REPORT OF STANDING COMMITTEES REPORTING DIRECTLY TO … · blocked invoices for various reasons...

REPORT OF STANDING COMMITTEES REPORTING DIRECTLY TO THE COUNCIL allowed in terms of Section 8(1)(f)(b)(i) of the Rules and Orders for consideration by the Council Agenda of the Council Meeting of the CITY OF TSHWANE METROPOLITAN MUNICIPALITY which will be held in the Council Chamber, Sammy Marks Conference Centre, corner Madiba and Lilian Ngoyi Streets, Pretoria, on THURSDAY, 30 MARCH 2017, at 10:00 to consider the matters set out in the agenda hereafter.

PAGES B. FROM THE SECTION 79 STANDING COMMITTEE:

PUBLIC ACCOUNTS: 10 FEBRUARY 2017 ................................ 5 – 114 Councillor RK Mathebe SPEAKER 6 March 2017

2

F. REPORTS TO COUNCIL

The Speaker, in terms of Section 8(1)(f)(b)(i) of the Rules and Orders, proposes to Council that the reports contained in this agenda, from the Meeting of the Section 79 Standing Committee: Public Accounts held on 10 February 2017, be submitted for consideration, and subsequently requests the Chair of Chairs, Alderman GC Pretorius, to present the report to Council.

3

COUNCIL AGENDA : CITY OF TSHWANE METROPOLITAN MUNICIPALITY: 30 MARCH 2017 REPORTS TO COUNCIL INDEX (The recommendations appear on the pages indicated in brackets)

Pages 1. Group Financial Services Department

(Financial Reporting and Assets) Creditor’s Age Analysis as at 31 October 2016 for the City …………… 5 - 13(9) (From the Section 79 Standing Committee: Public Accounts:

10 February 2017) 2. Group Financial Services Department

(Financial Reporting and Assets) Creditor’s Age Analysis as at 30 November 2016 for the City …………… 14 - 22(19) (From the Section 79 Standing Committee: Public Accounts:

10 February 2017) 3. Office of the Executive Mayor

(Shareholder Unit) Sandspruit Works Association: Timelines and process for disestablishment …………………………………………………………. 23 - 44(32) (From the Section 79 Standing Committee: Public Accounts:

10 February 2017)

4. Office of the Executive Mayor (Shareholder Unit) Housing Company Tshwane (HCT) Information on organisational structure and service delivery agreement …………………………..…… 45 – 80(53) (From the Section 79 Standing Committee: Public Accounts:


(Financial Reporting and Assets) Creditors age analysis as at 31 December 2016 for the City ………… 81 – 89(86) (From the Section 79 Standing Committee: Public Accounts:

10 February 2017)

4

Pages

6. Group Financial Services Department

MAPC Report on Group Financial Services Department Municipal Finance Management Act (MFMA): In-year Financial Report (monthly budget statement) for the period ending 31 October 2016 …………………………………………………. 90 – 108(96) (From the Section 79 Standing Committee: Public Accounts:


(Financial Reporting and Assets) Explanations of debit balances and discrepancy of trade Creditors’ balances between creditors’ age analysis as at 30 September 2016 for the City and the September In-year report …………………….…………………………………………………….. 109 -114(114)

(From the Section 79 Standing Committee: Public Accounts: 10 February 2017)

*.*.*.*.*.*.*.

5 COUNCIL AGENDA : CITY OF TSHWANE METROPOLITAN MUNICIPALITY: 30 MARCH 2017

REPORTS TO COUNCIL ST-B18/1 U Banda (012 358 8100) COUNCIL: 30 March 2017 1. GROUP FINANCIAL SERVICES DEPARTMENT

(FINANCIAL REPORTING AND ASSETS) CREDITORS’ AGE ANALYSIS AS AT 31 OCTOBER 2016 FOR THE CITY (From the Section 79 Standing Committee: Public Accounts: 10 February 2017)

1. PURPOSE The purpose of this report is to update the Municipal Public Accounts Committee of the creditor’s age analysis for the City.

2. STRATEGIC OBJECTIVE To ensure financial sustainability.

3. BACKGROUND Public Accounts rescinded its resolution of 14 June 2013 with regard to the submission of the monthly detailed report in respect of creditors’ age analysis. The City’s CFO is now required to provide MPAC with a summary of the creditors age analysis on a monthly basis and that the Section 79 Standing Committee: Public Accounts only be provided with further details if the City of Tshwane is in contravention with section 65(2)(e) of the Municipal Finance Management Act.

4. DISCUSSION Creditors’ age analysis of CoT as at 31st October 2016 is summarized and reported as follows: (Please note that the Amounts & Percentages are rounded off to the nearest decimal)

• The total outstanding creditors, captured on the City’s processing system (SAP), amounted to R93 933 965 not yet paid at the date of the report. (September 2016 – R74 590 321)

Analysis per Ageing:

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(0–30 days)

• R25 985 149 adjusted to R92 905 933 on current balances which represent 28% adjusted to 99% of the total outstanding creditors. (September 2016: R37 257 156 adjusted to R71 739 933 which represented 50% adjusted 96%)

(31–60 days) • R35 745 114 Adjusted to R166 280 which represents 38% adjusted to 0% of

the total outstanding creditors. (September 2016: R10 672 295 adjusted to R2 150 822 which represented 14% adjusted to 3%)

61 days (+)) • R32 203 702 adjusted to R861 751 represent 34% adjusted to 1% of the total

outstanding creditors. (September 2016: R26 660 870 adjusted to R699 565 which represented 36% adjusted to 1%)

Tabular representation:

Description October 2016 September 2016 Amount % Amount % R R The total outstanding creditors 93 933 965 74 590 321 Invoices not yet due payable end of November 2016/(Current)

25 985 149

28

37 257 156

50

Overdue invoices on 31 to 60 days 35 745 114 38 10 672 295 14 Overdue invoices on 61 days and older

32 203 702

34

26 660 870

36

Adjusted tabular representation after taking into account (Distortions to balances) i.e. for example: invoices submitted late and paid in the first week of November 2016, etc.

Description October 2016 September 2016 Amount % Amount % R R The total outstanding creditors 74 590 321 Invoices not yet due payable end of November 2016(Current)

92 905 933

99

71 739 933

96

Overdue invoices on 31 to 60 days 166 280 0 2 150 822 3 Overdue invoices on 61 days and over

861 751

1

699 870

1

Explanation of creditors on 31 days (+) can be summarized and reported as follows:

I.E. (Unpaid invoices outside Financial Reporting and Asset Management control)

Creditors on 31 days (+) amounts to R67 948 816 representing 72% of the total outstanding creditors (September 2016: R37 333 164 which represented 50% of the total outstanding creditors)

7 • R41 655 043 of the total outstanding creditors on 31 days (+) was paid in the first

week of November 2016 due to late submission. (September 2016: R16 761 290 which was paid first week of October 2016)

• R1 024 740 of the total outstanding creditors on 31 days(+) is not paid due to incorrect banking details (September 2016: R900 162)

• R16 053 843 of the total outstanding creditors on 31 days (+) is not paid due to blocked invoices for various reasons (for e.g. Conflict of interest, tax clearance certificate, Incorrect invoice details, Pro forma invoice etc.) (September 2016: R16 855 845)

• R9 215 189 of the total outstanding creditors on 31 days(+) is not paid due to other various reasons (September 2016: R2 815 868)


Description October 2016 September 2016 Amount % Amount % R R Overdue invoices on 31 days and over to Total Creditors

67 948 816

37 333 164

Overdue(Late submission) invoices paid first week of November 2016

41 655 043

61

16 761 290

45

Overdue invoices not paid due to incorrect banking details(Eft Return)

1 024 740

2

900 162

2

Vendors blocked for payment due to overdue accounts or expired tax clearance certificate, conflict of interest(etc.)

16 053 843

24

16 855 845

45 Overdue invoices not paid due to other reasons

9 215 189

14

2 815 868

8

It should be noted that Cot creditors are paid within 30 days for normal creditors and 15 days for SMME creditors on receiving the relevant statement on the 15th and end of each month. The following is the report per the payment method: Payment Method October 2016 September 2016 R R Eft 1 999 712 667 1 635 216 475 Cheques 2 833 200 2 433 170 Grand Total 2 002 545 867 1 637 649 645

5. FINANCIAL IMPLICATIONS

Section 65(e) of the MFMA stipulate that all money owing by the municipality be paid within 30 days of receiving the relevant invoice or statement, unless prescribed otherwise for certain category of expenditure.

8 6. COMMENTS FROM THE STAKEHOLDER DEPARTMENTS 6.1 FINANCIAL PERFORMANCE MANAGEMENT

(Unaltered)

“There are no additional financial implications emanating as a result of this report on the City’s budget, since the purpose of this report is to update the Municipal Public Accounts Committee of the creditor’s age analysis for the City.”

6.2 COMMENTS FROM THE STRATEGIC EXECUTIVE DIRECTOR: GROUP LEGAL

SERVICES

(Unaltered)

“The purpose of this report is to update the Municipal Public Accounts Committee of the Creditor’s age analysis for the City. Section 51 of the Local Government: Municipal Systems Act 32 of 2000 places a duty on the Municipality within its administration and financial capacity to establish and organize its administration in a manner that would enable the Municipality to amongst others, be performance orientated and focused on the objects of local government as embodied in Section 152, of the Constitution of the Republic of South Africa, Act 108 of 1996. The Municipality is required by the provisions of section 68(1) of the Municipal Systems Act 32 of 2000, to develop its human resource capacity to a level that enables it to perform its functions and exercise its powers in an economical, effective, efficient and accountable way. In terms of Section 11(3) (a) & (n) of the Local Government: Municipal Systems Act 32 of 2000, A municipality exercises its legislative or executive authority by developing and adopting policies, plans, strategies and programs, including setting of targets for delivery and also by doing anything else within its legislative and executive competence. Section 65(1) and (2)(a) & (e) of the Municipal Finance Management Act 56 2003, provides that the Accounting Officer of a municipality is responsible for the management of the expenditure of the municipality and must take all the reasonable steps to ensure that the municipality has and maintains an effective system of expenditure control, including procedures for the approval, authorisation, withdrawal and payment of funds and that all money owing by the municipality be paid within 30 days of receiving the relevant invoice or statement, unless prescribed otherwise for certain categories of expenditure. Section 15 of the Municipal Finance Management Act 56 2003 requires the municipality to incur expenditures in terms of the approved budget and within limits of the amounts appropriated for the different votes in an approved budget which must be complied with.

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Having taken regard to the aforesaid and with specific reference to the contents of the report, Group Legal Services Department supports the approval of the report and the recommendations thereof and submit that the report and its Annexures be referred to the Mayoral Committee for their attention and cognizance.”

7. IMPLICATIONS 7.1 HUMAN RESOURCES

Not applicable.

7.2 FINANCES

Refer above.

7.3 CONSTITUTIONAL AND LEGAL FACTORS

Refer above. 7.4 COMMUNICATION

Not applicable. 7.5 PREVIOUS COUNCIL AND MAYORAL COMMITTEE RESOLUTIONS

Not applicable.

8. CONCLUSION Invoices submitted timeously without errors and or queries were processed and paid within 30 days of receiving statements as required by section 65(e) of the MFMA. Invoices with queries were followed up with relevant officials from creditors and user departments within the City.

ANNEXURES: A. Reconciliation of payables as at 31 October 2016. B. Top 100 vendor payments for October 2016.

RECOMMENDED: That cognizance is taken of the creditors’ age analysis as at 31 October 2016.

