ATC201207: Budgetary Review and Recommendations Report of the Portfolio Committee on Cooperative Governance and Traditional Affairs, Dated 03 December 2020

Cooperative Governance and Traditional Affairs

SUPPLEMENTARY BUDGETARY REVIEW AND RECOMMENDATIONS REPORT OF THE PORTFOLIO COMMITTEE ON COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS, DATED 03 DECEMBER 2020

 

Having assessed the financial and non-financial performance of the Departments of Cooperative Governance and Traditional Affairs (COGTA), the Municipal Infrastructure Support Agent (MISA), the South African Local Government Association (SALGA), the Municipal Demarcation Board (MDB) and the CRL Rights Commission for the 2019/20 financial year, the Portfolio Committee on Cooperative Governance and Traditional Affairs, (the Committee) reports as follows: 

1.Background

 

1.1.Committee Mandate

 

Chapter 4 of the Constitution of the Republic of South Africa (1996) sets out in detail the powers, functions and procedures of Parliament. It tasks Parliament through its Committees, such as the Portfolio Committee on Cooperative Governance and Traditional Affairs, with the following functions:

 

• Making laws;
• Maintaining oversight over the National Executive Authority and any organ of state;
• Facilitating public involvement in the legislative and other processes of the National Assembly and its Committees;
• Participating in, promoting and overseeing co-operative governance; and
• Engaging and participating in international participation (participate in regional, continental and international bodies)

 

In line with the parliamentary oversight functions, Section 5 of the Money Bills Amendment Procedure and Related Matters (Act No.9 of 2009) empowers Portfolio Committees, to assess annually the performance of each national department through an annual Budgetary Review and Recommendations Report (BRRR). The overarching purpose of the BRR Report is for a Committee to make recommendations on the forward use of resources to address the implementation of policy priorities and services as the relevant department may require additional, reduced or re-configured resources to achieve these priorities and services. The Act also gives effect to Parliament’s constitutional powers to amend the budget in line with the fiscal framework. The BRRR process enables a Committee to exercise its legislative responsibility to ensure that the Department and the relevant entities fulfil their respective mandates. 

 

1.2.Core functions of the Department

 

The main aim of the Department of Cooperative Governance and Traditional Affairs is to improve cooperative governance across the three spheres of government. The Department must support and strengthen the capacity of municipalities to manage their own affairs, exercise their powers and perform their functions, as envisaged in s154 of the Constitution.

 

The Department also oversees the following entities:

 

• The Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities, which promotes and protects cultural, religious and linguistic rights;

 

• The Municipal Demarcation Board, an independent authority responsible for determining municipal boundaries and also mandated to declare district management areas, delimit wards for local elections and assess the capacity of municipalities to perform their functions;

 

• The South African Local Government Association, which has a constitutional mandate to assist in the transformation of local government; and

 

• The Municipal Infrastructure Support Agent, whose mandate is to render technical advice, and support to municipalities, as well as strengthen their capacity to provide access to basic services.

 

1.3.Purpose of the Report

 

Section 77 (3) of the Constitution stipulates that an Act of Parliament must provide for a procedure to amend money Bills before Parliament. This Constitutional provision resulted in Parliament passing the Money Bills Amendment Procedure and Related Matters (Act No. 9 of 2009) (the Money Bills Act). The Money Bills Act sets out the process that allows Parliament to make recommendations to the Minister of finance to amend the budget of a national department. In October each year, Portfolio Committees must compile the Budgetary Review and Recommendation Reports (BRRR) that assess service delivery performance given the available resources; evaluate the effective and efficient use and forward allocation of resources; and may make recommendations on forward use of resources.

 

However, the BRRR process during the year under review was unusual in that it came before the tabling of Annual Reports. The delays arising from the declaration of the National State of Disaster due to the COVID-19 pandemic required extension of the Annual Report tabling deadline to 16 November 2020. This necessitated Committees of the National Assembly to submit preliminary BRR Reports based on Quarterly financial and service delivery performance information. In this regard, the National Assembly has considered the Portfolio Committee’s preliminary BRR Report. This is a supplementary Report.

