MUNICIPAL SYSTEMS MUNICIPAL SYSTEMS IMPROVEMENT GRANTIMPROVEMENT GRANT

SELECT COMMITTEE ON FINANCESELECT COMMITTEE ON FINANCE

10 OCTOBER 200710 OCTOBER 2007

• A conditional grant to support municipalities in building in-house capacity to:

- Perform their functions - Stabilize institutional and governance system

• The focus of the grant is on:-Local and Economic Development, Financial Viability, Institutional Development, and Good Governance

• Grant maintained at R200 mil per annum until 2009/10 • For 2007/08 number of receiving municipalities

increased from 211 (2006/07) to 254 municipalities

Background of MSIG

Comparison: Receiving Municipalities2006/07 & 2007/08

Summary by Province No of Municipalities2006/07 FY

No of Municipalities2007/08

Eastern Cape 35 40

Free State 18 24

Gauteng 8 10

KwaZulu Natal 45 53

Limpopo 22 28

Mpumalanga 21 21

Northern Cape 27 32

North West 19 22

Western Cape 16 24

TOTAL 211 254 (additional 43 munics)

Comparative Analysis on Transfers2006/07 & 2007/08 by July

Province 2006-07: (annual) 2007-08: (annual)

(R'000) Schedule Actual % Schedule Actual %

Eastern Cape 28,244 14,505 51 27,868 10,948 44

Free State 17,172 8,736 51 19,160 8,155 48

Gauteng 9,034 2,017 22 8,404 3,835 50

KwaZulu Natal 39,886 17,908 45 40,076 14,992 42

Limpopo 22,148 11,149 50 23,502 10,884 46

Mpumalanga 23,742 12,329 52 18,794 9,397 50

Northern Cape 20,910 10,905 52 25,084 12,175 49

North West 21,542 10,404 48 17,820 7,309 43

Western Cape 17,322 8,811 51 19,292 7,770 40

TOTAL 200,000 96 764 48% 200,000 85 465 45%

Actual Expenditure by Provinces against Funds transferred at 31 Sept 2007

2006/07 AllocationSummary by Province

Allocated & transferred(R’ 000)

Expenditure to date (R’ 000)

Expenditure as % allocation

Variance (R’000)

Variance %

Eastern Cape 28 244 22 456 79.5 % 5 788 20.5 %

Free State 17 172 13 111 76.3 % 4 061 23.7 %

Gauteng 9 034 8 570 94.9 % 464 5.1 %

KwaZulu Natal 39 886 21 166 53.0 % 18 720 47 &

Limpopo 22 148 15 610 70.4 % 6 538 29.6 %

Mpumalanga 23 742 14 214 59.9 % 9 528 40.1 %

Northern Cape 20 910 16 789 80.3 % 4 121 19.7 %

North West 21 542 12 887 59.8 % 8 655 40.2 %

Western Cape 17 322 10 833 62.5 % 6 489 37.5%

TOTAL 200 000 135 636 68 % 64 364 32 %

Actual Expenditure by Provinces against Funds transferred at 31 Sept 2007

2007/08 AllocationProvince (R'000) Amount

TransferredActual Expenditure

% Spent

Eastern Cape 12,182 499 1.8

Free State 9,155 0 0.0

Gauteng 4,202 6 0.1

KwaZulu Natal 16,827 0 0.0

Limpopo 10,884 252 2.3

Mpumalanga 9,397 75 0.8

Northern Cape 12,175 1314 10.8

North West 7,676 0 0.0

Western Cape 7,770 158 2.0

TOTAL 90,268 2,303 (Ave) 2.2

• Allocations transferred to qualifying municipalities in July 2007 in accordance with the NT approved payment schedule.

• The dplg withheld 2007/08 MSIG allocations (R 25,585 million) for 27 municipalities due to non –reporting and or under spending on the 2006/07 grant as prescribed by Sec 25 of the DoRA. - Of the withheld amount of R 25 million, an amount of R

4,803 was transferred in August 2007 for those municipalities which responded to the withholding letter.

- An amount of R 10,782 still withheld and will be transferred in November 2007

• Municipalities still spending the 2006/07 balance of the allocation

Reasons for Variance in the 2007/08 Expenditure Performance

• Late submission of Activity Plans by municipalities which then result in delays in allocation and approval process;

• Late and/or non sub-mission of MISG expenditure reports by municipalities resulting in MFM not being able to ascertain whether the projects have been implemented or not.

Challenges in the administration of Grant

• High staff turnover at municipal level especially with regards to CFO’s, which affects the sign-off of expenditure reports.

• Continued culture of non-reporting or consistent reporting by receiving municipalities.

Specific Areas of Non-Compliance with DORA

• Withholding letters addressed to all concerned municipalities in July 2007 regarding the 2007/08 allocations;

• Negotiated for amendment of payment schedule to August 2007 and approval was sort from National Treasury;

• District-wide bilateral meetings ongoing an a quarterly basis with the Provinces, Districts and Local Municipalities; and

• Deploying an MSIG Response Team members to assist individual municipalities with compiling expenditure and quarterly reports as well as general support on the implementation of business plans

Steps taken to address Non-Compliance

• Agreement with DWAF on provision of resource team to augment the dplg current MSIG Administration capacity

• Working relations with Provincial Departments of Local Government – Dedicated provincial official for monitoring of MSIG in the province

Collaboration and Coordination with other sectors

Funds Withheld: E.Cape2007/08

DERM.CODE MUNICIPALITY NAME AMOUNT

EC121 MBHASHE 367,000

EC136 EMALAHLENI 367,000

EC138 SAKHISIZWE LOCAL 367,000

EC141 ELUNDINI 367,000

EC152 NTABANKULU LOCAL 367,000

EC156 MHLONTLO LOCAL 367,000

TOTAL 2,202,000

Funds Withheld: Free State 2007/08

DERM.CODE MUNICIPALITY NAME AMOUNT

FS 195 PHUMELELA 500,000

TOTAL  500,000

Funds Withheld: KZN2007/08

DERM.CODE MUNICIPALITY NAME AMOUNT

KZ211 VULAMEHLO 367,000

KZ213 UMZUMBE 367,000

KZ223 MPOFANA 367,000

KZ233 INDAKA 367,000

KZ235 OKHAHLAMBA 367,000

KZ244 MSINGA 367,000

DC24 UMZINYATHI DISTRICT 500,000

KZ272 JOZINI 367,000

KZ274 HLABISA 367,000

TOTAL 3,436,000

Funds Withheld: Limpopo2007/08

DERM.CODE MUNICIPALITY NAME AMOUNT

NP03a3 FETAKGOMO LOCAL 367,000

NP334 BA-PHALABORWA 500,000

TOTAL 867,000

Funds Withheld: N.Cape2007/08

DERM.CODE MUNICIPALITY NAME AMOUNT

NC072 UMSOMBOMVU 367,000

TOTAL 367,000

Funds Withheld: N.West2007/08

DERM.CODE MUNICIPALITY NAME AMOUNT

DC37 BOJANALA DISTRICT 500,000

NW392 NALEDI LOCAL 367,000

NW393 MAMUSA LOCAL 367,000

TOTAL 1,234,000

Funds Withheld: W.Cape2007/08

DERM.CODE MUNICIPALITY NAME AMOUNT

WC022 WITZENBERG LOCAL 367,000

WC031 THEEWATERSKLOOF 367,000

WC041 KANNALAND 1,442,000

TOTAL 2,176,000