ANNEXURE A

Month: 31 October 2016Financial Year: 2016/2017

R R

Balance as per Age Analysis as at 31 October 2016 (93 933 965)

Add : Other creditors (448 681 918)

ABSA Outgoing EFT Clearing account (GL 113502) (106 182 544) Small differences (GL 165110) 5 Price Variance: Suspense accoun (165100) 189 416 Accrual bulk water (GL 160600) (188 059 907) Accrual bulk electricity (160610) - Goods received/Invoice received clearing (GL 191100) (144 388 847) RTMMC: AARTO creditors (160535) (10 240 041) Creditor: Year end accrual (GL 160590) - Less : Creditors with debit balances 56 722 297

Aquazania (pty)ltd 359 Imatu Traduna 1 828 City of Tshwane 18 995 Tshwane university oftTechnology 19 720 Lorcom 142 pty ltd 380 233 AIG South Africa Ltd 921 200 Department Water Affairs 9 481 435 Centriq insurance company 20 000 000 One Time Vendor 2 25 898 527

BALANCE OF TRADE CREDITORS AS AT 31 OCTOBER 2016 (485 893 586)

Note:

RECONCILIATION TO AFS

Balance-Trade creditors(Monthly Financial Statements) (486 605 580) RTMMC/AARTO Creditors (10 240 041) Loan Interest Accrual(160710) 10 952 036 Balance per Reconciliation(Above) (485 893 586)

Variance -

CITY OF TSHWANE METROPOLITAN MUNICIPALITY

TRADE CREDITORS RECONCILIATION PER BALANCE SHEET

Please note that the creditors age analysis balance is derived from invoices processed but not yet paid as at the date of reconciliation and it is

reconciled to trade creditors amount relating to vendor invoices which excludes other creditors

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NUMBER VENDOR NO VENDORS PAID OCTOBER 2016 TOP 100 AMOUNT PAID TO

VENDOR IN OCT 2016

1 727 ESKOM HOLDINGS R 612 794 273.63

2 1333 Rand Water R 395 567 294.50

3 3329 MOIPONE GROUP OF COMPANIES R 77 273 739.06

4 100386 Group Five WEC Consortium R 67 629 495.80

5 100005 Dept of Transport & Public Works R 39 739 021.33

6 10835 TSHOLETSO PROJECTS R 32 145 765.69

7 100186 MAKOLE CIVILS R 31 339 318.26

8 13559 XTREMETEC CONSORTIUM TSHWANE R 24 822 943.11

9 100296 ZAS JOINT VENTURE R 24 016 143.17

10 13426 FREE WIFI FOR AFRICA R 23 769 000.00

11 3963 A-M CONSULTING ENGINEERS R 21 684 472.79

12 15612 Internet Filing (Pty)Ltd R 17 129 939.25

13 10996 CIVCON CONSTRUCTION R 14 400 000.00

14 12167 DITSHIMEGA PROJECTS AND TRAINING R 13 543 497.38

15 15483 Fleetmatics Vehicle R 12 172 891.98

16 100057 VHARANANI-BOITSHOKO JOINT VENTURE R 11 849 462.63

17 15641 MAPITSI CIVIL WORKS R 11 043 754.15

18 11984 Balimi Barui Trading CC R 10 787 644.82

19 133 JL EXCAVATORS R 10 702 673.88

20 3796 Mivami Construction cc R 10 646 695.75

21 11173 NOBOMATE R 10 519 331.78

22 14250 Ascension Properties R 10 078 934.46

23 3027 AMAWAKAWAKA PROJECTS R 9 991 860.28

24 5223 PRIMAT CONSTRUCTION R 9 784 499.87

25 10833 Vharanani Properties cc R 9 390 892.73

26 13718 SEGABOKENG BUILDING CONSTRUCTION R 9 117 765.43

27 1958 Maluleke & Luthuli Development R 8 533 709.85

28 505 HOTLINE SECURITY R 7 985 801.10

29 11617 URBAN DYNAMICS (GAUTENG) R 7 328 377.13

30 1448 Magalies Water R 7 317 607.46

31 4632 Early Moon Trading 361 cc R 7 158 599.72

32 1810 Superbia Four (Pty) Ltd R 7 150 713.79

33 5088 Bigeye Investments 210 cc R 7 093 365.44

34 12102 Group Five Motlekar (Pty) Ltd R 7 017 868.24

35 13247 Both Best Trading and Projects CC R 6 749 721.24

36 8641 Morubisi Technologies (Pty) Ltd R 6 747 888.00

37 1189 Auditor-General of South Africa - N R 6 706 269.45

38 7338 BONA ELECTRONIC SOLUTIONS R 6 681 037.37

39 14127 TAHAL SOUTH AFRICA R 6 611 032.78

40 13534 FIKILE CONSTRUCTION R 5 789 616.04

41 3006 THEMBA CONSULTANTS R 5 719 570.67

42 665 CONSOLIDATED POWER PROJECTS R 5 713 675.59

43 804 The South African Post Office Ltd R 5 693 956.20

44 12046 LEUNGO CONSTRUCTION ENTERPRISE R 5 686 122.60

45 232507 Lokxion Generation R 5 600 797.00

ANNEXURE B 11

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46 11914 KJM BUSINESS ENTERPRISES R 5 533 918.43

47 100342 WORKING ON FIRE R 5 500 000.00

48 153 Marumo-Maepe Cleaning Security R 5 473 742.18

49 11570 Conlic Electrical cc R 5 228 496.00

50 227485 Xihlovo Farming Co-Operative R 5 138 763.22

51 12288 Bophelong Construction (Pty) Ltd R 4 957 484.53

52 232846 All I Pre solution Primary R 4 724 900.50

53 1911 Central High Trading 277 cc R 4 707 254.18

54 4858 COMBINED PRIVATE INVESTIGATIONS R 4 352 010.11

55 1644 MCC SECURITY AND PROJECTS R 4 338 255.69

56 1783 Majorie's Trading Enterprises cc R 4 241 341.68

57 13216 EOH INTELLIGENT INFRASTRUCTURE R 4 213 917.66

58 15603 Wining Minds Farming R 4 131 149.58

59 386 Sandspruit Works Association R 4 096 363.48

60 709 Telkom SA Ltd R 4 067 925.88

61 2484 MABOTWANE SECURITY SERVICES R 3 673 677.42

62 6391 PSMA Holdings (Pty) Ltd R 3 660 027.00

63 13611 Umphakathi Security Services CC R 3 460 157.40

64 12407 AFRIRENT R 3 411 108.00

65 12166 RUA CONSTRUCTION AND PROJECTS R 3 370 525.20

66 3639 Milnex 151 (Pty)Ltd R 3 343 519.88

67 7109 Wenzile Phaphama Trading R 3 174 110.12

68 1066 SENSUS SOUTH AFRICA R 3 081 454.12

69 9764 THABETHE MARKETING R 3 017 252.70

70 100087 LABUCON RESOURCES R 3 011 034.33

71 13967 VOX TELECOMMUNICATIONS R 2 952 012.09

72 2845 Phuthadichaba Trading Enterprise R 2 897 563.93

73 14706 Rajwale Trading and R 2 897 196.00

74 1155 V I P CONSULTING ENGINEERS R 2 896 426.28

75 11272 T C T CIVIL AND CONSTRUCTION R 2 845 730.61

76 331 Boitshoko Road Surfacing R 2 822 649.61

77 9957 Slip Knot Investments 777 R 2 820 206.64

78 15664 Seed Accounting Services cc R 2 695 000.00

79 12760 PROCUREX ADVISORY AND GENERAL SERVI R 2 599 536.57

80 14036 Nkoananyana Security R 2 569 359.05

81 12368 Super Group Africa R 2 554 578.74

82 1528 VODACOM R 2 522 182.38

83 12559 BUZAPHI CONSTRUCTION R 2 522 106.60

84 530 Leithcons Machinery cc R 2 488 497.97

85 9375 Griften Security and Cleaning R 2 456 293.50

86 1263 Abner's Civil Construction & R 2 414 843.89

87 3681 NTIYISO CONSULTING R 2 395 105.80

88 223592 MABOMASEMA CO-OPERATIVE LIMITED R 2 370 191.82

89 9730 UBUNTU TRANSPORT LOGISTICS R 2 333 896.92

90 6933 ISD PROPERTIES R 2 279 847.87

91 9307 MUHANYISI TRADING ENTERPRISE R 2 241 562.69

92 4317 Mphosa Construction Projects cc R 2 228 380.48

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93 100248 MOORE STEPHENS B&W PARTNERSHIP T/A R 2 194 500.00

94 9732 Mogatladi Trading Enterprise cc R 2 146 612.25

95 215457 CBD Residency (pty) ltd R 2 118 001.14

96 5325 MOSEPELO TRADING R 2 111 740.68

97 6044 City Property Administration R 2 030 137.88

98 5664 SIDAS SECURITY SERVICES R 2 004 373.99

99 226368 KHANYISA IMPILO PRIMARY CO-OPERATIV R 2 000 000.00

100 225961 TIVUMBENI PRIMARY CO-OPERATIVE LIMI R 1 998 434.00

R 1 826 542 400.07TOTAL

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14 ST-B18/1 U Banda (012 358-8100) COUNCIL: 30 March 2017 2. GROUP FINANCIAL SERVICES DEPARTMENT

(FINANCIAL REPORTING AND ASSETS) CREDITORS’ AGE ANALYSIS AS AT 30 NOVEMBER 2016 FOR THE CITY (From the Section 79 Standing Committee: Public Accounts: 10 February 2017)

1. PURPOSE The purpose of this report is to update the Municipal Public Accounts Committee of the creditors’ age analysis for the City.



4. DISCUSSION Creditors’ age analysis of CoT as at 30th November 2016 is summarized and reported as follows: (Please note that the Amounts & Percentages are rounded off to the nearest decimal)

• The total outstanding creditors, captured on the City’s processing system (SAP), amounted to R126 655 414 not yet paid at the date of the report. (October 2016 – R 93 933 965)

Analysis per Ageing:

(0–30 days)

• R100 483 364 adjusted to R124 769 425 on current balances which represent 79% adjusted to 99% of the total outstanding creditors. (October 2016: R25 985 149 adjusted to R92 905 933 which represented 28% adjusted 99%)

(31–60 days)

15

• R7 034 266 Adjusted to R968 368 which represents 6% adjusted to 1% of the total outstanding creditors. (October 2016: R35 745 114 adjusted to R166 280 which represented 38% adjusted to 0%)

(61 days (+))

• R19 137 784 adjusted to R917 621 represent 15% adjusted to 0% of the total outstanding creditors. (October 2016: R32 203 702 adjusted to R861 751 which represented 34% adjusted to 1%)


Description November 2016 October 2016 Amount % Amount % R R The total outstanding creditors 126 655 414 93 933 965 Invoices not yet due payable end of December 2016/(Current)

100 483 364

79

25 985 149

28

Overdue invoices on 31 to 60 days 7 034 266 6 35 745 114 38 Overdue invoices on 61 days and older

19 137 784

15

32 203 702

34

Adjusted tabular representation after taking into account (Distortions to balances) i.e. for example: invoices submitted late and paid in the first week of December 2016, etc.