 

1.4.Method of reporting

 

This BRR Report assesses the financial performance as well as service delivery performance of the Department of Traditional Affairs, the Municipal Infrastructure Support Agent, the South African Local Government Association, the Municipal Demarcation Board and the CRL Rights Commission for the 2019/20 financial year. Informing the assessment are briefings to the Committee by the Department and entities, and other sources of information such as the Reports of the Auditor-General and Annual Reports.

 

1.5.Report outline

 

The structure of the Report is as follows: Section 2 provides key financial and performance recommendations of the Portfolio Committee on COGTA. Section 3 of the Report provides an overview and assessment of reported financial and service delivery performance for the 2019/20 financial year. Section 4 of the Report focuses on the Portfolio Committee’s observations on governance, technical, service delivery and financial performance information. Section 5 tabulates additional reporting requests by the Portfolio Committee. The Report concludes with recommendations in section 6.

2.SUMMARY OF PREVIOUS KEY FINANCIAL AND PERFORMANCE RECOMMENDATIONS OF THE COMMITTEE.

 

2018/19 RECOMMENDATION	PROGRESS MADE IN 2019/20
The CRL Rights Commission should consider raising the profile of its work and activities around linguistic matters to ensure balance vis-à-vis its work and activities around cultural and religious matters.	During the year under review, the Commission began a systematic approach towards reviving diminishing languages.
The CRL Rights Commission should improve the implementation of its post-audit action plan to prevent stagnation of audit opinion.	The audit opinion stagnated and did not improve.
The CRL Rights Commission should consider raising supplementary income from other funding sources, as it has a high potential to do so.	The Commission remains heavily dependent on the grant from the Executive Authority.
The Portfolio Committee on Cooperative Governance and Traditional Affairs should develop mechanisms to ensure that there are consequences for inadequately explained failures to adhere to the prescribed timeframes for the tabling of Annual Reports.	During the period under review, Government extended the prescribed timeframes for tabling of Annual Reports owing to the COVID-19 pandemic.
The Portfolio Committee should commence with the process of introducing the proposed amendments to the Demarcation Act as a Committee Bill to ensure that the Bill is in time for the post 2021 municipal demarcation cycle.	The Department is at an advanced stage and will table the Bill to Parliament earlier than the process of commencing with a Committee Bill
The Portfolio Committee should make it a standard Committee agenda item for Committee Members to report on the current issues affecting their constituencies, instead of waiting for petitions.	Committee members are utilising the WhatsApp chat group to report on matters affecting their constituencies
The Portfolio Committee should engage more robustly with the work of the National House of Traditional Leaders and assess the House’s impact on traditional communities.	The Committee has begun engaging robustly with the work of the NHTL

 

3.OVERVIEW AND ASSESSMENT OF FINANCIAL AND SERVICE DELIVERY PERFORMANCE 2019/20

 

3.1.Department of Cooperative Governance

 

The Committee has already considered some of the key financial and service delivery performance issues at the Department during the preliminary Budgetary Review and Recommendations (BRR) process where it received a briefing on the Department’s Quarterly Performance Reports. The Reports were inclusive of the four quarters of the financial year ending on 31 March 2020.

 

Of concern to the Committee was that the majority of the Programmes had spent almost 100 percent of their allocated budgets, but did not achieve 100 percent of the pre-determined objectives. The Annual Report also indicates that overall Programme expenditure amounted to 96.2 percent, but the overall service delivery performance was 62 percent. The reported service delivery performance does not match the reported spending of the allocated budget.

 

The three Programmes that contributed to the underperformance were the Administration Programme, which achieved zero percent but spent 98.6 percent of the allocated budget; the Regional and Urban Development and Support Programme achieved 33 percent of targets and spent 99.8 percent of the budget, while the Community Work Programme achieved 40 percent of targets and spent 98.5 percent of the budget.

 

The Committee has taken strong exception against the gross wastage of public funds through the Community Work Programme, and against the lack of consequences for the perpetrators. In her foreword to the Department’s Annual Report, the Minister agrees that there are challenges with the current form of the CWP delivery model. The Minister has also said this on previous occasions.

