Democratic Alliance Debate on the Financial Performance of KZN Municipalities

George Mari, MPP

DA KZN Spokesperson on COGTA

THANK you MEC for an honest and precise report on the performance of municipalities – not much has been hidden.

I am disappointed though that the report did not cover elements of service delivery not achieved as a result of massive under-spending by municipalities. This has had a serious impact on the quality of lives of KZN’s communities and here I question the phrase “KZN Municipalities becoming the pulse of Service Delivery”. It is worth noting that only 6 out of 61 KZN municipalities have clean audits – only 10%

The statistics relating to municipalities adhering to deadlines and submitting financial statements on time in compliance with the Auditor-General’s requirements is encouraging but the use of consultants to do this must be tested.

The question is – have KZN municipalities achieved their milestones in line with set targets?

This is answered in a report by the Finance MEC, wherein she notes that some of the districts spend less on employee-related cost and more on contracted services. MEC – have these reports been tested for quality and accuracy? I believe not. The report also confirms misstatements were identified in various areas such as capital assets, current assets, liabilities and disclosure items. Municipal managers must be held accountable here.

MEC – on page 7 of your report, you indicate that 61 municipalities did not comply with Section 121 of the MFMA. How does this impact on the good stats? The DA is concerned that whilst the reporting and compliance stats may seem good, the other side of the coin shows a very different picture;

– 64% of municipal audit responses were adequate

– 26% partially adequate and 10% inadequate

Further, the 10 audit issues raised give an indication of the extent of the problems and raises questions around the accuracy and quality of the stats.

Let’s look at what we have – irregular, fruitless and wasteful expenditure. A total of 17 municipalities have been identified in this regard, amounting to R477 million. How can you spend money that you don’t have? This is pure negligence. Accountability must be enforced and disciplinary action taken. Further, 37 Municipalities or 61% of Municipalities incurred irregular expenditure totaling R2.115 billion for 2010/2011. This is shocking and again is as a result of the contravention of the Supply Chain Management Regulations and flouting of the MFMA and other laws.

The crooks are in the municipalities and are now known. What action has been taken against these rogues? We cannot have employees and councillors doing business with municipalities.

This is a serious breach. Relatives and immediate family members are also used as fronts for these businesses. Endemic fraud and corruption involving officials and councillors must be rooted out. This is the biggest threat to service delivery. The DA looks forward to a report from the department on the outcomes of disciplinary procedures and what action is to be taken against these crooks. These people are stealing from the poor and should be jailed.

Hon MEC I implore you to Release the Manase Report. Your integrity is at stake. You have called for the forensic investigation and have received the findings. Certain officials have been named but the “big fish” have not been exposed. You know who they are. The DA gives you fair warning that we will do whatever it takes to force the Municipal Manager and you to release this document – the public have a right to know.

In the media yesterday there was a headline relating to officials fleecing the system.

Poor management regarding expenditure is the problem and CFO’S and Municipal Managers must be held to account. A lack of good governance is linked to cadres being deployed to senior positions with neither the skills nor the experience to perform their functions. The SCOPA reports on municipalities highlight the fact that Accounting Officers lack the ability to perform.

Thirteen municipalities had failed to spend their Conditional Grants as at June 2011. What action has been taken against officials, Mayors and councilors? The DA calls for an investigation into whether these funds have been used for operational expenses. Conditional Grants were allocated for a specific service delivery purpose, such as water, electricity or other Infrastructure Development that would improve the lives of the poor. This money has not been utilized correctly. At the end of the day, we don’t need stern measures. We need stern action against those who have erred.

The Department has tried, year in and year out, to lend and provide support and with Treasury’s support they can continue to do this. But, if incompetent cadres are not weeded out, very little will be achieved.

A total of 19 municipalities have reflected a negative cash flow after the deduction of unspent grants. Grants must be cash-backed. Can the MEC indicate if this is the case?

Most municipalities rely heavily on Grants and Subsidies, followed by Electricity and Rates.

The Rates income is around 12 % and KZN has 28 Municipalities that are 80% Grant reliant. The implementation of the Property Rates Act must be expedited to ensure that property owners, who can afford to pay, do so. The lack of operational funds impacts on their ability to spend their Conditional Grant, thus the under-spend of R2.2billion resulting in failure to achieve service delivery projects. Have municipalities done an exercise to determine the fair value of properties in order to rate them? Municipalities use Conditional Grants for operational expenditure because of inadequate own revenue.

Overdrafts have also sky rocketed, in some cases, to more than a thousand percent. At provincial level this has gone from R3.8 million to R613million. Outstanding debt has also gone through the roof, as has outstanding creditors.

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