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STATE OF MUNICIPALITIES DEPARTMENT OF LOCAL GOVERNMENT WESTERN CAPE

STATE OF MUNICIPALITIES DEPARTMENT OF LOCAL GOVERNMENT WESTERN CAPE. SELECT NATIONAL COMMITTEE ON LOCAL GOVERNMENT AND ADMINISTRATION NCOP 7 SEPTEMBER 2005. Overview of the presentation. High level financial state of municipalities Results of provincial capacity audit

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STATE OF MUNICIPALITIES DEPARTMENT OF LOCAL GOVERNMENT WESTERN CAPE

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  1. STATE OF MUNICIPALITIESDEPARTMENT OF LOCAL GOVERNMENTWESTERN CAPE SELECT NATIONAL COMMITTEE ON LOCAL GOVERNMENT AND ADMINISTRATION NCOP 7 SEPTEMBER 2005

  2. Overview of the presentation • High level financial state of municipalities • Results of provincial capacity audit • Readiness to implement the MFMA • Project Consolidate Municipalities and focus areas • Levels of service delivery, backlogs and implementation of free basic services • Housing accreditation • Achievements • Challenges

  3. High level financial state of municipalities • General strengths of Western Cape municipalities • All 30 municipalities submitted financial statements for the 2003/04 financial year • 11 out of 30 reports of the Auditor-General were unqualified • Analysis of financial statements indicated positive solvency ratio in most municipalities • 27 Municipalities are in in favorable position to meet all its current commitments and recovery plans are currently being implemented at the remaining 3 with very positive results • In general sound financial management systems are in place but there will always be room for improvement

  4. High level financial state of municipalities • Staff costs of all municipalities expressed as a percentage of operating expenditure generally falls within national treasury guidelines • All municipalities have council approved credit control policies that include provision for indigent households • Credit control policy and its implementation is compulsory in terms of MFMA • Implementation is currently monitored on quarterly basis with indication of debt recovery rates • Survey was done to determine support needed with credit control and various best practices were shared between municipalities

  5. High level financial state of municipalities • General weaknesses • 18 Qualified Audit reports for the financial year ending 30 June 2004 • Qualifications mainly focusing on • the increasing level of outstanding debtors and insufficient provision for bad debts due to budget constraints • More provision in current budgets due to implementation of MFMA • Best practice credit control policies are being shared between municipalities • Internal audit deficiencies • Challenge for rural municipalities due to unavailability of sufficiently skilled members of the public to serve on these committees – department encourages municipalities to establish a committee on a district municipal level and to then share the committee • Accumulated funds and reserves in general not fully cash backed

  6. High level financial state of municipalities • Debt levels and revenue collection • Total amount of outstanding debt of municipalities in the Western Cape is ± 5 billion of which ±4 billion is owed to the Metro • All 30 municipalities have council approved credit control policies that provide for indigent households (see previous slide for monitoring and support by department) • The average debt recovery rate of municipalities is currently under 100% and they need to improve their credit control systems by assigning sufficiently dedicated skilled personnel to implement their policies

  7. High level financial state of municipalities • Debt levels and revenue collection • Although good progress is made, the level of outstanding debtors over 120 days is rising from year to year and poses a threat to the financial ability of municipalities to deliver services at optimum levels. This is mainly due to: • Lack of sufficiently dedicated staff • More aggressive measures of municipalities to apply effective credit control are being influenced by increasing levels of unemployment and poverty • New infrastructure for services with static revenue base, equitable share not flexible over medium term to cater for this.

