presentation to the select committee on finance date: 16 july 2014 part 1: cogta's mandate

PRESENTATION TO THE SELECT COMMITTEE ON FINANCE

Date: 16 July 2014

PART 1: COGTA'S MANDATE

CONTENTS

1. Constitutional foundation of CoGTA’s mandate

2. Legislative mandate of CoGTA

3. CoGTA’s mandate as a Ministry

2

CONSTITUTIONAL FOUNDATION OF COGTA’S MANDATE

The COGTA Ministry comprises the Department of Cooperative Governance and the Department of Traditional Affairs

Key elements and Constitutional foundations of CoGTA’s mandate: System of Cooperative Government (Chapter 3 of

the Constitution); Bill of Rights (Chapter 2); Provinces (Chapter 6 of the Constitution); Local Government (Chapter 7 of the Constitution); & Traditional Leaders (Chapter 12 of the Constitution).

3


System of Cooperative Government: Chapter 3 [section 40 (1)] of the Constitution constitutes government as National, Provincial and Local spheres, which are distinctive, inter-dependent and interrelated;

Collaboration between and among national departments, provincial departments and municipalities is crucial:

Section 40 (2) enjoins all spheres of government to observe and adhere to the principles of cooperative government and intergovernmental relations set out in section 41;

Chapter 7 [section 151(1)] provides for the establishment of municipalities for the whole of the territory of the Republic;

Section 154 (1) of the Constitution obliges National and Provincial government to support and strengthen the capacity of municipalities to manage their own affairs, to exercise their powers and perform their functions”.

4


The mandate of the Department of Traditional Affairs is derived from:

Sections 211 and 212 of the Constitution which stipulates that:

“The institution, status and role of traditional leadership, according to customary law, are recognized, subject to the Constitution”;

“National legislation may provide for a role for traditional leadership as an institution at local level on matters affecting local communities”.

Section 30 of the Constitution, on Language and Culture: “everyone has the right to use the language and participate in the cultural life of their choice, but no-one exercising these rights may do so in a manner inconsistent with any provision of the Bill of Rights.”

Section 31 of the Constitution on Cultural, Religious and Linguistic Communities: “persons belonging to a cultural, religious or linguistic community may not be denied the right, with other members of that community to enjoy their culture, practice their religion and use their language; to form; join or maintain cultural, religious and linguistic associations and other organs of civil society.”

5

Constitutional Foundation of COGTA’s mandate

Local government at coalface – at the service of citizens

• The Constitution defines the Republic of South Africa as one, sovereign, democratic state founded on, among others, the following values:

o Human dignity, the achievement of equality and the advancement of human rights and fundamental freedoms;

• The Constitution contains a Bill of Rights which reaffirms the democratic values of human dignity, equality and freedom;

• The Bill of Rights provides everyone with, among others, the right to human dignity and an environment that is not harmful to their health and wellbeing, and access to water and adequate housing.

• The Constitution enjoins the State to respect, protect and fulfil the rights in the Bill of Rights.

6

LEGISLATIVE MANDATE OF COGTA

DEPARTMENT OF COOPERATIVE GOVERNANCE

DEPARTMENT OF TRADITIONAL AFFAIRS

Municipal Property Rates Act, 2004 The Traditional Leadership and Governance Framework Act, 2003

The Intergovernmental Relations Framework Act, 2005

The National House of Traditional Leaders Act, 2009

Local Government Municipal Structures Act, 1998

Local Government Municipal Finance Management Act, 2003

Local Government Municipal Systems Act, 2000

Disaster Management Act, 2002

CoGTA will give effect to it’s mandate through the development of policies and legislation with regard to local government and traditional leaders within the legislative framework that includes:

7

COGTA’S MANDATE AS A MINISTRY

As the Ministry of CoGTA our primary mandate is to: Develop and monitor the implementation of national

policy and legislation seeking to transform and strengthen key institutions and mechanisms of governance to fulfill their developmental role.

Develop, promote and monitor mechanisms, systems and structures to enable integrated service delivery and implementation within government.

Promote sustainable development by providing support to and exercising oversight over provincial and local government.

.