 

The poor performance recorded under Programme 2 is also worrisome considering that the Department envisions the Programme as the vehicle for the implementation of the District Development Model. It is also questionable whether the Programme will be equal to this task given the absence of dedicated personnel owing to the outstanding vacancy in the position of Deputy Director-General (DDG).

 

During the preliminary BRR process, the Committee also had a robust discussion regarding the R3.3bn under-expenditure in respect of the Local Government Share under the Institutional Development Programme. At the time, the Department’s answers on how it intended to capacitate municipalities to comply with the conditions of the Division of Revenue Act were not satisfactory.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Department of Cooperative Governance (2020).

 

As indicated in the Table above, the Department received a final appropriation of R90.3bn. Actual expenditure amounted to R86.9bn, resulting in under expenditure to the value of R3.4bn. The top contributor to the under-expenditure was the Institutional Developmental Programme and this related to the offsetting or withholding of the Local Government Equitable Share (LGES) to those municipalities that failed to comply with the requirements of the Division of Revenue Act (DORA). This problem recurs every financial year.

 

1. Financial performance

 

2019/20
Fruitless and wasteful expenditure	Incurred fruitless and wasteful expenditure to the value of R7.5m due to employment of non-qualifying participants in the CWP Programme and payments to deceased participants. The Auditor-General could not obtain appropriate evidence that the Department took disciplinary steps against the officials who had incurred the fruitless and wasteful expenditure.
Irregular expenditure	Incurred irregular expenditure amounting to R15m. This drastic reduction in irregular expenditure is due to the fact that National Treasury exempted the CWP from complying with Supply Chain Management Processes until 31 March 2021. The Programme has had a long track-record of irregular expenditure amounting to hundreds of millions of rand. The Auditor-General could not obtain appropriate evidence that the Department took disciplinary steps against the officials who had incurred the irregular expenditure.

 

1. Audit findings

2019/20
Qualified Audit Opinion
AUDIT FOCUS AREAS	FINDINGS
Quality of submitted financial statements	The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records as per the requirement of the PFMA.
Quality of submitted performance reports	There were no material findings on the quality of performance information due to the reduced scope of audit resulting from COVID-19 related constraints.
Compliance with legislation	During the year under review, National Treasury exempted the Department from complying with SCM processes in relation to the CWP until 31 March 2021.

 

1. Key reported achievements

• Improvement from a disclaimed audit opinion to a qualification with findings.
• Conceptualisation, development and piloting of the District Development Model to foster integrated planning.

 

1. Key reported challenges

 

• Implementation of only 15 percent of the 2018/19 post-audit action plan, as opposed to the envisaged 100 percent.
• Failure to obtain approval for the implementation of Integrated Urban Development Framework (IUDF) strategy and programme for small town regeneration due to unexpected protracted consultations with key experts and stakeholders;
• Failure to develop a draft Integrated Development Township Development Programme due to delays related to preliminary desktop research;
• Failure to conclude draft profiles of 42 Districts and eight Metros because the Gauteng and Western Cape requested revision of their draft profiles due poor quality;
• Training of fewer CWP participants than planned due to go-slows, instability, suspensions and non-complying Non-Profit Organisations;
• Non-development of the revised CWP model; and
• Non-development of the target number of District and Metro municipal CWP plans due lapse of contracts of the employees tasked with this function.

 

3.2.Department of Traditional Affairs

 

The Committee has already considered some of the key financial and service delivery performance issues at the Department during the preliminary BRRR process where it received a briefing on the Department’s Quarterly Performance Reports. The Reports were inclusive of the four quarters of the financial year ending on 31 March 2020.

 

Among the issues of concern was the widespread unhappiness among traditional leaders in respect of the lack of clarity on the place and role of the institution of traditional leadership in the District Development Model (DDM). There was a clear misunderstanding of the DDM concept, which was indicative of inadequate consultation. This was also among the Committee’s findings during a recent oversight visit to KwaZulu-Natal and Gauteng.

