THEMBISILE HANI LOCAL MUNICIPALITY

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BRIEF STATUS PRIOR INTERVENTION

1.1 The situation in Thembisile Hani Municipality was considered volatile and unsafe for the general community.

1.2 The incident of burning houses, the looting and damages to property has compromised the safety and security of both communities and investors in the area.

1.3 The deterioration of good relationship between the Council and its communities, mistrust on whether the Council shall be able to fairly handle the allegations as lodged against the municipality and attack on Counsellors and officials were some of the issues that were considered to be of extreme concern to Government.

1.4 Considering such extreme situation it was concluded that a directive in terms of Section 139 (1)(a) would not be effective and that the Municipality is now in such a state that it would not be able to manage its own affairs in terms of the said Section.

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BRIEF STATUS PRIOR INTERVENTION Conti....

1.5 Thembisile Hani Municipality was not able to continue in furthering the objects of local Government in terms of Section 152 of the Constitution due to the continued unrest brought about by the mistrust against Council.

1.6 The municipality experienced serious financial problems1.7 Public participation collapsed1.8 Supply chain management processes were not followed1.9 Service delivery collapsed and projects were not

implemented1.10 Collapse of trust between the communities and the

municipality

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TERMS OF REFERENCE

To address the above short comings the following Terms of Reference were given to the Administrator :

I.Implementation of the Section 106 recommendations.II.Implement financial turnaround strategy to give effect to Section 136 of the MFMA.

III.Ensure the municipality are performing the key functions as determined by legislation.

IV.Facilitate the appointment of critical vacant posts.V.Establishment of supply chain management processes.VI.Ensure compliance with regard to financial systems and reportingVII.Re-establish the trust between the communities and the municipality VIII.Re-establish public participation processesIX.Provide monthly progress reports.

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PROGRESS

2.1 An Administrator, Mr. V. Kubheka and four assistants were appointed on 15 April 2010 for a period of six (6) months to assume the responsibilities at Thembisile Hani Municipality.

2.2 Initiatives were taken to deal with the irregularities as identified in the Section 106 investigation report. Disciplinary proceedings against the nine (9) implicated employees were instituted and criminal charges for investigations were opened with the SAPS.

2.3 The Municipal Manager was found guilty and dismissed during May 2010. In order to root out corruption, the Administrators Team engaged both the SARS, the Criminal Investigation Unit and the Hawks to discuss and explore the possibility of criminal investigations.

2.4 Four service providers have been arrested regarding corruption and fraud

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2.5 A project management unit was established to manage all capital

projects funded by Municipal Infrastructure Grant (MIG). This unit is liaising and coordinating with Nkangala District Municipality on all projects earmarked for the Municipality.

2.6 A comprehensive turnaround strategy was developed which covers all functional areas of the Municipality. The MTAS was included in the reviewed IDP and both IDP and Budget was approved by Council on 14 June 2010.

2.7 A financial turnaround strategy has been developed and were implemented. All financial systems were reviewed with support from the DBSA this includes the establishment of internal controls.

2.8 An action plan was compiled that details the road map which were followed for the compilation of the Annual Financial Statement. The cash flow situation has been improved which contributed to a positive bank balance. The billing of consumers was resumed as the process was stopped in July 2009.

PROGRESS Cont...

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2.9 To enhance Public Participation all Ward Committees have being reestablished after the elections

2.10 Public Participation processes were reengineered and implemented.

2.10 The MPAC was also reestablished consisting of 10 members2.11 All section 79 and 80 Committees are in place and functional.

The detail progress is as follows:

PROGRESS Cont...

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PROGRESS MADE BASIC SERVICE DELIVERY

ROADS AND STORM WATERStatus of the Municipality before

interventionCurrent Status

Very little maintenance on roads was being carried out

Maintenance contractors have been appointed to deal with road maintenance issues.