8

Fiscal Challenges in Municipalities and Support/Interventions in relations the instruments administered by the Department

Part 2: Fiscal Investment and Challenges

OUTLINE OF PRESENTATION1. Introduction

2.Constitutional Provisions

3.Equitable Share to municipalities per province

4.Municipal Infrastructure Grant per province

5.MIG Expenditure

6.Debt Management

7.Challenges faced by municipalities

8.MISA role in addressing the challenges

9.Audit outcomes for municipalities

10.Interventions/Actions planned

11.Conclusions

10

INTRODUCTION

We will seek to provide a summary of the investment that flows directly and indirectly to municipalities aggregated per province.

We will also provide some of the challenges experienced in the implementation of fiscal instruments that we administer and how these are mitigated through MISA.

We will look at the Debt owed to municipalities by Households, Business, Government and others aggregated per province

We will also provide audit outcomes summary for the last four financial years and the plans to support municipalities to improve on their audit outcomes.

The audit outcomes of the 12/13 financial year will not be in the presentation because AGSA is releasing them at of July 2014

11

Constitutional Provisions

Section 214 provide for the equitable shares and allocations of revenues raised nationally

These revenues are shared or distributed conditionally or unconditionally through the Division of Revenue Act which is passed annually

Section 227(1) of the Constitution provides for the entitlement of provinces and LG to the equitable share of national raised revenue.

This is so to enable it to provide basic services and perform functions allocated to it.

Section227(1)(b) further provides for allocations that may be received from national government revenue, either conditionally or unconditionally

LG receives, among others, the LGES and the Municipal Infrastructure Grant, with the later being conditional

12

The Intergovernmental Fiscal System

Chapter 13 of the Constitution sets out the guiding principles on intergovernmental financial matters including treasury control, the equitable division of revenue between the 3 spheres of government and the fiscal powers of provincial and local government among other matters.

The South African Intergovernmental Fiscal System has been in place now for the past 18 years.

It must be mentioned that the current system allocate almost 9% of nationally raised revenue to LG and around 90% is shared between national government and provincial governments

Some commentators are of the view that the system has matured and needs minor adjustments to address some of its rigidities.

There is also a contrary view that suggests that the system served South Africa well during its transitional phase and needs a thorough review13

Principles guiding the Intergovernmental Fiscal System The system should be consistent with the Constitution; The system should be clear, consistent and stable; The system should be implementable and administratively

practical; Powers and functions should be aligned to expenditure

responsibilities; The system should allow for ease of regulation and oversight;

and Provision must be given to essential or basic services.

14

CONDITIONAL GRANTS ALLOCATION TO MUNICIPALITIES OVER THE MTEF

15

GRANT 2014/15 (R’000)

2015/16 (R’000)

2016/17 (R’000)

Municipal Infrastructure Grant 14 683 835 15 098 070 15 766 819

Integrated City Development Grant 255 000 266 000 292 950

Urban Settlement Development Grant 10 284 684 10 654 773 11 231 861

Neighbourhood Development Partnership Grant (Capital grant) 591 179 600 000 631 800

Public Transport Infrastructure Grant 4 968 029 5 097 881 5 104 052

Rural Household Infrastructure Grant 47 624 51 000 124 599

Rural Roads Asset Management Grant 75 223 97 763 102 944

Integrated National Electrification ( Municipal )Programme 1 104 658 2 056 090 2 165 063

Municipal Water Infrastructure Grant (SCHEDULE 5) 534 150 1 380 205 1 302 002

Municipal Disaster Recovery Grant 37 302 21 805

Regional Bulk Infrastructure Grant 3 986 896 4 221 654 4 623 602

Integrated National Electrification ( Eskom)Programme 2 948 037 3 680 043 3 875 085

Neighbourhood Development Partnership Grant (Technical Assistance) 58 300 55 000 52 000

Rural Households Infrastructure Grant 65 500 67 328

Municipal Water Infrastructure Grant (SCHEDULE 7) 524 826 1 291 729 1 511 545

TOTAL (Rounded figures) 40 165 000 44 639 000 46 784 000

LG EQUITABLE SHARE ALLOCATION OVER THE MTEF

PROVINCE 2014/15 (R’000) 2015/16 (R’000) 2016/17 (R’000) TOTAL PER PROVINCE(R’000)

