Presentation to Select Committee on Finance (NCOP): Local Government support programmes

1. Presentation to Select Committee on Finance (NCOP):Local Government support programmes PRESENTED BY: MEC PAUL SEBEGOE MEC FOR FINANCE AND ACTING MEC FOR DEPARTMENT OF LOCAL GOVERNMENT AND TRADITIONAL AFFAIRS(NORTH WEST PROVINCE) Date: 28 May 2013

2. PRESENTATION OUTLINE 1. Background 2. Recommendations by the SCOF on 2011 engagement and progress made 3. Local government support programmes for 2012/13 and 2013/14 4. General challenges facing municipalities in the NW Province 5. Conclusion

3. Background • The Select Committee visited the province in 2011 and engaged with 10 municipalities, the dlgta, and other sector departments • The engagement confirmed that municipalities in the province, especially the medium and low capacity ones, are experiencing challenges with respect to governance, financial management, administration, and service delivery • A need had been identified that more intensified support is required in the 10 municipalities • Three[3] of the identified municipalities were under provincial administration in 2010 (section 139) • The new term of Local government had just commenced and the new councils were experiencing challenges such as community protests, expiry of MMs and section 56 managers’ contracts etc.

4. Progress made on recommendations

5. Progress made on recommendations

6. Progress made on recommendations

11. Local government support programmes for 2012/13 and 2013/14 • The department implemented the following support programmes under the Local Government Turnaround Strategy in 2012/13: • Records management support • Revenue enhancement • Provincial Infrastructure grant projects • MPAC support

12. Records management • Initiated the project in 2011 and formed a partnership with Provincial DSAC to address the issue of “loss of documents” and unavailability of records as raised by the AG • Conducted workshops for 81 municipal officials on records management • Provided training to 57 officials charged with the responsibility of records management (mainly registry clerks) • Dlgta provided 11 (including Moretele, Mafikeng, Kgetleng, Ventersdorp, Tswaing, and Maquassi Hills) municipalities with equipment to improve document management and records management (computers, scanners, printers, faxes, stationery) • The department is continuing to implement the records management project to instil a culture of proper document management and record keeping in the prioritised municipalities

13. Revenue enhancement • The department initiated and implemented a revenue management project in 2011/12 in five municipalities (including Mafikeng, Ventersdorp, and Tswaing LMs) to address: • meter installation and rehabilitation, • data management, • meter readings, • billing, receipt management, • credit control, debt management, • indigent management, • customer care

14. Revenue enhancement cont. • Part of phase 2 of the project included meter rehabilitation in two municipalities(Tswaing and Naledi LM) • The two municipalities received grant funding to the tune of R294 000 each to replace faulty meters • The project is still in implementation phase and will be completed before the end of the municipal financial year • The focus in the current financial year is on providing support on revenue enhancement to six municipalities (Tswaing, Naledi, Ventersdorp, Lekwa-Teemane, Mahikeng, Madibeng, Ditsobotla, Maquassi Hills and Matlosana) • The improvement on collection has improved in Mafikeng and Naledi LMs significantly and slightly in the other municipalities

15. Provincial Infrastructure grant projects • The department receives an infrastructure grant on an annual basis for water and sanitation support to municipalities. • The funds are transferred to targeted municipalities that are water services authorities to implement water and sanitation infrastructure projects (to eradicate backlogs) • The department provides planning and technical support to municipalities to implement infrastructure projects through PIG and MIG • The allocations for the past five years are as follows:

16. PROVINCIAL INFRASTRUCTURE GRANT (PIG) ALLOCATIONS FROM 09/10-11/12

17. MPAC support • Dlgta supported the establishment of all 23 MPACs by November 2011 • MPAC functionality is at varying levels (only 3 MPACs are not fully functional – Tswaing, Maquassi Hills, and Kgetleng, though they are receiving attention) • Dlgta in partnership with PT, AG and PPAC, APAC, conducted orientation and training programmes for all MPACS to empower them to execute their functions • The dlgta and PPAC established Provincial and District MPAC forums that are convened on a quarterly basis to review progress, address challenges, and share best practices

18. MPAC support • 67 Female MPAC members (out of a total of 119 females and 83 males) were trained by the National Democratic Institute on negotiation skills, conflict resolution, and communication • The dlgta continuously monitors and supports the functionality of MPACs through regular engagements and workshops • 9 MPACs (priority municipalities) received office equipment on 24 May 2013 (computers, faxes, scanner, printers, and stationery) to assist them with effective management and execution of their roles)

19. General challenges facing municipalities in the NW Province • Governance related problems in municipalities [political instability] affects the impact of provincial support programs • General non-compliance to legislation and regulations by municipalities • Escalating levels of uncollected debt from consumers [currently estimated at R4.5 billion] • High vacancy rate in key positions and high turnover rate affect the impact of municipal support programmes • Lack of skills and expertise in municipalities impact negatively on sustainability of municipal support programmes