Description November 2016 October 2016 Amount % Amount % R R The total outstanding creditors 126 655 414 74 590 321 Invoices not yet due payable end of December 2016(Current)

124 769 425

99

92 905 933

99

Overdue invoices on 31 to 60 days 968 368 1 166 280 0 Overdue invoices on 61 days and over

917 621

0

861 751

1

Explanation of creditors on 31 days (+) can be summarized and reported as follows: I.E. (Unpaid invoices outside Financial Reporting and Asset Management control)

Creditors on 31 days (+) amounts to R26 172 050 representing 21% of the total outstanding creditors (October 2016: R67 948 816 which represented 72% of the total outstanding creditors)

• R5 952 994 of the total outstanding creditors on 31 days (+) was paid in the first week of December 2016 due to late submission. (October 2016: R41 655 043 which was paid first week of November 2016)

• R698 279 of the total outstanding creditors on 31 days (+) is not paid due to incorrect banking details (October 2016: R1 024 740 )

• R16 510 249 of the total outstanding creditors on 31 days (+) is not paid due to blocked invoices for various reasons (for e.g. conflict of interest, tax clearance certificate, incorrect invoice details, Pro forma invoice etc.). (October 2016: R16 053 843)

• R3 010 528 of the total outstanding creditors on 31 days (+) is not paid due to other various reasons. (October 2016: R9 215 189)

16


Description November 2016 October 2016 Amount % Amount % R R Overdue invoices on 31 days and over to Total Creditors

26 172 050

67 948 816

Overdue(Late submission) invoices paid first week of December 2016

5 952 994

23

41 655 043

61


698 279

3

1 024 740

2


16 510 249

63

16 053 843


3 010 528

12

9 215 189

14

It should be noted that Cot creditors are paid within 30 days for normal creditors and 15 days for SMME creditors on receiving the relevant statement on the 15th and end of each month. The following is the report per the payment method: Payment Method November 2016 October 2016 R R Eft 1 634 653 117 1 999 712 667 Cheques 489 134 2 833 200 Grand Total 1 635 142 250 2 002 545 867



6. COMMENTS FROM THE STAKEHOLDER DEPARTMENTS 6.1 FINANCIAL PERFORMANCE MANAGEMENT

(Unaltered)


6.2 COMMENTS FROM THE STRATEGIC EXECUTIVE DIRECTOR: GROUP LEGAL

SERVICES

(Unaltered)

17

“The purpose of this report is to update the Municipal Public Accounts Committee of the creditor’s age analysis for the City.

(Unaltered) The report is in support of the following Strategic Objectives, namely: To ensure financial sustainability. In terms of chapter 6 of (sections 38-49), of the Local Government: Municipal Systems Act, (32 of 2000) which deals with performance management as envisaged. More specifically section 40 which inter alia provide that the municipality must establish mechanism to monitor and review its management system. Further the provisions of regulation 7 of the regulations listed in the Municipal Systems Act which canvass that a municipality’s performance management system entails a framework that describe and represents how the municipality’s cycle and processes of performance planning, monitoring, measurement, review, reporting and improvement will be conducted organized and managed, including determining the roles of the different role-players. In developing the its performance management system, a municipality must ensure that the system complies with all the requirements set-out in the Act; demonstrates how it operates and be managed from the planning stage up to the stage of performance and reporting, clarifies the roles and responsibilities of each role- player, including the local community, in the functioning of the system, clarifying the processes of implementing the system within the framework of the integrated development planning process; determines the frequency of reporting and the lines of accountability for performance; relates to the municipality employees performance management processes; provides for the procedure by which the system is linked to the municipality’s integrated development planning processes. The provisions of section 153 of the Constitution of the Republic of South Africa stipulates that a municipality must structure and manage its administration and budgeting and planning process to give priority to the needs of the local community, and to promote the social and economic development of the community. Having regards to the aforesaid, and with specific reference to the contents of the report, we advise that the report complies with supra mentioned provision of the legislation, and that Group Legal Services supports the recommendations thereof.”


Not applicable.

7.2 FINANCES

Refer above.

18 7.3 CONSTITUTIONAL AND LEGAL FACTORS


Not applicable/ 7.5 PREVIOUS COUNCIL AND MAYORAL COMMITTEE RESOLUTIONS

Not applicable/


After the Chairperson put this matter for discussion at the Section 79 Standing Committee: Public Accounts on 10 February 2016, Councillor OM Mathafa referred the situation with the SMME suppliers at the Office of the Speaker where for two days the office could not operate and as reported in the newspapers. He had indicated that he personally witnessed the situation and it is disturbing. He requested an explanation as to why these services providers were not paid within 30 days as stipulated in legislation. He further indicated that they are now waiting six months for the payments and asked if this is not political. He requested the EH in the Speaker’s office, Mr. Thema to answer. The Executive Head: Council and Committee Oversight Services, Mr JRK Thema responded as follows: • That service providers who rendered services in the current financial year were

paid on time; • The current situation with service providers to which Councillor Mathafa was

referring to was for services which were rendered in the previous financial year and some even before that;

• in terms of the MFMA one cannot pay for services rendered in a previous financial year in the current financial year without following certain processes;

• as a result of some serious allegations made, there is currently a forensic audit investigation into some of the service providers, which were interrupted on Monday;

• some of the service providers are claiming for the same services rendered and therefore all the claims must be verified;

• as soon as the investigation has been finalised a report in this regard will be submitted explaining all the relevant aspects.

Councillor MS Marishane called upon the Office of the Speaker to pay those service providers who can prove that they did render services from those that are investigated to avoid unnecessary litigations in future.

19 Mr Thema hereupon responded to indicate that where it is proven that a certain service provider indeed rendered the service, the City will pay the said provider.He also indicated that a meeting will again be held with the service providers on 10 February 2017 (the day of the MPAC meeting) to update them on the process. Councillor Mathafa enquired as to when the said forensic investigation would be finalised and also indicated that, in his opinion, there in an increase in forensic investigations. Councillor TF Kgatle posed the question as to when the current situation with the service providers came to the attention of the Office of the Speaker as they are dealing now with the situation for six months and that there must be a cut-off time to resolve the issue. Mr Thema hereafter responded as follows: • Some irregularities were found in the internal audit in November/December

2016 when verifying the claims, which then lead to the forensic investigation being undertaken in January 2017;

• The Forensic Auditors were requested to finalize this issue as a matter of urgency.

The Section 79 Standing Committee: Public Accounts hereafter resolved to recommend as set out below. ANNEXURES: A. Reconciliation of payables as at 30 November 2016. B. Top 100 vendors paid in November 2016. RECOMMENDED: That cognizance is taken of the creditors’ age analysis as at 30 November 2016.

ANNEXURE A

Month: 30 November 2016Financial Year: 2016/2017

R R

Balance as per Age Analysis as at 30 November 2016 (126 655 414)

Add : Other creditors (561 715 819)

ABSA Outgoing EFT Clearing account (GL 113502) (240 481 524) Small differences (GL 165110) - Price Variance: Suspense accoun (165100) 189 416 Accrual bulk water (GL 160600) (188 059 907) Accrual bulk electricity (160610) - Goods received/Invoice received clearing (GL 191100) (123 123 762) RTMMC: AARTO creditors (160535) (10 240 041) Creditor: Year end accrual (GL 160590) -

Less : Creditors with debit balances 58 299 799

Aquazania (pty)ltd 359 Mabotwane Security Services 1 140 Imatu Traduna 1 667 Tshwane University Of Technology 19 720 Bokosi Project 115 230 Lorcom 142 pty ltd 380 233 AIG South Africa Ltd 921 200 Ditshimega Project and Training 1 437 288 Department Water Affairs 9 481 435 Centriq Insurance Company 20 000 000 One Time Vendor 2 25 941 527

BALANCE OF TRADE CREDITORS AS AT 30 NOVEMBER 2016 (630 071 434)

Note:


Balance-Trade creditors(Monthly Financial Statements) (630 783 429) RTMMC/AARTO Creditors (10 240 041) Loan Interest Accrual(160710) 10 952 036 Balance per Reconciliation(Above) (630 071 434)

