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Where's the Money Going???

31 December 2013, 08:50

Knysna's politicians and Municipal staff are spending a fortune. It would seem that they are borrowing money so as to increase their salaries. And they get default bonuses i.e. whether they achieve their goals or not. If it's happening in our town, it's likely happening in yours too.

Consider this a prelude before i share with you a letter from a concerned citizen of Knysna.

"Follow the money" is a modern adage that rings true. So does wondering if Knysna's Municipal staff and politicians are worth the monies they earn in a town with a population of only 68 000 people. Knysna is not alone in its problems. If you are South African, there's a good chance that you're asking similar questions where you live.

I've questioned this topic several times, most recently with Over R1million Salaries for Knysna Municipal Staff and Do Knysna’s Politicians Deserve These Salaries? I have documented their false election promises and local government falsehoods, with particular mention of their excommunication of the public (that means "us"). My resulting answer is that they definitely do not deserve what they are being paid. Essentially, we are working to pay them for not working for us.

Discontent with the ANC was obvious when they lost the town to the DA in the 2011 municipal elections. The oddity was that Georlene Wolmarans became the DA mayor despite the ANC winning her ward. There was much expectancy and hope under DA leadership. After all, a fundamental part of the DA's campaign had been to promise austerity, much needed after the stock market collapse had ravaged our tourist-based economy and emptied 80% of the industrial area.

Instead, from the outset there were worrying signs. There were the upgrades to the offices of the politicians. There was the expensive payoff (an amount they wouldn't reveal) to Johnny Douglas, the Municipal Manager, to leave. There was the 7% increase in politicians' salaries. And the municipal salary budget bloated by 50% over 3 years whilst R30 million was written off in public debt (with Lauren Waring, the next Municipal Manager, failing to give the public a breakdown of who benefited from that...and why).

Public discontent has grown steadily and 2013 seems to have been a watershed year for Knysna as many have begun to see that there's less difference between the nature of political parties than they'd thought. The most powerful adage of all is that power corrupts.

As much as the belly of the public has rumbled, few have dared to speak out publicly. For the most part, i've been a lone sore thumb (and sometimes middle finger) in my protest for transparency but this year has found others, with deep roots in the Knysna community, asking questions too.

Ian Stewart, a chartered accountant, is one of these and he has written an important letter that everyone should read...and then ask what the hell is going on??? Considering his credentials, people need to listen to what he has to say. More importantly, the Knysna Municipality needs to start answering.

Ian is a chartered accountant and proprietor of Outeniqua Financial Services. He was also the accountant for the original Knysna Ratepayers' Association. Ian has the interest of Garden Route towns at heart and has kindly given permission for the re-posting here of his letter to Knysna's residents:

A Summary of Knysna's Financial Budget... and Other Funny Stories!

The following expose' has taken quite some time to put together. While it is "longish", it is important for the residents to be appraised of what is going on behind closed doors in the ivory towers of municipal power. Please sit back when you have a chance and read this. Comments would be appreciated.

Dear Knysna Residents,

Election Time is near. You should be hearing from those political animals that promised you the earth years ago and since then I doubt if you even got lip service! But now they need your vote to keep them in power so that they can um- err- well- you know- keep doing what they have been doing since they last needed you... filling their pockets with your money is one thing they do well. Services?? No way - fix your own potholes (as per a circular sent out by the Ratepayers Association).

So maybe you need to print this mail, take it home and, over a cuppa or beer, have a chuckle. It is not that funny really but you must try to find the humour wherever it may be hidden.

As an accountant in Knysna, I see from client books that things are very tough out there. You don't have to be a rocket scientist to figure out that this town is severely, financially depressed. Take a drive down the main road and CBD roads and you see empty premises. The state of roads in the town speaks volumes too. We really have a very tired town that sorely lacks maintenance. The industrial area is depressed financially too as hordes of empty buildings testify.

The MTREF medium term (something or other) Budget

Now we move on to the budget for the town as prepared by the municipality. How many of you have the faintest idea what it says? How many have bothered to try to find it?