  8. High level financial state of municipalities • Debt levels and revenue collection • Municipalities are being supported with the installation of pre-paid meters, credit control policy guidelines and the sharing of best practice credit control measures • Department also developed indigent policy guideline that was submitted to the national Department as input into the development of a national guideline on an indigent policy that they are currently working on

  9. High level financial state of municipalities • General expenditure patterns • Municipalities are becoming more and more reliant on external grants to finance their capital expenditure on municipal infrastructure development • Demands for new infrastructure have increased, while revenue bases have remained static • Operational expenditure also take up bigger portions of budgets due to increased staff costs and more responsibilities in terms of national and provincial programmes being delegated/assigned to municipalities • MIG do not provide for the maintenance of municipal infrastructure • Department is supporting municipalities to develop and implement LED strategies • Also support to compile better quality IDP’s with long term vision to cater for this challenges

  10. High level financial state of municipalities • General expenditure patterns • Analysis of financial statements for the 2003/04 financial year indicated that on average a budget performance of only 63% for the Metro and 75% on average for non-metro municipalities could be achieved on capital expenditure, mainly due to capacity constraints in their technical departments . • Department is currently finalising a capacity audit of all municipalities to determine the gaps and to develop a strategy to address this

  11. High level financial state of municipalities • Key preliminary findings of capacity audit • Growing need for skills, expertise and experience in local government (Governance, Integrated Planning, LED) • Lack of financial skills • Quality of IDPs - sector alignment and integration • Access to additional funding for infrastructure development • Institutional Management of Ward committees and CDWs • Housing Mandate and the role of municipalities • Interpretation and understanding of national and provincial policies and programmes • Participation of local government in national and provincial policy making

  12. High level financial state of municipalities • Departmental interventions to address capacity challenges • Draft strategy will be completed by September 2005 • A mentoring/coaching programme will be developed and in implementation by December 2005 • Technical support programme will be developed and in place by December 2005

  13. Readiness to implement the MFMA • Implementation of the MFMA is being monitored by the Provincial Treasuries • Western Cape municipalities were categorized as follow for MFMA implementation • High 8, Medium 18, Low 4 • Provincial wide workshops were held with municipalities to capacitate them on implementation • Training was provided by the National Treasury on the budget processes

  14. Readiness to implement the MFMA • Extensive training and support are provided by the provincial treasury on the compilation of financial statements and supply chain management • A provincial implementation unit was established to monitor implementation and to determine support initiatives by provincial Treasury • Municipal finances are monitored on a monthly basis by provincial treasury

  15. Readiness to implement the MFMA • A provincial Municipal CFO forum was established by the provincial treasury and will be launched on 9 September. The main objective of this forum will be to build the capacity of municipal financial personnel with best practice sharing, etc • The challenge will however remain for municipalities to attract and appoint sufficiently skilled financial personnel to perform these functions

  16. Project Consolidate municipalities and focus areas • Project Consolidate municipalities • City of Cape Town ( Khayalitsha and Mitchell’s Plain) • Matzikama • Cederberg • Witzenberg • Kannaland • Theewaterskloof • Beaufort west • Laingsburg • Prince Albert • Central Karoo (Murraysburg)

  17. Project Consolidate municipalities and focus areas • Focus areas that are being addressed in Project consolidate • Initial service delivery hot spots that were identified are being addressed with capital projects • Capacity building action plans are currently being finalised to support identified municipalities with the 5 national KPI’s of Project Consolidate (Transformation and institutional development, financial viability and management, basic service delivery & infrastructure, LED, good governance) • Service Delivery Audit was conducted to confirm data and to align the hot spots within Project Consolidate areas • Training of 400 CDW’s is currently taking place with the aim to place a CDW in each of the Project Consolidate municipal wards

  18. Project Consolidate municipalities and focus areas • Focus areas that are being addressed in Project consolidate • A Public participation conference was held to build the capacity of municipalities and everybody who attended committed themselves to roll out effective public participation in their areas • A provincial capacity building strategy is currently being finalised and a mentoring/coaching programme will be in implementation by December 2005 • Departmental IDP unit with the support of the PIMS are providing dedicated support to these municipalities to improve the quality of their IDP’s • National Dplg was supported to develop a national action plan to support identified municipalities to implement anti-corruption strategies with the assistance of a national appointed service provider

  19. Levels of service delivery, backlogs • Service delivery Audit was conducted by the Department during June and July. • The audit revealed that there are a number of communities where basic services are not being delivered. These have been classified as “red flags” and usually relate to the lack of water and sanitation services.

