How the DA manipulated the budget process to gain power at ratepayer expense
Drewan Baird. Oudtshoorn. 8 September 2013. 21h30. I had a call Sunday afternoon from a man who until recently was still the DA’s go to fixer of municipalities. His loathing of the Democratic Alliance shocked even me.
“If this is South Africa’s alternative government”, we agreed, “the gods help us all.”
Here’s how the DA prevented Oudtshoorn’s budget from being approved…
The Council Meeting at which the 2013/2014 annual budget was to be considered on 31 May was closed owing to circumstances out of the Speaker’s control when the DA Councillors, in concert with 5 ANC Councillors attempted, unsuccessfully, to take control of the Council and the administration by a misbegotten coup.
As a result of this take-over attempt the Council was prevented by the DA and Cope Coalition to fulfill its statutory obligations in terms of Section 23(1) of the MFMA.
It appears that misleading and irrelevant averments made by DA Councilor Chris MacPherson during the subsequent Special Council Meeting on 14 June, led to the DA and Cope Coalition voting against the approval of the budget. These false and irrelevant statements were used as a smokescreen with a political motive to deliberately jeopardise the process of finalization of the budget and preventing the Council, yet again and for the third time, from fulfilling its statutory obligation in terms of Section 23(1) of the MFMA. It should be noted that the special consultant to the acting CFO advised the Council that MacPherson`s allegations were incorrect and irrelevant to the budget. It was quite apparent that MacPherson had no interest in any clarification or evidence that was contrary to his misleading statements.
Such an intervention by the Department of Local Government Finance, Western Cape Government did in fact take place in terms of Section 139 of the Constitution and a temporary budget was forced upon the Oudtshoorn Municipality as from the date of the intervention effective from 18 July.
Municipal budgets are governed by chapter 4 of the Local Government: Municipal Finance Management Act (MFMA).
Section 16(1) provides that for each financial year the council of a municipality must approve an annual budget for the municipality before the start of that financial year. Read with the definition of ‘financial year’ in Section 1 of the Act, it means before 1 July annually. A budget is approved by a resolution of the council and must be supported by a majority of the members of the council. Section 16(1) reads as follow:
Section 16(1) The council of a municipality must for each ﬁnancial year approve an annual budget for the municipality before the start of that ﬁnancial year.
The approval process does however commence long before 1 July. Section 16(2) of the MFMA makes provision for an approval process commencing with the obligatory tabling of the annual budget at a council meeting at least 90 days before the start of the new budget year.
Section 16(2) In order for a municipality to comply with subsection (1), the mayor of the municipality must table the annual budget at a council meeting at least 90 days before the start of the budget year.
A Draft Budget was tabled at Council on 27 March for consideration by council in terms of Section 16(2) of the MFMA.
The Draft Budget was accepted unanimously by all political parties represented in Council.
The Draft Budget was subsequently advertised in local newspapers and on the website of the Oudtshoorn Municipality as well as placed at various public venues to provide an opportunity for the broader public to submit reservations and to invite submissions from the broader public in terms of the Section 22 of the MFMA.
In addition the Draft Budget was submitted to National Treasury for scrutiny as to whether it complies with the relevant prescripts and regulations. The Draft Budget was successfully loaded onto the date-base of National Treasury in evidence that the Draft Budget was found to be cash funded.
The draft budget was also submitted to the Provincial Treasury for the issuing of an assessment report as part of the scrutiny process.
In terms of Section 22(b)(ii) the electricity tariffs as set out in the draft budget were provided to NERSA for approval. These tariffs were approved by NERSA and the approved tariff structure by NERSA was provided and submitted to Council.
In an attempt to assist, accommodate and fulfill an inclusive process leading to the finalisation of the annual budget, the specialist consultant led a workshop on 15 May to consult with councilors and provide them with an opportunity to consider submissions.
During this workshop MacPherson, the apparent spokesperson, confirmed that the DA and Cope Coalition supported the budget. The only point of concern was the effective implementation of the budget and MacPherson requested the specialist consultant to assist in ensuring that proper internal control management systems were in place and to such end requested a strategic workshop for after the adoption of the budget on 31 May, but prior to 1 July 2013.
One of the main agenda items for the Council Meeting of 31 May was the consideration and adoption of the Annual Budget 2013/2014 budget.
For purposes of transparency, and to ensure compliance with legislation, the broader public was invited to this meeting.
Also at this meeting consideration was to have been given to the submissions in terms of Section 22 of the MFMA which should have been tabled by the Executive Mayor.
However the Mayor was prevented from fulfilling his statutory obligation in terms of section 23(2) of the MFMA to table the submissions in that the Speaker had to adjourn the meeting due to an attempted take-over of the Council by the DA and Cope Coalition.
It is abundently clear that the intention of the DA and Cope Coalition was to act not in good faith and not in the best interests of the Oudtshoorn community. If good faith was in fact intended the DA and Cope Alliance would have made provision during their own meeting that took place after the duly constituted council meeting, to place the budget on the agenda, alternatively they would have considered the submissions and made the changes, if necessary, to ensure compliance. It became quite evident that their intention was to overthrow, or to take control of the council with the help of the five councilors who defected from the ANC.