Eastern Cape6 858 777 7 758 145 7 953 651

22 570 573

Free State3 324 604 3 403 269 3 340 251 10 068 124

Gauteng7 734 333 8 499 029 9 324 909 25 558 271

Kwazulu Natal8 653 044 9 868 168 10 353 912 28 875 124

Limpopo5 843 601 6 957 200 7 327 712 20 128 513

Mpumalanga3 995 937 4 514 085 4 747 032 13 257 054

Northern Cape1 266 168 1 373 651 1 405 426 4 045 245

North West3 751 372 4 301 590 4 528 631 12 581 593

Western Cape3 062 309 3 532 561 3 887 182 10 482 052

TOTAL (ES)44 490 000 50 208 000 52 869 000 147 567 000

MUNICIPAL GRANTS (TOTAL) 40 165 000 44 639 000 46 784 000 131 588 000

TOTAL (ES & GRANTS) 84 655 000 94 847 000 99 653 000 279 155 00016

MUNICIPAL INFRASTRUCTURE GRANT (MIG) ALLOCATION TO MUNICIPALITIES OVER THE 2014 MTEF

PROVINCE 2014/15 (R’000) 2015/16 (R’000) 2016/17 (R’000) TOTAL PER PROVINCE(R’000)

Eastern Cape 2,916,227 3,022,805 3,158,498

9,097,530

Free State 813,654 724,060 754,408

2,292,122

Gauteng 453,318 461,648 482,230

1,397,196

Kwazulu Natal 3,207,141 3,322,553 3,468,354

9,998,048

Limpopo 3,064,058 3,202,931 3,350,444

9,617,433

Mpumalanga 1,707,250 1,766,529 1,847,404

5,321,183

Northern Cape 450,944 452,351 467,659

1,370,954

North West 1,598,850 1,658,492 1,733,431

4,990,773

Western Cape 472,393 486,701 504,391

1,463,485

TOTAL (MIG) 14,683,835 15,098,070 15,766,819

45,548,724 17

MUNICIPALITIES’ PROJECTED OWN REVENUE(OPERATING) 2014/15 FINANCIAL YEARS

18

PROVINCE

Billed Property

Rates

Billed Service Charges

Electricity


Water

Billed Service Charges Waste

water Mng

Billed Service Charges Waste Mng

Billed Service Charges Other

Other Revenue Total Revenue

Eastern Cape 2,664,310

6,040,241 1,546,675 833,982 621,733 433,310 3,918,798 16,059,049

Free State 1,492,572 4,889,730 1,514,124 580,676 460,338 67,426 2,477,669 11,482,536

Gauteng 17,273,372 40,793,785 12,143,168 4,818,729 3,709,880 607,932 8,683,585 88,030,451

Kwazulu Natal 8,395,219

16,490,610 4,618,993 1,300,222 962,310 220,371 4,917,087 36,904,812

Limpopo 903,973 2,325,449 766,666 165,241 175,494 55,107 1,132,923 5,524,853

Mpumalanga 1,293,282

2,596,181 847,257 261,385 346,589 19,614 1,107,219 6,471,527

Northern Cape 1,215,561

3,379,848 1,247,141 444,461 359,480 199,645 1,377,446 8,223,581

North West 727,361 1,541,233 544,479 214,222 178,953 62,633 452,284 3,721,165

Western Cape 7,798,393

15,283,823 3,803,554 2,018,288 1,528,748 271,663 4,793,357 35,497,826

TOTAL 41,764,042

93,340,900

27,032,058 10,637,206 8,343,525 1,937,701 28,860,367

211,915,800

MUNICIPALITIES’ PROJECTED OWN REVENUE (OPERATING) 2015/16 FINANCIAL YEARS

19

PROVINCE Billed Property

Rates


Electricity


Water


Waste water Mng


Waste Mng


Other

Other Revenue

Total Revenue

Eastern Cape

2,891,774

6,508,968

1,703,016 922,717 687,011

468,449 4,119,115

17,301,050

Free State 1,598,981

5,364,629

1,633,915 622,629 492,280

81,200 2,639,414

12,433,048

Gauteng 18,660,855

44,384,853

13,138,246 5,146,789 3,995,851

647,854 9,203,321

95,177,769

Kwazulu Natal

8,918,765

17,887,578

4,917,231 1,404,947 1,034,569

235,713 5,252,274

39,651,076

Limpopo 960,040

2,499,391

815,789 179,444 186,147

56,301 1,069,690

5,766,801

Mpumalanga 1,393,632

2,680,218

986,772 313,799 382,021

20,655 1,213,320

6,990,418

Northern Cape

1,291,116

3,621,624

1,334,058 471,057 380,635

210,439 1,344,478

8,653,407

North West 785,089

1,661,912

583,142 225,937 192,719

29,618 475,254

3,953,673

Western Cape

8,325,126

16,607,118

4,175,881 2,216,853 1,661,531

294,956 5,064,117

38,345,583

TOTAL 44,825,377

101,216,291

29,288,050 11,504,172 9,012,764

2,045,185 30,380,984

228,272,823

Transfers and own revenues for different types of municipalities, 2012/13 Budgets

