Lack of consequence management a death knell for local municipalities in Limpopo

11 October 2019

The Portfolio Committee on Cooperative Governance has criticised the lack of clear and substantial consequence management in local government in Limpopo despite continuous transgressions. The committee is of the considered view that without concomitant action, municipalities will continue to struggle to deliver quality services, which will impact on residents, especially the poor.

What has come out clearly from the engagements with the Office of the Auditor-General, the Provincial Co-operative Governance, Human Settlements and Traditional Affairs (CoGHSTA) and municipalities that invested monies into Venda Mutual Bank is that those municipalities are technically insolvent. This impacts on their financial viability and on the ability of municipalities to service their creditors. This is likely to continue in the foreseeable future and has a direct impact on the ability of municipalities to deliver quality service delivery to the people. For example, the Collins Chabane municipality is now unable/unwilling to fill vacant positions in an effort to maintain a positive cash-flow balance, but to the detriment of the ability of the municipality to service its clients.  

The saga around investments into the Venda Mutual Bank (VBS) is concrete illustration of lack of consequence management in the face of municipalities in the province cumulatively losing over R1.2 billion, which has a direct impact on service delivery. “It is concerning that some municipalities have even paid out Municipal Managers (MMs) and Chief Financial Officers (CFOs) who have been identified to have been central in investing the money of the municipalities into VBS. There is clear lack of appetite for consequence management, which undermines prescripts of good governance,” said Ms Faith Muthambi, the Chairperson of the committee.

The Municipal Finance Management Act clearly sets out the responsibilities of both Accounting Officers and Municipal Council and the consequences attached to any action that is contrary to the act. It is obvious that various MMs and CFOs committed financial misconduct in terms of section 171 (2) and 173 (1)(a)(iii). It is in this context that the committee is perplexed that despite suspensions of various MMs and CFOs, no further action has been taken.

Councils have also neglected their fiduciary and oversight duties, first in that councils have adopted investment policies that are contrary to the Municipal Investment Regulations, as set out by National Treasury, and secondly that they have failed to adequately investigate the recoverability of expenditure and liability of officials. The committee has urged for speedy civil claims to be instituted, especially against those MMs and CFOs that have since resigned from these municipalities, in an effort to recover part of the monies lost through VBS investments.

The lengthy suspensions of senior managers have an unintended consequence in that they have created management gaps in municipalities, many of which have had negative audit opinions, which impacts on stability and performance. The committee urges the Department of Public Service and Administration to find a way of blacklisting officials who resign before completion of disciplinary proceedings only to emerge somewhere else within the public service. 

Regarding negative audit opinions in many of the municipalities in the province, the committee has criticised the overreliance on consultants to prepare financial reports. For example, in Greater Giyani Municipality the finance unit is fully staffed with a CFO and Deputy CFO, yet they have appointed consultants to prepare their financial reports. Mopani has for its part spend over R24 million and Vhembe District Municipality spend R41 million on consultants over three years. Even more disconcerting is that despite the expenditure on consultants, the Auditor-General found the financials unreliable and full of material misstatements.

Furthermore, the committee considers it unacceptable that there are no skills transfer from consultants to internal staff at municipalities, which means that is ongoing reliance on consultants, despite the fact that municipalities have personnel employed and are being paid to work within the finance environment.

Irregularities around the supply chain management (SCM) remain a concern for the committee. The Auditor-General highlighted some areas of concern, including: not advertising tenders, contracts awarded to underserving contractors, contracts awarded to providers who were in the service of other state institutions or whose directors we in the service of other state institutions. This continued undermining of SCM prescripts will continue to contribute to the negative audit opinions          

The committee welcomes the frank admissions by the MEC for CoGHSTA on the challenges facing municipalities in the province and willingness to address them. The committee will monitor commitments made by the MEC, especially in relations to supporting Municipal Public Accounts Committees (MPAC). The committee views these committees as critical in improving municipalities in the province.

The committee also committed to regular monitoring of implementation of audit action plans to ensure that municipalities improve and will, together with the Standing Committee on Public Accounts, receive frequent updates on implementation of those action plans.

Above all, councils must also play their oversight role to ensure that they hold the executive accountable for the effective and efficient running of the municipality.

Issued by Malatswa Molepo, Parliamentary Communication Services, 11 October 2019