 

In her foreword to the Annual Report, the Minister of Cooperative Governance and Traditional Affairs, Dr Nkosazana Dlamini-Zuma, states that the institution of traditional leadership is a key partner in the implementation of the DDM. However, the reality on the ground does not yet reflect this sense of partnership, as many traditional leaders feel alienated from the DDM. This includes the leadership of the National House of Traditional Leaders, which the Minister envisages playing the role of support and oversight for DDM implementation.

 

The Committee further noted that the tools of trade for traditional leaders to enable them to participate effectively in the business of Government remained a perennial issue, especially during this time of COVID-19 where virtual meetings are the new normal. There was still much work to do to bridge the rural-urban digital divide. The slow implementation of the resolutions emanating from the 2017 Traditional Leaders Indaba was also contributing negatively to this.

 

The performance information presented in the Annual Report was not remarkably different from the performance information considered during the preliminary BRRR process. The only significant difference is that the Department is now presenting audited performance information, which ascertains that the DTA Report is financially unqualified, with no emphasis of matters. This maintains the standard the DTA has set in the three previous financial years.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Department of Traditional Affairs (2020).

 

As the Table above illustrates, the Department secured a final appropriation amounting to R168.3m during the year under review. Expenditure amounted to R160.7m, resulting in under-expenditure to the value of R7.6m. Programme 3, the Institutional Support and Coordination Programme, accounted for just over 50 percent of the under-expenditure. The Department attributes the under-expenditure to a slow recruitment process arising from a moratorium placed across Government on reconfiguration of the state, as well as on the delays relating to the proclamation of the Traditional and Khoi-San Leadership Act (2019).

 

1. Financial performance

The Department did not incur any irregular, fruitless and wasteful expenditure during the year under review.

1. Audit findings

2019/20

Unqualified audit opinion, with no emphasis of matters (clean audit)

 

1. Key reported achievements

• Achievement of a clean audit for the fourth consecutive financial year.

 

1. Key reported challenges

 

• Delays in the finalisation of the Traditional and Khoi-San Leadership Bill, which contributed to the DTA’s under expenditure during the year under review; and
• Inadequate funding that hampers the Department’s ability to increase the budget to the National House of Traditional Leaders and the CRL Rights Commission.

 

3.3.Municipal Infrastructure Support Agent

 

The Committee has already considered some of the key financial and service delivery performance issues at the MISA during the preliminary BRRR process where it received a briefing on the Entity’s Quarterly Performance Reports. The Reports were inclusive of the four quarters of the financial year ending on 31 March 2020.

The Committee noted MISA’s attainment of a clean audit for the second consecutive year. There were some concerns, particularly around the serious human resources constraints, which risked rendering MISA ineffective. Budget allocation to MISA was also decreasing over the medium term and yet its organisational structure had undergone revision to accommodate more employees. The Department of Cooperative Governance was not forthcoming in terms of a concrete plan that responds to the financial pressures arising from the repositioning of MISA.

In her foreword to the MISA Annual Report, the Minister alludes to the need for expanding the role of MISA to accommodate the increasingly high demand for technical support from municipalities, as well as the need for MISA to assume an implementing role in certain municipalities that lack the internal capacity to deliver and manage infrastructure. However, the Minister is not specific as to the particular initiatives the Department has implemented, or intends implementing, to capacitate MISA - except to recommend that MISA should drive the mobilisation of additional funding from private sector financiers. 

There has been considerable growth in the human resources contingent of MISA during the period under review due to the upward revision of the entity’s organisational structure. This growth has seen an increase in spending of allocated budget, which has risen from 83 percent in 2018/19 to 93 percent in 2019/20. However, it is of concern that this growth in spending has coincided with a significant reduction in performance, as the entity has achieved 79 percent of its annual performance targets, compared to 91 percent in 2018/19.

During the year under review, MISA’s budget allocation from the Department of Cooperative Governance and Traditional Affairs amounted to R344m. The expenditure amounted to R401m resulting in a deficit of R54m. However, MISA ended the financial year with a surplus of R29m due to a surplus amount of R83m retained from the previous financial year. In 2018/19, MISA spent 83 percent of its allocated budget. Spending in 2019/20 has increased to 93 percent due to the increase in the number of employees owing to the recruitment drive to fill vacancies on MISA’s revised organisational structure. However, the spending has not been commensurate with service delivery performance.

