Constant vigilance and scrutiny.
Bitou municipality has for years suffered from financial mismanagement and poor leadership generally. In November last year, we had a change in government and management, and we remain hopeful that the mistakes of the past will not be repeated. The new budget should ideally be a reflection of that intent and should adequately address the current and future needs of the communities.
The law provides that residents can (and must) take part in the budgeting process and that their input must be considered. This year, as always, the RA put in the effort to do just that on behalf of members and we had great hopes that the new council would take our input into consideration.
Our assessment of the budget, as adopted by council in June, together with recent discussions with both the Executive Mayor and Municipal Manager, is that despite a general awareness of a number of financial issues, they are not being adequately addressed nor responded to quickly enough.
New Budget.
This year, overall expenditure is set to increase 5% from R779m to R818m. This will require an equal growth in revenue which at this stage seems unrealistic. The budgeted revenue increase demands a significant improvement in collection rate as well as a broadening of the ratepayer base. There is no debt collection agency in place yet to increase the collection rate to deliver this revenue, so the thin margin of surplus will have to be monitored closely.
Salaries and excessive overtime.
The total salary bill is a significant driver of this increase in expenditure. Employee cost is budgeted to increase 13% from R271 million to R306 million. This is due to the hiring spree of the previous administration and despite a total organizational review currently taking place, it is unlikely we will witness any benefits until early 2023. The organization is management top heavy with insufficient resource at the lower end. In addition, a key area of concern is excessive overtime which has increased from R11.9m to R15.2m. This has been raised repeatedly, by the Auditor-General, the CFO, the Audit Committee, and by the RA. Despite their awareness of this problem, there are no immediate plans to address this.
Infrastructure Priority.
The Repairs and Maintenance budget is set at R50.3 million this year compared to R55.2 million last year. With our fast-growing population and housing boom, not enough has been budgeted for this critical requirement and in conjunction with depleted capital reserves, we are greatly concerned about the maintenance backlog and over-aged infrastructure that is beyond its design life. A direct and obvious result will be constant failure and hurried ‘band aid’ repairs especially to water, waste and sewerage. The failure to properly maintain and replace infrastructure is the direct cause of increased overtime. Municipal services are the basic core responsibilities of a municipality and MUST be given priority in the budget.
Municipalities are required to have a Capital Reserve fund for planned infrastructure replacement. Bitou’s funds are reported to be depleted, yet crumbling and obsolete infrastructure has not been replaced. Where has that money gone? These issues relate to basic financial management and if a council and its administration do not get them right, service delivery will suffer. The previous administration got it wrong and we have real concerns that unless new initiatives get implemented quickly, nothing will change.
Irregular and Unauthorized Expenditure .
Another matter which is of great concern is the manner in which council and its MPAC (Municipal Public Accounts Committee) has approached and dealt with irregular and unauthorized expenditure. The Auditor-General has repeatedly criticized Bitou Municipality for the lack of consequence management; government speak for good old-fashioned discipline and holding people responsible for their actions.
An example of how our council and senior management manage and govern in this regard is how they dealt with over R40 million in irregular expenditure. MPAC recently proposed that council simply write off the entire sum without further ado or recovery. They delegated the matter of disciplinary action to the Municipal Manager so we will be monitoring how he addresses accountability of his officials.
The report presented to council has a number of glaring omissions. There were no individual MPAC investigations underpinning their report and no findings related to recoverability of funds. Before council can decide to write off, they must first consider and decide in each individual case that the money is in fact irrecoverable. We find it strange that councillors were not provided with this information which is obviously indispensable for them to properly consider each issue and reach a properly informed decision. Legislation requires that the council must, before writing off an amount, first find that it is irrecoverable.
Considering all the above facts and our observations, the obvious question we must ask ourselves is; “Why do we continue to have these governance problems and what can be done.”
Excerpts from 4th Quarter 2021/2022 Financials in the 28 July council agenda:
- “Debt impairment is reported at a staggering R132.8 million for 4th quarter and currently exceeds the budget by 28%.
- “Total expenditure YTD amounts to R777.1 million. The municipality reports an operating deficit of R3.9 million for the year and R43.9 m after capital grant revenue has been taken into account.”
- “The municipality is reporting a negative R8.3 m on monthly actual net cash from operating activities and on YTD actual reports.”
- “Council and management should note with great concern that no new investments was (sic) made for the entire financial year as no surplus funding is available for investing purposes.”
- Virements (transfers between budgets to make them balance) were three pages long. What is the point of budgeting if officials can move money around so easily?
The Problem.
As representatives of our rate paying community we met with the Mayor and Municipal Manager earlier this week and received some explanation on budget items. Beyond the financials and our many concerns, it was positive to hear of a number of strategic initiatives the council are driving. Our biggest concern is that without sufficient and fast change in behaviour, it is unlikely that we will see any reduction in wasteful expenditure, or a smarter allocation of our revenue to sustainable service delivery and improved governance and financial management. Turning around our municipality will require our leaders to be courageous and strong-minded, willing and able to take the inevitably painful and unpopular decisions the current situation requires.
The Executive Mayor and Municipal Manager will have to put an enormous effort into ensuring their organization is rapidly streamlined and skilled, and new appointees have the requisite competence and skills. Discipline, accountability and consequence management are urgently required to change behaviour. Otherwise we face an even greater deficit and ever declining investment in infrastructure that is necessary to cope with the growth of our population.
Kind regards,
Peter Gaylard
Chairman
