SUPPLEMENTARY TO FOCUSED PRESENTATION TO THE SELECT COMMITTEE ON APPROPRIATIONS

1. SUPPLEMENTARY TO FOCUSED PRESENTATION TO THE SELECT COMMITTEE ON APPROPRIATIONS SUPPORT PROVIDED TO MUNICIPALITIES AND MUNICIPALITIES PLACED UNDER ADMINISTRATION UNDER SECTION 139 OF THE CONSTITUTION, 1996 28 January 2014 Parliament, RSA, Cape Town

2. OUTLINE OF THE SUPPLEMENTARY PRESENTATION To provide additional information on the following: • MIG Support Initiatives • Operation Clean Audit • Section 139 Interventions • Local Economic Development • MISA Support

3. 1. MIG support initiatives

4. MIG support initiatives

5. MIG support initiatives

6. 2. Operation Clean Audit • Background • Milestones • Status of outcomes • Support Initiatives • Key challenges affecting Municipal Financial Management and audit outcomes • Capacity of provinces to support municipalities

7. Operation Clean Audit 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.

8. Operation Clean Audit milestones The 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.

9. Current status of audit outcomes • The 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. • The tables in the next 2 slides illustrate the status.

10. Current status of audit outcomes

11. Status of audit outcomes per province

12. 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.

13. Operation Clean Audit Support The key areas of focus in the attached 2013/14 OPCA plan are the following: • Actions to ensure that quality Annual Financial Statements (AFS) 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, politically and administratively. • 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

14. Key challenges affecting Municipal Financial Management and audit outcomes Although progress has been made within the municipal finance arena, municipalities face a number of historical challenges. These include: • A history of receiving qualifications and inability to turn them around due to unresolved historical transactions (legacy issues) that affect the opening balances. • The instability within the municipality, both at a political level as well as administratively. • The high vacancy rate of CFO’s and other key personnel due to the suspensions and resignations. • Lack of funds for asset management to facilitate a complete disclosure of infrastructure assets. • Non functional MPACs as well as MPAC chairpersons being changed regularly which affect the committee’s stability and progress. • Lack of capacity in Internal Audit units and inadequate functionality of Audit Committees. • Inadequate information communication technology (ICT) systems to support financial management.

15. Capacity of provinces to support municipalities • The capacity of certain provinces to support municipalities is of great concern. • There seems to be a direct correlation between the provinces with substantive support programmes, dedicated personnel to support municipalities as well as funds for support interventions and the level of improvement in the audit outcomes over the OPCA period. • Gauteng, Western Cape and KwaZulu Natal clearly demonstrate this correlation; of the 9 provinces whose support plans were analysed; they have the most comprehensive provincial CoGTA support programs for OPCA. • These are also the provinces who currently meet the 2013 OPCA target of 75% unqualified audit opinions.

16. 3. Section 139 interventions • Nature of the Challenges • Support Initiatives • Detailed and other S139 initiatives • Development of Intergovernmental Support and Monitoring Bill (IMSI).

17. S 139 - Nature of the Challenges

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35. DETAILED S139 INITIATIVES

36. OTHER S 139 SUPPORT INITIATIVES

37. OTHER S139 SUPPORT INITIATIVES

38. OTHER S 139 SUPPORT INITIATIVES

39. S 139 – Development of the Intergovernmental Monitoring, Support and Interventions Bill (IMSI): • Objectives of the Bill: • To provide for support and intervention measures to strengthen the capacity of each sphere to fulfil its executive obligations in respect to oversight and support of municipalities • Stabilise the interventions environment through: • a) Clearer procedures and processes for undertaking both S100 and S139 interventions; • To establish, together with DPME, a range of sector norms and standards for service delivery to better define executive obligations; • To ensure that interventions are used as a ‘last resort’ and prevent ‘conflictual interventions’ through providing pre-intervention measures for provision of support. • Providing for a consistent and uniform approach to the application of an intervention at both provincial and local level (and rationalising procedurally, re both S139 and S 100) • e) Section 139 (8) legislation would complement the provisions of the Municipal Finance Management Act, which provides a detailed framework for section 139 (4) and (5) ‘financial’ interventions.

