SUNDAY'S RIVER VALLEY MUNICIPALITY INTERVENTION

STATUS REPORT

PRESENTED TO SELECT COMMITTEE

19 OCTOBER 2010

PARLIAMENT – CAPE TOWN

TABLE OF CONTENT

1. Introduction

2. Problem Statement

3. Achievements - Finance

4. Achievements – Institutional Development

5. Turn Around Focus Area – Service Delivery

6. Turn Around Focus Area – Governance

7. Turn Around Focus Area – LED

8. Critical success factors

9. Conclusion

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INTRODUCTION

• Section 139 (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

INTRODUCTION

Turnaround Strategy and Plan adopted by council on 25/3/10

A detailed Turnaround Plan was developed and implemented

over the past seven months, was subsequently updated after

the MUTAS capacity assessment

Financial Recovery Plan integrated into Turnaround Plan

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PROBLEM STATEMENT - FINANCE THE TURNAROUND PLAN AND THE FINANCIAL RECOVERY PLAN

MUST ADDRESS THE FOLLOWING MATTERS AT THE TIME:

Non payment for services rendered

DEBT BOOK AT R55m and >30% INDIGENT CONSUMERS

Poor collection rates at about 30%

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

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

ACHIEVEMENTS - FINANCE CREDIT CONTROL AND DEBT MANAGEMENT POLICY REVIEWED AND ADOPTED BY COUNCIL

25/3/10

STAFF COMPLIMENT INCREASED AT FINANCE WITH 13 NEW POSITIONS, OF WHICH 10 HAVE

BEEN FILLED

MANAGEMENT POLICIES WERE DEVELOPED FOR COUNCIL APPROVAL BY 31/5/10

DELEGATIONS MANUAL WORKSHOPPED ON 13/4/10 AND APPROVED 0N 13 MAY 2010

ADJUSTMENT BUDGET APPROVED ON 25/3/10

DRAFT IDP AND BUDGET 2010-11 APPROVED ON 31/3/10 AS PER TREASURY REGULATIONS

IDP, BUDGET AND SDIBP CONSOLIDATED AND APPROVED BY COUNCIL ON 31 MAY 2010

TARIFFS REVIEWED TO TAKE INTO CONSIDERATION COST OF SERVICE PROVISION

COST CUTTING MEASURES IN PLACE, E.G. TELEPHONE AND 3G CARDS, TRAVELLING AND FLEET

MANAGEMENT

CURRENT FINANCIAL SITUATION• DEBTOR’S STATUS:

• TOTAL DEBTORS OUTSTANDING FOR SEPTEMBER 2010 AMOUNTED TO R66 829 771

• THIS INDICATES AN INCREASE FROM THE LAST SIX MONTHS AND THIS IS DUE TO THE

UPDATING OF THE BILLING SYSTEM AND INCREASE ON THE INDIGENTS

NEW INDIGENT REGISTRATIONS AND NO SUBSIDY ALLOCATIONS

THE ANNUAL CHARGES FOR RATES 2010-11

CONSUMERS HAVE RESPONDED POSITIVELY ON THE NEW INCENTIVE SCHEMES, SO EVEN

THOSE WHO WERE NOT BILLED ARE NOW ON THE SYSTEM AND STARTING TO PAY

• DISCONNECTIONS EFFECTED WEEKLY AND PAYMENT IS SLOWLY FLOWING IN

CURRENT FINANCIAL SITUATION• CREDITOR’S STATUS:

• TRADE CREDITORS AS AT 30 SEPTEMBER 2010 AMOUNTED TO R35 664 203.28.

• LONG OUTSTANDING CREDITORS DECREASED WITH AN AMOUNT OF R4.4 MILLION FROM R37.9 MILLION TO R33.5 MILLION.

• CURRENT INVOICES AMOUNTED TO R790 945 FOR SERVICES RENDERED DURING SEPTEMBER 2010.

• THE MUNICIPALITY HAS ENTERED INTO PAYMENT ARRANGEMENTS WITH THE FOLLOWING CREDITORS:

THE AG - R 193,106.55/ MONTH FOR 6 MONTHS – AUDIT FEES

ESKOM - R 217 364.67 /MONTH FOR 2 MONTHS – BULK ELECTRICITY

• SALARY EXPENDITURE AMOUNTED TO R2 060 031 DURING SEPTEMBER 2010

• ALL STATUTORY DEDUCTIONS ARE PAID UP TO DATE EXCEPT SARS WHOM WE OWE AN AMOUNT OF R1 701 224-29, WHICH IS ALREADY INCLUDED IN TRADE CREDITORS.