1. Financial performance

MISA did not incur any irregular, fruitless and wasteful expenditure during the year under review. 

1. Audit findings

2019/20

Unqualified audit opinion, with no emphasis of matters (clean audit)

 

1. Key reported achievements

 

• An unqualified audit opinion with no emphasis of matters (clean audit) for the second consecutive year

 

1. Key reported challenges

 

• Retention of technical officials has proven difficult due to scarcity and competitive remuneration packages in the private sector;
• The non-completion of the enrolment process of the 31 municipal officials selected for the Artisan Recognition of Prior Learning, due to the outbreak of COVID-19 and the subsequent declaration of a national state of disaster;
• Delay in the development of Municipal Capacity Development Plans (MCDPs) for eight municipalities due to a contractual dispute lodged by a service provider;
• Due to incapacity at municipal level, only 14 of the 87 municipalities supported through the District Support Teams achieved at least 70 percent spending on their Municipal infrastructure Grant (MIG) allocations as end of March 2020;
• Failure to support all the 18 targeted District municipalities with water and sanitation infrastructure functionality assessments due to the outbreak of COVID-19; and
• Failure to enrol the targeted number of Learners into the MISA Apprenticeship Programme due to a very high number of applications received and subsequent delays in verifying the recommended candidates through the relevant authorities

 

3.4.South African Local Government Association

 

During the year under review, SALGA participated actively in the business of the Parliament including that of the Portfolio Committee. The Annual Report correctly emphasizes this as one of the highlights of 2019/20. The Portfolio Committee has benefited immensely from SALGA’s well-researched, insightful and well-articulated contributions, especially in relation to the Municipal Systems Amendment Bill, which the Committee adopted during the first week of November 2020. 

 

SALGA’s internal control environment also remains impressive, with eight consecutive audits and achievement of 38 out of 39 targets set out in the 2019/20 Annual Performance Plan (APP). This is in stark contrast to the state of affairs in the member municipalities, which SALGA assists and supports. This is the main dilemma with SALGA. There are many innovative outputs detailed throughout the Report, but the absorption rate by the member municipalities leaves much to be desired.

 

For example, there is a reported implementation of the Municipal Audit Support Programme in 62 Red Zone municipalities. Yet the number of disclaimed opinions among these municipalities increased from 26 to 33. Looking at the diagrammatic representation of the National Treasury Framework for Strategic Plans and Annual Performance Plans, as seen on page 28 of the Annual Report, one notices that SALGA’s work is very active on the bottom three rungs of the pyramid, namely the inputs, activities and outputs.

 

The top two rungs of the pyramid relate to the outcomes, or results of SALGA interventions on municipalities, and impacts or long-term results at local government level. This is where the work of SALGA starts becoming more aspirational and less definitive. Consider, for example, the lack of accountability and poor consequences management, which the Auditor-General has consistently identified as a serious area of weakness in municipalities.

 

SALGA’s intervention in this regard, as detailed on page 44 of the Annual Report, has been the development of an Accountability and Consequences Management Protocol, with the envisaged outcome/impact of stronger oversight and accountability in local government. There is still a significant gap between the Protocol and its envisaged outcome and impact. It is common knowledge that accountability and consequences management in local government are nowhere near to where they should be. This again emphasizes the point that, when measured against the last two rungs of the National Treasury pyramid, SALGA’s interventions are not quite decisive.

 

As seen from the Table below, 50.1 percent (R332.4m) of SALGA’s total operating expenditure relates to programme costs, which comprise municipal advisory and service cost amounting to R239.1m, Organised Local Government Mandate implementation cost to the value of R88.1m, and Intergovernmental Relations Participation and mandating cost amounting to R5.1m. Employee-related costs on the other hand amount to 13.7 percent (R91m). This reflects an organisations that mobilises the bulk of its financial resources towards programme implementation. 

