Sunday's River Valley Municipality Turnaround Status Report

1. SUNDAY'S RIVER VALLEY MUNICIPALITY TURNAROUND STATUS REPORTNATIONAL COUNCIL OF PROVINCES20 APRIL 2010

2. Background • Paterson town had been without water supply for a number months and the municipality was unable to buy chemicals to purify water for the whole area. This indicated that there was no money within the operational budget. • The department learnt that the municipality utilized the conditional grant of R10, 5m earmarked for Paterson water for other operational expenditure. • Whilst the budget has been approved by Council the budget remained unfunded and was unrealistic. • The monthly income of the municipality was R1,5m whereas the salaries on monthly basis amounted to R2m which left a deficit of R500 000 per month. • The municipality had been ravaged with adverse and disclaimer audit reports since the year 2006/7, 2007/08 and 2008/09 financial years. • Supply Chain Management processes of the municipality were flawed.

3. Background cont... • There are fourteen members of Council, (Twelve ANC and two DA). The ANC Councillors are divided into two groups, a difficult situation that compromises the decision of the Council. A consensus is as a result never reached on any matter. • Eskom continuously threatened to cut power supply because of a failure by the municipality to meet its monthly obligations. • After visits from the MEC and SG it became clear that the situation was deteriorating rapidly • Court actions launched by Ratepayers Association was premised on Council’s inability to resolve issues decisively and clearly

4. Introduction to Intervention • DLGTA S139 (b) intervention with effect from 18/2/10 • Administrator assumed duties on 23/2/10 • Areas of intervention • Finance • Human resources • Infrastructure and service delivery • Legal • Public participation/stakeholder engagement • Turnaround strategy and plan adopted by council on 25/3/10 • Financial recovery plan integrated into turnaround plan

5. Problem Statement - Finance • The turnaround plan and the financial recovery plan must address the following: • Non payment for services rendered • Debt book at R55m+ and 80% is rates • Poor collection rates at about 40% • Tariffs setting is poorly structured, grossly undercharged and not considering cost of service provision • Limited financial competencies and skills • Completeness and validity of accounting records

6. Problem Statement - Finance • Failure to implement credit and debt management policies and by-laws • Poor indigent policy and system • Inadequate structure and high vacancy rate • No optimal use of financial management systems • Lack of adequate financial policies and procedure manuals • Complete disregard of procurement policies • Non-credible budget • No proper budget monitoring and control

7. Turnaround Focus Areas - Finance • Implementation of financial recovery plan • Revenue collection • Credit and debt management policy review • Indigent policy review and register consolidation • Tariff policy review • Database cleansing and management • Metre reader capacity enhancement • Electricity and water loss management • Finalisation of property valuation • Financial department structure review • Critical vacancy filling • Training and capacity building of finance staff

8. Achievements - Finance • Credit control and debt management policy reviewed and adopted by council 25/3/10 • Recalling of chief financial officer • Draft financial management policies developed for council approval by 30/4/10 • Delegations manual workshopped on 13/4/10 • Adjustment budget approved on 25/3/10 • Draft IDP and budget 2010-11 approved on 31/3/10 as per treasury regulations • Finance structure reviewed • Critical posts budgeted for in 2010-11 • Cost cutting measures in place, eg Telephone and 3G cards, travelling and fleet management

9. Problem Statement Institutional Development • Structure not aligned to the IDP • High vacancy rate • High staff turnover • Lack of required competencies in critical departments eg Infrastructure and finance • Non-functioning of local labour forum • No training and capacity building interventions • Lack of procedure manuals and critical policies • Performance management not measured nor cascaded • Outdated policies • Outdated delegations and rules of order

10. Turnaround Focus Areas – Institutional Development • Human resource policy review • Procedure manual review • Rules of order review • Delegations review • Organisational review - finance and infrastructure to be prioritised • Review of local labour forum representation and membership • Develop a training plan based on skills audit • Develop a change management programme • Train staff on performance management • Cascade performance management to all levels

11. Achievements – Institutional Development • Structure reviewed to align to IDP (finance approved) • Roles and responsibility manual developed and workshopepd • Rules of order developed and workshopped • Draft delegations developed to be workshopped before 30/4/10 • Draft telecommunications policy developed • HR policies under review • Performance management system workshop due in by 30/4/10 to revive process • Policy to be reviewed to include all levels by 30/06/10 • Local labour forum structure reviewed • Pro-active labour engagement (3 meetings to date) • Service delivery at the core of council agenda, 3 council meetings have taken place in the last six (6) weeks • Political and administrative stability prevailing

