Risk Awareness and Assessments are scheduled for the following Municipalities:

Naledi Local Municipality Matjhabeng Local Municipality Mantsopa Local Municipality Lejweleputswa District Municipality

• Quality assurance is scheduled to be performed for all Internal Audit Units. This project is a joint project with National Treasury.

MUNICIPAL ACCOUNTING SERVICES

Municipal Accounting Services - Support

Masilonyana municipality•The municipality was supported during the audit process•Support was given in the compilation of the Annual Report in the new template. Although there was no commitment from the municipality, the new management have given an undertaking that the municipality will welcome the support from Provincial Treasury•Monitoring of the audit action plan was done•Support was given in the initial implementation of IMESA project

Matjhabeng municipality• The municipality will be supported in the preparation of the 2012/13 Annual Financial Statements. Provincial

Treasury will assist the municipality to ensure that the preparation for year end takes place. A detailed key activity has been developed and arrangements are being made to meet with the municipality

• The meeting will also review the 2011/12 audit action plan for progress and verification thereof. We will also assist the municipality to draw up a timetable for the preparation of the AFS and there will be monitoring thereof.

Municipal Accounting Services - SupportNaledi municipality•The municipality was supported during the audit process. 6 Audit Steering Committee meetings were attended by Provincial Treasury to render technical support to the municipality•Problems arising from the contract with Centlec that lead to disclaimer of opinion for Naledi are being attended to with the assistance from Provincial Treasury•A Delphi session to address the audit qualifications will be held next week•National and Provincial Treasury compiled a financial recovery plan for the municipality

Mohokare municipality•The municipality was supported during the audit process. Three audit steering committee meetings were attended by Provincial Treasury•Support was given in the compilation of the Annual Report in the new template•A work session has been arranged for 04 June 2013 to prepare for the compilation of the 2012/13 Annual Financial Statements•Problems arising from the contract with Centlec that lead to disclaimer of opinion for Mohokare are being attended to with the assistance from Provincial Treasury

Municipal Accounting Services - SupportKopanong municipality•The 2010/11 Audit report was evaluated and comments given to the municipality•9 Audit steering committee meetings were attended and assistance was given to deal with some of the audit queries. However, there were still issues that we could not assist with due to lack of information from the municipality. These issues are the following:

– Landfill site. There was a rehabilitation projection done but we could not get the proof that the land belongs to the municipality

– Classification of leases (cellphones)– Centlec has entered into an agreement with the Southern Hemisphere municipalities including Kopanong Local

Municipality to provide electricity services on its behalf to its communities and Free State Provincial Treasury has in numerous attempt requested to secure appointment with Centlec in a process to facilitate assistance between the municipalities with the main purpose of the issues mentioned below and no success/response has been achieved to secure such appointment:o The impact of Centlec’s audit findings on Southern Free State Municipalities;o The processes in place to ensure financial and performance reports are submitted to the Southern Free

State Municipalities on a monthly basis; ando The progress made towards addressing issues on the audit action plans.


Mafube municipality•The municipality was supported during the audit process. 4 Audit Steering Committee meetings were attended by Provincial Treasury to render technical support to the municipality•A session was held with the municipality to determine the readiness of the municipality towards the compilation of the 2012/13 Annual Financial Statements. The biggest challenge at the moment is for the municipality to appoint a service provider to complete the compilation of GRAP compliant asset register•The municipality will be assisted with the compilation of the 2012/13 Annual Report on the new template

Ngwathe municipality•The municipality was supported during the audit process, although the challenge during the 2011/12 financial year and part of the 2012/13 financial year there was no appointed CFO. The CFO has just been recently appointed•We assisted with the investigation into salary increases during the 2011/12 financial year•A session will be held with the municipality to address the qualifications in the 2011/12 audit report and to ensure that the municipality submit the 2012/13 financial statements on time.


Phumelela municipality•An assessment of the 2010/11 audit report was done, and progress on the implementation of the audit action plan was monitored•The municipality was also supported during the audit process. Audit Steering Committee meetings were attended by Provincial Treasury to render technical support to the municipality•The municipality was assisted in monitoring the work performed by the service provider•Although the 2011/12 audit opinion was a disclaimer, the qualifications decreased to more than 40 in the 2010/11 audit report to 8 in 2011/12 one, 5 of which were on assets

Setsoto municipality•Council was given training in understanding GRAP compliant Annual Financial Statements•Support was given to the municipality during the 2011/12 audit process


OTHER SUPPORT TO MUNICIPALITIES

•GRAP training was held to ensure that municipalities are kept abreast with Accounting developments.•Training on the compilation of the Annual Report on the new National Treasury template was held•Audit Technical Steering Committee Meetings took place during the audit process. These are meetings held with AG(SA) and CoGTA to deal with technical issues picked up during the audit process. Significant achievements include a reduction of audit findings for municipalities.•The 2012/13 PROPAC resolutions will include the compilation of mid-year financial statements