Variance -0





20

ANNEXURE B

NUMBER VENDOR NUMBER VENDORS PAID NOVEMBER 2016 TOP

100

AMOUNT PAID TO VENDOR IN

NOVEMBER 2016

1 727 ESKOM HOLDINGS R 601 796 569.00

2 1333 Rand Water R 186 202 744.27

3 3329 MOIPONE GROUP OF COMPANIES R 58 872 710.89

4 10835 TSHOLETSO PROJECTS R 57 416 347.69

5 100005 DEPT OF TRANSPORT & PUBLIC WORKS R 40 027 245.18

6 13590 Man Financial Services (SA) R 34 556 513.54

7 12167 DITSHIMEGA PROJECTS AND TRAINING R 32 766 322.21

8 15256 Gerhard Botha And R 30 970 000.00

9 14363 Tshwane Economic R 30 865 500.00

10 100031 DELTA PROPERTY FUND R 27 491 789.67

11 13172 TSHWANE RAPID TRANSIT R 25 050 434.59

12 3452 EOH Mthombo (pty) ltd R 19 378 569.89

13 100296 ZAS JOINT VENTURE R 16 681 861.30

14 3963 A-M CONSULTING ENGINEERS R 14 872 771.47

15 1138 A T C R 14 322 427.81

16 100386 Group Five WEC Consortium R 11 656 193.16

17 11984 Balimi Barui Trading CC R 10 442 490.51

18 13426 FREE WIFI FOR AFRICA R 10 431 000.00

19 13522 NTSHADI CONSORTIUM R 9 566 597.57

20 15483 Fleetmatics Vehicle R 9 381 815.52

21 10833 Vharanani Properties cc R 9 107 244.47

22 11173 NOBOMATE R 8 777 795.79

23 133 JL EXCAVATORS R 8 770 878.67

24 10461 CIGI CELL R 8 423 173.69

25 15641 MAPITSI CIVIL WORKS R 8 245 106.63

26 234788 TSHWANE AFFECTED OPERATORS INVESTME R 7 803 378.25

27 227067 CROSS HILL PRIMARY CO-OP R 7 461 000.00

28 6239 VIMTSIRE SECURITY AND PROTECTION SE R 7 287 283.92

29 232869 DYNAMIC PROJECTS PRIMARY CO-OPERATI R 6 429 575.44

30 3212 Electro Inductive Industries R 6 171 733.18

31 12673 KUNENE RAMAPALA R 6 137 396.81

32 100429 KATSILA LENAILA PROJECTS R 5 845 732.34

33 14250 Ascension Properties R 5 793 548.60

34 100186 MAKOLE CIVILS R 5 749 955.03

35 3639 Milnex 151 (Pty)Ltd R 5 749 645.66

36 1066 SENSUS SOUTH AFRICA R 5 619 495.10

37 3796 Mivami Construction cc R 5 594 408.41

38 13216 EOH INTELLIGENT INFRASTRUCTURE R 5 436 059.22

39 100387 MAPITSI VALDEV JV R 5 407 265.54

40 1958 Maluleke & Luthuli Development R 5 284 851.60

41 13967 VOX TELECOMMUNICATIONS R 5 177 449.89

42 9730 UBUNTU TRANSPORT LOGISTICS R 4 974 833.46

43 1189 Auditor-General of South Africa - N R 4 941 251.93

44 4669 Boffin & Fundi (Pty)ltd R 4 923 639.65

45 5223 PRIMAT CONSTRUCTION R 4 855 492.17

46 1911 Central High Trading 277 cc R 4 698 296.28

47 13534 FIKILE CONSTRUCTION R 4 232 730.46

48 100359 SEKELAXABISO CA R 4 213 182.74

49 1528 VODACOM R 4 116 139.29

21

50 12288 Bophelong Construction (Pty) Ltd R 4 069 722.63

51 1448 Magalies Water R 3 984 403.75

52 13718 SEGABOKENG BUILDING CONSTRUCTION R 3 885 444.77

53 15634 Tshwane North Electrical R 3 871 389.08

54 15026 Nweti Construction cc R 3 848 517.79

55 14586 Taugotla Primary R 3 847 500.00

56 100310 MAKGOTAMISHE BUILDING CONSTRUCTION R 3 829 872.25

57 14326 KHEDZO TRADING AND PROJECTS R 3 801 887.46

58 2319 Gijima Holdings (Pty) Ltd R 3 701 898.24

59 227485 Xihlovo Farming Co-Operative R 3 690 698.66

60 8486 BOKOSI PROJECTS R 3 656 357.19

61 1810 Superbia Four (Pty) Ltd R 3 579 583.23

62 8641 Morubisi Technologies (Pty) Ltd R 3 566 258.58

63 1213 SHIKWINYA BUILDING CONSTRUCTION R 3 522 118.38

64 1318 Council For Scientific & Industrial R 3 466 411.68

65 1610 BP SOUTHERN AFRICA R 3 443 186.19

66 15612 Internet Filing (Pty)Ltd R 3 439 673.44

67 9732 Mogatladi Trading Enterprise cc R 3 398 062.75

68 2338 Air Traffic & Navigation Services R 3 303 028.60

69 12407 AFRIRENT R 3 220 795.26

70 7534 SAFCRETE CONSTRUCTION R 3 186 889.99

71 530 LEITHCONS MACHINERY R 3 082 021.53

72 9764 THABETHE MARKETING R 2 998 112.48

73 804 The South African Post Office Ltd R 2 944 332.86

74 232990 Dinatla Projects Primay R 2 915 000.00

75 226368 KHANYISA IMPILO PRIMARY CO-OPERATIV R 2 799 958.91

76 12102 Group Five Motlekar (Pty) Ltd R 2 708 324.55

77 100225 DAVIS AND DEALE IRRIGATION R 2 679 200.64

78 14254 JOFANI ACCOUNTING AND CONSULTING SE R 2 668 610.93

79 232899 MASHMAHLA PRIMARY CO-OPERATIVE LIMI R 2 655 248.00

80 548 QUATROKOR R 2 624 116.47

81 6254 ARMS-AUDIT AND RISK MANAGEMENT SOLU R 2 610 012.60

82 11342 FAMBAYEXE CONSTRUCTION AND PROJECTS R 2 553 600.00

83 5284 BLUE ANVIL TRADING R 2 545 982.97

84 12046 LEUNGO CONSTRUCTION ENTERPRISE R 2 506 353.31

85 137 KC SOLUTIONS SA R 2 407 356.87

86 3681 NTIYISO CONSULTING R 2 398 548.60

87 225258 ENVIROTECH CO-OPERATIVE LIMITED R 2 385 000.00

88 15427 LEGAE HOUSING PROJECT R 2 360 377.52

89 233696 Master Chemicals South R 2 327 862.20

90 232508 Erac Trading and Projects R 2 305 499.88

91 10072 PGN CIVILS R 2 299 880.16

92 153 Marumo-Maepe Cleaning Security R 2 261 518.18

93 11209 Tat I-Chain Technologies R 2 249 163.00

94 4327 Bvelela Engineering cc R 2 244 649.93

95 505 HOTLINE SECURITY R 2 225 970.52

96 13247 Both Best Trading and Projects CC R 2 206 505.51

97 228430 Kgalope Agric and Projects R 2 200 000.00

98 12760 PROCUREX ADVISORY AND GENERAL SERVI R 2 196 919.33

99 4858 COMBINED PRIVATE INVESTIGATIONS R 2 155 702.87

100 5884 TRIVIRON PROJECT MANAGEMENT R 2 145 024.00

R 1 570 953 002.23TOTAL

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23

M AUCAMP (012 358 2899) COUNCIL: 30 March 2017 3. OFFICE OF THE EXECUTIVE MAYOR

(SHAREHOLDER UNIT) SANDSPRUIT WORKS ASSOCIATION: TIMELINES AND PROCESS FOR DISESTABLISHMENT (From the Section 79 Standing Committee: Public Accounts: 10 February 2017)

1. PURPOSE

The purpose of this report is to provide information on the disestablishment of Sandspruit Works Association (SWA), a municipal entity of the City.

2. STRATEGIC OBJECTIVES

Promote good governance and active citizenry.

3. BACKGROUND

On 18 November 2016, MPAC inter-alia resolved as follows:

(Unaltered)

“A report, indicating the timelines and actions to be taken to complete the unwinding process of Sandspruit Works Association (SWA) be submitted to the Section 79 Standing Committee: Public Accounts.

The information provided hereunder endeavours to highlight the process and timelines that will be followed with the disestablishment of SWA.”

4. DISCUSSION

The Council resolved on 27 October 2016 as follows

(Unaltered)

“1. That the unwinding of Sandspruit Works Association be approved effective immediately but for administrative purposes, the date of the unwinding be recorded as 31 October 2016.

2. That the functions currently performed by Sandspruit Works Association including personnel, assets and other resources must be transferred to the

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(Unaltered)

respective Departments within the City of Tshwane. 3. That the Services Delivery Agreement entered into between the City of

Tshwane and Sandspruit Works Association, in terms of Section 76 (b) of the Local Government: Municipal Systems Act, Act 32 of 2000 as amended, for the provision of water services in the Ga-Rankuwa, Mabopane and Winterveldt area, be terminated immediately. This agreement has in fact since expired in March 2016 and was never renewed.

4. That the Shareholder Operations Department, together with the Regional Operational Centre (Region 1), be the lead Department for the unfolding of the necessary processes and the transfer of the function back into the municipality.

5. That a maximum period of 8 months i.e. up to end of 2016/2017 financial, is provided/allowed for the transfer of personnel and other resources from Sandspruit Works Association to the City of Tshwane. This period may be extended at the end of the financial year depending on the progress of the unwinding process.

6. That cognisance be taken that the current Board of Directors’ term of office expires and/or ends on 30 November 2016.

7. That approval be granted for extension of 3 board members’ term of office up to the end of 2016/2017 financial to allow the board to function during the unwinding process.

8. That a report on the extension of the 3 board member’s term of office be submitted to the Mayoral Committee meeting by the Executive Head: Shareholder Operations.”

Subsequent to the Council resolution as quoted above, a process plan and timeframes were developed to ensure that the disestablishment of SWA includes all the information relevant to:

• Ensure that the takeover and actual disestablishment are correctly done and conform to the requirements for audit purposes; and

• Terminate SWA as a corporate entity. It should be noted that the resolution by Council on 27 October 2016 to disestablish SWA was taken without an indication of the financial and other obligations associated with SWA. It is thus important that these obligations are comprehensively and correctly determined and captured in the disestablishment

25

process in order to ensure that the City is fully aware of the extent of the obligations it will incur as a result of the disestablishment of SWA. Furthermore, SWA is taken over as a going concern implying that its operations will continue. The operations will be transferred to the City to execute. It is thus important that all operational activities must be maintained until the services have been taken over by the City. For practical reasons, 30 June 2017 will be used as the date for financial closure of SWA. This date coincides with the financial year end of the City and SWA as well as the audit cycle as prescribed by the AGSA. A team was constituted under the leadership of the SED: Water and Sanitation to disestablish SWA. The team consists of representatives of the Water and Sanitation Department, SWA, the Shareholder Unit and Region 1. This team will do the ground work and thereafter liaise with other relevant Departments within the City to ensure a smooth incorporation of the operations and resources of SWA into the City. The process to disestablish SWA was divided into five phases i.e.:

A. Information gathering, B. Takeover of services by the City C. Administrative/financial disestablishment D. Consultation phase E. Audit phase

It should be noted that some of these phases will be implemented in parallel. A. INFORMATION GATHERING

In order for the City to accurately record the human resources, financial, contractual and other obligations associated with SWA, it is necessary to have accurate assessment of the status quo. A process will be followed to accurately capture the required information from the records of SWA. In this regard the following aspects will be assessed:

1. Human Resources

All the information regarding the employees of SWA will be captured and quantified. In this regard; the following differentiation will be made:

i. Permanent employees ii. Fix term contract appointments iii. Ad hoc, contract and month to month employees

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The permanent employees must be taken over by the City as stated in the Council resolution of 27 October 2016.

The fix term contract appointments as well as the ad hoc, contract and month to month employees, will be assessed on necessity and a decision will be taken by the City once a proper understanding has been obtained regarding their required services. Those contracts that are not required will be terminated.

In each instance of the aforesaid categories of employees, the following information must be captured:

• Full names • Employee number • Designation • Department • Appointment date • Termination date (if applicable) • Salary scale • Indication of the personnel file of the employee is available • Functions currently performing (brief summary) • Office/workstation location (where is the employee executing

his/her duties) • Details of the HR system SWA is using for personnel

administration. Once the information as contained above has been obtained, the City’s HR Department will be engaged to place the permanent employees in the appropriate City structures to continue with their duties as previously executed.

It should be noted that SWA is taken over as a going concern implying that the operations the officials of SWA is currently performing, will still be rendered after the incorporation of SWA into the City’s organisational structure. It is thus essential to ensure that, during the disestablishment phase, the services are rendered on a continuous basis.

2. Contracts and other obligations

All contracts where legal obligations have been incurred by SWA must be listed and quantified. It is of the utmost importance that this assessment be done accurately in order to determine the financial and or legal obligations that the City will incur once the takeover has been completed.

In this regard, the following differentiation will be done:

27

i. Contracts that can immediately be terminated if services are not required.

ii. Contracts where a mandatory periodic payment is made for

services rendered. These contracts entail instances where the City will in future be obliged to effect payment and receive the services as described in the specific agreements.

iii. Contracts that cannot be terminated but no mandatory payment

obligation vests with SWA (as and when required contracts).

iv. Work in progress contracts where a contractor is currently busy with construction or rendering services and will be concluded within the next 12 months.

v. Any other contract not falling within any of the aforesaid

categories. In all instances, comprehensive details and copies of the agreements must be made available. The details must include the following:

• Name of contractor • Date of commencement of the agreement • Copy of resolution authorizing the conclusion of the

agreement • Copy of the agreement • Date of termination (if applicable) • Contact details of contractor • Any outstanding amounts that is due and payable

3. Financial, Human Resources and other IT systems at SWA

Comprehensive details must be provided on the IT systems used by SWA to manage its financial systems (including the billing system) as well as its HR resources. The details of these systems must be compressively described in order to determine whether it can be taken over by the City.

4. Details of the financial records of SWA

All the information regarding the financial position of SWA including its financial record keeping system, financial statements, details of bank accounts, outstanding debt etc. must be described and be made available in order for the City to assess its current financial position. It should be noted that the consumer accounts currently issued by SWA must be taken over by the City and that will necessitate an evaluation on the compatibility of the financial systems.

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5. Legal processes currently underway

Details of all instances where SWA might be at risk or, are currently engaged in legal processes must be listed in detail. This includes any disciplinary actions against any employee of SWA.

In this regard the following information must be provided:

• Name of litigant • Cause of action • Amount claimed • Details of attorney or legal practitioners dealing with the specific

matter • Status of litigation process (court dates etc.)

6. Asset registers of SWA

The comprehensive asset register of SWA must be provided. The details of this asset register format and compatibility with the systems of the City must be established.

7. Assessment of services rendered by SWA

The different types of services currently rendered by SWA must be assessed in order to find the most appropriate unit within the City where these services can be transferred to in order to ensure that the services are rendered on a continuous basis. It can be stated at this stage that from the City’s perspective the transfer of the services rendered by SWA will be done as follows:

• The operational maintenance teams will be transferred to the City’s

regional maintenance teams in Region 1. • All personnel associated with financial issues will be transferred the

Finance Department. • Customer Care Consultants will be transferred to the Customer-

Walk-in-Centres in Region 1. • All personnel associated with planning and infrastructure

provisioning will be transferred to the Water and Sanitation Department.

• IT personnel to be relocated to the City’s IT Department. 8. Administrative disestablishment The official company documents must be obtained to have a comprehensive list of all the CIPC requirements. In addition to this, all the audited financial statements for the past five years must be made available.

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B. TAKEOVER OF SERVICES BY THE CITY

Once all the information as mentioned above has been obtained, a transfer agreement will be prepared between the City and SWA to capture the information as highlighted in phase 1 above. The rationale for the conclusion of the transfer agreement is to ensure that the City is aware of its obligations with regard to the disestablishment of SWA and SWA certifies that the information provided is comprehensive and correct. It will further include the physical (if necessary) relocation of personnel and the amendment of the reporting lines of the personnel. Lastly, it will include the taking over of the assets of SWA.

