GMM financial recovery plan

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The Govan Mbeki Municipality is in trouble! If one looks at all the comments on all the social media platforms, it is clear that the majority of GMM residents believe this is a fact. This was strengthened by the recent reports of being placed under Section 106 and Section 139 etc (read more in the mayor’s statement on pg ???).
The office of the MEC for Finance Economic Development & Tourism, Mr Pat Ngomani, handed an approved Financial Recovery Plan over to Govan Mbeki Municipality in compliance with Section 143(3) of the Local Government: Municipal Finance Management Act, Act 56 of 2003.
In his presentation Basie Straus (Head of MFMA (Municipal Finance Management Act) in Mpumalanga) said: “The municipality is facing financial crisis and numerous governances, service delivery and institutional challenges. Many of these challenges have been recurring over a period of time and repeatedly reported in the annual reports of the municipality, oversight reports and the audit reports, amongst others. The mandatory provincial intervention requires that a Financial Recovery Plan (“Plan”) must be prepared.“
He further stated in his presentation: “The approach adopted in the development of the Financial Recovery Plan was a consultative approach and the process included consultation with, amongst others, management and other staff of the municipality, organised labour, municipality’s principal creditors, Salga , MISA, relevant National and Provincial government departments (Provincial Treasury, Mpumalanga Co-operative Governance and Traditional Affairs, DCoG) and that, the Financial Recovery Plan was published on the 22 March 2019 for public comments also that written inputs have been taken into consideration in the compilation of the Financial Recovery Plan which is holistic in nature and that the plan was approved on the 23 August 2019 by the MEC and the implementation thereof is critical to ensure financial recovery and sustainable service delivery.”
Basie Straus painted a bleak picture of the workings of the municipality. “The governance challenges include amongst others: Dysfunctional council since January 2019 which resulted in gaps in oversight, risk management and control coupled with leadership inefficiencies have created opportunity for misappropriation of funds, non-adherence to legislation and prescripts, none implementation of risk management, audit committee and internal audit recommendations, lack of mechanisms to address prevention of irregular, unauthorised, fruitless and wasteful expenditure.”
The presentation further states that: “The current vacancy rate is at 42%” and “There had been situations of disregard for recruitment legislation, policies and processes.” The bleak picture does not end there: “It is noted that there is no consequence management and there is a need to establish a Municipal Disciplinary Board.” When addressing the financial capabilities Basie said: “Majority of employees within finance and supply chain do not comply with minimum competency level. Also, the municipality needs to conduct a skills audit to assess level of skills, knowledge and competency it has.” There had been numerous calls, especially by the opposition, for a skills audit over the past years. This has been falling on deaf ears as the ruling party overruled the suggestion by using their majority.
Poor management of overtime and sick leave also compounded to the financial problems of GMM.
When speaking about the infrastructure and service delivery Basie said: “Shortage of technical skills in the municipality such as engineers, electricians, technicians and planners to plan, implement operate and maintain municipal infrastructure,” and “Distribution losses in water and electricity services, as a result of illegal connections, poor maintenance of the existing infrastructure and old electrical infrastructure with high energy indexes.”
Then this was highlighted: “Poor conditional grant management and expenditure. The Municipality was underspending on grant funding expenditure against national bench marks in the 2017/18 FY. As a result of the under expenditure, a total of R 33,2 million of grant funding was returned to the National Revenue Fund at the close of the financial year. This is highly unacceptable given the high service delivery backlogs and capital projects funding challenges the Municipality is currently facing.” It is very worrying that money that was given as a grant to improve our infrastructure was not spent on improving infrastructure.
The Financial status is the worst, “Liquidity Ratio: 0.34:1 (2015/16) decreased to 0.29:1 (2016/17) and increased to only 0.47:1 (2017/18).” This means that the municipality would not even be able to carry their financial responsibilities for one month should all payments to GMM cease. Basie continues with: “Creditors payment period for the 2015/16 and 2016/17 financial years was extremely high at 192 days and 265 days respectively and increased to 329 days for the 2017/18 financial year showing that the municipality is unable to pay its creditors within 30 days as per MFMA.” Then lastly: “Govan Mbeki Local Municipality is in breach of its obligations to meet its financial commitments by failing to make payments as and when due which in aggregate is more than 2 percent of the Municipality’s budgeted operating expenditure in terms of Section 140 (2) (c) of the MFMA.” The Supply Chain Management is a major concern for the team from Mbombela. They site: “Lack of skills and expertise in SCM officials, Gross non-adherence to SCM Regulations and procedures, Bid Adjudication Committee not consistent with SCM Regulations, R324 million will be classified as irregular expenditure as a minimum amount and Financial misconduct in corruption and fraudulent cases have not been investigated as per the MFMA Financial Misconduct Regulations.” One of the first steps in the Financial Recovery Plan (FRP) is to align the IDP and Budget process plan with the FRP, monitor budget performance in relation to actual performance on revenue collection and spending, reprioritise the budget in line with the Cashflow Management Plan, re-align budgeted expenditure from non-critical expenditure items and to agreed service delivery priorities, review the budget for tabling of a realistic adjustment budget considering the actual performance since beginning of the financial year and consider and implement Provincial Treasuries recommendations on unfunded budget assessments. The implementation of the FRP vests with Govan Mbeki Municipality, the Mayor and Council, the Municipal Manager, Chief Financial Officer, other Senior Managers and staff in general. The municipality must report monthly on the implementation of this plan as required in terms of Section 146(1)(c) of the MFMA to the MEC Finance, including to the Provincial Executive, National and Provincial Treasury, DCoG and Mpumalanga CoGTA. The Bulletin spoke to the official opposition party, The Democratic Alliance, for their responses on the proposed FRP. Democratic Alliance Caucus leader, Ciska Jordaan, said in a statement to The Bulletin: “The Democratic Alliance is disappointed that this severe level of intervention by the Provincial Treasury was only discussed in the council chambers now since the municipality has been aware of the necessity for the construction of the FRP from 11 October. This disappointment is especially fuelled by the fact that the DA has been calling for the intervention of the Province since before the first unfunded budget was approved in 2018 and the lack of transparency with which the process of preparing the FRP was conducted.” Ciska further said: “According to the MFMA, 14 days before finalising such a plan, a variety of stakeholders must provide their input including organised labour and the local community. It is doubtful whether these stakeholders have been given the opportunity, since the DA was not made aware of any public participation that was taking place. The inconsistency with which the ANC Executive of the Municipality attempted to defend the process had not done much to clarify these doubts and shows a total lack of transparency. While the Speaker, Nhlakanipho Zuma indicated that there were stakeholders who have submitted written comments; the Chief Whip of Council, Doctor Mtshali had said during the council meeting that public participation still needs to take place.” (Read the Full statement online)
The Bulletin noted that none of the opposition parties received copies of the approved FRP. The Council noted that if the Municipal Council fails to take necessary measures to implement the FRP, the Provincial Executive may take necessary steps as legislated. This includes steps up to dissolving council.
The resolve of the entire council will determine the outcome of this FRP. Let us all hope that the ruling party will see this as an opportunity to rectify some of the incompetency’s of the past decade.


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