Process for dealing with Irregular Expenditure and role ...

1 Process for dealing with Irregular Expenditure and role clarification Presenter: Wayne McComans: National Treasury: Office of the Accountant-General 13 November 2018 Table of Contents Legal Framework Irregular Expenditure Root Causes Procedure for addressing Irregular Expenditure Consequence Management Framework2 Legal Framework Takeallreasonablestepstoensurethattheres ourcesofthemunicipalityareusedeffectivel y,efficientlyandeconomicallyand Takeallreasonablestepstoensurethatunauth orised,irregularorfruitlessandwastefulex penditureandotherlossesareprevented3 IntermsofSection62oftheMFMAtheAccounting Officerofamunicipalityisresponsibleforma nagingthefinancialadministrationofamunic ipalityandMUST Intermsofsection4(2)(a)oftheMSA;thecounc ilhasadutytousetheresourcesofthemunicipa lityinthebestinterestofthelocalcommunity . Thereforemunicipalitiesneedtoadoptpolici esandprocessestopreventorcurbunauthorise d, Irregular , is IrregularExpenditure? Expenditureincurredbyamunicipalityormuni cipalentityincontraventionof,orthatisnot inaccordancewith,arequirementoftheMFMA,a ndwhichhasnotbeencondonedintermsofsectio n170;or Expenditureincurredbyamunicipalityormuni cipalentityincontraventionof,orthatisnot inaccordancewith,arequirementoftheMunici palSystemsAct,andwhichhasnotbeencondoned intermsofthatAct;or Expenditureincurredbyamunicipalityincont raventionof,orthatisnotinaccordancewith, arequirementofthePublicOffice-Bearers;or Expenditureincurredbyamunicipalityormuni cipalentityincontraventionof,orthatisnot inaccordancewith,arequirementofthesupply chainmanagementpolicyofthemunicipalityor entityoranyofthemunicipality sby-lawsgivingeffecttosuchpolicy,andwhic hhasnotbeencondonedintermsofsuchpolicyor by-lawdancewith, Trend of Irregular Expenditure5R11,136,000,000 R16,810,000,000 R28,376,000,000 2014/152015/162016/17 Irregular Expenditure Theirregularexpenditureincreasedby75%in2 016/17.

2 R16,8billionwasincurredinpreviousfinanci alyears. 61% Causes Procurement (contributes between 80 and 90% of Irregular Expenditure ) MunicipalitiesfailingtofollowSCMprocesse swhenprocuringgoodsandservices. MunicipalitiesfailingtocomplywithSCMR egulation32requirementswhen piggybacking oncontractssecuredbyanotherorganofstate. Poorplanningresultinginmunicipalitiesuti lisingSCMR egulation36. Extensionofexpiredcontractsandfailuretof ollowsection116(3)processeswhenextending contracts. Failuretocomplywithsection33beforeenteri ngintoacontractofmorethan3years. NoauditevidenceofSCMprocessfollowedinpro curinggoodsandservice. Personsappointedinactingpositionsformore than3monthswithoutpermissionfromMECofLoc alGovernment. Remunerationofpoliticaloffice-bearersoth erwisethaninaccordancewiththePublicOffic e-BearersAct. Lack of consequence management for non-compliance with the MFMA. 6 Procedure for addressing Irregular Expenditure7 YesYesYesYesNoYesYesRecover Expenditure from person liable and Accounting Officer to take Disciplinary and criminal stepsNational Treasury and Council s Roles Council s role Section32oftheMFMA Authoriseacouncilcommitteetoinvestigater ecoverabilityofexpenditureandliabilityof officialsresponsibleforexpenditure Councilonlyratifies,regularises,authoris esUnauthorised, Irregular ,FruitlessandWas tefulExpenditure(afterinvestigationbycou ncilcommittee)National Treasury s role Section170oftheMFMA AuthorizesNTtocondonethenon-compliancewh ichledtotheirregularexpenditurebeingincu rred OnlyNTmaycondonenon-compliancewithMFMA oritssubordinatelegislationongoodgrounds shown8NT and Council roles in addressing Unauthorised, Irregular , Fruitless and Wasteful Expenditure Consequence Management Chapter15oftheMFMA providesthelegalframeworkforfinancialmis conductandfinancialoffences.