UNAUTHORISED, IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE

Unauthorised, Irregular, Fruitless and Wasteful ExpenditurePHASE 1 – Prior Years SCM Matters•FS PT and COGTA is in the process to form a task team to support 3 municipalities (Kopanong, Matjhabeng & Moqhaka) that owe 55 percent of the unauthorised, irregular, fruitless & wasteful expenditure in the Province.•Scope of Work of the Task Teamo Teams formed must investigate prior year Unauthorised, fruitless, wasteful and irregular expenditure incurred by the municipality.o Report on findings presented to the council committee appointed to investigate such expenditureo Report must be reviewed and endorsed by the committee o Committee to present the report to council for:

o approval of report;o write off were applicable or o further investigation oro Legal action and or criminal proceeding against officials and oro Recovery of amounts from officials / parties concerned

•Composition of the Task Teamo Officials from FS PT and COGTAo Municipal officials in Internal Audit and SCMo MFIP Advisor

Unauthorised, Irregular, Fruitless and Wasteful ExpenditurePHASE 2 – Current Year SCM Matters•The Task Team will simultaneously deal with current year SCM issues:

– Identification of weaknesses within the municipalities SCM process for the 3 selected municipalities

– Rolling out SCM Quarterly & Annual Reporting Templates– Assisting Municipalities to identify and rectify SCM Deviations i.t.o S36 of the SCM

Regulations – Rolling SCM Competitive Bidding Templates (Tender Processes)

– Training on Improved Contract Management

Unauthorised, Irregular, Fruitless and Wasteful Expenditure

Ranking MunicipalityUnauthorised expenditure

Irregular ExpenditureFruitless and wasteful

expenditure

Total Unauthorised, Irregular, Fruitless & Wasteful Expenditure

Total % of Unauthorised,

Irregular, Fruitless & Wasteful

Expenditure

1 Matjhabeng Local Municipality 1 075 758 597 160 377 149 76 391 793 1 312 527 539 45%2 Centlec (Pty) Ltd - 344 545 131 32 080 187 376 625 318 13%

3 Mangaung Metropolitan Municipality 307 256 486 58 324 226 183 514 365 764 226 13%

4 Moqhaka Local Municipality 52 582 569 111 721 311 13 022 400 177 326 280 6%5 Kopanong Local Municipality 65 714 217 59 806 579 3 328 391 128 849 187 4%6 Mafube Local Municipality 17 925 031 56 089 663 7 196 416 81 211 110 3%7 Metsimaholo Local Municipality 6 173 762 66 719 549 1 035 341 73 928 652 3%8 Dihlabeng Local Municipality - 60 385 887 9 857 254 70 243 141 2%9 Phumelela Local Municipality 20 791 736 40 037 283 518 848 61 347 867 2%

10 Letsemeng Local Municipality 33 109 579 9 507 674 1 083 904 43 701 157 1%11 Tokologo Local Municipality 36 221 598 5 154 096 595 927 41 971 621 1%

12 Maluti-A-Phofung Local Municipality 29 605 589 7 247 237 3 892 225 40 745 051 1%

13 Mantsopa Local Municipality 18 611 996 11 626 988 292 260 30 531 244 1%14 Nketoana Local Municipality 21 430 022 8 627 946 60 255 30 118 223 1%15 Naledi Local Municipality - FS 29 913 092 108 442 45 000 30 066 534 1%16 Mohokare Local Municipality 2 453 960 13 576 851 276 929 16 307 740 1%

17 Lejweleputswa District Municipality 227 750 13 516 246 1 537 13 745 533 0%

18 Xhariep District Municipality 1 524 583 10 465 869 41 398 12 031 850 0%19 Fezile Dabi District Municipality 272 771 4 253 383 5 290 4 531 444 0%20 Maluti-A-Phofung Water - 4 244 160 250 127 4 494 287 0%21 Tswelopele Local Municipality 1 913 745 2 076 997 1 411 3 992 153 0%

22 Thabo Mofutsanyana District Municipality - 3 140 976 60 078 3 201 054 0%

23 Lejweleputswa Development Agency - - 20 840 20 840 0%

24 Fezile Dabi DM Trust - 0%25 Metsimaholo Mayoral Trust - - - - 0%

SUPPORT PROVIDED AT NALA MUNICIPALITY

NALA MUNICIPALITY

Provincial task support provided•FS Provincial Treasury and Department of Cooperative Governance & Traditional Affairs (COGTA) intervened, reason being:

To obtain the 2009/10 & 2010/11 annual financial statements submitted for audit as soon as possible. Initial agreed date for submission was 30 November 2011, and the final proposed date for submission of the 2009/10 statements were 24 April 2012.

To ensure consumers are billed for services and subsequently collection of revenue.