In terms of the MFMA, in the event of the meeting of 31 May failing to adopt the budget the council would have had to reconsider the budget within seven days. Should this subsequent meeting also fail to approve the budget, the council would have had to meet again until the budget was approved before the commencement of the budget year.
In a further attempt to approve the 2013/2014 budget a Council Meeting was held on 11 June.
At this meeting consideration was to have been given to the submissions in terms of Section 22 of the MFMA which should have been tabled by the Executive Mayor.
The Speaker terminated the Special Council Meeting on 11 June 2013 as no quorum remained after the DA and Cope Alliance walked out.
Yet again the DA and Cope Alliance prevented the Council from fulfilling its statutory obligation to have the budget approved before 1 July 2013.
During a Special Council Meeting held on 14 June the draft annual budget 2013/2014 was an item on the agenda for the third time in another attempt to have the budget approved by Council.
After the budget speech of Executive Mayor Gordon April, MacPherson immediately forced a debate on the budget.
MacPherson argued for the budget to be rejected on the grounds that it did not comply with prescripts and the needs of the residents of Oudtshoorn. Further to this MacPherson stated that:
No organogram was provided;
There was no asset register;
There was no audit committee and no audit reports.
MacPherson said, “Die ANC Koalisie wil hê ons moet ‘n begroting goedkeur wat glad nie voldoen aan die voorgeskrewe voorskrifte of behoeftes van die inwoners van Oudtshoorn nie. Mnr die Speaker waar is die personeel struktuur die organogram dit bestaan nie, hoe kan jy iets spandeer derde party begroting op iets wat nie bestaan nie. Geen borg die leier van die ANC beskuldig die bestuur dat daar alreeds 34% persent bestee is op personeel hulle eie leier sê so waar is die hele jaar se finansiële verslag wat deur die verskeie komitees goedgekeur moes word is dit bestaan nie. Waar is die verslae van die oudit komitee … dit bestaan nie. Waar is die bate behoeftes wat saamstel dit bestaan nie. Ons gaan nie weer toelaat dat die kiesers Mnr die Speaker mislei word … om ’n begroting te laat goedkeur deur hierdie Raad want die Burgemeester en die Munisipale Bestuurder verander dit soos en wanneer dit hulle pas en self hulle Mayco lede word nie daarin geken nie as dit verander word nie. Die ANC gebruik Mnr die Speaker om belasting betalers se geld om die NNP Speaker en die ICOSA Onder Burgemeester deel van die koalisie te hou deur onwettig honderde duisende rand aan hulle te gee om honderde stemme te werf onder die die voorwendsel van “Social Assistance”. Die ANC leiers het die kiesers van Oudtshoorn onvergifnis gevra oor die swak leierskap van die Burgemeester en die Speaker, maar die Speaker tot dusver het hulle nog niks gedoen om dit reg te stel nie. Weereens bewys dat die ANC nie vertrou kan word ek sluit af nie Mnr die Speaker as die ANC nie kan optree teen sy eie lede nie dan sal ons DA Cope nie … raadslede hierdie begroting verwerp en daardeur bewys dat die Raad die ANC koalisie se leiding verwerp. Deurdat ons hierdie begroting … ons glo u sal die kennis so uitstuur en bedank want ons en die vyf raadslede wat reeds bedank het uit die ANC gaan steeds op 7 Augustus.”
There was surprise at these contentions made by MacPherson, as the Council had adopted the draft budget unanimously on 28 March, and an inclusive and consultative process was followed, which included workshops, and moreover MacPherson had informed the specialist consultant that the DA and Cope Alliance would vote in favor of the budget.
Furthermore MacPherson’s accusations were untrue and irrelevant to the budget. His allegations were clearly made with the intent to mislead the Council. MacPherson has no statutory oversight role over the annual budget, as the National Treasury and Provincial Treasury fulfill that role.
At this point Councilor Pierre Nel requested that the council vote on the budget, but the Speaker ruled to provide the specialist consultant and others with an opportunity to deal with matters that had arisen.
Councilor Wagenaar (ANC) stated that the budget had been subjected to months of hard work. There had been extensive community participation and councilors had had ample opportunities to participate and raise problem areas and objections, which objections were not raised in any of these forums.
The specialist consultant informed the Council that the remarks made by MacPherson were seriously misleading statements and continued to address MacPherson’s:
I confirmed that there was an approved organogram of the municipal staff structures and that was always available on request. I must point out that it is never required to submit an organogram with the budget;
In terms of the Asset Register I explained that there is an Asset Register and given the fact that we had an unqualified audit should be obvious that the auditors would have audited the Asset Register;
That nowhere in the regulations is there a responsibility that rests on the Municipal Manager to submit a Asset Register for approval to council;
An Asset Register is part of the Municipal Administration and it must be available for scrutinizing by the Auditor General;
In this light there is no compliance issue with regard to the Asset Register;
The Asset Register is submitted with the annual budget; and
The Municipality received an unqualified audit opinion which confirms that an Asset Register is in place and which was audited by the Auditor General.