It is anticipated at this stage that the following City operations will be impacted on by the transfer of the personnel from SWA:

• Region 1 maintenance operations • Bulk water supply • Waste water treatment works • Finance Department • IT Department • Human resources • Legal Services • Communication • Customer Care • Administration • Risk Management

C. ADMINISTRATIVE/FINANCIAL DISESTABLISHMENT

This phase will include the flowing aspects:

i. Preparation of the financial statements of SWA to reflect a zero balances in its financial records.

ii. Finalisation of the CIPC processes to ensure that SWA is disestablished from the records of CIPC.

iii. Closing of all bank accounts of SWA. D. CONSULTATION PHASE

During this process a number of stakeholders will be affected with the disestablishment of SWA. This will include:

i. The community where SWA is rendering its services; ii. The suppliers and contractors contracted by SWA to render

services on their behalf; iii. The employees of SWA and or trade unions; and

30

iv. CIPC and other Organs of State.

It is important that during this disestablishment process the aforesaid person/institutions be kept informed about the process and the implications thereof. The consultation will vary depending on the different interests of each person/institution.

The consultation process will commence from the start of phase 1 up to its final conclusion planned at this stage at the end of 2017.

E. AUDIT PHASE

Once the disestablishment processes from a services and administrative perspective have been completed on 30 June 2017, the final audit by the AGSA must be conducted to put final closure on the existence of SWA.

The effectiveness of the audit process is dependent on the preceding phases as outlined above and at this stage it is difficult to anticipate any challenges. It should however be mentioned that the process as described above and how well it is conducted, will directly influence the audit process and the subsequent audit outcomes.

It is the intention to do the disestablishment in such a way that the final audit of SWA by the AGSA will be without serious challenges.

5. COMMENTS FROM STAKEHOLDER DEPARTMENTS 5.1 FINANCIAL PERFORMANCE MANAGEMENT

Cognisance is taken of the contents of the report. There are no financial implications emanating as a result of this report for the City of Tshwane as the purpose of this report is to provide information on the disestablishment of Sandspruit Works Association (SWA), a municipal entity to the City. The Group Financial Services Department will render further financial comments on future reports in this regard.

5.2 COMMENTS FROM THE STRATEGIC EXECUTIVE DIRECTOR: GROUP

LEGAL SERVICES

The purpose of the report is to provide information on the disestablishment of SWA, a municipal entity of the City of Tshwane.

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Note is taken of the contents of the report and annexures thereto for purposes of these comments. The report is in compliance with a Council resolution taken on 27 October 2016 to the effect that the unwinding of the SWA be approved with immediate effect and the functions currently performed by the SWA, including personnel, assets and other resources, be transferred to the respective departments within the City of Tshwane. In view of the above cognizance may be taken of the report as recommended.


There are no direct human resource implications on the report. The implementation will deal with the absorption of the personnel of SWA into the City structures.

6.2 FINANCIAL IMPLICATIONS There are no financial implications evident from the content of the report.

6.3 CONSTITUTIONAL AND LEGAL FACTORS 6.4 COMMUNICATIONS

The consultation process with the various role players will vary depending on the different interests of each person/institutions.

6.5 PREVIOUS COUNCIL OR MAYORAL COMMITTEE RESOLUTIONS

Council resolution dated 27 October 2016.

7. CONCLUSION

The five phases as described above will run concurrently to a certain degree, especially phases 2 and 3. The most important aspect however in the disestablishment process is to ensure that the correct and accurate information is captured in phase 1. Phase 1 forms the basis for the disestablishment process. It should further be noted that this process plan will be adjusted during the disestablishment process. Experience has shown that challenges arise during your disestablishment process and the time table and process plan must be amended when challenges are encountered. The timetable for disestablishment

32

is a programme to illustrate the anticipated dates and attached as Annexure B. The programme will be updated and or amended as the process unfolds.

IT WAS RECOMMENDED: (TO THE SECTION 79 STANDING COMMITTEE: PUBLIC ACCOUNTS: 10 FEBRUARY 2017): That it be recommended to the Council: That cognisance be taken of the contents of the report. After the Chairperson put this matter for discussion at the Section 79 Standing Committee: Public Accounts on 10 February 2016, Councillor Y Duvenhage, seconded by Councillor MI Strange, proposed the following amendment to the recommendation.

(Unaltered) “1. That cognisance be taken of the contents of the report.

2. That a quarterly progress report on the timeframes, objectives and performance on objectives be submitted to MPAC.”

The proposal was accepted by the Section 79 Standing Committee: Public Accounts and it was resolved to recommend as set out below. ANNEXURES: A. Council resolution dated 27 October 2016. B. Timeframe for the disestablishment of SWA. RECOMMENDED: 1. That cognisance be taken of the contents of the report. 2. That a quarterly progress report on the timeframes, objectives and performance

on objectives be submitted to the Section 79 Standing Committee: Public Accounts.

Reference No 76996/1(W4/2/1/10/1) Stephens Notoane (3773) SPECIAL COUNCIL: 27 October 2016

9. WATER AND SANITATION DEPARTMENTUNWINDING OF SANDSPRUfT WORKS ASSOCIATION, A MUNICIPAL ENTITYOF THE CITY OF TSHWANE(From the Mayoral Committee: 19 October 2016)

1. PURPOSE

The purpose of the report is to reQuest Council approval for unwinding of SandspruitWorks Association (SWA), an entity of the City of Tshwane (Con. and the subseQuent transfer of functions and personnel of SWA to the City of Tshwane.


The Strategic Objectives to be addressed are:

2.1 Strategic Objective t: Provide Sustainable Service Infrastructure and Human Settlement Management

Strategic Objective 4: Promote Good Governance and Active Citizenry

Strategic ObJec1ive 6: Continued Organlzatlonal Development, Transformation and Innovation

3. BACKGROUND

The Mayoral Committee on 11 May 2015 resolved that the erstwhile ServiceInfrastructure Department (SID) be split Into two fully fledged departments, namelythe Energy and Electricity Department and the Water and Sanitation Department. Itwas also noted in the report that provision to Include the services currently providedby the Sandspruit Works Association (SWA) be made in the splitting of the department. It further resolved that the sPlitting of the SID be the first phase towardsimproving basic service delivery in the City of Tshwane.

Phase 1 of the business strategy to spilt the SID into two distinct and separatedepartments, each managed by a Strategic Executive Director (SEO), had been completed. The next phase, namely to consolidate the water and sanitation servicedellvery model into a single focussed unit, Is now proposed.

The newly elected Mayoral Committee has also resolved on 25 August 2016 to disestablish SWA and review the continued exlstence of other Municipal Entities.The unwinding of SWA and the subseQuent transfer of functions and personnel ofSWA to the City of Tshwane is proposed as part of the ratlonallsatlon of servicedelivery within the municipality.

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M AUCAMP (012 358 2899) COUNCIL: 30 March 2017 4. OFFICE OF THE EXECUTIVE MAYOR

(SHAREHOLDER UNIT) HOUSING COMPANY TSHWANE (HCT) INFORMATION ON ORGANISATIONAL STRUCTURE AND SERVICE DELIVERY AGREEMENT (From the Section 79 Standing Committee: Public Accounts: 10 February 2017)

1. PURPOSE

The purpose of this report is to provide information to MPAC as requested at its meeting held on 18 November 2016 regarding the organisational structure and service delivery agreement of Housing Company Tshwane (HCT).


Promote good governance and active citizenry.

3. BACKGROUND

On 18 November 2016, MPAC inter-alia resolved as follows:

(Unaltered)

“b) That a report indicating the complete organogram of the current vacancies in the Housing Company Tshwane (HCT) be submitted to the Section 79 Standing Committee: Public Accounts.

c) That a report on the state of development of the service delivery agreements between the Housing Company Tshwane and the effected City Departments.

4. DISCUSSION

In pursuance to provide the required information, the following can be submitted:

4.1 Organisational structure of HCT

A request was submitted to HCT to provide their approved organisational structure. The original response received from HCT is attached hereto as Annexure A. The organisational structure can be summarized as follows:

46

An addition to the positions as reflected in the approved organisational structure, the following positions have been filled but are not on the approved organisational structure:

a. Security Guard Supervisor - MRS L. KEKANA b. Security Guards x 12:

• Mr T. Mulaudzi • Mr P. Maluleke • Ms M.Thamane • Ms I. Sethebe • Mr T. Bapela • Mr A. Mehala • Mr M. Rakgotho • Mr S. Zikaye • Mrs V.Makgolane • Ms I. Mudau • Ms M. Mukwevho • Ms F. Magoda

c. Senior Supply Chain Officer- Mr K. Finini d. Junior Credit Controller- Ms T. Kgatle e. Cleaners x 6

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• Ms P. Koma • Ms M. Mokone • Mr D. Moatshe • Mrs I. Busari • Ms P. Mawela • Mrs P. Ramaoka

f. Tea lady/ Cleaner/ Messenger- Mrs A. Matlou g. Executive Personal Assistant to CEO- Ms N. Mtshizana h. Personal Assistant to COO- Ms C. Venter

The following vacant positions exist on the approved organisational structure and are reflected in yellow:

a. Chief Financial Officer b. Compliance Officer c. Office Assistant (Receptionist) d. Marketing Officer e. Building Manager f. Project Co-ordinator

The following posts are currently in the process of being filled i.e. where the advertisement for the filling of the vacancy has already been placed: a. Front Office Receptionist b. Caretakers x5 c. Security Supervisor x2 d. Security Guards x24 e. Housing Officers x3 f. Cleaners x2 Gardeners x4 HCT has been informed that no vacant position should be filled until the City has completed the municipal entity review that is currently in process. It is anticipated that the review process will be completed by mid-January 2017.

4.2 Status of Service Delivery Agreement

In order to determine the review process of the Service Delivery Agreement (SDA), it is necessary to determine the date of commencement of the current SDA and when it will expire or (in terms of the provisions of the SDA) when it can be reviewed. With regard to the status quo of the SDA between the City and HCT, the following should be noted:

a. The Council on 25 March 2010 approved the SDA between HCT and the

City. The SDA was signed on 12 April 2010. This agreement had a

48

duration period of three years and expired on 11 April 2013.

b. The Council on 05 November 2013 again approved a further the SDA. The report approved by Council is attached hereto as Annexure “B”. The Council resolution reads as follows:

(Unaltered) “1. That the Service Delivery Agreement and Housing Company

Tshwane Business Plan be approved by Council.

2. That the City Manager be authorised to sign the Service Delivery Agreement on behalf of the City of Tshwane.”

c. The date of commencement and date of termination of the “2013 agreement” (as attached to the Council report of November 2013) specifically stated that the agreement will commence on date of signature by the parties and shall continue for a period of three years.

d. After numerous enquiries, a signed copy of the SDA as approved by

Council on 5 November 2013 could not be obtained. It was indicated during the enquiries by officials from HCT that, according to their knowledge, the 2013 SDA has never been signed by the parties.

e. A further report was considered by the Mayoral Committee on 15 July

2016. The report that served before the Mayoral Committee is attached as Annexure “C”.

The resolutions of the Mayoral Committee read as follows:

(Unaltered)

“1 That cognisance be taken of the report;

2. That the amendment of Annexure C of the Council resolution of 31 March 2010 and the transfer of the housing rental complexes from the City of Tshwane (Department of Housing and Human Settlements) to the Housing Company Tshwane on an incremental basis be approved; and

3. That the City Manager be authorised to sign the Service Level Agreement on behalf of the City.”

f. A signed copy of the 2016 approved SDA could also not be obtained. It

should further be noted that it is doubtful whether the Mayoral Committee had the necessary delegated powers to approve the SDA with a municipal entity. It is suggested that the power to approve SDA’s with entities was exclusively reserved for the Council.