• Weekly meetings held on Mondays to evaluate progress and deal with challenges arising from submission of the financial statements and correcting the billing.

• A decision was taken to suspend the services of Pastel and BIQ was then requested to take over early in February 2012. Billing commenced at the end of February 2012.

FREE STATE DEPARTMENT OF CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS

LOCAL GOVERNMENT SUPPORT PROGRAMMES 2012/13 TO DATE

• MPACS• MANAGEMENT SUPPORT PROGRAMME• CASEWARE• IMESA PROJECT• SPECIFIC SUPPORT• LEGAL SERVICES• MUNICIPAL PERFORMANCE MONTORING• MIG SUPPORT• INVESTIGATIONS

Municipal Public Accounts Committees (MPAC’S)

• The following Municipalities established MPACs:– Mangaung Metropolitan Municipality– Xhariep District Municipality with the following Local Municipalities sharing in the Committee

o Kopanong o Letsemengo Naledi

– Matjhabeng Local Municipality– Masilonyana Local Municipality– Tswelopele Local Municipality– Thabo Mofutsanyana District Municipality with the following Local Municipalities sharing in

the Committeeo Mantsopa Local Municipalityo Nketoana Local Municipality

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Municipal Public Accounts Committees (MPAC’S) (Cont…)

– Dihlabeng Local Municipality– Maluti a Phofung Local Municipality– Fezile Dabi District Municipality with the following Local Municipalities sharing in the

Committeeo Mafubeo Ngwathe o Metsimaholoo Moqhakao Setsotso

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Management Support Program

• Agreements concluded with Individuals and Service Providers for deployment to selected Municipalities to strengthen and expand available capacity towards achieving and maintaining Clean Audits.

• Municipalities includes the following:oNala Local MunicipalityoMatjhabeng Local MunicipalityoNaledi Local MunicipalityoMohokare Local MunicipalityoSetsoto Local Municipality

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Management Support Program - Achievements• NALA LOCAL MUNICIPALITYArrears Annual Financial Statements for 2009/10 and 2010/11 completed and AuditedArrears Annual Financial Statements for 2011/2012 75% complete. To be submitted to AGSA 30

June 2013Stable Financial Management System implemented and administration updated20 months arrears billing resolved. Current billing up to dateR 60 million arrears identified for collection from Business Community and negotiations with some

completedAgreements with Service Providers not in best interest of Council terminated through negotiationsFunctional Organogram for Municipality reviewed and completed – also presented to CouncilCorrect placement of staff currently underwayKPMG Forensic Report implemented with COGTA support and discussions with Public Protector

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Management Support Program – Achievements (Cont…)• SETSOTO LOCAL MUNICIPALITY2012/2013 Audit Opinion improved to Qualified – 2011/2012 Audit Opinion was AdverseSupport was provided through IMESA partnership to provide Municipality with GRAP 17

Compliant Infrastructure Asset RegisterMunicipality supported throughout the 2011/2012 MFMA Audit Process – resulted in

improved 2011/2012 Audit OpinionLegal opinions were obtained on some Agreements and those not in best interest of Council

terminated through negotiationsUnauthorised, Irregular, Fruitless and Wasteful Expenditure investigated and

recommendations made to Accounting OfficerMunicipality’s Organogram was reviewed, corrected and to be presented to CouncilSalary levels of Officials was investigated and corrected to bring equity and parity about

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Management Support Program – Achievements (Cont…)• NALEDI LOCAL MUNICIPALITY Municipality supported towards compiling and submitting its 2011/2012 Annual Financial

Statements to AGSASupport provided through IMESA Partnership towards a GRAP 17 Compliant Infrastructure

Asset Register. Further support towards full compliance will be provided in Phase 2 (2013/2014 Financial year)

Municipality was supported through close cooperation with System Vendor to improve on the correct and proper utilisation of the Financial Management System

Accounting errors that could not be resolved for a number of years was investigated and corrected

Unresolved Trial Balance errors over several years were investigated and corrected

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Management Support Program – Achievements (Cont…)• MOHOKARE LOCAL MUNICIPALITY Following civil unrest earlier community consultations were facilitated to improve relations – communication

channels were opened for discussing service delivery issues and contingency plans developed for service interruptions

Municipality supported to address water service challenges in Zastron – funding was obtained to re-furbish or replace obsolete pumps and equipment

A Commonage Management Strategy was developed and implemented to address the issue and risk of stray animals and maximise the potential of stock farmers using communal grazing

A Debt Collection Policy was developed and implemented to improve the collection rateThe Municipality was supported throughout the 2011/2012 MFMA Audit processThe Municipality was supported in negotiations with CENTLEC to improve electricity service. Current Service

Provider Agreement with CENTLEC was referred for legal opinion. Negotiations are under way to re-structure the Agreement in such a manner that Council’s interests are better protected

