Media Statement by Premier Helen Zille
The Western Cape Government welcomes today's tabling of the Auditor-General's 2010/2011 Municipal Finance Management Act (MFMA) General Report.
The report provides key insight into the administration and service delivery within municipalities, and more importantly, highlights challenges and identifies causes for the problems in some municipalities.
Municipalities are the coal face of service delivery. Audit outcomes produced by the AG in previous financial years have shown that the service delivery crises in many municipalities are often the result of poor financial management. The ability of municipalities to manage their finances efficiently and effectively is critical to ensuring that resources are spent on providing services to citizens.
The MFMA provides the framework and guidelines for the sound and sustainable management of the financial affairs of municipalities, and sets out the treasury norms and standards for local government. These guidelines require several layers of complex bureaucratic procedures, but they establish a regulatory framework designed to minimise corruption. Municipalities must therefore subscribe to the regulations contained in the MFMA to ensure clean audit outcomes.
The AG has noted that when it came to the 2010/2011 financial year, audit outcomes of Western Cape municipalities remained where they were.
The Western Cape Government agrees with the AG that this "stagnation" is a cause for concern. This must change, and we must work hard to secure improvements in audit outcomes.
However, it is also important to recognise that there has been some improvement over the last three financial years. For example, there has been a marked decrease in the number of municipalities receiving "disclaimers" or adverse opinions - the worst audit outcome. In the 2008/2009 financial year, 15% of municipalities received disclaimers or adverse opinions, which dropped to 9% in 2009/2010 and 0% in 2010/2011.
There has also been a decrease in the number of municipalities receiving qualified audit opinions over the last two financial years (from 12% in 2009/2010 to 9% in 2010/2011).
It is concerning that there has been a drop in municipalities receiving clean audits, and an increase in the number receiving unqualified audits with findings - however minor such findings may be in some cases. But the most worrying trend of all, is the increase in the number of municipalities that have failed until now to submit their audit documents to the AG. Three municipalities failed in this regard, although 12 municipalities missed the first deadline.
In other words, while the reduction in qualified opinions and adverse opinions or disclaimers is positive, an inertia has developed where municipalities are struggling to move out of the "unqualified with findings" bracket and into the clean audit bracket. This stagnation does not sufficiently advance the achievement of the target set by the national government's Operation Clean Audit initiative, which envisages every municipality achieving a clean audit by 2014.
It is clear that municipalities need to up their game, in order to move out of the "financially unqualified with findings" bracket. The Western Cape Government has a constitutional mandate to assist them in this regard - Section 154 (1) of the Constitution requires both national and provincial governments to support and strengthen municipalities, through legislative and other means, so that they can manage their own affairs, exercise their powers and perform their functions.
The AG has highlighted that the key obstructions to clean audits in the province are control weaknesses in supply chain management, human resource management, information technology controls and some significant errors in financial reports.
He also identified the following specific problems:
It is evident that if we hope to reverse this stagnation, municipalities must be supported to overcome these challenges and to promote good governance, strengthen financial management and encourage accountability.
The Western Cape Government, more specifically the provincial departments of Treasury and Local Government, have committed to a number of interventions aimed at addressing the problems raised by the AG.
The first category of interventions focuses on strengthening the relationship between the provincial government, the provincial legislature and the municipalities. It includes the following initiatives:
The second category of interventions focuses on providing support to municipalities. It addresses a number of the control weaknesses raised by the AG.
When it comes to the lack of appropriate skills in municipalities, our provincial government has introduced the following interventions:
The Western Cape Government has also taken steps to assist municipalities in promoting greater accountability and strengthening performance managements systems:
When it comes to addressing internal control shortcomings across the board, both the provincial departments of Treasury and Local Government have introduced the following interventions:
I am also pleased to announce that last week the Western Cape Cabinet endorsed the newly drafted Local Government Framework for Municipal Support. The purpose of this framework, is to provide a co-ordinated approach between provincial departments when providing support to municipalities. A Municipal Support Committee (MSC) has been established, that will guide and facilitate aligned and combined provincial support actions to municipalities. The MSC will ensure that these co-ordinated support actions between provincial departments, other spheres of government and other stakeholders, are tailored to a specific municipality's needs, requirements and priorities.
The Western Cape Government is confident that all these initiatives will assist municipalities in improving their financial management, and addressing current control weaknesses so that audit outcomes are improved over time.
However, it is important to highlight that we face challenges in this regard.
First, some municipal laws are so complex and prescriptive, that municipalities have great difficulty implementing and complying with them. In addition, municipalities have continuously raised concerns about the cost of compliance. Some legislation has also been drafted without taking into consideration the limited capacity of most municipalities in the country, and the differences between metropolitan municipalities and small municipalities.
In 2009, we submitted a list of national legislation that unnecessarily hampers the service delivery of municipalities in the Western Cape. Included in this list were a number of provisions in the MFMA, and recommendations that GRAP regulations need to be reconsidered and, where warranted, scrapped altogether.
President Zuma referred our submission to the national department of Local Government and Traditional Affairs for consideration, but we have had no feedback on our suggestions to date - despite indicating that changes to this legislation need to be considered as a high priority.
Another challenge is the political instability in some municipalities in the province, which despite our various interventions, paralyses municipal councils and prevents them from performing their duties, including complying with MFMA regulations, in particular tabling their own budgets.
It is also crucial that leaders in municipalities take responsibility for ensuring their municipalities are running effectively and efficiently, and that service delivery to citizens are placed before their own self-interest. I would like to congratulate the leaders of both Swartland and West Coast District municipalities for the leadership they have shown when it comes to ensuring their municipalities receive clean audits. I would also like to commend the leaders of all municipalities who have improved their audit outcomes over the last three financial years. These municipalities are examples of what can be achieved if leaders are committed to promoting good governance, and improving the financial management in their municipalities.
While these problems pose challenges to the success of some of our interventions, we remain committed to assisting municipalities in finding solutions to the problems raised by the AG, when it comes to their municipal financial management and good governance.
We would also like to thank the AG's office for their assistance and support. We will study the contents of 2010/2011 MFMA General Report closely, in particular, the concerns raised by the AG that threaten a greater number of municipalities moving from financially unqualified audits with findings, to clean audits.
The Western Cape Government is committed to working with the AG and with all municipalities in the province, to ensure that public money is spent efficiently and effectively, and that citizens enjoy access to the basic services they are constitutionally entitled to.
Zak Mbhele
Spokesperson for Premier Helen Zille
Tel: 021 483 4584
Cell: 083 600 2349
E-mail: Zak.Mbhele@westerncape.gov.za