  20. Levels of service delivery, backlogs • The following interventions were approved by Cabinet: • Implementation of basic services projects in Project Consolidate municipalities (alreadyin progress); • In-depth investigation of all red flag issues in non-Project Consolidate municipalities, with implementation of action plans commencing on selected projects • Visit by MEC for Local Government & Housing to three municipalities , announcing specific action plans in those municipalities; • Implementation of all action plans to be completed by end of November; • Establishment of a City-Province task team to facilitate development processes • Engagement with municipalities over development of communication strategies • On-going monitoring of red-flag issues.

  21. Implementation of free basic services • All municipalities in the Provinces that have the specific function provide free basic water, electricity, sanitation and refuse removal to their indigent households that are linked to the grid/ infrastructure • The challenge however will remain to expedite these services once the necessary infrastructure is developed, Department is influencing the MIG funding at municipalities to enhance this • Department will also embark on project in partnership with Department of Water Affairs and Forestry to facilitate agreements between municipalities and farmers to ensure that free basic services are provided to farm workers

  22. Housing accreditation • At a Heads of Housing Departments meeting on 14-15 October 2004, it was agreed that each provincial Housing Department would enter into negotiations with relevant metros or large municipalities around accreditation. • City of Cape town was identified as a pilot and indicated their interest in accreditation in writing • A task team was established by the City and the Department. Was agreed that further work should be done, with the City assessing its capacity to carry out various functions arising from accreditation and the Province assessing the budgetary and staffing implications.

  23. Housing accreditation • The process has slowed down considerably, due to the framework for accreditation not yet been finalised • Difficult to engage in detailed discussions in the absence of such a framework. • The Department has been actively participating in the process of developing a national accreditation framework and has asked that a number of its concerns be taken into account in the framework.

  24. Housing accreditation • The most significant of these is the need to ensure that Province and national government are able to prioritise investment in human settlements according to the NSDP and PSDF. • Apart from the City, there are no other municipalities in the Province that have indicated an interest in being accredited, but the Department will engage with these municipalities once the accreditation framework is finalised.

  25. Departmental achievements • A guideline indigent policy document was developed and submitted into the national policy development process • Very effective specialized support is being provided to municipalities that are experiencing financial difficulties with very positive results • 100% of the total MIG allocation to the Province is spend annually • A very successful public participation conference was held to enhance public participation on a municipal level

  26. Departmental achievements • Training of 400 CDW’s is currently taking place with the aim to place a CDW in each of the Project Consolidate municipal wards • Very successful provincial Treasury/Local Government and Housing engagement with all municipalities on IDP/Budget alignment • Relationship established between Provincial Treasury and Local Government and Housing on IDP engagement and support to be provided to municipality. • Successful IDP hearings started a dialogue between provincial government and municipalities

  27. Departmental achievements • Successfully managed the following incidents: Drought, informal settlement fires, Swine fever, April floods in Overberg and Asian flu • A disaster management Satellite communication system was installed at all municipalities • Completed a draft provincial disaster management framework • Established a Provincial disaster management Centre at Tygerberg: Launch 15 December 2005

  28. Departmental achievements • All three spheres working together on first “breaking new Ground” housing policy pilot – N2 Gateway • Working with Umsobomvu Youth Fund in Drakenstein municipality to create jobs with housing projects

  29. Departmental challenges • Establishing of a effective monitoring and evaluation system to establish pro-active supporting initiatives • Effective and ongoing refocusing of department as new challenges arise • Alignment of national, provincial and local priorities • Lack of skilled and sound political and administrative leadership at municipalities • Lack of long term visions at municipal level – quality of IDP’s

  30. Departmental challenges • Not to neglect smaller municipalities and smaller housing projects while managing the big N2 pilot project • Balancing of allocation of units in N2 project

  31. Thank you!Questions

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