Municipality is supported to conclude on outstanding issues in respect of Forensic Investigations that are currently in the prosecution process

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Management Support Program – Achievements (Cont…)• MATJHABENG LOCAL MUNICIPALITY Process undertaken to review and curtail unnecessary expenditureAn ongoing process was implemented to review and terminate the services of Service

Providers not yielding positive results/those contracts not in best interest of the CouncilCases were the Municipality litigated in or were litigated against were reviewed in

consultations with Council’s Attorneys to ensure value for money and to settle out of the Court those cases where the merits do not favour the Council

Payment of long outstanding Insurance claims for damages to Council properties were expedited

The Project Management Unit (PMU) that the Municipality outsourced is being investigated following poor performance and mismanagement of projects

A training session for Councillors on Corporate Management and Ethics were facilitated and well received

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Caseware• During 2010/11 and 2011/12 CaseWare Software (compatible with all Municipal Financial

Management Systems) was rolled out to District and Local Municipalities as part of Operation Clean Audit

• The Project yielded a measure of success in improving the quality of Annual Financial Statements • For 2012/13 CaseWare was rolled out in partnership with Provincial Treasury to the remaining

Municipal and Provincial Entities• Training and Implementation for Provincial Entities was completed during 3 May 2012 to 18 May

2012• Training and Implementation for Municipal Entities completed from 28 May 2012 to 1 June 2012• To reinforce previous CaseWare Training and add value to the 2011/12 Annual Financial

Statements of Municipalities 2 Refresher Training Courses were held as follows: 31 May 2012 Bloemfontein01 June 2012 Bethlehem• Training on Software updates and refresher training is again planned for May and June 2013

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IMESA Project• Partnership concluded with Institute for Municipal Engineering of South Africa

(IMESA) in 2011/12 for a Infrastructure Asset Management System solution as currently used by eThekwini Metropolitan Municipality

• Moqhaka, Kopanong, Masilonyana were selected as Pilot Municipalities in 2011/2012• Deliverables included:• Provision of Infrastructure Management System• Provision of training on use of the System• Uploading of available Infrastructure Asset information on System• Providing the Municipality with a GAP – Analysis Report on outstanding matters

beyond Pilot scope to be addressed to be GRAP 17 compliant• Pilots were completed and hand-over made to Municipalities

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IMESA Project (Cont…)• Moqhaka was supported though IMESA to implement findings of GAP Analysis and

Infrastructure Asset Register was fully updated and corrected• Interim Audit is currently conducted by the AGSA in anticipation of the 2012/2013 Audit –

Issues identified in this Audit will be resolved in time for 2012/2013 Audit• IMESA was approached to assist and support Setsoto Local Municipality in the run-up to and

during its 2011/2012 Audit with making its Infrastructure Asset Register GRAP 17 Compliant• Setsoto received lesser qualifications on Infrastructure Asset Register and Audit Opinion

improved from Adverse to Qualified in 2011/2012• Matters of qualification is currently addressed and corrected for 2012/2013 Audit• IMESA also reviewed work done on GAP analysis report of Kopanong, which the Municipality

appointed consultations for Quality review report and recommendations were provided• The intention is to support 10 Municipalities in 2013/2014 with GRAP 17 Compliant

Infrastructure Asset Registers, based on the successes in Setsoto and Moqhaka

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Specific support provided• Assessment of Municipal IDP’s during April 2013• Municipalities assisted with the implementation of PROPAC resolutions:

– Kopanong Local Municipality (17 October 2012)– Lejweleputswa District Municipality (17 October 2012)– Letsemeng Local Municipality (12 October 2012)– Mafube Local Municipality (16 October 2012)– Maluti-a-Phofung Local Municipality (31 October 2012)– Matjhabeng Local Municipality (18 October 2012)– Metsimaholo Local Municipality (25 October 2012)– Moqhaka Local Municipality (9 October 2012)– Nketoana Local Municipality (24 October 2012)– Phumelela Local Municipality (19 October 2012)– Setsoto Local Municipality (14 November 2012)– Thabo Mofutsanyana District Municipality (21 November 2012)– Tokologo Local Municipality (7 November 2012)– Tswelopele Local Municipality (2 November 2012)– Ngwathe Local Municipality (23 October 2012)

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Specific support provided• Financial assistance provided to Municipalities:

Xhariep District Municipality: Funeral cost of Municipal Manager of Naledi Local Municipality to the amount of R50,000 R10 million to cover the budget deficit

Kopanong Local Municipality Compilation of the 2011/2012 Annual financial statements to the amount of R2,884,413.26

Naledi Local Municipality Chief Financial Officer’s salary to the amount of R720,000 Valuation Roll retention amount of R12,600

Mohokare Local Municipaltiy Salaries for the Municipal Manager, Chief Financial Officer, Director: Corporate and Director: Technical to the amount of R2,775,200 Water pumps to the value of R1,111,000