20

ProvinceAllocated

09/10 (R'000)Expenditure

(R'000)Expenditure

%

Balance Unspent (R'000)

Allocated10/11 (R'000)

Expenditure(R’000)

Expenditure% 10/11

Balance Unspent

10/11(R’000)

Eastern Cape 1,892,079 1,720,894 91.0% 171,182

2,193,444

2,085,653 95.09% 107,791

Free State 793,030 683,381 86.2% 109,646

869,071

754,001 86.76% 115,070

Gauteng 283,204 219,973 77.7% 63,233

379,349

326,514 86.07%

52,835

KwaZulu Natal 1,872,214 1,827,929 97.6% 44,317

2,160,896

1,954,584 90.45% 206,312

Limpopo 1,465,222 1,402,970 95.8% 62,250

1,688,104

1,358,280 80.46% 329,824

Mpumalanga 928,752 734,141 79.0% 194,610

978,689

799,638 81.71% 179,051

Northern Cape 335,710 241,438 71.9% 94,271

353,286

275,013 77.84%

78,273

North West 896,277 708,910 79.1% 187,369

989,881

680,629 68.76% 309,252

Western Cape 272,185 272,185 100.0% 0

312,086

311,609 99.85%

477

TOTAL 8,738,672 7,811,821 89.4% 926,878

9,924,806

8,545,922 86.11% 1,378,884

National Overview of MIG expenditure 2009/10-2010-11National Overview of MIG expenditure 2009/10-2010-11

National Overview of MIG expenditure 2011/12-12-13National Overview of MIG expenditure 2011/12-12-13

PROVINCEAllocated

11/12 (R'000)

Expenditure to date

(R'000)

Expenditure as %

allocation


Allocated 12/13

(R'000)

Expenditure (R'000)

Expenditure as %

allocation


Eastern Cape

2,405,727

2,019,91

9 83.96%

385,807

2,918,290

2,580,727 88.43%

337,563

Free State 841,111

767,148 91.21%

73,962

1,020,313

964,527 94.53%

55,786

Gauteng 399,532

317,715 79.52%

81,816

484,655

446,994 92.23%

37,661

KwaZulu Natal

2,598,937

2,181,93

7 83.95%

416,998

3,152,666

2,897,792 91.92%

254,874

Limpopo

2,030,304

1,485,01

3 73.14%

545,289

2,462,883

1,479,424 60.07%

980,988 Mpumalanga

1,177,082

873,070 74.17%

304,009

1,427,874

982,951 68.84%

444,922

Northern Cape

424,909

299,602 70.51%

125,301

515,429

381,218 73.96%

134,211

North West

1,190,545

931,278 78.22%

259,267

1,444,203

1,130,014 78.24%

314,189 Western Cape

375,358

372,736 99.30%

2,622

455,320

455,320 100.00%

0

TOTAL

11,443,505

9,248,41

8 80.82%

2,195,071

13,881,633

11,318,967 81.54%

2,560,194

2013/14 MIG EXPENDITURE AS AT END MAY 2014

ProvinceAllocated

(R'000)

Transferred to date (R’000)

Expenditure to date (R’000)

Expenditure as %

allocation

Expenditure as %

transferred

Balance Unspent (R’000)

Eastern Cape

2,952,906

2,952,906

2,474,256 83.79% 83.79%

478,650

Free State

968,682

968,682

805,321 83.14% 83.14%

163,361

Gauteng

456,461

456,461

333,781 73.12% 73.12%

122,680 KwaZulu Natal

3,193,259

3,193,259

2,586,054 80.98% 80.98%

607,205

Limpopo

2,650,869

2,650,869

1,659,505 62.60% 62.60%

991,364

Mpumalanga

1,565,716

1,565,716

1,145,332 73.15% 73.15%

420,384 Northern Cape

499,123

499,123

322,264 64.57% 64.57%

176,859

North West

1,481,743

1,481,743

1,094,073 73.84% 73.84%

387,670 Western Cape

455,688

455,688

346,979 76.14% 76.14%

108,709

TOTAL

14,224,447

14,224,447

10,767,565 75.70% 75.70%

3,456,882 23

MIG expenditure comparison

The MIG expenditure over the past four financial years has been always been above 80%