 

 

 

 

 

 

 

 

 

 

 

Source: SALGA (2020)

 

1. Financial performance

2019/20
Fruitless and wasteful expenditure	R3 062 in fruitless and wasteful expenditure resulted from interest charged by vendors. SALGA NEC condoned the expenditure.

 

1. Audit findings

2019/20

Unqualified audit opinion, with no emphasis of matters (clean audit)

 

1. Key reported achievements

• Significant contributions to the Municipal Systems Amendment Bill [B2-2019].
• Eight consecutive clean audits, with no emphasis of matters.
• Achieved 38 of its 39 APP targets, which translates to 97% achievement rate.
• Hosted the largest gathering of local government leaders from the across the world through the World UCLG Congress.

 

1. Key reported challenges

 

• Vacancies in several key positions following the revision of organisational structure.

 

3.5.CRL Rights Commission

 

The Commission continues to be the only entity in the COGTA Portfolio that has not attained a clean audit opinion. Compliance findings on procurement remain a stumbling block, as the Auditor-General identified irregularity in the process of appointing internal auditors and in the facilitation of strategic planning. This contributed to the R1.1m irregular expenditure reported in the year under review. The Committee is in receipt of correspondence from the Commission detailing the nature and circumstances around this irregular expenditure, as well as a commitment to eradicate the irregularities by strengthening internal controls and implementing consequence management.

 

Other related audit findings emphasize that the Accounting Officer did not exercise oversight responsibility regarding financial and performance reporting and compliance as well as related internal controls. Management did not always prepare regular, accurate and complete financial and performance reports based on reliable information. Management also did not adequately review and monitor compliance with applicable laws and regulations. The Commission therefore did not attend fully to the Committee’s 2019/20 BRR recommendation, which urged it to improve the implementation of its Post-Audit Action Plan to prevent stagnation of audit opinion.  

 

Performance in terms of the APP also regressed, as the achievement rate of targets fell from 100 percent in 2018/19 to 76 percent during the year under review. This mostly affected the Administration Programme, which deals with organisational development and support services. It also affected, to a lesser extent, the Legal Services and Conflict Resolution Programme.

 

On the positive side, the Commission has deepened its work on public engagement and education. The Commission has not only met the targets set in this regard, but has also exceeded targets in relation to educational programmes on CRL Rights matters and capacity building workshops.During the previous BRRR engagement with the Commission, the Committee was also concerned that the legal fees incurred during the 2018/19 reporting period were too high, and urged the Commission to investigate whether or not the legal fees were inflated. During the year under review legal expenses have indeed fallen from R1.4m in 2018/19 to R141 000 in 2019/20.

 

The Commission’s baseline allocation for the under review amounted to R45.1m, in the form of a direct transfer from the Department of Traditional Affairs. Total expenditure amounted to R40.7m resulting in under-expenditure to the value of R4.8m. The Commission attributes this under-expenditure to savings resulting from the late appointment of Commissioners. Employee related costs amounted to R24.2 million or 53.6 percent of the baseline allocation.

 

1. Financial performance

2019/20
Irregular expenditure	Incurred irregular expenditure amounting to R1.1m due to: Awarding of tender for outsourced internal audit function to an incorrect bidder. Awarding the facilitation of Strategic Planning Order to an incorrect supplier.
Fruitless and wasteful expenditure	Incurred fruitless and wasteful expenditure amounting to R3000 in relation to traffic fines. The Commission has recovered the money from the responsible employees.

 

1. Audit findings

2019/20
Unqualified audit opinion, with emphasis of matters
Audit Focus Areas	Findings
Quality of submitted financial statements	The internal audit function was not satisfactory in its review of annual financial statements. Management did not always prepare regular, accurate and complete financial and performance reports supported and evidenced by reliable information.
Compliance with legislation	Non-compliance with Preferential Procurement Regulations in the process of appointing internal audit services. Management did not adequately review and monitor compliance with all applicable laws and regulations.

 

1. Key reported achievements

 

• Achievement of 100 percent of targets set during the period under review, with no material audit findings on the usefulness and reliability of the reported performance information; and
• Exceeding of targets in relation to educational programmes on CRL Rights matters and capacity building workshops.

