District fails to fix its finances

2007-12-13 00:00

The uMgungundlovu District Council showed no urgency yesterday in approving a recovery plan that could help it rectify the poor financial status of the municipality.

The recovery plan included unanimous recommendations of the Executive Committee (Exco), reached following a two-week assessment of the financial status of the municipality by a financial recovery task team from the provincial treasury department.

uMgungundlovu is one of six KZN municipalities that have had to receive the intervention of the provincial treasury, which prepared a recovery plan to help it in achieving financial, legislative and corporate governance compliance.

A detailed look at expenditure patterns and the projected funds available for the rest of the financial year painted a bleak picture. The municipality’s total expenditure from July to November amounts to R114 million — a monthly expenditure of R20 million.

Treasury has advised that council reduce this to R3,7 million a month for the rest of the financial year.

A contributing factor to the unstable finances of the district was the municipality’s failure to collect all of its projected R229 million revenue, reaching only R176 million. The total cash amount available to the municipality for December 2007 to June 2008 is R62 483 453.

Treasury’s adjustments of the district’s finances advised that if the municipality is able to collect water revenue of R5 million and receive the annual equitable share allocation from government in February, and if it only spends R73 million on “must-haves” like rent, salaries and so on, it will by June 2008 have a balance of over R13 million.

Council members expressed shock at the figures, but after a 20-minute caucus, the ANC voted to delay adopting the recommendations until Tuesday, in order to make a more informed decision. The decision was opposed by the DA and IFP.

Rodger Ashe (Democratic Alliance) asked how the financial situation of a municipality can reach such dire straits without anyone in the finance department picking it up.

“I cannot understand why the decision to adopt the recommendations has been postponed.

“There has been gross overspending on petrol and social functions,” Ashe said.

Ntokozo Bhengu (IFP) urged council to give the matter due urgency as it has been making and approving decisions that are not implemented by staff, leading to the current poor financial situation.

The recommendations include reducing the council’s monthly financial expenditure to R3,7 million and that the mayor enters into urgent discussions with local municipalities in terms of the recovery of water revenue. It was also recommended that council place a moratorium on all new and vacant posts at the municipality.

Mayor Bongi Sithole acknowledged council’s poor financial state and suggested (as per Exco’s recommendation) that council should also consider engaging in discussions with the eThekwini Municipality on the utilisation of their Information Technology System.

“The system costs R10 million which we may not be able to afford but our current accounting systems are outdated and require us to start making use of the Pastel accounting system,” Sithole said.


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