49

g. If the submission that the agreements as elaborated above were never signed is correct, it would imply that the agreements never came into existence and consequently cannot expire. It further implies that no SDA existed between the City and HCT since April 2013. For obvious reasons this is of serious concern as numerous actions have been taken as a result of the perceived conclusion of the SDA.

h. It must be stated that although the Shareholder Unit could not obtained a

signed copy of the SDA between the City and HCT it does not mean it does not exist. It is the view that this matter should be investigated to determine if a signed agreement exists or not.

It must further be noted that the Office of the Executive Mayor (Shareholder Unit) appointed a consultant to investigate and advice the City on the necessity, benefits and rationale for the existence of the municipal entities of the City. A report from the consultants is expected during January 2017. It is proposed that the matter be kept in abeyance until the report from the consultant has been considered and an informed decision can be taken in this regard. It would serve no purpose at this stage to conclude the SDA with HCT.

From the information received, HCT enquired from the City’s Departments to enter into service level agreements for the services that HCT is supposed to render for social housing projects in the City. The Departments indicated that it can only sign service level agreements with private companies and not with the City Departments. They indicated that letters of support for HCT will be issued to endorse their social housing projects. Examples of these letters of support are attached hereto as Annexures D, E and F.

5. COMMENTS FROM STAKEHOLDER DEPARTMENTS 5.1 FINANCIAL PERFORMANCE MANAGEMENT

(Unaltered)

“Cognisance is taken of the contents of the report. There are no financial implications emanating as a result of this report for the City of Tshwane as the purpose of the report is to provide information the MPAC as requested at its meeting held on 18 November 2016 regarding the organizational structure and service delivery agreement of Housing Company Tshwane (HCT). The Group Financial Services Department will render further financial comments on future reports in this regard.”

50

5.2 COMMENTS FROM THE STRATEGIC EXECUTIVE DIRECTOR: GROUP LEGAL SERVICES

(Unaltered)

“The purpose of this report is to provide information to MPAC as requested at its meeting held on 18 November 2016 regarding the organizational structure and service delivery agreement of Housing Company Tshwane (HCT). Note is taken of the contents of the report and annexures thereto for purposes of these comments. The HCT is a municipal entity as envisaged in Chapter 8A of the Municipal Systems Act, 32 of 2000. Section 76(b)(i) of the MSA, 2000, states that a municipality may provide a municipal service in its area or a part of its area through a municipal entity. In accordance with the City of Tshwane’s current Corporate System of Delegations the power to decide to enter into a service delivery agreement with a municipal entity in terms of section 76(b) of the MSA, 2000, is reserved for Council by way of legislation. (See Annexure “A” para 2 of the Corporate Delegations). The Mayoral Committee’s decision of 15 July 2016 to enter into the SDA with HCT was therefore illegal and of no effect. In view of the above cognizance may be taken of the report as recommended.”

5.3 HOUSING AND HUMAN SETTLEMENTS 6. IMPLICATIONS 6.1 HUMAN RESOURCES

There are no direct human resource implications on the report.

6.2 FINANCIAL IMPLICATIONS There are no financial implications evident from the content of the report.

51


No direct constitutional or legal factors are evident in the report save to say that a possibility exist that no SDA between the City and HCT existed since 2013.

6.4 COMMUNICATIONS

No direct communication implications are evident in the report.

6.5 PREVIOUS COUNCIL OR MAYORAL COMMITTEE RESOLUTIONS

Council 25 March 2010 Council 05 November 2013 Mayoral Committee 15 July 2016.

7. CONCLUSION

From the content of the report, the conclusion of the SDA between the City and HCT should be investigated and it should be determined if the SDA was concluded or not as it may have serious implications for certain actions that were taken by the City.

IT WAS RECOMMENDED (TO THE SECTION 79 STANDING COMMITTEE: PUBLIC ACCOUNTS: 10 FEBRUARY 2017): That it be recommended to the Council: That cognisance be taken of the contents of the report. After the Chairperson put this matter for discussion at the Section 79 Standing Committee: Public Accounts on 10 February 2016, Councillor OM Mathafa indicated that the following issues were previously raised regarding the Housing Company Tshwane: • Unoccupied units; • Their inability to raise levies; or • to raise revenue. Councillor Mathafa further indicated that these challenges are as a result of the post of Chief Financial Officer being vacant and therefore there is, in his opinion, no accountability. He further indicated that the post of Marketing Officer is also vacant and whilst noting that fact that there is currently a review process, he asked for clarity from Housing Company Tshwane HCT) as to whether these vacancies would be filled. He also indicated that the report does not speak to on how the City is going to be capacitated to become a key player in the accommodation space.

52

Councillor Mathafa further indicated that the report highlights the non-signing of the Service Delivery Agreement by the City and HCT and posed the question as to whether this would have any legal implications for the City. Mr J Jacobs from the Shareholder Unit responded by indicating that the review has been finalised and that a report on the way forward will be submitted to Council in March 2017. Mr Jacobs further indicated the following: • The Service Delivery Agreement (SDA) is mandatory as stipulated by the

Systems Act; • the fact that there was no SDA signed, places all the actions, payments

included, under scrutiny that were done since 2013; • the original question posed by MPAC was about the Service Level

Agreement (SLA) between HCT and the different Departments and as can be seen in the report, there are not SLAs, only letters of intent to support their projects; and

• that all these problems will be addressed in the report to be submitted to Council.

The CEO of the Housing Company Tshwane, Mr A Ngcezula, hereafter responded as that, as far as the non-filling of vacancies are concerned, the HCT has been informed by the City that no vacant positions should be filled until the City has completed the municipal entity review. Councillor MS Marishane hereafter indicated that he was irresponsible of the Housing and Human Settlements Department to not give any input on this report when it was circulated to them, whilst knowing that there are issues of serious concerns regarding HCT. In view of this and the fact that it is indicated in the report that there are no direct human resource implications, Councillor Marishane was of the opinion that the report was misleading. Councillor Mathafa, seconded by Councillor Marishane, hereafter proposed the following be added to the recommendation:

(Unaltered)

“2. That a progress report be tabled to MPAC detailing the status of the HCT review process in the meeting of March 2017.”

The proposal was accepted by the Section 79 Standing Committee: Public Accounts and it was resolved to recommend as set out below.

53

ANNEXURES: A. Housing Company Tshwane Organogram. B. Council report dated 5 November 2013. C. Mayoral Committee report dated 15 July 2016. D. Letter dated 28 June 2016 to the Housing and Human Settlements Department

with regard to the waiving of plan submission fees for Townlands 351 JR (Pretoria Ext 14).

E. Letter dated 21 September 2016 to the Acting Executive Director: Transport Planning with regard to the funding for bulk services upgrades.

F. Letter dated 09 November 2016 to the Chief Executive Officer: SHRA. RECOMMENDED: 1. That cognisance be taken of the contents of the report. 2. That a progress report be tabled to MPAC detailing the status of the HCT review

process in the meeting of March 2017.

HOUSING COMPANY TSHWANE

TpJ:-2112 35S·+WO I F1,,c: ....,lf &G 21 .. 88!J� r PO 0,o,. lli}$0,, Th.: Tr,rnu.hc•d. J1RET0RtA, 012G Shop i & 8. (h-o\lnd Floor. lio1hongi) f>h1i.1 w.,�t. tiJ Fmncus .liillltd Strt!C.'t. Pnnon:i

REQUEST FROM SECTION 79 PUBLIC ACCOUNTS COMMITTEE : HCT ORGAN OGRAM

1. The approved organisational structure or HCT;

Attached as Annexure 1

2. Indicate which posts on the organogram is currently filled and the names of theemployees: (New Titles)

a. Chief Executive Officer - MR A. NGCEZULAb. Company Secretary- MR J. MOKAOIKWAc. Finance Manager- MRS L. MAKIBINYANEd. Bookkeeper- MR T. BETAe. Accounts Clerk- MS P. MOTSWAISOf. Supply Chain Officer- MR T. MTHETHWA (Supply Chain & IT Officer)g. Chief Operations Officer- MR W. CAMPBELLh. Human Resources Officer- MS S. MANAMELA (Human Resources SupportOfficer) I. Property Manager- MR W. RAMOTSHELAj. Leasing Officer- MS T.OLUOLA (Client Service & Office Supervisor) k. Maintenance Officer- MR M. MALULEKA (Maintenance & Safety Officer)I. Caretaker- MR S. NKOSIm. Caretaker- MR D. MALATJIn. General Worker- MR A. MUROVHIo. Property Development Manager- MR J. MKHONTO

Posts lhat are not on the approved oroanoqram

p, Security Guard Supervisor - MRS L. KE KANAQ. Security Guards x 12

MR T. MULAUDZIMR P. MALULEKEMS M. THAMANEMS I. SETHEBEMR T. BAPELAMR A. MEHALAMR M, RAKGOTHOMR S. ZIKAYEMRS V.MAKGOLANEMS I. MUOAUMS M. MUKWEVHOMS F. MAGODA

r. Senior Supply Chain Off1<:er- MR K. FININI

Nol\oExocuHve Oireaors: M,. T. Phetfa (Cha!rpenonJ: Dr. M. MatlOu; Adv. s. Kh�r,g. Dr. w Rowtand, Ms. N. Mblu Or. A. Singh; Ms 0. Masiltla; Adv, M Mpha.Nele;Mr. A.l Ngcezula (CEO}

54

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81 ST-B18/1 U Banda (012 358-8100) COUNCIL: 30 March 2017 5. GROUP FINANCIAL SERVICES DEPARTMENT

(FINANCIAL REPORTING AND ASSETS) CREDITORS AGE ANALYSIS AS AT 31 DECEMBER 2016 FOR THE CITY (From the Section 79 Standing Committee: Public Accounts: 10 February 2017)

1. PURPOSE

The purpose of this report is to update the Municipal Public Accounts Committee of the creditor’s age analysis for the City.



4. DISCUSSIONS Creditors’ age analysis of CoT as at 31st December 2016 is summarized and reported as follows: (Please note that the Amounts & Percentages are rounded off to the nearest decimal)

• The total outstanding creditors, captured on the City’s processing system (SAP), amounted to R35 339 263 not yet paid at the date of the report. (November 2016 – R126 655 414)

Analysis per Ageing: (0–30 days) • R9 204 108 adjusted to R34 128 893 on current balances which represent

26% adjusted to 97% of the total outstanding creditors. (November 2016: R100 483 364 adjusted to R124 769 425 which represented 79% adjusted 99%)

82

(31–60 days) • R5 353 681 Adjusted to R399 159 which represents 15% adjusted to 1% of

the total outstanding creditors. (November 2016: R7 034 266 adjusted to R968 368 which represented 6% adjusted to 1%)

(61 days (+))

• R20 781 474 adjusted to R811 211 represent 59% adjusted to 2% of the total outstanding creditors. (November 2016: R19 137 784 adjusted to R917 621 which represented 15% adjusted to 0%)


Description December 2016 November 2016 Amount % Amount % R R The total outstanding creditors 35 339 263 126 655 414 Invoices not yet due payable end of January 2017/(Current)

9 204 108

26

100 483 364

79

Overdue invoices on 31 to 60 days

5 353 681 15 7 034 266 6

Overdue invoices on 61 days and older

20 781 474

59

19 137 784

15

Adjusted tabular representation after taking into account (Distortions to balances) i.e. for example: invoices submitted late and paid in the first week of January 2017, etc.