In terms of the audit reports I informed the meeting that the Auditor General Support for 2010 – and 11/2012 was actually due to a delay on the side of the Auditor General and that we only received the report during the last week of May 2013.
Due to the absence of a Auditor General opinion we could not complete the annual report for submission to Council yet.
Importantly, another workshop was planned to clarify these issues and to give an opportunity to all the councilors to submit further concerns. This workshop never took place. Recommendations were made with regard to the provision of a detailed report including an action plan on pertinent strategies and internal control measurements which would probably contribute to further savings, value for money, spending by all budget holders to prevent fruitless and unauthorised expenditure to prohibit misuse of assets and public funds, improving production levels of staff and finally to ensure continuous financial discipline. It was envisaged that a workshop will be held for Council and the Senior Management during mid June for adoption of the aforesaid report before 1 July.
After a second round of debate on the approval of the budget it was agreed that it be brought to a vote.
Alderman Pierre Nel proposed that the budget be rejected and this was seconded by Alderlady De Jager. Both are DA councilors. Alderman April proposed that the budget be approved and this was seconded by Alderman Donson.The DA and Cope Alliance brought out 12 votes to reject the budget against the eight votes in favour of the approval of the budget.
According to the specialist consultant, the budget had been rejected on clearly spurious grounds and added that MacPherson provided false and misleading information to the Council on 14 June.
Compelling reasons to reject a budget are:
Substantial differences between the approved draft budget and final submission;
That the final submissions were not in the public interest;
Misrepresentations for example would have been expenditure which was not previously included in the draft budget and which was advertised for public comments;
Changes of the tariffs which were publicised were not affordable; and
Had there been higher electricity tariffs than those approved by Nersa.
None of the grounds on which MacPherson based his opposition to the budget were relevant or compelling. In fact, the averments made by MacPherson were without any substance and totally irrelevant to the budget.
Alarming consequences follow on the deliberate obstruction of the approval of the Oudtshoorn 2013/2014 budget by the DA and Cope Alliance:
A temporary budget for the Oudtshoorn Municipality was approved by the Western Cape Provincial Executive in terms of its statutory mandate and the Oudtshoorn municipal council was directed to approve the annual budget by no later than 30 September 2013;
The Temporary Budget was not subject to senior review and it is doubtful whether the Provincial Treasury had consulted National Treasury to ensure correctness of their proposed Temporary Budget and to ensure that it was indeed cash funded and compliant;
The Temporary Budget provides for a decrease of approximately R13 million of Total Expenditure (Comparisons between budgets submitted to the Council on 27 March 2013 “Draft budget” against the Temporary Budget);
An error made by National Treasury regarding the incorrect allocation of R5 million was not taken into account;
No provision was made for a detailed Operating Budget which is needed to enable the municipality to scrutinize any further deviations between the Draft Budget and the Temporary Budget;
Monthly and quarterly reporting on budget performance will be extremely difficult to submit in the prescribed format;
After 14 June the Municipality was not in a position to effectively function for two weeks due to the absence of an approved budget and the uncertainty surrounding expenses. Certain capital and operating projects were suspended;
As a result of the reckless rejection of the budget by the DA / Cope alliance and the fact that the approved tariffs by NERSA(which were available) could not be submitted to Council on 14 June, due to the fact the Executive Mayor was prevented from fulfilling his statutory obligations in terms of Section 23 of the MFMA to table these electricity tariffs. As such the Municipality was not in a position to enforce for example the electricity tariffs from 1 July to prevent any losses which could have had a negative impact on the cash funded aspects of the budget;
It caused disruption of the administration in that there was confusion and uncertainty amongst officials about whether the budget was approved or not and which budget should be captured on the financial system;
This was exacerbated by public statements made by MacPherson wherein he stated that the budget was not approved and officials would be held personally responsible for the payments.
Notwithstanding the fact that all the aspects that MacPherson had raised in his attempt mislead the Council were negated by the specialist consultant, MacPherson did not proffer a reply to the correction of the misleading, irrelevant and false averments that he had made in his address to Council.
There was a nett difference of R28 000 between the draft budget approved on 28 March and the final budget that was to be submitted on 31 May. These differences cater for the requirements that had been agreed upon in a workshop. It was the understanding of the Budget Office that if these aspects were properly addressed, the budget as embodied in the final submission would be accepted and approved.
The specialist consultant told O!O: “I was astonished that having gone to great lengths to provide for an inclusive, consultative and transparent budget process since August 2012 and having addressed the savings requirements and other concerns of the Councillors, MacPherson who had previously been very positive towards the budget had done an about-turn.
“It was clear to me that this was a planned obstructionist strategy by MacPherson.
“I have personal experience of a similar and unacceptable strategy that was pursued by the DA, where the ANC was in charge of a council, to prevent the approval of a budget within the set time frames in order to enable the MEC to enforce Section 139 of the Constitution, so as to intervene, or in the extreme to abolish the council, as happened in the Overberg Municipality matter.”
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