North West progress on COVID-19 Expenditure Audit

Meeting report

The Chairperson indicated that the meeting represented a follow-up to a prior briefing by the North West (NW) Provincial Government to the Committee on 26 August, 2021. During the course of that meeting, it was decided that in the next meeting, the province would elaborate on the steps it had taken to implement consequence management against officials responsible for irregularities found in the Auditor-Generals (AG’s) report on Covid-19 spending.

Thereafter, he asked for a mover for the adoption of the agenda.

Mr G Mpumza (ANC) moved to support the adoption of the agenda.

Ms D Direko (ANC) seconded the mover to support the adoption of the agenda.

Ms Motlalepula Rosho, MEC for Finance, NW, indicated that the MECs of the DoH, DCoGHSTA, DBE and the DSD also formed part of the delegation present in the meeting.

Briefing on the AG’s special report on Covid-19 funds

MEC Rosho and Mr Ndlela Kunene, Head of Finance, NW Provincial Treasury, briefed the Committee on the AG’s Special Report on Covid-19 funds.

MEC Rosho began by providing the Committee with a brief background. In line with the equitable share formula, NW reprioritised R2.1 billion for COVID interventions, following which Provincial Treasury (PT) tabled a Special Adjustment Budget on 24 June 2020, including a Division of Revenue Amendment Bill. This budget made, amongst other things, additions of R11 billion to the Local Government equitable share, with the provincial equitable share remaining the same. Through this appropriation, the DoH was allocated an additional R1.1 billion from the equitable share, R193.640 million from conditional grants; and R399 million was reprioritised from its internal baseline allocation to Covid-19, with the total number dedicated to Covid-19 amounting to R1.693 billion.

MEC Rosho also highlighted that the DSD received an additional R40 million for the Social Relief of Distress (SRD) Programme to respond to the challenges of disasters, extreme poverty and destitution. This programme, she said, included food parcels and cooked meals, blankets, sanitary dignity packs and any other appropriate interventions as a short-term measure to respond to the emergency needs of individuals and households.

PT offered several support mechanisms to assist municipalities with the management of Covid-19 funds, some of which were: engaging with them on virtual platforms to assess the impact of COVID-19 on their operations; the development and issuance of a reporting template for municipalities in the province to report weekly and monthly expenditure on COVID-19; monitoring reporting by municipalities to National Treasury (NT) on weekly basis, and issuing non-compliance letters for those found not to be filing reports.

Mr Kunene mentioned that despite the assistance provided by PT, the AG made several adverse findings against the local and district municipalities in the province, such as limited or no implementation of the Municipal Standard Chart of Accounts (mSCOA); excessive prices paid for Covid-19 goods and services; and the spending of Covid-19 funding for non-Covid-19 related purposes. He added that the AG made several recommendations to rectify these findings, and PT was monitoring the implementation thereof.

(See presentation)

The Chairperson indicated that Members would ask questions on behalf of the people they represented.

He opened the floor for discussion.

Discussion

Mr I Groenewald (FF+) asked the department to compile a report for the Committee, which illustrated what consequence management had been implemented and the charges laid against officials accused of wrongdoing by the Special Investigating Unit (SIU). This report would assist in preparing the Committee for its meeting with the SIU. 

Ms P Xaba-Ntshaba (ANC) highlighted that during the Committee’s oversight visit on 7 May 2021, the Matlosana Local Municipality (MLM) officials indicated that the SIU had completed its forensic report into its Covid-19 PPE procurement. As such, she asked whether the municipality had acted on these reports and, if so, what the outcomes were.

Mr K Ceza (EFF) asked whether panic buying, as referred to in slide 12 of the presentation, was covered in the legislation. Furthermore, he asked what constituted panic buying.

He asked NW DSD to provide a list of the service providers it sourced food and sanitary dignity packs from for distribution to those in need during the Covid-19 disaster, in line with the SRD programme.

Touching on the distribution of sanitary dignity packs, he asked what steps the DSD had taken to place these packs in public spaces and make them accessible to all who require them, similar to what has been done with condoms. Doing so, he said, would assist in the restoration of girl school-goers’ dignity.

He then asked what action the NW DoH had taken to ensure that the installation of a new transformer in the Moses Kotane Local Municipality (MKLM) would be done promptly so that the handover of the newly-built clinic in the area could finally take place. 