Until now, not even I, as an accountant, had done so for this current budget (I did look at previous years' when I was fired up then!). I suppose we are all too busy trying to make ends meet. And for those of you who may have looked at the 90 odd page budget before, do you really understand it (other than the commentary amongst the schedules of figures)? I should understand these municipal figures but have to admit I have trouble in doing so. So the non-financial folk out there probably have no chance!!

Lets look at some items in this budget - keep in mind that the town residents and businesses are struggling financially:

1. While a lot of people employed in the real world are lucky to have a job (albeit poorly paid), excessively paid municipal staff (salaries dwarf the private sector) get a 6.85% increase on top of their inflated salaries. They get bonuses too that many in the private sector would love to have. The bonuses for the execs used to be performance related but performance came into question so they changed the rules to make the bonus non-negotiable i.e. they get it whether deserved or not.

2. Knysna has the 3rd highest municipal employee cost per population member IN THE PROVINCE.

3. It is admitted in the budget that "leadership did not not implement effective human resource management to ensure that adequate and sufficiently skilled resources are in place in key finance functions". Quite an admission - and these directors were on +\- R1m p/a packages.

4. The largest cost that we ratepayers must bear is salaries. A few years ago, while the town was run by the ANC, there was a massive outcry when the salary packages of directors and councillors was exposed to ratepayers via an email that did the rounds. In a little town of 50-60,000 residents, we were all horrified that the directors were on packages of between R900,000 to R1,2m (the latter was the deal for the Municipal Manager). One department manager reported to me that he was livid to find that he earned R500,000 less than his director - and he was the guy that did the work!

5. I have scanned through the various budgets on the municipal website in an endeavor to find the salaries of the top brass and councillors. On page 69, in one year, and 71, in another year, under section 13 "councillor allowances and employee benefits", it says "refer to annexure 2 supporting table SA22". There is no such annexure or table to be found! Maybe the current party in power learned not to show us what they earn as we would by peeved that they are all up front at the same feeding trough that the ANC regime were at.

6. A bit of research led me to a controversial blog where some of the salaries are revealed, albeit for years gone by. Lauren Waring (now Municipal Manager) is stated to be on R1,203m (2011/12) R1,016m (2010/11) and Grant Easton R1,311m and R1,162m for the same years. We are now in 2013/14 so their troughs are much bigger, I would think. Seems like there has been no change in power, just different badges! They all end up at the feeding trough with snouts dug in deep!

7. Even though the town streets are lined with empty shops and tough times are evident everywhere. Rates income is planned to increase from R108m in 2009/10, R117m 2010/11, R125m 2011/12, R144m 2012/13 to R152m in 2013/14. And it keeps going to R172m in 2015/16. Now I don't see big housing developments anywhere soon so who is going to pay these extra rates? The rates obviously need to keep going up to fund the salary bill that obviously has to go up to fund all the assistants to the assistants and advisors and... the massive salaries and increases thereon.

8. Electricity revenue will increase over the same period from R117m to R208m and water R35m to R50m. Talk about getting blood out of a stone?

9. In the real world, we have to live within our means. If your profits are down due to tough times you cut out the frills and go home with less pay. Municipality fills buildings with people way above market related salaries and says to us "you pay" (the old cart before the horse story - we want this money to spend so give it to us). I would have thought that seeing there are less businesses to serve (serve is what they should be doing) there should be a freeze on salary increases as well as on new jobs.

But open any local newspaper and you will find jobs advertised. Costly decorating of municipal offices should be put on hold for a good few years till the roads are fixed and rates and services costs to ratepayers have been reduced.

10. Quote from the budget : Council basic employee costs will have risen by 93% on average by 2013/14 since 2009/10. Why? Who are they serving? Empty businesses and factories! Finance directorate increased by "only" 81%. And the ringer - Executive and Council increased by 116%!! Corporate services by 105%, 100% in Planning and 86% in Community Services. And for this shocking state of affairs they vote themselves bonuses in excess of what the average man in the street earns in a year!

And the budget states "clearly here is a disjuncture either in the number of staff employed or in the grading of the staff... and probably both." It gets worse. The budget documents says further that, "The question arises as to whether council [i.e.the overpaid beaurocrats you voted in] is over staffed or wrongly staffed and the probable answer is now BOTH" !!!