Emergencies were not being attended on time or not at all

Response plan developed and implemented .The response time to emergencies has improved

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WATER & SANITATION

Status of the Municipality before intervention

Current Status

A number of areas not getting water and or getting intermittent water supply

Water is supplied through water carts wherever it is not possible to supply through pipes

Huge amount of water lost through reservoir overflowing

Control valves have been installed on reservoirs to shut down the reservoirs when the reservoirs are full

Huge amount of water being lost through leaks

A number of leaks have been attended to.

Municipality could not pay for water purchased

All entities from where THLM purchase water were paid

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PROJECT MANAGEMENT UNIT (PMU)

Status of the Municipality before intervention

Current Status

Unit Staffed with PMU Manager, DBSA deployee & two technicians

The organogram has been developed to ensure that the Capacity of the Municipality addresses the mandate of the organisation Made decision that all capital projects should be managed from the unit

Inadequate planning Improvement in planning

Improvement in quality control

The unit is managing the capital projects for the municipality

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ENGINEERING SERVICESMost of the vehicles and plant were standing and were not being serviced

Vehicle and Plant were fixed and on-going service is being carried out

FINANCIAL MANAGEMENT

Revenue and ReceivablesIncorrect customer data, with 82% of bills returning as undeliverable.

The Municipality developed a revenue enhancement strategy that includes data cleansing to ensure that bills distributed are not returned as undeliverableThe strategy included the following:Customer data cleansing;Valuation roll;Town planning and Zoning services;Indigent registration; andICT Infrastructure updated.

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Incorrect valuations roll with incorrect values and description of properties that impacts the ability of the Municipality to implement the MPRA.

The Municipality developed a revenue enhancement strategy that includes data cleansing to ensure that bills distributed are not returned as undeliverableThe strategy included the following:Customer data cleansing;Valuation roll;Town planning and Zoning services; Indigent registration.

Organogram not designed in a manner that supports the unit for generation of revenue and debtors management

The new organogram proposed to be endorsed by the incoming council made provision for senior positions to support this critical function of revenue management

Revenue and Receivables Conti....

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No revenue enhancement strategy

Revenue enhancement strategy was developed.

Business process for “registration to cash” not compiled.

The business process for the revenue and receivables was developed.

Reconciliation of cash up slips to the deposit slips not performed

The reconciliations are currently done by the acting CFO.

Action plans to improve audit outcomes in line with operation clean audit for the financial year 2014 not developed

The action plans to improve the audit outcomes was developed.

Revenue and Receivables Conti....

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Customer data not reconciled to the customer documentation or files.

The data cleansing project will include making sure that each customer in the system has a file.

Receipts for payments issued manually and captured in the financial system

The process of issuing receipts for payments was made electronic

EXPENDITURE AND CREDITORS

The Municipality had outstanding debts in excess of R14 million with the flowing:Rand Water;Kungwing Local Municipality; Dr JS Moroka Municipality for water purchases

The Municipality does not have outstanding debts, the commitment of the Municipality to pay invoices within 30 days is being realised.

Revenue and Receivables Conti....

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Creditors reconciliations were not done

The creditors reconciliations were done from June 2010.

Petty cash reconciliations were not done

The petty cash reconciliations processes were implemented from 16 April 2010.

There were significant complaints from Creditors as they were not paid within 30 days.

The Municipality continues to pay creditors within 30 days.

Documentations for all payments were not properly recorded.

A dedicated filing area was identified and implemented for all expenditure related documents.

Revenue and Receivables Conti....

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There is no Electronic payment system (EFT) and procurement module not made electronic.

The Municipality issued a tender for provision of banking services, Nedbank was subsequently appointed. Currently Nedbank is working hand in hand with the Municipality and MUNSOFT (financial system) to implement the system.All stakeholders (NT, PT and AG) were informed about the change of the bank account.

Revenue and Receivables Conti....

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PAYROLL

The Municipality had a separate Bank Account for payment of salaries with Capitec Bank.

The Municipality appointed Nedbank to centralise the banking system of the Municipality through a Tender process.

The Monthly payroll was not reviewed and reconciled before payments to employees are made.