He mentioned that political and administrative instability in municipalities such as Ditsobotla Local Municipality (DLM), Lekwa-Teemane Local Municipality (LTLM), Kagisano-Molopo Local Municipality (KMLM) and the Maquassi Hills Local Municipality (MHLM) had disrupted service delivery to the residents in those areas. There seemed to be a recycling of Municipal Managers (MM) in some of the mentioned municipalities, with no consequences taken against them, as should be, in line with Section 86 of the Public Finance Management Act (PFMA). Further, despite the implementation of Section 100 in the province, issues such as poor financial management and a lack of internal controls remained.

Mr A Matumba (EFF) mentioned that the report presented had not given the Committee a clear picture of what consequence management had taken against officials found to be involved in wrongdoing. In addition, he voiced his disappointment that the Ngaka Modiri Molema District Municipality (NMMDM) did not attend the meeting – citing that it was informed at short notice – as he expected its officials to answer questions on the serious allegations faced by the municipality.

Referring to Section 32 (1)(a) of the Municipal Finance Management Act (MFMA), which states that political office bearers are liable for unauthorised expenditure, he asked why the liability of unauthorised, irregular and fruitless (UIF) expenditure only applied to the Senior Management within municipal administrations, and not to the political office-bearers. Moreover, he asked what steps the Councils in the various municipalities in the province had taken to implement consequence management against officials accused of wrongdoing; and to report acts of criminality where they have been found to have occurred. He added that without action being taken against politicians in the municipalities, unauthorised, irregular and fruitless expenditure would continue to occur.

Mr X Msimango (ANC) was also left disappointed by the NMMDM’s absence at the meeting and advised that the Committee look into ways to ensure that municipalities took its work seriously.

Thereafter, he asked the NW Provincial Government whether it believed that the R2.7 million expenditure spent by one of the municipalities in the province [he did not mention which municipality it was, and the information was neither on the presentations provided] on guesthouse accommodation for essential workers during the Level 5 Lockdown, was justifiable contrary to the AG’s findings that it was unnecessary.

He asked what punitive measures were taken against officials in the JB Marks Local Municipality (JBMLM) who advanced a payment of R6 million to a service provider when the goods had not yet been delivered. If so, he asked what action had been taken and how far in the process it was.

To him, it seemed that consequence management in the NW was moving at a snail's pace. Following this, he asked the NW Provincial Government to provide details on consequence management taken against officials accused of wrongdoing and whether cases had been opened. More evidence needed to be provided to illustrate that officials were fighting against the scourge of corruption in municipalities and provinces.

The Chairperson mentioned that the Committee Chairperson for the NW Legislature Portfolio Committee on Cooperative Governance, Mr Aaron Motswana, had joined the meeting.

Ms S Buthelezi (IFP) asked four questions. One, she asked what plans were put in place to assist the provincial departments that were financially limited during the 2020-2021 financial year due to the reprioritisation of their budgets towards supporting the government’s Covid-19 interventions.

Two, she asked if the Provincial departments had followed up on whether municipalities had implemented the AG’s recommendations, considering their history of mismanaging funds. Three, she asked how often the internal audit units in the municipalities reported on the progress of the implementation.

Four, she asked what additional accountability measures, besides the issuing of non-compliance letters, had the NW PT put in place to ensure that municipalities reported back on their weekly and monthly Covid19-related expenditures.

Ms Direko mentioned that she had many concerns related to the presentation, particularly that the Provincial Government had not followed through on the Committee’s request for it to provide in-depth details on the state of local municipalities in the province. As such, she requested that it provide a report on how many cases had been reported thus far, how many officials had since been suspended or dismissed, and how much of the funds lost to corruption had been recovered.

Mr Mpumza asked the DCoGHSTA and PT whether the NW local and district municipalities had established rigorous reporting and early warning monitoring systems, as provided by the MFMA. Furthermore, he asked if the two departments had an early warning monitoring system that would allow them to urgently assist financially-distressed municipalities through Section 154. He asked why so many irregularities had been recorded in the province’s municipalities if such a capability existed.

The Chairperson mentioned that Members wanted clarity on what steps have been taken by the province’s municipalities to implement the findings of the AG’s report. He asked for the provincial departments to provide specific detail, where possible, in their responses; where they could not, he asked that written responses be provided.