Letsemeng Local Municipality Chief Financial Officer’s salary to the amount of R1,060,000

Setsoto Local Municipality Municipal Manager’s salary to the amount of R500,000

Nala Local Municipality Legal cost – KPMG report amounted to R2,886,174 Financial management system to the amount of R1,000,000 Compilation of 2010/2011 Annual financial statements to the amount of R2,000,000

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Specific support provided

• Municipalities assisted with the implementation of the Municipal Property Rates Act: There are 5 Valuation Appeal boards which are remunerated by this Department. A hearing took place on 23 April 2012 at

Matjhabeng Local Municipality to finalise all objections and appeals. Hearings were also held at Moqhaka Local Municipality on 18 – 19 September 2012

Hands-on support was given to the following Municipalities that needed assistance with the applications for extension: Nala Local Municipality Kopanong Local Municipality Mantsopa Local Municipality Setsoto Local Municipality Phumelela Local Municipality Tokologo Local Municipality Ngwathe Local Municipality Metsimaholo Local Municipality and Masilonyana Local Municipality

National COGTA selected Tswelopele and Metsimaholo Local Municipalities to monitor compliance relating to certain criteria as stipulated in the Act and a meeting was held on18 April 2013 to discuss non-compliance.

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Specific support provided Hands-on support was provided to the following Municipalities:

Mantsopa Local Municipality (22 June 2012 and 16 August 2012) Metsimaholo Local Municipality (5 July 2012, 24 August 2012 and 12 March 2013) Kopanong Local Municipality (17 August 2012, 13 February 2013 and 8 May 2013) Letsemeng Local Municipality (17 August 2012, 19 September 2012 and 21 February 2013) Ngwathe Local Municipality (24 August 2012 and 12 March 2013) Nala Local Municipality (6 March 2013, 7 May 2013 and 23 May 2013) Moqhaka Local Municipalty (8 June 2012) Mangaung Metro Municipality (26 July 2012 and 14 August 2012) Tswelopele Local Municipality (10 August 2012 and 18 February 2013) Dihlabeng Local Municipality (16 October 2012 and 20 February 2013) Tokologo Local Municipality (14 August 2012) Phumelela Local Municipality (12 September 2012) Nketoana Local Municipality (20 February 2013)

The following Municipalities were assisted with property owners’ queries: Masilonyana Local Municipality Manguang Metro Municipality Metsimaholo Local Municipality

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Legal ServicesBy-lawsMunicipalities may choose and adopt by-laws from a set of 43 standard by-laws promulgated by the MEC.The adoption and promulgation of By-laws is however dependent on Council Resolutions. As Council meetings are only held quarterly, it slows down the process considerably. In some cases Councils defer By-laws to the next meeting, whilst other Councils may not consider them at all. In some cases, communities are also not properly consulted during the process and capacity constraints within Municipalities also impact negatively on the process.

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Legal Services (Cont…)

The current status on By-laws is as follows :

•Provincial:-

By-laws promulgated 123By-laws in process 83Total 206•Thabo Mofutsanyana and Local Municipalities:-Promulgated 23In Process 11Total 34

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Legal Services (Cont…)

• Municipal legal compliance:-• All Municipalities were during the previous financial year assessed and

reported on compliance with the Systems Act.• All Municipalities during the new financial year will be assessed and reported

on compliance with the Structures Act.• Municipal Policies:-• COGTA have introduced polices in the different Municipalities.• The adoption of policies depend on Council Resolutions.• Municipal Policies adopted: 450• Adopted Policies in Thabo Mofutsanyana and its Local Municipalities: 114

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Municipal Performance Monitoring

• Working session on the Municipal Systems Amendment Act interpretation conducted in order to ensure that municipalities comprehend with the amendments

• Working session on the Municipal Systems Amendment Act Compliance Tool conducted in order to ensure that municipalities comply with all the prerequisites of the amendment

• Supported municipalities with regards to the reporting reforms, the new reporting template and the oversight report

• COGTA also supported municipalities with regards to developing LGTAS Refocusing and Profiling templates

• Compiled Councillor Competency Profile report which will assist in developing capacity building initiatives for municipalities

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MIG Expenditure: 30 April 2013

30 April 2013 Expenditure Target: 82%

Allocation Expenditure % Balance2011/2012 Roll over amount

Expenditure Balance

Letsemeng (FS161) 22 090 000.00 13 673 632.05 62% 8 416 367.95

Kopanong (FS162) 23 521 000.00 19 651 828.43 84% 3 869 171.57

Mohokare (FS163) 18 840 000.00 13 595 668.26 72% 5 244 331.74 12 482 102.70 - 12 482 102.70

Naledi (FS171) 17 163 000.00 9 248 721.30 54% 7 914 278.70 4 835 400.00 - 4 835 400.00