The MIG allocation quantum has been increasing over the years and the balance unspent has always been an issue of concern;

The support initiatives like Siyenza manje were introduced to support municipalities

Challenges contributing to under-expenditure were identified-which will be outlined in the slides below

The establishment of a Special Purpose Vehicle to support municipalities to spend on their infrastructure was muted around 2009 and culminated in the establishment of MISA

24

Lack of municipal readiness to address extension of basic services to areas where there are no services, especially with regards to project prioritisation and registration.

Lack of information regarding basic services backlogs per ward/village in targeted municipalities.

Non-functional water schemes, resulting to inconsistence water supply. Outdated sector plans to direct future MIG and other funds to areas of

high priorities. Poor project preparation and packaging to achieve efficiency and

attraction of alternative funding Lack of contract and project management skills Poor financial management threaten the sustainability and viability of

most municipalities. Poor Supply Chain Management Processes with regard to

procurement leading to delays in project implementation and poor spending on infrastructure grants

Lack of infrastructure asset management practices in particular, GRAP 17 asset registers

MIG expenditure challenges which were further confirmed by the diagnostic conducted by MISA

23-04-1925

Overloaded Waste Water Treatment Works that require refurbishment

Urgent need for road classificationDeteriorated road conditions on both municipal and provincial

roads Landfill sites not licensed and the Municipalities require

support with the licensing process.Municipalities requires assistance with the development of

operations and maintenance plansHigh water and electricity losses due to illegal connections,

vandalism of infrastructure assets and problematic billing systems


23-04-1926

Severe lack of skilled personnel in infrastructure and service delivery units.

Lack of credible Master Plans for the development of service delivery infrastructure.

Inadequate focus on maintenance and operations of existing infrastructure remains a huge problem across the board.

Municipalities unable to attain blue drop and green drop certification.

Lack of implementation of municipal by lawsPrevalent governance problems affecting service delivery


23-04-1927

MISA’s Role and Responsibility in relation to challenges identified

23-04-1928

Flowing from the mandate, MISA’s primary role and responsibilities are:

To support municipalities to conduct effective infrastructure planning;To support and assist with the delivery of infrastructure in municipalities; To support and assist with operation and maintenance of infrastructure in municipalities; and To build the capacity of municipalities to undertake effective planning, delivery, operations and management of municipal infrastructure

MISA support initiatives

• We are currently through MISA, providing support to 121 municipalities in the country. Of these, a total of 92 municipalities are from the 108 municipalities approved by Cabinet and an additional 29 municipalities identified by provinces.

• We have 69 Technical Consultants across municipalities 63 of which are allocated within provinces,

• A total of 33 PSPs are currently supporting 92 municipalities on various areas of infrastructure planning, development and management.

• We have noticed that there are a number of interdependencies that require attention for municipalities to be able to effectively spend, like skills, governance aspects relating to proper oversight, recruitment practices etc 29

CURRENT AREAS OF SUPPORT TO MUNICIPALITIES PER PROVINCE

Municipalities Kind of Support

1. Eastern Cape: Alfred Nzo DM, Ntabankulu, Joe Gqabi

DM, Gariep, OR Tambo DM, Port St. Johns, Mhlontlo, KSD, Chris Hani DM, Engcobo, Emalahleni, Sakhisizwe , Amathole, Nxuba, Mbashe, Kouga, Blue Crane, Great Kei, Sundays River, Makana, Koukama, Mbizana, NMBM

• PMU and Project Management Support to fast track MIG expenditure

• Contract Management, O&M Support• Basic Water & Sanitation Services

Support• Audit of existing infrastructure projects.

Spatial Development Plan Reviews

2. Free State: Mohokare, Naledi, Letsemeng, Kopanong, Tokologo, Masilonyana, Nala, Phumelela, Setsoto, Ngwathe, Maluti-a-Phofung.