Mr Madoda Sambatha, MEC for NW DoH, said that the Lenchwe Mokgalwaneng Clinic was built by the NW DoH and the contractor, Mr Siyanda Bakgatla. As explained by Eskom, a new transformer to power the clinic was subsequently damaged after installation because it was too small to power operations. As a result, Eskom advised that the DoH procure a larger transformer, which has been done.

Regarding the question of what consequence management taken against implicated officials, he mentioned that all four of the employees fingered by the SIU had undergone their second disciplinary hearing.

On what panic buying constituted, he explained that due to the shortage of PPE in the country, departments were forced to buy these goods from service providers at higher prices than they usually would.

Ms Tumi Moiloa, MEC for NW DSD, explained that the department referred to sanitary towels as sanitary dignity packs because they now included toiletries. She indicated that since her department did not have the budget to purchase sanitary dignity packs for all South Africans, it and the DBE profiled young girls and older women who required the packs. With a sufficient budget, she was sure that the department would be able to make sanitary pads available in all public areas. 

Touching on the companies appointed by the department to procure PPE, she indicated that the NW DSD had already compiled and provided this list to the Provincial Government and would be willing to provide this to the Committee if requested.

She further explained that during the period of hard Lockdowns (from 2020-2021), the department went from house to house to provide food parcels to those in need. That support, she added, is still provided, but only to those who have been profiled for SRD.

Ms Wendy Matsemela, MEC for Education, mentioned that in line with the PFMA, the department applied consequence management relating to the non-compliance of supply chain management (SCM) legislation against, for instance, the 34 officials who the AG found to have conducted business with the state. 25 of these cases have since been finalised, including those of the Chief Executive Officer (CEO) and the Director of SCM, both of whom have been dismissed from the department.

She highlighted that NW DBE had a report which contained details on the individuals involved in unauthorised, irregular and fruitless expenditure and the punitive measures taken thereafter. 

MEC Rosho assured Members that they would be provided with a comprehensive report on what consequence management has been taken and how many cases had been laid against implicated officials.

Regarding whether NW PT and DCoGHSTA had monitoring mechanisms at their disposal, she said that she formed part of the three-member Governance Cluster Committee in the province, which deals with matters pertaining to local government and is chaired by the MEC of DCoGHSTA. The Premier, through the EXCO, tasked the Committee with engaging municipalities faced with instability. Particular focus has been placed on LTLM, KMLM, DLM and the Mamusa Local Municipality (MLM), which have had unstable Councils.

One of the challenges experienced by KMLM was that the MM took PT to court because of its request to National Treasury (NT) to withhold the municipality’s and DLM’s equitable share. PT came to that decision as it was unsure which of the two Councils – a parallel structure had been established –  in the municipality had adopted the budget.

A court settlement was reached three weeks ago between the three parties, and in it, NT agreed to release the municipality’s equitable share, with the condition that proof be provided that the Council constituted and which approved the budget was legitimate. However, a judgement on the originally constituted Council’s appeal relating to certain aspects of the first judgement is expected soon.

The DCoGHTSA received a report that first contained a request from DLM Council for a secondment by the MEC on the appointment of an Acting MM. Once the secondment was provided, the Council, which was now correctly constituted, planned to sit either today or the following day to formally introduce the Acting MM. This would end the feud between the municipality’s two MMs, who were fighting over the position, and whilst doing so, their terms of office had lapsed.

Still on DLM, she stated that the municipality was part of the municipalities in the country that Cabinet resolved are under financial distress. Following the appointment of the Acting MM, both the PT and DCoGHSTA planned to work on a comprehensive financial recovery plan (FRP) for the municipality to assist it in adopting a funded budget for the first time since 2015. This same process would be done with all financially-distressed municipalities in the province, including Mamusa, which also faced challenges with its MM – an Acting MM has since been seconded by the MEC for CoGHTSA – as well as its Chief Financial Officer (CFO).

Municipalities such as JB Marks and Matlosana also faced challenges, with the CEO and MM in the former both undergoing disciplinary hearings (the MM’s case has been finalised and the subsequent report has been tabled in Council); while in the latter municipality, four officials have undergone disciplinary hearings, including the CFO – who later resigned before the issuing of the report – with one reaching finalisation; however, she was unsure on how far Council was in implementing the findings. Further in LTLM, a motion of no confidence against the Mayor was recently debated in Council, although the MEC for CoGHSA intervened to stabilise affairs.

She confirmed that the PT and DCoGHSTA did have monitoring mechanisms to pick up on irregularities, such as the PT’s mid-term budget assessment, where municipalities are expected to provide ten risk areas identified.