40. 4. MISA Strategic Focus An integral part of COGTA’s efforts to realise the objectives of LGTAS. • Accelerating service delivery • Enhancing Good Governance • Promoting sound financial management • Fighting corruption • Facilitating sustainable infrastructure development. 40

41. Local Government Skills Challenges Findings from Empirical Studies • Migration of older experienced Built Environment professionals out of local govt • Replacement by younger relatively inexperienced officials (3 -5 years minimum average experience) • Majority unregistered with statutory professional Body (unregulated) • High Vacancy Rates(35 -50%) • Increased Technical workloads & falling staffing levels   • Municipal Technical departments unable to spend MIG allocations • Frequent budgetary rollovers of MIG • General inability to cope with the demands of municipal operations and maintenance, • Frequent sewage spills, water quality problems and refuse non-removal • Inability to cope with services for developments/ large housing projects due to a lack of bulk services and support bylaws • High water / electricity losses • Poor Metering management • Poor revenue income streams and collection rates (growing indigents) • Increased service delivery protests

42. Key Technical Professions Targetted

43. Artisans Development Programme Sub-Programme Objectives To create a pool of Artisans for efficient operations and maintenance of infrastructure in local government Current Support Deployed – Total x231 Apprentices deployed (FET graduates) + New Deployments - Total x58 Apprentices deployed (graduates) Total Deployments x289 Apprentices deployed Municipal Officials Under Apprenticeship – x87 municipal officials Current Skills Sets • Electricians • Bricklayers & Plumbers • Motor and Diesel Mechanics • Fitters & Turners New Skills Set • Water Process Controllers – (Water & Wastewater) • Landfill Site operators

47. Technical Bursary Programme • Established by Cogta in 2010 • Transferred to MISA in 2012 • Bursary to fund undergraduate studies - National Diploma/ Bachelors degree studies in Civil, Electrical Engineering, Town Planning & Geographical Information Systems (GIS) disciplines. • Historically disadvantaged candidates from poor background   • Eligibility: Matriculants meeting minimum university entrance requirements • Total graduates currently funded - x91 graduates • Graduating bursary holders contracted to municipal Technical departments for service delivery and skills pipeline

48. Technical Training Programmes Certificate Programme in Infrastructure Management Post Grad Diploma / Certificate Level To assist Technical Directors /junior/ middle managers without minimum academic qualifications • Core Technical Modules • Construction Management • Asset and Maintenance Management • Supply Chain Management • Road Traffic Engineering and Management • Water Resources Engineering and Management • Solid Waste Management • Environmental Management • Town and Regional Planning • Core Management Module • Strategic Management and Leadership Electives for Technical Managers (1 Module) Fleet Control and Management Infrastructure Strategic Project Management Project Quality and Risk Management Programme to be delivered with full academic credits by all x7 Universities of Technology with common curriculum, full academic credits nationally, subsidized by MISA Technical Training short courses , subsidized by MISA, about to start in January 2014 x12 municipal officials trained in Japan through MISA-JICA partnership

49. Young Professionals (YP) & Experiential Learning Programmes • YP Programme • 3 year structured work-based internship development programme leading to professional registration • Focused on Civil Engineering & Town Planning graduates from Universities/ University of Technology with 1 year or more working experience • Professional registration + absorption for building municipal internal capacity. • x40 graduates underway to register as Technician professionals with statutory professional bodies ECSA, SACPLAN • Experiential Learning Programme • 18 months structured work-based internship development programme for new built environment graduates • Focused on Civil Engineering, Electrical Engineering, Waste Management, Construction & Town Planning graduates from Universities/ University of Technology with less than 1 year work experience • Exposure for employability + absorption for building municipal internal capacity. • x151 graduates currently being deployed nationally

50. Mentoring Towards Registration • Providing mentoring support to municipal officials to ensure the professional registration with professional registering bodies • (ECSA; SACPLAN; SACPCMP). • MISA Investment- • Direct Mentoring Cost • Technical Training Required • Secondment Workplace • Municipal Investment • S & T • Accommodation during Secondment Minimum academic qualifications in line with statutory requirements (National Diploma/ B. degree) Five years or more relevant working experience Eligibility for registration as Candidate Existing professional registration (candidacy) with relevant statutory body will be preferred.