The process of reconciling and reviewing the payroll was implemented.

Employee records not properly maintained.

A separate filing area was identified for filing all HR documents.

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CASH AND CASH EQUIVALENTSThe Municipality had 8 bank accounts

The Municipality closed all Bank Accounts and appointed Nedbank to provide all banking services.

The daily cash up slips were not reconciled to the cash deposited in the Primary Bank Account.

The reconciliations of daily cash up slips with the deposit slips done weekly

Expenditure was not properly controlled with payments being made that are not budgeted for or irrelevant resulting in cash flow pressures for the Municipality,

Controls were implemented to avoid paying for expenditure transactions that were not budgeted for.

Bank reconciliations were not up to date.

The bank reconciliations were updated.

The Municipality had R32 million of VAT refund outstanding with SARS

The Municipality managed to recover the money through external assistance.

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INVENTORY AND ASSETS MANAGEMENTThe assets were not counted or physically verified quarterly and at the end of the financial year

The Municipality did do assets count, however the asset count indicated that the assets management process should be started from the beginning with the assets register, a project for assets management was initiated. The District Municipality will address the Movable assets and THLM will update the Infrastructure assets.The objective of the exercise was to achieve GRAP 17 compliance.

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There were no controls for the movement of inventory at the stores.

The Manual controls were implemented for management of inventory at the stores.

The Assets register was not updated

The Municipality did do assets count, however the asset count indicated that the assets management process should be started from the beginning with the assets register, a project for assets management was initiated. The District Municipality will address the Movable assets and THLM will update the Infrastructure assets.The objective of the exercise was to achieve GRAP 17 compliance.

INVENTORY AND ASSETS MANAGEMENT Conti....

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There was no inventory register for the items in the stores

A list of all items in the stores was captured on an excel spreadsheet with the objective of uploading the data in the financial system.

The Inventory module in the financial system not utilised as the inventory was not updated

A list of all items in the stores was captured on an excel spreadsheet with the objective of uploading the data in the financial system.

INVENTORY AND ASSETS MANAGEMENT Conti...

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BUDGETING , FINANCIAL REPORTING AND GENERAL LEDGER

The budget and IDP for 2010/11 did go through the required public consultation process.

The Municipality improved the budget consultation process with the 2010/11 budget and 2011/12 IDP budget process. Meetings were held for each zone.

The financial reporting to National Treasury was not done as legislated in the MFMA.

The financial reporting to NT was improved however full compliance can not be fully realised before the ICT project and filling of vacant posts are realised.

The general ledger contained suspense accounts with long outstanding transactions from the financial year 2006/7.

The action plans to improve the audit opinion included the process of clearing suspense accounts in the General Ledger.

BUDGETING , FINANCIAL REPORTING AND GENERAL LEDGER Conti....

SECTION 106Section 106 investigation was conducted and report was issued with recommendations.

All recommendations were implemented which led to the following:• MM Mr. W.K. Mahlangu’s Disciplinary Tribunal found him guilty and he was subsequently dismissed and it was endorsed by Council on 14 June 2010.• Mr. W.K. Mahlangu took the Municipality to the High Court. Case postponed. • Assitant Manager: Finance (S Mahlangu) resigned• Technical manager's (RS Ruiters) resigned• LED Coordinator (N Ndala) received a written warning. • Secretary E. Skosana received a written warning.

• Manager: Social Development Services, WM Mawela resigned. • Manager Corporate Service, Mr. MA Mahalangu passed away on 12 June. •Assistant Manager: Technical Services, TJ Skosana received a written warning. • Accountant KT Mahlangu received a written warning• 10 cases has been lodged with the SAPS against officials employed at the municipality. • Two people were arrested without bail with case no. 322/01/2010 (R282 000 fraud with Loba and Thami Travel). 1 Person was arrested without bail with case nr. 177/10/2009 (R294 000 fraud with Sussus Trading Enterprise).

SECTION 106 CONTI….

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THANK YOU