Xhariep (DC16) - -

Masilonyana (FS181) 36 782 000.00 22 406 591.67 61% 14 375 408.33

Tokologo (FS182) 21 658 000.00 17 238 112.02 80% 4 419 887.98

Tswelopele (FS183) 30 344 000.00 26 578 775.24 88% 3 765 224.76

Matjhabeng (FS184) 200 030 000.00 139 476 927.50 70% 60 553 072.50

Nala (FS185) 55 367 000.00 39 933 776.11 72% 15 433 223.89 17 918 495.39 - 17 918 495.39

Municipality

Expenditure vs MIG Allocation Roll overs (2011/2012)

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MIG Expenditure: 30 April 2013 (Cont…)Lejweleputswa (DC18) - -

Setsoto (FS191) 76 379 000.00 44 057 736.24 58% 32 321 263.76 16 925 000.00 12 001 091.19 4 923 908.81

Dihlabeng (FS192) 51 733 000.00 38 261 586.22 74% 13 471 413.78

Nketoana (FS193) 34 018 000.00 20 648 760.81 61% 13 369 239.19 5 769 455.37 - 5 769 455.37

Maluti-a-Phofung (FS194) 207 842 000.00 142 767 088.81 69% 65 074 911.19

Phumelela (FS195) 26 624 000.00 17 253 806.56 65% 9 370 193.44

Mantsopa (FS173) 27 625 000.00 20 580 631.58 75% 7 044 368.42

Thabo Mofutsanyana (DC19)

Moqhaka (FS201) 46 897 000.00 37 018 773.18 79% 9 878 226.82

Ngwathe (FS203) 50 441 000.00 22 456 935.49 45% 27 984 064.51 17 100 000.00 9 204 795.19 7 895 204.81

Metsimaholo (FS204) 47 118 000.00 43 525 252.08 92% 3 592 747.92

Mafube (FS205) 25 841 000.00 16 649 690.28 64% 9 191 309.72

Fezile Dabi (DC20) - -

Provincial Total 1 020 313 000.00 705 024 293.83 69% 315 288 706.17 75 030 453.46 21 205 886.38 53 824 567.08

* Roll over not approved by National Treasury (Mohokare, Naledi, Nala, Nketoana)

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MIG SUPPORT 2012/2013 FINANCIAL YEAR

The Directorate Municipal Infrastructure, Planning and Support, supported the following 13 Municipalities trough individual intervention meetings to assist with project planning, project preparation and achievement of expenditure targets. The meetings are normally attended by the Municipal Manager, CFO and Technical Director/PMU Manager.Ngwathe MatjhabengNala NketoanaLetsemeng MohokareNaledi MasilonyanaSetsoto MantsopaKopanong DihlabengMaluti a Phofung

All 19 Municipalities were also supported trough 49 one to one working sessions to assist with the submission of accurate DORA reports

MIG expenditure was further monitored trough 4 Quarterly MIG meetings held with all 19 Municipalities.

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KPMG Forensic Report: Nala

Background

• Nala received a very negative Audit Report for 2008/09• Section 139 (Constitution) Intervention followed (Dec 2009)• Transaction verification conducted as part of the Intervention• Decided to focus further investigations on 15 Projects• Main emphasis on SCM policy and associated process• During investigation also diverted to some other allegations

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KPMG Forensic Report: Nala (Cont…)

Approach to Investigation

1. Conducted Interviews with:• Creditors selected from the database where possible

irregularities were identified in the scoping review.• Officials in the SCM department to obtain an understanding of

the SCM policy and its application.• Members of the community that were identified as possibly

having received irregular payments. • Individuals forming part of the tender process.

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2. Site Inspections:• Undertook site inspections to verify that work claimed and paid for was completed3. Conducted Searches:•Searched the SCM department after it became evident that all requested information had not been handed over to the investigation team.•Searched other Offices for missing documentation.4. Analysed and Perused:•Tender documentation of selected tenders to confirm that the selection processes followed was in terms of municipal policies•Minutes of tender meetings relating to the selected tenders

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KPMG Forensic Report: Nala (Cont…) Mandate of the Investigation:• Integrated Municipal Financial Management System• Bucket Eradication Program• Waste Water Treatment Plant• Kgotsong Paved Road Phase 1 – 3• Monyakeng Paved Road Phase 1 – 3• Kgotsong Multi Purpose Centre• Valuation Roll• Upgrading of the Wesselsbron Taxi Rank Phase 2• Electrification of 500 households• Meter reading services• Kgotsong landfill site• Monyakeng landfill site• Naledi Clinic

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Summarised Findings:

• Contravention of the SCM Policy • Manipulation of the SCM process• Lack of performance by the contracted parties• Amendment of documents prepared and utilised in the SCM process• Breaches of Internal control procedures• Poor value for money• Contravention of the MFMA

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KPMG Forensic Report: Nala (Cont…) Other alleged issues:

•Allegations of premature invoicing to solicit bribes•Documentation destroyed in anticipation of Investigation•Payments made to temporary workers (R705 000.00) cannot be confirmed and substantiated•207 vehicles fueled at cost of Municipality (R160 000.00) that do not appear on vehicle list provided to Investigators•No ghost employees found – instances where some staff received duplicate payments•Security wall at Mayoral Residence – Council not specify an amount (R230 000.00 paid to contractor) – SCM not followed•Credit cards – source documentation not always available and could not be provided with Policy •No SCM followed to provide Mayoral vehicle

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Current Implementation Status •Report presented to Council on 14 November 2011•Disciplinary proceedings were instituted against former Municipal Manager and Manager Technical Services – both no longer in Service•Disciplinary proceedings ongoing against Official implicated in misuse of vehicles and petrol cards•Criminal proceedings commenced, dossier opened with SAPS (Hawks Pretoria) Case No. CAS 167/01/2012, Investigating Officer, Warrant Officer E Crouse

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Current Implementation Status

•Full Report also handed to National Treasury who pledged support with further expertise and investigative work, if required•Speaker re-paid R 10,000 back misappropriated on Council’s Credit Card•In process of appointing Quantity Surveyor to access cost of wall erected at former Mayor’s private residence with a view to recover •Preliminary “means assessments” done on contractors who did not perform. Nulla bona returns expected in some cases, but Department is negotiating with private legal firms to support Nala with civil recoveries

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Current Implementation Status

•Payroll review / investigation under way as part of Financial Recovery with a view to discipline staff involved and recover irregular salary related expenses•Public Protector visited Nala on 6 February 2013 and expressed satisfaction with progress thus far made. Also pledged assistance and support in resolving outstanding issues

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Ramathe - Fivaz Forensic Report: Matjhabeng

Background:

•Matjhabeng Local Municipality appointed Latitude and Ramathe-Fivaz Forensic and Investigation Accounting Services to investigate root causes of previous processes undertaken which did not result in desired outcomes / organisational efficiency

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Ramathe - Fivaz Forensic Report: Matjhabeng (Cont…)Approach to the Investigation

1.Conducted Interviews with:•Senior Management of Municipality•Other Municipal Officials identified to provide information on allegations of irregularities•Other parties outside the Municipality who held interest or information or benefited in an irregular manner2. Analysed and Perused•Relevant legislation, policies and procedures, Codes of Conduct, Organisational Structures and directives•Relevant records and supporting documentation both hard copy and electronic

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Ramathe - Fivaz Forensic Report: Matjhabeng (Cont…)

3. Site Inspections

• Undertook site inspections and verifications of work claimed and paid, also verified Municipal property and assets

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Ramathe - Fivaz Forensic Report: Matjhabeng (Cont…)Mandate For The Investigation

• Issues of false Rate Clearance Certificates• Cash pay points• Bad debts and debts written off• Mechanical Stores• Electrical Stores• Supply Chain Management• Sale of land and assets• Waste Management• Verification of Municipal properties

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Ramathe - Fivaz Forensic Report: Matjhabeng (Cont…)Summarised Findings:

• The Municipality suffered loss and damage on account of;– Incompetence in Supply Chain Management– The absence of adequate Contract Management– Non-compliance with the Local Government Legal Framework governing

operations– Reliance on poorly structured Service Provider Agreements and incorrect

legal opinions– Incompetence in the Finance Department– Poor oversight– Weak Project Management especially on infrastructure projects

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Ramathe - Fivaz Forensic Report: Matjhabeng (Cont…)Position of the former Municipal Manager

• Municipality and its operations were adversely affected by historical events and transactions which placed it in financial distress and resulted in losses as contracted services were not of desired standard

• Certain agreements were terminated through negotiations and / or arbitration before the investigation, while others were terminated as such based on findings of the investigation

• It became also apparent that the Municipal Manager was under political pressure at times to accede to and / or effect certain decisions, as Councillors threatened to remove him from office

• In particular instances the Municipal Manager could also not rely on staff, as his signature on some agreements were found to have been forged

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Ramathe - Fivaz Forensic Report: Matjhabeng (Cont…)Position of the former Municipal Manager (cont.)