20. SUPPORT PROGRAMMES BY THE NORTH WEST PROVINCIAL TREASURY • The purpose of this document is to provide a detailed report on the assistance and support provided by the provincial Treasury to all municipalities in the Province. • We highlight in the report the Provincial Treasury tailor made support to specific municipalities in the Province which has been identified as lowest in terms of capacity and also the worst in terms in terms of the Auditor Generals Reports.. PART 1 • PART 2 deals with other support provided by Provincial Treasury to all municipalities, • The report further covers issues and recommendations raised by the Select Committee on Finance

21. PART 1 DETAILED REPORT ON THE SUPPORT PROVIDED BY PTROVINCIAL TREASURY • Due to the North West Province municipality’s history of non submission of annual financial statements to the Auditor General and poor audit outcomes, the Department realised that the municipalities are in dire need of assistance with the annual financial statement preparation and close process. • The Department appointed a panel of 15 service providers to assist with the preparation of annual financial statements at the Municipalities that the Department indentified to require immediate assistance. • The Municipal Financial Management Support Programme (MFMSP) was launched on the 21st June 2012 where the political and administrative leadership of all municipalities were invited, as a result of the continuous negative audit outcomes of municipalities in the Province, coupled with non/late submission of Annual Financial Statement for audit to the Auditor General.

22. Continued • The audit outcomes for the 2010/11 financial year showed that municipalities in the Province performed very poor and there was not much improvement on the 2011/12 outcomes either. • A Technical Project Steering Committee was established, consisting of officials from the department and the lead service provider which monitored the implementation of the project. • Coupled to the above, the Project Political Oversight Committee was also established, consisting of the Mayor, the Speaker, and MEC for Finance and Chairperson of MPAC of the identified municipalities, and chaired by the MEC for Finance. • The first phase of the programme entailed giving basic support i.e. deployment of service providers and trained graduate to municipalities and technical support for assistance with preparation and review of AFS and ensuring that all 23 municipalities in the province submit their AFS in compliance with MFMA, furthermore, ensuring that all prior years outstanding AFS were also submitted. In total 39 sets of annual financial statements was submitted to the Auditor General of South Africa for 23 municipalities.

23. continued • This was indeed a great success as all municipalities managed to submit the AFS by 31 August 2012 including prior years AFS, all the 23 municipalities signed a Commitment Charter that committed them to submit AFS within the legislated timeframe in future, and to improve the quality of the statements so as to achieve the 2014 Clean Audit objectives. • The Department of Finance decided to provide ongoing support to all the eight municipalities identified in phase One to achieve sustainable improvement in financial management and governance that will yield clean audit opinions by 2014.

24. The eight municipalities benefiting from Phase 2 initiatives are: • Kgetlengrivier Local Municipality • Ventersdorp Local Municipality • Tswaing Local Municipality • Kagisano Molopo Local Municipality • Ditsobotla Local Municipality • Moretele Local Municipality • Mafikeng Local Municipality • Maquassi Hills Local Municipality

25. continued • After the completion of phase 1 the Department realised that in order for this project to reap sustainable results at the municipalities, focus have to be placed on ensuring the reliability of underlying data and information contained in the annual financial statements. • To this extend the appointed service providers will continue to assist municipalities in updating their records and completing all the necessary reconciliations up to the end of June 2013. • They are further expected to prepare the 2012/2013 Annual Financial Statement for the submission on the legislated date. • The audit process will be supported until we receive the audit outcome in November 2013. • We anticipate that all the municipalities supported will improve from disclaimer audit opinions to at least qualifications at the end of November 2013

26. GRAP 17 IMPLEMENTATION • The audit outcomes for the 2011/12 financial year showed that municipalities in the Province where predominately disclaimed or qualified on the basis of lack of implementation of GRAP 17 and the unbundling of infrastructure assets . • We have identified 4 municipalities to assist with the unbundling of infrastructure assets. • The project is currently fifty percent to completion and it will be concluded before the end of the municipal financial year end  • The municipalities currently assisted are:  • Greater Taung Local Municipality • Ventersdorp Local Municipality • Kagisano Molopo Local Municipality • Maquassi Hills Local Municipality  • We believe that in at the end of the audit period none of these municipalities will be disclaimed on assets.

27. OTHER SUPPORT INITIATIVES BY PROVINCIAL TREASURY • Municipal Financial Health Check questionnaire • Analysis and Assessment of the 2011/12 Audit Action • Engagement with municipalities on financial management assessments • MEC’s Engagement with Municipalities to assess their readiness towards clean audit 2012 • Capacity Building • Training on MFMA reforms • Quarterly CFO Forum

28. Conclusion • The Provincial EXCO has resolved to place three local municipalities under section 139(1)(b) intervention and progress would be provide on the impact of the intervention on a continous basis.