With tears in my eyes, I cannot believe that these people have the audacity to keep giving themselves increases and massive bonuses and simply tell us to pay.

11. Total income excluding capital transfers is shown at R380,640,000 in 2009/10.

Employee related costs that year were R114,453,000 (30.07% of total income) and councillors R4,302,000 (1.13%).

Now we all know that since then things have been bad and businesses and factories have closed, we have all had to tighten our belts. So why is it that municipality needs :

a) R528,123,000 income this year 2013/14 with R168,789,000 (31.96%) for employee related costs and R6,348,000 for councillors? A massive R54,000,000 increase on 2009/10!

b) And, in 2015/15, R594,789,000 income and employee related costs of R192,385,000 (32.34%) in 2015/16 (R7,158,000 for councillors)? There surely should be a decrease in salaries as there is less work? And as times are tough you scale down on costs surely?

DO YOU SEE the trend? Where is the efficiency/economy of scale? - the less money coming in should mean that the percentage going to salaries should be less. BUT it is growing! Is this suggesting that there is an incentive within municipality that the more they can drain from us the more they can spend on themselves? These numbers say this IS the case.

12. We all know that even though there are all these highly paid execs, they need consultants to also do the work - R12,220,000 in "contracted services" (which I presume is consultants?) in 2009/10 climbing to R20,452,000 this year and planned to be R23,015,000 in two years time. Do we need these R1m plus p/a executives if someone else needs to be called in to do their work? Maybe contracted services is NOT the consultants figure - maybe a contentious item like that is hidden away elsewhere - see below "other expenditure"?

13. And then we come to that nice little hiding place called "other expenditure" which has gone from R131,784,000 in 2009/10 to R210,757,000 in 2011/12 then R125,456,000 in 2012/13 only to drop to R119,149,000 this year (22.56% of total income and we have no idea what this number represents!). I wonder what caused the drop? Less "indulgent" expenses i.e. on themselves?

14. Electricity is a necessity, right? So the profit margin municipality makes is small, right? Guess again. Their profit margin is 30,4% when compared to the bulk price! [See page 49] Granted (no pun intended), the profit margin has decreased from 38.4% in 2010/2011, possibly due to pressure from the National Energy Regulating Body to curb increases. The excuse for large profit margin will be that they need the money to keep rates and services costs increases down! Or maybe the truth is that they need the money to help fund their excessive salary bill and exorbitant, non-performance related bonuses.

Seeing that we are the paymasters of all within the municipality, why can we not be given information that makes sense to the man in the street.

The gobbledegook way that the financial reports are presented is quite amusing - on page 46 there is a table of very finely printed figures called Budgeted Financial Performance (by standard classification) - whatever that means. Under Revenue they show, under a sub-heading, Executive and Council an amount of R6,938,000 budgeted for this year. That sounds like the Execs pay the municipality money? No chance. I really don't know what that means. In 2009/10 that figure was R10,535,000, the next year R56,626,000 and then R37,772,000. This year it drops to R6,007,000. Why such huge fluctuations? But then I am just an accountant so why should I understand Knysna Municipality's financial reports? Maybe one of you reading this report can help me understand this.

QUO VADIS? Where to from here?

 If you are at all a financially minded person, have internet, know how to log into the municipal website, can wade through the 90 odd pages, and can make sense of it, please correspond with me with your findings. Maybe together we can make sense of all of this? Maybe we are being suckered by the politicians...maybe not?

We need to compare Knysna/Sedgefield with Plettenberg Bay (Bitou) and George. I hear Plett salary bill has shot up too with huge head count increase.

Why are the salaries of the Directors and Councillors not disclosed like they used to be under the ANC? Is this the transparency and good governance we deserve.

The masses Boo-ed Zuma. Is it not time we boo-ed the people running our town into the ground? The DA were opposed to fat salaries that the ANC people were on. What has changed now that they are lined up at the trough?

And what, dear voter, do you intend to do about this?

 Yours faithfully,

Ian Stewart

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