• Sensitive and confidential information were leaked to the media and other parties in an ongoing manner, which further compromised the Municipality and the Municipal Manager

• The Municipal Manager was moved into a position where he had to rely on wanting advice from persons that caused adverse publicity for the Municipality in the first place

• The Municipal Manager was increasingly isolated in his efforts to remedy difficulties facing the Municipality

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Section 106 Investigations (Selesho Commission): Matjhabeng

Background

• Commission constituted to investigate:

– Non compliance persistently reported– Concerns on Matjhabeng’s ability to fulfill statutory obligations– Concerns about institutional instability and governance in general– Concerns on MIG implementation– Possible mal-administration, fraud and corruption

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Approach to the Investigation:

• Set up in terms of Sec 106 of the MSA• Provisions of Commissions Act of 1947 also applicable• Provisions of Free State Commissions Ordinance, 1994 further applied• Commission could:– Order submission of documentation / vouchers/ objects or materials– Order or if need be, subpoena witnesses to appear before it

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Section 106 Investigations (Selesho Commission): MatjhabengMandate for the Investigation:

• The Commission conducted inquiries in to the following:– Performance of Council– Interface between Council and Administration– Administrative capacity and capability– Implementation of MIG Projects– Supply Chain Management– Outcome of support provided by the Service Provider, Latitude to the Municipality– Assessing the implementation status of Ramathe Fivaz Forensic Report– Allegations of fraud and corruption made against Political Office Bearers and

Senior Officials

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Section 106 Investigations (Selesho Commission): MatjhabengSummarised Finding:

• Council– Council did execute its statutory responsibility, but Standing Rules and Orders not

properly regularised– However, some critical governance structures / committees such as Audit Committee and

Oversight Committee not fully functional– Although good governance frameworks existed, these were not always fully enforced– Council did not provide sufficient leadership and oversight over administration to a point of

disfunctionality– Council failed to enforce accountability from Senior Management over an extended period

of time– Councillors meddled and interfered in the Administration

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Summarised Finding (cont):

• Council and Administration Interface– Structures, systems, frameworks etc. to regulate interface were in place

but not observed– Council and Administration interface depended on relations between

Executive Mayor and Accounting Officer– 2 Executive Mayors tended to encroach on responsibility and authority of

Accounting Officer– Councillors meddled and interfered in administration without sanction from

Council


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• Administrative capacity and capability– 50% vacancy rate and uneven spread of capacity– High turn-over rate at Senior Management level with slow replacement rate. Critical

position of Chief Financial Officer vacant for past 5 years, except briefly filled by irregular appointment

– Poor culture of public service and lack of supervision and management– Weak strategic planning capabilities– Culture of staff conflict deviates attention and energy away from priorities (especially

factional conflicts)– Inefficient business processes and delayed implementation– Shortage of equipment, material and utilities, repairs and maintenance on especially

infrastructure found wanting

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• MIG and Infrastructure– Chronic backlogs in housing, water, sanitation etc.– Many MIG Projects implemented over past 4 years– Some contracts awarded and paid irregularly– Poor project management and subsequent losses and damages now

addressed by PMU management consultancy

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Section 106 Investigations (Selesho Commission): MatjhabengSummarised Finding (cont):

• Supply Chain Management– The Commission findings corresponds with those of Ramathe Fivaz

Forensic Report– SCM consistently undermined in Municipality– Bids awarded without following due SCM processes– Contracts were entered into which were in contravention of Local

Government Legislation– SCM Unit poorly managed and staffed– Contracts and Contract Management poorly executed and resulted in loss

and damage for Municipality

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Section 106 Investigations (Selesho Commission): MatjhabengSummarised Finding (cont):

• Latitude– Helpful to extent that assisted with institutional assessment, long-term vision and

financial recovery plan– Some value added, but many challenges remains– Contract could have been better managed - Commission recommended its

termination. No longer on site, but considers claims against Council– Clash of interest when Director of Latitude appointed as Chief Financial Officer– Relationship terminated since and Municipality successfully defended litigation

from Latitude Director appointed as Chief Financial Officer and dismissed shortly afterwards

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• Ramathe Fivaz Forensic Report– Identified risk areas and financial losses– Identified weaknesses in financial management – Identified weaknesses in Contract Management– Some counter-productive agreements cancelled through negotiations and

arbitrations

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Allegations of mal-administration, fraud and corruption• Former Executive Mayor– Findings point towards possible administrative interference in some

cases– Commission could not be provided with substantial evidence to proof

allegations of fraud and corruption• Municipal Manager and Senior Managers– Some infringements of MFMA provisions (referred to Ramathe Fivaz for

further investigation) majority of allegations could not be sustained

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Section 106 Investigations (Selesho Commission): Matjhabeng• Current Status of Ramathe Fivaz Forensic Report and Selesho Commission

Report– Ramathe Fivaz Report presented to Council on 15 November 2011– Handed over to SAPS (Hawks) Colonel Dlova, Case number CAS 155/07/2011– Also handed over to Special Investigation Unit (SIU), Inspector D Human– Report remains a Draft Report at this stage, requires further criminal investigative work

as discussed with the SAPS– Ramathe Fivaz successor Company , Open Water Advanced Risk Solutions presented

a proposal to this effect to Accounting Officer and Executive Mayor, still awaiting approval

• Selesho Commission Report– Was presented to Council by MEC on 15 November 2011– Detailed recommendations also made in respect to remedial actions to be considered

and implemented on Commission’s findings

THANK YOU

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