3 SimilarlyMSAhaveCodeofConductforofficial sandcouncillors,prescribedprocessestobef ollowedwhenofficialsorcouncillorsbreacht hecode; TheMFMA buildsontheprinciplesofgoodgovernance,tr ansparency,effective,efficientandeconomi caluseofpublicfundsandpublicaccountabili ty; MunicipalRegulationsonFinancialMisconduc tProceduresandCriminalProceedingspromulg atedon31 May2014withimplementationdatebeing01 July2014. Purposeofregulationistosetoutprocessesan dprocedurestodealeffectivelyandexpeditio uslywithallegationsoffinancialmisconduct ; Regulationsapplytoallofficialsandpolitic alofficebearersinmunicipalitiesandmunici palentities. EC:7municipalitieshaveestablishedDCboard s:BlueCraneRoute;Mbizana;Matatiele;Umziv umbu,SarahBaartman,ChrisHaniandNelsonMan dela FS:4municipalitieshaveestablishedDCboard s:Letsemeng;Dihlabeng;NketoanaandThaboMo futsanyana. GP:5municipalitieshaveestablishedDCboard s:CityofTshwane;CoJ;Midvaal;EmfuleniandW estRand. KZN:5municipalitieshaveestablishedDCboar ds:Ubuhlebezwe;uMhlathuze;Jozini;AlfredD umaandeThekwini.

4 LP:11municipalitieshaveestablishedDCboar ds:EliasMotswaledi;Sekhukhune;Thulamela; Musina;Capricorn;Lepelle-Nkumpi;Blouberg ;Molemole;Lephahlele;BelaBelaandBa-Phala borwa. MP:7municipalitieshaveestablishedDCboard s:ChiefAlbertLuthuli;Enhlanzeni;GovanMbe ki;SteveTshwete;CityofMbombelaandNkangal a. NW:10municipalitieshaveestablishedDCboar ds:NgakaModiriMolema;RamotshereMoiloa;Ma dibeng;DrRuthSegomotsi;Naledi;GreaterTau ng;MaquassiHills; NC:24municipalitieshaveestablishedDCboar ds:Richtersveld,NamaKhoi,Kamiesberg,Hant am;KarooHoogland;Khai-Ma;Namakwa;Frances Baard;GaSegonyana;Gamagara;Emthanjeni;Ub untu;Thembelihle;Renosterberg;Kareeberg; Dikgatlong;Umsobomvu;JohnTaoloGaetsewe;S iyancuma;PixleykaSeme;ZFMgcawu;KaiGarib; DawidKruiper;!Kheis;Tsantsabane;Kgatelop ele;Siyathemba;MagarengandPhokwane. WC:10municipalitieshaveestablishedDCboar ds:Drakenstein,Stellenbosch,BreedeValley ,Eden,MosselBay,Overstrand,CityofCapeTow n,Witzenberg,Bitou,Swartland,Knysna,Geor ge,PrinceAlbert,CederbergandCapeWineland s 83(32%) MM Forum note content of presentation MM Forum note Process for dealing with Irregular Expenditure MM forum note the role clarification with regard to Irregular Expenditure MM Forum note the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings including the national compliance status with regard to the establishment of the Disciplinary Boards as the structure through which the regulation has to be implemented MM Forum agrees that Accounting Officers to expedite processes in dealing with high levels of Irregular Expenditure MM Forum agrees that Accounting Officers will expedite the establishment of Disciplinary Boards in terms of the Regulations referred to above.

5 12 NgiyabongaThank You13