 

1. Key reported challenges

 

• Stagnation of audit opinion due to compliance findings on procurement;
• Lack of regional offices hampered the Commission’s outreach work in rural areas; and
• Inadequate funding.

 

3.6.Municipal Demarcation Board

 

A common theme running through the Annual Report of the Municipal Demarcation Board for the year ending 31 March 2020 is the ward delimitation process in preparation for the 2020/21 local government elections. Although the Board will be considering municipal boundary re-determination after the elections, it is instructive to note that during the ward delimitation consultation meetings, members of the public and stakeholders continued to propose municipal boundary re-determinations. The Report indicates that the Board has to date received 29 proposals for municipal boundary re-determinations.

 

This is indicative of dissatisfaction with current boundary configurations and is consistent with current dominant thinking on demarcations. Demarcation stakeholders are noting with increasing concern the growing governance, financial and service delivery challenges facing recently amalgamated municipalities. A common response to these challenges has been the invocation of constitutional interventions in terms of section 139. In the majority of instances, these interventions have not yielded the desired result.

 

The Annual Report indicates that the MDB is also seized with this matter, having partnered with the Human Sciences Research Council to conduct a research seminar examining the impact of amalgamations on service delivery. The seminar reaffirmed the view that amalgamations are not a solution to struggling municipalities. The Report also emphasizes the Board’s initiatives to reposition itself through robust communication initiatives and public awareness and education campaigns focused on ward delimitation. This is in response to perceptions among some members of the public that the Board does not provide adequate opportunity for public participation in its processes.

 

The COVID-19 related constraints on the Board’s work during the period under review are clearly evident in the R6.6m budget surplus, as almost all the Programmes underspent on their allocated budgets. The exception is the Research and Knowledge Management Programme, which overspent its allocated budget. During the year under review, the Board has continued to improve its internal control environment, consequently earning itself a consecutive clean audits as well as 95 percent achievement of pre-determined objectives. The two main issues raised earlier, namely amalgamations and public participation remains the Board’s main challenges.

 

The MDB’s total budget for 2019/20 amounted to R63.3m, with actual expenditure amounting to R56.7m and leaving an unspent balance of R6.6m. The under-expenditure has doubled compared to the R3.2m incurred in the previous financial year. Programme 2: Demarcations, accounts for R3.6m of this under-expenditure due to the COVID-19 related downward revisions to the targets relating to ward delimitation consultations.

 

1. Financial performance

2019/20
Irregular expenditure	The MDB incurred irregular expenditure of R136 000 from non-compliance discovered in the current financial year, and this related to legal services used without following SCM processes

 

1. Auditing findings

 

2019/20
Unqualified audit opinion, with no emphasis of matters (clean audit)
AUDIT FOCUS AREAS	FINDINGS
Quality of submitted financial statements	The system of internal control over financial reporting for the period under review was partially efficient and partially effective and required some improvement.
Quality of submitted performance reports	The content and quality of quarterly reports prepared and issued by management were proper and in compliance with the PFMA and National Treasury Frameworks.
Compliance with legislation	The MDB incurred irregular expenditure of R136 000 from non-compliance discovered in the current financial year, and this related to legal services used without following SCM processes.

 

1. Key reported achievements

 

• Finalisation of technical municipal re-determinations; and
• Receipt of a ‘clean’ audit for the second consecutive year.

 

1. Key reported challenges

 

• During the period under review, limited funding continued constrain the Board’s ability to implement some of its key projects, including the establishment of a regional footprint across the country;
• There are also limitations in establishing a full-scale research capacity to conduct, among others, research work on municipal capacity assessments;
• The envisaged review and amendment of the Municipal Demarcation Act (Act no.27 of 1998) is yet to materialise.
• Public misunderstanding of municipal demarcation processes remain a problem; and
• COVID-19 related downward revisions to the targets relating to ward delimitation consultations.

4.COMMITTEE OBSERVATIONS

 

1. The Municipal Demarcation Board’s performance during the year under review, including obtaining two consecutive clean audits, is a good model of good governance and deserves the Committee’s recognition and commendation.