Description December 2016 November 2016 Amount % Amount % R R The total outstanding creditors 35 339 263 126 655 414 Invoices not yet due payable end of January 2017(Current)

34 128 893

97

124 769 425

99

Overdue invoices on 31 to 60 days

399 159 1 968 368 1

Overdue invoices on 61 days and over

811 211

2

917 621

0

Explanation of creditors on 31 days (+) can be summarized and reported as follows: I.E. (Unpaid invoices outside Financial Reporting and Asset Management control) Creditors on 31 days (+) amounts to R26 135 155 representing 74% of the total outstanding creditors (November 2016: R26 172 050 which represented 21% of the total outstanding creditors)

• R7 944 916 of the total outstanding creditors on 31 days (+) was paid in the first week of January 2017 due to late submission. (November 2016: R5 952 994 which was paid first week of December 2016)

83

• R750 179 of the total outstanding creditors on 31 days(+) is not paid due to incorrect banking details (November 2016: R698 279)

• R16 291 563 of the total outstanding creditors on 31 days (+) is not paid due to blocked invoices for various reasons (for e.g. Conflict of interest, tax clearance certificate, Incorrect invoice details, Pro forma invoice etc.) (November 2016: R16 510 249)

• R1 148 497(Vendors not confirmed - R460 191, court order - R601 541 and cheque printer error - R86 765) Of the total outstanding creditors on 31 days (+) is not paid due to other various reasons (November 2016: R3 010 528).


Description December 2016 November 2016 Amount % Amount % R R Overdue invoices on 31 days and over to Total Creditors

26 135 155

26 172 050

Overdue(Late submission) invoices paid first week of January 2017

7 944 916

30

5 952 994

23


750 179

3

698 279

3


16 292 563

62

16 510 249


1 148 497

5

3 010 528

11

It should be noted that CoT creditors are paid within 30 days for normal creditors and 15 days for SMME creditors on receiving the relevant statement on the 15th and end of each month. In order for the Municipality to comply with the provisions of Sec 65(e) of the MFMA, the use of the stamp date (that is the date the invoice is submitted for payment at Accounts Payable) was recommended and duly implemented on the 9th of November 2016. The following is the report per the payment method: Payment Method December 2016 November 2016 R R Eft 1 775 092 063 1 634 653 117 Cheques 517 164 489 134 Grand Total 1 775 609 227 1 635 142 250

84 5. FINANCIAL IMPLICATIONS


6. COMMENTS OF STAKEHOLDER DEPARTMENTS 6.1 FINANCIAL PERFORMANCE MANAGEMENT

(Unaltered)


6.2 GROUP LEGAL SERVICES

Unaltered

“The purpose of this report is to update the Municipal Public Accounts Committee of the creditor’s age analysis for the City. The report is in support of the following Strategic Objectives, namely: To ensure financial sustainability. In terms of chapter 6 of (sections 38-49), of the Local Government: Municipal Systems Act, (32 of 2000) which deals with performance management as envisaged. More specifically section 40 which inter alia provide that the municipality must establish mechanism to monitor and review its management system. Further the provisions of regulation 7 of the regulations listed in the Municipal Systems Act which canvass that a municipality’s performance management system entails a framework that describe and represents how the municipality’s cycle and processes of performance planning, monitoring, measurement, review, reporting and improvement will be conducted organized and managed, including determining the roles of the different role-players. In developing the its performance management system, a municipality must ensure that the system complies with all the requirements set-out in the Act; demonstrates how it operates and be managed from the planning stage up to the stage of performance and reporting, clarifies the roles and responsibilities of each role- player, including the local community, in the functioning of the system, clarifying the processes of implementing the system within the framework of the integrated development planning process; determines the frequency of reporting and the lines of accountability for performance; relates to the municipality employees performance management processes; provides for the procedure by which the system is linked to the municipality’s integrated development planning processes. The provisions of section 153 of the Constitution of the Republic of South Africa stipulates that a municipality must structure and manage its administration and budgeting and planning process to give priority to the needs of the local community, and to promote the social and economic development of the community.

85

(Unaltered) Having regards to the aforesaid, and with specific reference to the contents of the report, we advise that the report complies with supra mentioned provision of the legislation, and that Group Legal Services supports the recommendations thereof.”


Not applicable.

7.2 FINANCES

Refer above.



Not applicable.

7.5 PREVIOUS COUNCIL AND MAYORAL COMMITTEE RESOLUTIONS

Not applicable.


After the Chairperson put the matter for discussion at the Section 79 Standing Committee: Public Accounts on 10 February 2016, Councillor T Tuwani referred to service providers 12 (MRL Advisory and Accounting Service) and 22 (Jofani Accounting and Consulting Services) and posed the question as why the City procured the services of two service providers who are seemingly doing the same type work for the same period. The Acting Chief Audit Executive, Mr J Mhlongo responded that the two services providers did two different audits in different financial years, namely: • Jofani did the audit for the review of Section 57 performance information as

well as the financial statements review; and • MRL did the review of Supply Chain Management. The Section 79 Standing Committee hereafter resolved to recommend as set out below.

86 ANNEXURES: A. Reconciliation of payables as at 31 December 2016. B. Top 100 vendors paid in December 2016. RECOMMENDED: That cognizance is taken of the creditor’s age analysis as at 31 December 2016.

ANNEXURE A

Month: 31 December 2016

Financial Year: 2016/2017

R R

Balance as per Age Analysis as at 31 December 2016 (35,339,263)

Add : Other creditors (500,923,690)

ABSA Outgoing EFT Clearing account (GL 113502) (224,029,233)

Small differences (GL 165110) (2)

Price Variance: Suspense accoun (165100) 189,416

Accrual bulk water (GL 160600) (188,059,907)

Accrual bulk electricity (160610) -

Goods received/Invoice received clearing (GL 191100) (78,783,922)

RTMMC: AARTO creditors (160535) (10,240,041)

Creditor: Year end accrual (GL 160590) -

Less : Creditors with debit balances 55,154,182

Imatu Traduna 1,506

City of Tshwane 3,199

South African Local Goverment 8,000

Bokosi Projects 115,230

A T C 252,440

Lorcom 142 pty ltd 380,233

AIG South Africa Ltd 921,200

Ditshimega projects and training 1,829,845

Tshwane affected operators investme 7,803,378

Department Water Affairs 9,481,435

Sandspruit Works Association 34,357,716

-

BALANCE OF TRADE CREDITORS AS AT 31 DECEMBER 2016 (481,108,771)

Note:


Balance-Trade creditors(Monthly Financial Statements) (470,868,730)

RTMMC/AARTO Creditors (10,240,041)

Loan Interest Accrual(160710) -

Balance per Reconciliation(Above) (481,108,771)