PROBLEM STATEMENT - INSTITUTIONAL DEVELOPMENT

• Structure not aligned to the IDP

• High vacancy rate & high staff turnover

• Lack of required competencies in critical departments e.g. 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

• Out-dated policies & Delegations and Rules of Order

ACHIEVEMENTS - INSTITUTIONAL DEVELOPMENT

• STRUCTURE REVIEWED TO ALIGN TO IDP (FINANCE APPROVED)

• 10 OUT OF 13 NEW POSITIONS HAVE BEEN FILLED AT FINANCE

• DBSA SPECIALIST SUPPORT HAS BEEN PROVIDED TO SRVM

• TECHNICAL SUPPORT FROM DLGTA DEPLOYED TO SRVM

• CACADU PROVIDING TECHNICAL SPECIALISTS FOR POLICY REVIEW AND DEVELOPMENT

• ROLES AND RESPONSIBILITY MANUAL DEVELOPED APPROVED

• RULES OF ORDER DEVELOPED, WORKSHOPPED AND APPROVED

• DRAFT DELEGATIONS DEVELOPED TWORKSHOPPED AND APPROVED

• MONTHS

• POLITICAL AND ADMINISTRATIVE STABILITY PREVAILING

ACHIEVEMENTS - INSTITUTIONAL DEVELOPMENT

• STRUCTURE REVIEWED TO ALIGN TO IDP (FINANCE APPROVED)

• 10 OUT OF 13 NEW POSITIONS HAVE BEEN FILLED AT FINANCE

• DBSA SPECIALIST SUPPORT HAS BEEN PROVIDED TO SRVM

• TECHNICAL SUPPORT FROM DLGTA DEPLOYED TO SRVM

• CACADU PROVIDING TECHNICAL SPECIALISTS FOR POLICY REVIEW AND DEVELOPMENT

• ROLES AND RESPONSIBILITY MANUAL DEVELOPED APPROVED

• RULES OF ORDER DEVELOPED, WORKSHOPPED AND APPROVED

• DRAFT DELEGATIONS DEVELOPED TO BE WORKSHOPPED AND APPROVED

• MONTHS

• POLITICAL AND ADMINISTRATIVE STABILITY PREVAILING

ACHIEVEMENTS - INSTITUTIONAL DEVELOPMENT

• Structure reviewed to align to IDP (finance approved)

• 10 out of 13 new positions have been filled at finance

• DBSA specialist support has been provided to SRV

• Technical support from DLGTA deployed to SRV

• Roles and responsibility Manual developed approved

• Rules of order developed and work-shopped and approved

• Draft Delegations developed to be work-shopped before 30/4/10

• Draft Telecommunications Policy developed and approved

• HR policies under review

ACHIEVEMENTS - INSTITUTIONAL DEVELOPMENT

• HR Plan in place

• Performance Management System workshop due in by 30/4/10 to revive

process (only to be done on 25 may 2010)

• Policy to be reviewed to include all levels by 30/06/10

• Local Labour Forum structure reviewed and has convened

• Pro-active labour engagement (5 meetings to date)

• Service delivery at the core of Council agenda, 5 council meetings have

taken place in the last six (3) months

• Political and administrative stability prevailing

PROBLEM STATEMENT – SERVICE DELIVERY

Poor maintenance of infrastructure

No street lights or poorly maintained

Internal roads not maintained

Water and electricity losses

No adherence to service standards

Lack of Procedure Manuals

No infrastructure maintenance plan

Lack of capacity (staff and required competencies)

PROBLEM STATEMENT – SERVICE DELIVERY

Inadequate budget for operations and maintenance

Housing development challenges/capacity

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TURNAROUND FOCUS AREA – SERVICE DELIVERY

Financial bailout is critical for the survival of the municipality (-+R20m)

Refunding of funds previously used for operating expenses solving a

service delivery challenge to some extent however putting pressure on

current obligations

Outsource capacity (DBSA intervention, Cacadu and provincial and

national government – in process and under consideration)

Consideration of outsourcing water and sanitation to Amatola Water Board

Build in-house skills (critical vacancies provided for in 2010-11)

Prioritise infrastructure organisational review and vacancy filling

TURNAROUND FOCUS AREA – SERVICE DELIVERY

Review implementing agency status of SRV 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 e.g . local road

maintenance and street lighting (2010-11 budget)

Develop Service Standards and Procedure Manuals (outsource)