• PMU and Project Management Support• O&M Support• Unlocking funds for bulk water projects,

Water Conservation and Water Demand Management

• Blue & Green Drop Assessments • Design & Construction

23-04-1930

MISA is providing technical support to municipalities in key areas of infrastructure planning, implementation, operations and / maintenance including strategic integrated planning, as indicated below :



3. Gauteng: Westonaria, Randfontein, Merafong , Emfuleni , Lesedi , Sedibeng DM

• Integrated Asset Management Support• Water & Electricity Loss Reduction

Strategies • O&M Support• Development of Dolomite Risk

Management Strategy (Merafong)• Bucket System Eradication - 58 hh in

Lesedi

4. KwaZulu-Natal: Ugu DM, Umgungundlovu DM, Msunduzi, Mkhambathini, Uthukela DM, Okhahlamba, Imbabazane, Zululand DM, Uphongolo, Umkhanyakude DM, Big Five False Bay, Umhlabuyalingana, Jozini, Mtubatuba, Uthungulu DM, Mthonjaneni, Ilembe, Ndwedwe, Maphumulo, Sisonke DM, Umzimkhulu, Amajuba DM, Umzinyathi DM

• PMU and Project Management Support• Bulk Water Supply – Planning &

Construction of Regional Water Scheme

• Exploration and development of boreholes for water extraction

• Maintenance and refurbishment of water purification works

• Revamping of ageing infrastructure• Dalton Dam Construction• Operations & Maintenance Support• SCM Policy Review

23-04-1931



5. Northern Cape: Renosterberg, Siyancuma, John Taolo, Ga-Segonyana, Joe Morolong, Gamagara, Khai Mai, Kamiesberg

• PMU Support • Land-use Management Systems• Asset Management Support• SCM Systems, Complaints Management

System• Funding Model for Waste Water-Roads-

Electrical-Water Infrastructure• O&M Support• Infrastructure Master Plans to ensure

sustainable infrastructure development• Spatial Development Framework• IDP Assessments

6. Western Cape: Swellendam, Kannaland, Berg Rivier, Cederberg, Witzenberg, Prince Albert

• PMU and Project Management Support (Multiple Infrastructure Projects under implementation),

• O&M Support, Integrated Regional Waste Management Plan

• Asset Management Planning• Infrastructure Funding Models

23-04-1932



7. Limpopo: Lephalale, Tubatse, Musina, Makhado, Ba-Phalaborwa, Tzaneen, Elias Motsoaledi, Maruleng, Sekhukhune DM, Mopani DM, Vhembe DM, Capricorn DM Letaba, Fetakgomo, Ephraim Mohale

• PMU and Project Management Support

• Asset Registers and Asset Management Support

• O&M Support• Water Conservation Demand

Management• Water & Sanitation Policies and SLAs

8. Mpumalanga: Thaba Chweu , Nkomazi, Dr JS Moroka, Thembisile Hani, Chief Albert Luthuli, Dr Pixley Ka Isaka Seme, Mkhondo, Bushbuckridge, Dipaleseng, Goven Mbeki, eMalahleni, Lekwa

• PMU and Project Management Support

• Energy Master Plans• Roads and Storm Water Master Plans

Integrated Waste management Plans• Dolomite Risk Strategies,• Water and Sanitation Asset registers

Environmental Impact Assessments• Geo-technical Studies• By-laws (Technical and Town

Planning)23-04-1933



9. North West: Tswaing, Ratlou, Moretele, Kgetleng Rivier, Mamusa, Moses Kotane, Madibeng, Ventersdorp, Dr Ruth Mompati DM, Lekwa-Teemane, Ngaka Modiri Molema DM

• PMU and Project Management• Infrastructure Asset

Management• Integrated Waste Management

System• Develop Fleet Management

System• Operations & Management

Support

23-04-1934

MUNICIPAL DEBTORS

35

Consumer debtAggregate municipal consumer debts were R93.4

billion as at 31 March 2014. This is R0.1billion more than the R93.3 billion

reported at 31 December 2013. Government’s share of the outstanding debtors

represent 4.3 per cent or R4.1 billion. The largest component relates to households

which accounts for 61.5 per cent or R57.5 billion followed by commercial or business for 20.7% or R19.3 billion and other category of debtors for 13.4% or R12.5 billion.

36

Debtors age analysis by province: March 2014

37

Operation Clean Audit

38

Background

Operation Clean Audit 2014; was launched in 2009 as a specific response programme within the Local Government Turnaround strategy.