Both PT and DCoGHSTA only utilise the intervention mechanisms provided by the Constitution as a last resort to assist municipalities. Where a municipality is unable to correct its poor financial predicament through its FRP, the PT, under the instruction of the NT, must mandate a directive to invoke Section 139 (5), together with Chapter 13, of the Constitution. Mandatory intervention, she added, did not take away Council’s powers; rather, it was used to assist municipalities in implementing their FRPs – which has been done in various municipalities in the province.

After reviewing its organogram, PT recognised that it needed to assist all four districts in the province, and as such, it has appointed four district directors in each, who, from time to time, are assisted by specialists. Due to its limited budget, the department has been unable to station the directors physically in each district, but it is in the process of doing so. Since their appointment, district directors have assisted PT and DoGHSTA in ensuring that municipal departments comply with the directives to implement the findings of both the SIU and the Public Protector of South Africa.

In her response to the question on what the department has done to support municipalities’ recovery efforts, she indicated that it has worked with DCoGHSTA since 2019 on providing a training and support programme for contract management to ensure that there are punitive measures implemented against implicated officials. Training on mSCOA compliance has also been done, so that councillors are better able to understand the complexity of the system and engage during the tabling of a Section 71 Report. PT also provided training to MPAC and EXCO members on financial management.

A SCM certificate programme, launched in 2019 but delayed due to the hard Lockdowns, commenced in 2021. This programme was established by PT in cooperation with various universities and service providers and sought to strengthen and professionalise SCM in Local Government. Furthermore, in 2021, PT established a support programme for accounting generals in all the provincial departments. She was pleased to report that PT had noted improvements in the audit outcomes of provincial departments. Due to its success, the programme is currently being implemented in local government through the MFMA Unit. She added that municipalities with disclaimers and unqualified audit opinions would be picked to form part of the programme.

While she was pleased with the outcomes of the training and support programmes thus far, she admitted that deep historical challenges in municipalities still remained. However, both DCoGHSTA and PT were determined to resolve these issues through, amongst others, establishing further programmes, particularly those that will support municipalities with the implementation of their FRPs.

Ms Lenah Miga, MEC for NW DCoGHSTA, referring to the issues faced by KMLM, mentioned that her department is currently drafting proposals that it planned to table to the Provincial EXCO, which include resolutions to the issues faced in the municipality. As required, these proposals would also be provided to the Minister and the National Council of Provinces.

Regarding DLM, she said that in line with Section 154 of the Constitution, her department seconded the appointment of the Acting MM, who assumed his position the previous day. All that remained was for Council to sit and formally introduce him as the Acting MM of the municipality. Part of his terms of reference, she explained, include ensuring that a plan is developed to appoint Senior Managers and a permanent MM. 

The appointment of an Acting MM in Mamusa, JB Marks and Madibeng had been signed off by the department, in line with Section 154 of the Constitution. In addition, the department provided a plan to make certain that the municipalities are able to fill in the SCM positions.

In LTLM, the department requested that the MM provide a detailed report on the allegations that the Mayor of the municipality had spent R130 000 of municipal finances on a rented car for two months. She assured the Committee that the department would report to Members and the Provincial Governance Cluster Committee once it was presented before it.

DCoGHSTA realised that there are challenges relating to the internal audit committees of municipalities in the province, and it has since instituted a programme to strengthen them. MPAC and Portfolio Committees in the municipalities have been trained by the department, with the assistance of the South African Local Government Association (SALGA), on strengthening internal controls. During the execution of this programme, both DCoGHSTA and SALGA noted a lack of leadership in the Municipal Councils.

She added that DCoGHSTA is monitoring the various issues in Matlosana and JB Marks, and once investigations into both are completed, it would release the subsequent reports.

The Chairperson said that the Committee scheduled a follow-up meeting with the NW municipalities that were not present during the meeting for the 20th of September, 2022.

Mr Ceza indicated that some of his questions were not answered. The Committee did not want to hear that many of the challenges faced were historical; rather, it wanted to hear what actions would be taken to correct them. He requested that timeframes be provided on all the measures taken thus far, to resuscitate financially-distressed municipalities in the NW. 

He reminded the delegation that condoms are distributed at various service delivery points (SDPs) found in public spaces. He then asked what methods the NW DSD and DBE were using to ensure sanitary dignity packs were provided to young girls.