Implementation of 100 days service delivery plan to deal with quick wins

(interim measure)

PROBLEM STATEMENT - GOVERNANCE• Public participation was 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

ACHIEVEMENTS- GOVERNANCE

• Public participation and plan approved and implementedPublic participation and plan approved and implemented

• Committee and council meetings taking place as scheduledCommittee and council meetings taking place as scheduled

• Five Internal Audit Steering Committee meetings with Auditor General and Five Internal Audit Steering Committee meetings with Auditor General and

internal auditors have taken placeinternal auditors have taken place

• An Internal Audit Plan and comprehensive checklist has been developed An Internal Audit Plan and comprehensive checklist has been developed

and approved by audit committeeand approved by audit committee

• An Audit Committee and Internal Audit Committee Charter is being An Audit Committee and Internal Audit Committee Charter is being

developed and these structures are seatingdeveloped and these structures are seating

ACHIEVEMENTS- GOVERNANCE

• An Anti-Corruption and Fraud Policy has been approved and An Anti-Corruption and Fraud Policy has been approved and

institutionalisedinstitutionalised

• Investigations of allegations of corruption, maladministration and Investigations of allegations of corruption, maladministration and

misconduct are being dealt with administratively but still awaiting SIU misconduct are being dealt with administratively but still awaiting SIU

investigations outcome since June 2010.investigations outcome since June 2010.

• Disciplinary processes and possible criminal charges have been Disciplinary processes and possible criminal charges have been

considered for two officials at community servicesconsidered for two officials at community services

• One official on suspension for alleged fraud and corruptionOne official on suspension for alleged fraud and corruption

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

TURNAROUND FOCUS AREA -LOCAL ECONOMIC DEVELOPMENT

• Funding for the master plan leveraged from DBSA and DEDEA

• The outcome of the plans should be the following:

SDF

Infrastructure plan

Land use management

Precinct or nodal developments

Strategic or special projects

Environmental management plan

TURNAROUND FOCUS AREA -LOCAL ECONOMIC DEVELOPMENT

DEDEA and DBSA has been approached

for potential funding of the Master Plan

Cacadu may fund certain components of

the Master Plan

LED forum established

CRITICAL SUCCESS FACTORS• FINANCIAL BAILOUT AND RECONCILIATION WITH HUMAN SETTLEMENTS HAS TO BE FINALISED

• SERVICE STANDARDS TO BE IMPROVED AT ALL TIMES

• PAYMENT FOR RATES & SERVICES CRITICAL FOR THE SUCCESS OF THE PLAN

• AN UPDATED INDIGENT REGISTER vs EQUITABLE SHARE

• 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

CONCLUSION• The support that is provided by Cacadu district council in providing

extensive capacity building has assisted the municipality in institutional

development and transformation

• DLGTA, DBSA and Treasury have deployed resources in the past four

months in finance and technical department and this value has been

acquired

• There is improved political support to the Administrator

• Councillors and officials have been trained on various skills including

training on Rules, Roles and Responsibilities

CONCLUSION• THE SUPPORT THAT IS PROVIDED BY CACADU DISTRICT COUNCIL IN PROVIDING EXTENSIVE CAPACITY BUILDING HAS ASSISTED THE

MUNICIPALITY IN INSTITUTIONAL DEVELOPMENT AND TRANSFORMATION

• DLGTA, DBSA AND TREASURY HAVE DEPLOYED RESOURCES IN THE PAST FOUR MONTHS IN FINANCE, HR AND TECHNICAL DEPARTMENT

AND THIS VALUE HAS BEEN ACQUIREDPORT

• THERE IS IMPROVED POLITICAL SUPPORT TO THE ADMNISTRATOR

• COUNCILLOR AND OFFICIAL HAVE BEEN TRAINED ON VARIOUS SKILLS INCLUDING TRAINING ON RULES, ROLES AND RESPONSIBILITIES

AND POLICIES

• 2 LITIGATIONS RESOLVED SO FAR

• GOOD RELATIONS WITH UNION STILL SUSTAINED

• CASHFLOW SLIGHTLY IMPROVING THOUGH NO SIGNIFICANT IMPACT BECAUSE OF OUTSTANDING OBLIGATIONS

• RELATIONS WITH LINE FUNCTION DEPARTMENTS HAVE IMPROVED AND SHOULD BE SUSTAINED AS THEY ARE REVIVING A NUMBER OF

PROJECTS WHICH WERE PREVIOUSLY BLOCKED.

THANK YOU