 

1. The Municipal Demarcation Board’s projected budget reduction over the medium is a concern, as it has negative implications for the Board’s operational stability, especially in relation to public participation.

 

1. There needs to be more clarity on the role of SALGA in relation to labour relations matters.

 

1. A review of the Organised Local Government Act is necessary, as SALGA’s over reliance on membership fees is in jeopardy due to the dwindling financial base of most municipalities as a consequence of the COVID-19 pandemic.

 

1. The funding allocation to the CRL Rights Commission is pitiful considering the magnitude of the Commission’s mandate, and needs urgent review. There is no great investment in the structure supposed to address the country’s deep-seated problems of racism, which inevitably related to culture, language and religion.

 

1. The abolishment of the Group Areas Act missed the opportunity to deal with the issue of the zoning of land for religious purposes. Consequently, citizens are turning private residences into places of worship, which is engendering conflict among residents.

 

1. The funding allocated to the National House of Traditional Leaders falls short of the goal of reaffirming the role of the institution of traditional leadership as a key player in cooperative government.

 

1. The Committee must give credit to the Department of Traditional Affairs for the number of targets met.

 

1. The delays in the proclamation of the Traditional and Khoi-San Leadership Bill are worrisome, as they perpetuate unfulfilled promises to the people.

 

1. There needs to be more clarity regarding the criteria for participation in the Community Work Programme, as to enable traditional leaders and their communities to take advantage of the benefits deriving from the Programme.

 

1. The Committee is concerned with the apparent lack of appetite for consequences management in respect of the malfeasance perpetrated in the Community Work Programme.

 

1. The lack of the promised detailed presentation on the remodelling of the Community Work Programme was disappointing. The Committee had also requested details on the Board of Directors of the CWP Non-Profit Organisations and detailed expenditure breakdown of the amounts disbursed to each NPO. This has also not been forthcoming.

 

1. The credibility of the performance information on the Community Work Programme is limiteddue to the reduced scope of audit resulting from COVID-19 related constraints.It is also regrettable that during the year under review, National Treasury exempted the Department from complying with SCM processes in relation to the CWP until 31 March 2021, especially considering that the Programme has had a long track-record of irregular expenditure amounting to hundreds of millions of rand.

 

1. The failure by the Department of Cooperative Governance to implement 100 percent of its 2018/19 Post Audit Action Plan was inconsistent with the commitments made earlier in the year.

 

1. While the financial performance of the Municipal Infrastructure Support Agent is commendable, it has not yet translated to improved service delivery performance on the ground.

5.TABLE OF COMMITTEE’S REPORTING REQUESTS

 

Reporting matter	Action required	Timeframe
Proceedings of the research seminar on amalgamations of municipalities	Municipal Demarcation Board to furnish the Committee the proceedings of this seminar	Immediately
Local Government laws that needed review	The South African Local Government Association must present to the Committee all the Local Government laws, which it is suggesting for review	Earliest opportunity
Progress report on the wrong payment to Sekhukhune Enterprises instead of Sekhukhune District	The Department of Cooperative Governance must present a separate progress report on this	Earliest opportunity in the next term

 

6.RECOMMENDATIONS

 

1. The Committee must use every opportunity to lobby and advocate for adequate funding to the CRL Rights Commission.

 

1. The CRL Rights Commission should guide municipalities in respect of the zoning of land for religious purposes.

 

1. The Committee must have structured engagements with CRL Rights Commissioners on a quarterly basis, as to understand better the various work streams Commissioners are leading.

 

1. In the next year, the Committee must consider hosting a colloquium on male cultural initiation to address the challenges associated with the practice.

 

1. The Committee must engage the National Treasury regarding the exemption of the Community Work Programme from Supply Chain Management processes in terms of section 79 of the Public Finance Management Act (PFMA).

7.APPRECIATION

 

The Committee wishes to thank the Departments of Cooperative Governance and Traditional Affairs, CRL Rights Commission, Auditor-General of South Africa, SALGA, Municipal Demarcation Board, and MISA for their fruitful, cordial and constructive engagements. The contributions of Committee Members, as well as Committee support staff is highly appreciated.

 

Report to be considered