In addition, he asked for the NW DoH to provide the Committee with a timeframe for when it would open the clinic to the community.

Mr Groenewald asked that all the reports referred to by the various departments be provided to the Committee before it next met with the other NW municipalities later this month.

He applauded PT and DCoGHSTA for executing the mSCOA training and asked who was responsible for approving the content. However, he felt more improvements could be made to the MPAC training programme.

He asked NW DBE to provide a report on the number of temporary teachers appointed permanently in the province, as a significant number of them had been in those positions for two years, which prevented them from accessing medical aid and other benefits.

Mr Matumba said corruption and unauthorised, irregular and fruitless expenditure would never be dealt with until councillors knew what the consequences were for being involved in such and until they were better prepared to understand the responsibilities of their jobs – especially as many of the Section 79 Oversight Committees are in disarray. Furthermore, he called for politicians to be held to account, in line with Section 32 (4) of the MFMA – which states that the MM must inform the Mayor and the MEC of if UIF has taken place and also show who is responsible for such, as well as the steps taken to recover the money.

Thereafter, he asked why sanitary pads were not as accessible as condoms. To this, he called for NW DSD and NW DBE to distribute sanitary pads in public spaces to protect the dignity of those collecting them.

Referring to the NW DSD’s comments that it did not have enough funds to provide all who required sanitary pads, he asked whether the department had requested additional funding from NT to enable it to do so. Additionally, he advised the department to utilise its database to identify which learners required sanitary pads, as many did not attend school because they did not possess them. 

MEC Matsemela agreed that access to sanitary towels provided dignity to girl learners. She explained that NW DSD and NW DBE have managed to distribute the towels, particularly to quintile 1,2 and 3 schools, over the past few years, through the HIV and AIDS Grant (which amounted to R70 million). A tender was recently issued for sanitary towels, which have since been delivered. She encouraged the government to put in place a concrete and long-term plan to supply girls with sanitary towels. 

Regarding appointing teachers permanently, she indicated that the department had appointed teachers to permanent positions in line with Resolution 18 of 2018 (which states that a temporary teacher must not exceed three months in a school without being given a permanent appointment). This, she mentioned, has resulted in the permanent appointment of 784 temporary teachers, out of 907, between January and July of 2022. As some of the remaining temporarily-appointed teachers were appointed only to relieve pressure on teachers already employed in schools, the department could not appoint them permanently. Moving forward, the department, she added, intended to appoint any person temporarily-appointed as a teacher (and not in a relieving post) who qualifies permanently by October 2022.

MEC Moiloa said that the collaboration between NW DSD and DBE occurs through the HIV grant. Through this collaboration, both departments had access to a broader range of communities. DSD also collaborates with other stakeholders to supply sanitary towels to communities that require them. She agreed with Members that government needed a deliberate approach to supply sanitary pads and make them accessible. In a Minister and Members of Executive meeting, the department informed the Minister that it wanted to be allocated a grant specifically designed to distribute sanitary pads.

MEC Sambatha mentioned that delivery of the transformer was anticipated within four to six weeks, as guaranteed by the service provider. He added that he would visit the clinic the following week to check its state of readiness.

MEC Rosho said she would ensure that the reports requested be provided to the Committee the following week, specifically those focused on the cases submitted, unauthorised, irregular and fruitless expenditure and the support provided by PT. She requested that any other follow-up questions be sent to the Premier’s office, which would prepare and provide detailed responses. 

She informed Members that PT introduced a new system requiring MPACs to provide them with their schedules. Thereafter, the district officials would visit them to assist with issues, such as consequence management. Furthermore, PT and CoGHSTA were looking to support municipalities in establishing disciplinary boards.

The Chairperson of the NW Legislature Cooperative Governance Committee, Mr Aaron Motswana, confirmed that the Provincial Committee would attend the meeting later this month.

The Chairperson said that the Committee looked to collaborate with Chapter 9 institutions, particularly the AG, to strengthen its oversight in municipalities. The Committee had identified which municipalities across the country have repeatedly received disclaimer opinions and sought to be part of the solution. It would begin with Eastern Cape municipalities and then proceed to others. Critically, the Committee wanted to assess what other mechanisms could be used to enable PTs, with the assistance of Provincial DCoGTAs, to provide support to municipalities in halting the misuse of public funds.

Members, he added, had learned much from the discussion, and with this added knowledge, they would do their best to ensure that residents are provided services.

The meeting was adjourned.