12. Problem Statement – Service Delivery • Poor maintenance of infrastructure • No street lights • Internal roads not maintained • Water and electricity losses • Lack of service standards • Lack of procedure manuals • No infrastructure maintenance plan • Lack of capacity (staff and required competencies) • Irregular utilisation of conditional grants meant for infrastructure (DWAF and DOH) • Housing development challenges/capacity

13. Turnaround Focus Area – Service Delivery • Financial bailout is critical for the survival of the municipality (-+r20m) • Refund all funds utilised for operating expenses – on agreed terms (2010-11) • Outsource capacity (DBSA Intervention, Cacadu and provincial and national government – in process and under consideration) • Build inhouse skills (critical vacancies provided for in 2010-11) • Prioritise infrastructure organisational review and vacancy filling • Review implementing agency status of SRVM until the financial position and capacity challenges are resolved (revert developer role to DOH) • Develop an infrastructure maintenance plan (2010-11) • Develop an infrastructure master plan (2010-11) • Increase operations and maintenance budget (done in 2010-11) • Prioritise infrastructure that is critical to economic growth eg. local road maintenance and street lighting (2010-11 budget) • Develop service standards and procedure manuals (outsource)

14. Problem Statement - Governance • Public participation not effective • Poor relations between council and administration • Gross lack of policy compliance, especially procurement policy and other policies • Internal control environment generally weak at all levels • Disclaimers for successive years • No risk management nor anti-corruption and fraud measures • Management oversight/governance • No internal audit function • Performance management ineffective • Corruption allegations/ misconduct

15. Turnaround Focus Areas - Governance • Develop a public participation policy • Develop a stakeholder engagement plan • Create and support sectoral structures • Review audit committee charter • Co-source an internal audit function • Develop a risk management plan • Develop an anti-corruption and fraud policy • Strengthen support for ward committees • Integrate matters of internal controls into PMS • Align PMS, to SDBIP and IDP • Investigate all allegations of corruption, maladministration and misconduct • Discipline and report criminal conduct

16. Achievements - Governance • Stakeholder engagement has taken place with Addo community, Cacadu district municipality, unions, ratepayers association to present turnaround plan • Draft public participation policy has been developed • A first internal audit steering committee with AG and internal auditors has taken place • A process plan to deal with internal audit and risk management will be presented to council by 30/4/10 • An audit committee and internal audit committee charter is being developed • An anti-corruption and fraud policy is being developed • Current investigations of allegations of corruption, maladministration and misconduct are underway • Disciplinary processes and possible criminal charges will be considered once the investigation is completed

17. Problem Statement Local Economic Development • LED strategy a stand alone plan and not aligned to spatial development framework and iDP • Strategy not specific about strategic objectives to be achieved and how those will be met • Other departments not aligning their plans and programmes to enhance LED • LED strategy focusing on short term projects and not on a long term vision • No core pillars or strategic thrusts

18. Turnaround Focus Areas - LED • The development of a master plan for SRVM as part of the turnaround strategy for economic growth is starting point. • The master plan will provide a detailed map and practical programmes to be pursued, for the future development and growth of this area • The master plan will entail a comprehensive land use planning and development strategy that can be used to guide all development within the SRVM municipality. • The plan should reflect the vision contained in the SRVM integrated development plan and should be aligned to the broader spatial development framework of SRVM.

19. Turnaround Focus Areas - LED • Funding for the master plan to be leveraged from DBSA and DEDEA • The outcome of the plans should be the following: • Land audit analysis • SDF • Infrastructure plan • Land use management • Precinct or nodal developments • Strategic or special projects • Environmental management plan • DEDEA and DBSA has been approached for potential funding of the master plan and there is an in-principle consideration

20. Other Achievements • Cacadu providing extensive capacity building support on council policies and standing orders • Municipal manager position to be advertised • External specialist support to be provided by DLGTA, provincial and national treasury on CFO support • Good political support to the administrator • Councillor and official training on rules, roles and responsibilities and policies • Review of all contracts with suppliers is underway • Focus on resolving current litigations (2) resolved so far • Good relations with union so far • Cash flow improving slightly • Relations with DWAF and DOH have improved

21. Critical Success Factors • Service standards to be improved at all times • Payment for rates & services critical for the success of the plan • Specialist intervention critical in finance and infrastructure • Political stability within Council is critical • Performance driven culture should be instilled • Appointment of competent staff not to be compromised, to sustain intervention achievements • Commitment of all stakeholders in supporting the plan • A corrupt free environment • A vibrant local economy

22. Thank you