At the time 86 of the municipalities audited obtained disclaimers for the 2007/8 financial year and another nine municipalities adverse audit opinions.

39

Operation Clean Audit milestonesThe guiding vision for Operation Clean Audit is that by 2014 all municipalities will achieve unqualified audit opinions in their Annual Financial Statements. The programme milestones to realise the 2014 vision for municipalities were fixed as follows:

Between 2010 and 2011, no municipality and municipal entity will obtain adverse and disclaimer audit opinions.

At least 60% of municipalities and municipal entities will achieve unqualified audit opinions by 2012.

There will be an increase in municipalities and municipal entities achieving unqualified audit opinions to at least 75% by 2013.

100% of municipalities and municipal entities will achieve unqualified audit opinions by 2014.

40

Current status of audit outcomesThe latest audit outcomes for Local Government that have

been released by the Auditor General (AG) pertain to the 2011/12 financial year. The AG is finalising the 2012/13 outcomes for release later this year.

The 2011/12 outcomes reflect that 48% of municipalities and municipal entities achieved unqualified opinions against the 75% target of 2013 . In addition; the adverse audit opinions and disclaimers have not been eliminated. These were set to be eliminated by 2011.

Only 3 provinces have managed to reach the 75% target for 2013 ; these are Gauteng, KwaZulu Natal and Western Cape at 84%, 77% and 85% respectively.

41

What has been achieved since 2009? Enhancing sound financial management•Audit outcomes for the past 4 years indicates a slow uptake from 1 to 9 (3%) out of 278 municipalities receiving Clean Audit outcome for 2008/09 and 2011/12 financial year, respectively. A total of 61 (22%) municipalities have consistently received unqualified audit outcomes over the past 4 years (50% WC, 45% KZN and 41% Gauteng).

•There is a significant reduction in the number of municipalities receiving disclaimers from 113 to 76 between 2008/09 and 2011/12 financial years.

42

Audit Outcome

Changes in the number of audits

between 2008/09 to

2011/12

2011/12 2010/11 2009/10 2008/09

Clean Audit Improved by 8 9 3% 13 5% 6 2% 1 0%

Unqualified Regressed by 7 109 39% 115 41% 119 43% 116 42%

Qualified Regressed by 15 62 22% 52 18% 62 22% 47 17%

Disclaimer / Adverse Improved by 37 76 27% 88 32% 86 31% 113 41%

Outstanding Regressed by 35 22 8% 10 4% 5 2% 1 0%

Operation Clean Audit Support

On an annual basis after the release of the Local Government audit outcomes by the Auditor General; the Department co-ordinates the development of a standard integrated support plan for Operation Clean Audit. (OPCA)

The OPCA plan is developed after the analysis of the annual financial statements and audit outcomes of municipalities; in response to Section 131 of the MFMA.

Accordingly; the attached 2013/14 plan (see ANNEXURE A) has been developed and approved by the CoGTA MINMEC for implementation in response to the 2012/13 Local Government Audit outcomes.

The provinces share municipal finance support responsibilities which include the activities in the OPCA plan between the Provincial Treasuries and Provincial CoGTA’s

The reporting on the implementation of the plan is quarterly to the Premier Co-ordination Forums / Committees; the Provincial MUNIMEC’s as well as a consolidated report to the CoGTA MINMEC.43

Operation Clean Audit Support

The key areas of focus in the attached 2013/14 OPCA plan are the following: Actions to ensure that quality AFS are submitted timeously. Actions to ensure that key controls are in place and that corrective measures are

implemented to address key control deficiencies. Actions to improve the efficient use of service providers Actions to ensure the development and implementation of audit remedial plans Actions to improve leadership involvement in guiding and directing the

implementation of OPCA initiatives Actions to create a platform for consequence management, Actions to improve performance reports Actions to improve asset management, Records management, Supply Chain

Management, Unauthorised, irregular, fruitless and wasteful expenditure. Actions to improve Information Technology Controls, Actions to ensure improved HR practises Actions to improve the capacity of DCoG and Provinces to support

municipalities. Actions to ensure effective governance - Audit and Public Account Committees 44

THANK YOU

45

presentation to the select committee on finance date: 16 july 2014 part 1: cogta's mandate

Documents

cogtas mandate slide

provincial government

spheres of government

republic section

legislative mandate

provinces chapter

local communities

local spheres