Variance -





87

ANNEXURE B

NUMBER VENDOR NUMBER NAME OF VENDORS AMOUNT PAID

1 727 ESKOM HOLDINGS R 611,628,997.42

2 1333 Rand Water R 175,765,215.30

3 3329 MOIPONE GROUP OF COMPANIES R 58,528,857.52

4 10835 TSHOLETSO PROJECTS R 52,332,550.48

5 100386 Group Five WEC Consortium R 42,898,695.01

6 100005 DEPT OF TRANSPORT & PUBLIC WORKS R 41,237,546.38

7 3022 SAFDEV SSDC R 33,704,100.00

8 13172 TSHWANE RAPID TRANSIT R 28,949,176.33

9 3963 A-M CONSULTING ENGINEERS R 22,180,513.07

10 665 CONSOLIDATED POWER PROJECTS R 20,956,016.50

11 3452 EOH Mthombo (pty) ltd R 19,389,196.38

12 11813 MRL ADVISORY AND ACCOUNTING SERVICE R 18,047,688.60

13 4669 Boffin & Fundi (Pty)ltd R 17,754,021.79

14 12102 Group Five Motlekar (Pty) Ltd R 14,911,525.91

15 100359 SEKELAXABISO CA R 14,788,679.50

16 11138 BAITSEANAPE CONSULTING ENGINEERS R 14,691,051.72

17 15641 MAPITSI CIVIL WORKS R 14,511,021.78

18 3681 NTIYISO CONSULTING R 12,669,504.00

19 2 SYSTEMS APPLICATIONS PRODUCTS (SOUT R 12,401,271.12

20 1958 Maluleke & Luthuli Development R 10,844,250.00

21 13590 Man Financial Services (SA) R 10,274,498.17

22 14254 JOFANI ACCOUNTING AND CONSULTING SE R 9,668,745.84

23 5223 PRIMAT CONSTRUCTION R 9,195,966.13

24 5088 Bigeye Investments 210 cc R 8,886,688.91

25 11984 Balimi Barui Trading CC R 8,442,261.11

26 10833 Vharanani Properties cc R 8,226,926.76

27 15483 Fleetmatics Vehicle R 7,699,798.29

28 14125 INNOVATE FARMING SYSTEMS R 7,548,206.63

29 12167 DITSHIMEGA PROJECTS AND TRAINING R 7,486,820.55

30 100429 KATSILA LENAILA PROJECTS R 6,942,619.95

31 133 JL EXCAVATORS R 6,903,760.68

32 232990 Dinatla Projects Primay R 6,890,380.00

33 4214 Liviero Civils (Pty) Ltd R 6,846,783.08

34 6391 PSMA Holdings (Pty) Ltd R 6,828,600.00

35 505 HOTLINE SECURITY R 6,562,695.53

36 10974 SOLMIX R 6,361,338.26

37 12559 BUZAPHI CONSTRUCTION R 6,007,023.68

38 13559 XTREMETEC CONSORTIUM TSHWANE R 5,738,049.66

39 13424 BONA TRAPEZE CONSORTIUM R 5,485,930.02

40 10461 CIGI CELL R 5,266,974.60

41 1066 SENSUS SOUTH AFRICA R 5,168,937.54

42 6254 ARMS-AUDIT AND RISK MANAGEMENT SOLU R 4,995,907.66

43 2427 PHAGAMA CIVIL AND MAINTENANCE R 4,745,295.28

44 1189 Auditor-General of South Africa - N R 4,686,848.48

45 15612 Internet Filing (Pty)Ltd R 4,515,178.96

46 100031 DELTA PROPERTY FUND R 4,394,332.66

47 13247 Both Best Trading and Projects CC R 4,263,587.03

48 1138 A T C R 4,178,296.62

TOP 100 VENDORS PAID IN DECEMBER 2016

88

49 143 LEKHOTLA CONSTRUCTION R 4,103,817.22

50 12407 AFRIRENT R 3,966,961.46

51 11272 T C T CIVIL AND CONSTRUCTION R 3,780,447.18

52 3796 Mivami Construction cc R 3,746,992.67

53 8224 Tlopo Construction and General R 3,742,473.87

54 2382 Makgosi Consulting cc R 3,682,261.42

55 4221 Maximum Profit Recovery (Pty) Ltd R 3,661,022.69

56 11914 KJM BUSINESS ENTERPRISES R 3,638,068.73

57 15603 Wining Minds Farming R 3,572,165.79

58 10072 PGN CIVILS R 3,562,292.67

59 12760 PROCUREX ADVISORY AND GENERAL SERVI R 3,492,578.82

60 233096 Boikanyoboitshepo Primary R 3,400,000.00

61 12288 Bophelong Construction (Pty) Ltd R 3,317,703.59

62 4741 Maesela Building Construction R 3,285,718.58

63 7534 SAFCRETE CONSTRUCTION R 3,236,554.41

64 100212 LANINO TRAFFIC MARKINGS R 3,234,229.32

65 11173 NOBOMATE R 3,097,361.67

66 14208 Mmamose Project and Conlic Electric R 2,940,334.01

67 5325 MOSEPELO TRADING R 2,886,274.43

68 100150 KGOSHI ELECTRICAL R 2,822,408.23

69 13216 EOH INTELLIGENT INFRASTRUCTURE R 2,796,624.06

70 232869 DYNAMIC PROJECTS PRIMARY CO-OPERATI R 2,784,587.18

71 100186 MAKOLE CIVILS R 2,723,121.19

72 2245 Aqua Transport & Plant Hire (Pty) R 2,703,953.17

73 1448 Magalies Water R 2,697,611.68

74 10961 Fimcorp Consulting (pty)Ltd R 2,696,784.00

75 15466 SUBROPLEX R 2,686,717.80

76 9764 THABETHE MARKETING R 2,664,428.16

77 1209 KPMG SERVICES R 2,607,829.10

78 9730 UBUNTU TRANSPORT LOGISTICS R 2,607,632.87

79 11385 Brandswell (Pty)Ltd R 2,594,487.60

80 12673 KUNENE RAMAPALA R 2,500,507.03

81 11617 URBAN DYNAMICS (GAUTENG) R 2,477,412.00

82 14250 Ascension Properties R 2,462,383.71

83 1155 V I P CONSULTING ENGINEERS R 2,448,238.77

84 13534 FIKILE CONSTRUCTION R 2,445,062.13

85 9732 Mogatladi Trading Enterprise cc R 2,443,818.21

86 9443 TN Molefe Construction Pty Ltd R 2,420,018.84

87 9184 LEFHUMO LWA BAREMA TRADING ENTERPRI R 2,403,768.74

88 100077 V P ELECTRICAL CONTRACTORS R 2,398,800.85

89 331 Boitshoko Road Surfacing R 2,389,817.18

90 13967 VOX TELECOMMUNICATIONS R 2,379,890.35

91 12046 LEUNGO CONSTRUCTION ENTERPRISE R 2,315,370.28

92 12854 BLACKHEAD CONSULTING R 2,241,826.91

93 153 Marumo-Maepe Cleaning Security R 2,230,860.12

94 14040 SANASANA TRADING ENTERPRISE R 2,220,351.21

95 4858 COMBINED PRIVATE INVESTIGATIONS R 2,135,030.52

96 4327 Bvelela Engineering cc R 2,099,219.39

97 530 LEITHCONS MACHINERY R 2,081,311.39

98 3639 MILNEX 151 R 2,070,634.45

99 15401 Nu Electrico Primary R 2,055,023.22

100 6467 GLADAFRICA CONSULTING ENGINEERS R 2,040,144.00

R 1,569,395,263.76TOTAL

89

90 F1/5/2 Umar Banda (012 358 8110) COUNCIL: 30 March 2017 6. GROUP FINANCIAL SERVICES DEPARTMENT

MPAC REPORT ON GROUP FINANCIAL SERVICES DEPARTMENT MUNICIPAL FINANCE MANAGEMENT ACT (MFMA): IN-YEAR FINANCIAL REPORT (MONTHLY BUDGET STATEMENT) FOR THE PERIOD ENDING 31 OCTOBER 2016 (From the Section 79 Standing Committee: Public Accounts: 10 February 2017)

1. PURPOSE

The purpose of this report is to address the concerns raised and provide additional and/or substantiate information to the Section 79 Standing Committee: Public Accounts relating to the "In-year" financial report (Monthly Budget Statement) for the period ended 31 October 2016.

2. STRATEGIC OBJECTIVE

"To improve financial sustainability". 3. BACKGROUND

At the Section 79 Oversight Committee on Municipal Public Accounts (MPAC) held on 13 January 2017 the following resolutions cited below was taken for the submission of reports at the next Committee meeting of 10 February 2017:

(i) That remedial actions to curb or rectify impending shortfalls and

overspending be submitted by the Accounting Officer in the MPAC meeting of April 2017.

(ii) That a report indicating remedial steps to address unfavourable

variance of R15 million against the YTD Budget of R10 238 million be submitted in the MPAC meeting of April 2017.

(iii) That reasons which resulting in underspending of R1 259 million be

submitted in the MPAC meeting of April 2017.

(iv) That proof of the in-year financial report (monthly and first quarter budget statement) for the period ending 31 October 2016 submitted to National and the Provincial Treasury be submitted to MPAC meeting of February 2017.

(v) That the Acting Chief Financial Officer in future attach proof of the

submission (with dates) of the In-year Financial Report to the Executive Mayor and National and Provincial Treasury.

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(vi) That the Acting Chief Financial Officer submit a report explaining the

City's funding mechanisms as well as how the funds are utilized to MPAC at its meeting to be held in February 2017.

4. DISCUSSION

Each of the resolutions taken at the S79 Oversight Committee are addressed below:

(i) That remedial actions to curb or rectify impending shortfalls and

overspending be submitted by the Accounting Officer in the MPAC meeting of April 2017; and

(ii) That a report indicating remedial steps to address unfavourable variance

of R15 million against the YTD Budget of R10 238 million be submitted in the MPAC meeting of April 2017.

The table below indicate that the revenue by source of the City of Tshwane (CoT) for the period ended 31 October 2016. YTD Budget reflects R10 238 million and YTD Actual R10 223. An unfavourable variance of R15 million.

The above table reflects that the main revenue sources contributing to the variance are:

Description

Budget Year 2016/17

Original Budget

Monthly actual

YTD actual YTD budget YTD variance

YTD variance

R'OOO R'OOO R'OOO R'OOO R'OOO % Revenue By Source Property rates 5,764,124 445,600 1,921,560 1,873,237 48,322 2.6% Service charges -

11,360,246 760,529 4,437,255 3,957,699 4,79555 12.1%

Service charges. water

3,995,130 249,426 1,055,484 1,306,086 (250,602) -19.2% Service charges •

949,597 64,045 275,964 315,482 (39,518) -12.5%

Service charges • refuse

1,205,390 95,918 408,756 394,145 14,611 3.7% Service charges • other 209,560 19,168 91,543 68,698 22,845 33.3% Rental of facilities and

136,321 9,449 36,667 45,164 (8,497) -18.8%

lnterest earned . ex ternal

43,089 7,217 27,156 14,403 12,754 88.6% Interest earned •

238,451 41,034 172,604 79,846 92,758 116.2%

Fines 198,658 133 59,127 66, 219 (7,092) -10.7% Licenses andperm1its Agency services

60,564 9,299

4,548 -

13,469 -

20,188 4,649

(6,719) (4,649)

-33.3% -100.0%

Transfers recognised.

4,240,323 47,559 1,473,189 1,513,870 (40,681) -2.7% Other revenue 1,799,117 64,430 250,204 578,273 (328,069) -56.7% Total Revenue (excluding capital transfers and contributions)

30,209,869 1,809,056 10,222,978 10,237,960 (14,982) -0.1%

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• Service charges -water revenue (R251 million) - The announcement in the Government Gazette of 12 August 2016, where the National Department of Water and Sanitation and Rand Water issued a directive that municipalities must reduce water consumption by 15%, due to the drop in water levels at the Vaal Dam. The CoT implemented level 2 water restrictions in its jurisdiction resulting in a decline in revenue (billings/debtor revenue), and other revenue (R328 million) - The replacement of smart meter contracts (R314 million). This project is under judicial review, therefore, no revenue has been realised.

The revenue earned by the CoT comprises of:

• Debtor revenue (Billings) • Direct revenue • Investment revenue; and • Grant revenue.

Debtor revenue amounts to almost 80% of the total revenue source. There are certain issues being experienced with the billing system where accounts are not issued as they feature on exception reports that needs to be followed-up addressed and the accounts issued. A target date for the resolution of these matters has been set for 28 February 2017.

The table below indicate the expenditure of the CoT for the period ended 31 October 2016. The YTD Budget amounts to R9 948 million and YTD Actual amount to R8 498 million. A variance of R1 249 million is reflected.

However, the following expenditure types reflect an unfavourable variance:

Description

Budget Year 2016/17

Original Budget

Monthly actual

YTD actual YTD budget YTD

variance YTD

variance R'OOO R'OOO R'OOO R'OOO R'OOO %

Expenditure By Type Employee related cos1S 7,622,096 639,591 2,577,248 2,437,529 139,719 5.7% Remuneration of councillors 125,834 9,687 37,856 41,823 (3,967) -95% Debt impairment 908,053 86,164 332,916 303,176 29,741 9.8% Depreciation & assetimpairment 1,258,208 108,690 431,113 419,366 11,747 2.8% Finance charges 1,057,982 69,493 193,579 338,431 (144,852) -42.8% Bulk purchases 9,956,609 731,883 3,258,041 3,330,409 (72,368) ·2.2% Other matenals 283,940 18,799 59,440 108,264 (48,824) -45.1% Conlracted services 2,738,440 328,121 798,302 1,070,203 (271,901) -25.4% Transfers and grants 288,055 4,986 (238,769) 96,018 (334,787) -348.7% Other expenditure 4,042,732 354,716 1,047,104 1,602,536 (555,432) -34.7% Loss ondisposal of PPE 1 2,112 1,426 0 1,426

Total Expenditure 28,281,950 2,354,243 8,498,257 9,747,754 (1,249,498) ·12.8'/4

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o Employee related costs (R140 million) - The following line-items, amongst others, are the main contributors: o "Service Bonus" (R121 million) - The implementation of GRAP 25 required

that the provision for "Service Bonus" be automated from 1 July 2016 contributed to the unfavourable variance, as the YTD projections are not aligned to this requirement.

o Over-time Salaries (R41 million) - The YTD Actual expenditure exceed

the YTD Budget provision due to staff shortages, extended services, year-end processes, compliance to norms and standards in repairing electrical faults, etc. However, total allocated budget has not been exceeded.

On 3 November 2016, a communiqué was directed to the relevant SED's/ Heads of Departments to provide comprehensive comments covering the following aspects:

• a justification for the payment of overtime; • an explanation on the excessive usage of overtime payment; and • the processes implemented by the Department to curtail this

expenditure.

The responses from the relevant Departments is contained in the Corporate Monthly Financial Report for 31 October 2016 and submitted to the Mayoral Committee.

(iii) That reasons which resulting in underspending of R1 259 million be submitted

in the MPAC meeting of April 2017.

The favourable variance is mainly attributed to the implementation of the following strategic directives:

• The implementation of e-Procurement - Vendors/Suppliers were required to

register according to legislation with the Centralised Supplier Database at National Treasury including with the Tshwane e- Procurement portal. A favourable variance was a result hereof due to the delay by vendors/suppliers to register and payments to them could not be processed.

• The implementation of Funds Management on the accounting system, a control

tool, which restrict expenditures in certain groups from exceeding the "Quarterly Budget Release" amount. This process was necessary to in an effort to avoid “Unauthorised expenditure”.

• In a communiqué dated 12 September 2016, "Cost Containment" measures

were introduced to encourage cost savings on certain line items.

• Year-end provisions, such as "Post-Employment Medical Expense, Post-

94

Employment Pension Expense, Post Employment Gratuity Expense and Post Employment Long Service Expense" totaling R196 million can only be processed during the year-end process.

• The favourable variance also include line-items with once-off payments such

as "Membership Fees, SA Cities Network Membership, etc. with contribute to the favourable variance.

It should be noted that a favourable variance reflects the difference between approved MTREF (a forecast plan) and actuals spent. The variance therefore should not be misconstrued as a saving. The CoT needs to generate the major portion of its revenue in order to pay for expenditure incurred.

(iv) That proof of the in-year financial report (monthly and first quarter budget

statement) for the period ending 31 October 2016 submitted to National and the Provincial Treasury be submitted to MPAC meeting of February 2017.

(v) That the Acting Chief Financial Officer in future attach proof of the submission

(with dates) of the In-year Financial Report to the Executive Mayor and National and Provincial Treasury.

Section 52 (d) of the MFMA requires that:

(Unaltered)

"The mayor of a municipality- 52(d) must, within 30 days of the end of each quarter, submit a report to

Council on the implementation of the budget and the financial state of the municipality;" For the reporting period ended 30 September 2016, the 30 days limit expired on 30 October 2016. The CoT had attained compliance as the report was considered and approved at its Council meeting held on 27 October 2016.

Further, Regulation 31(1) of the Government Gazette No 32141 of 17 April 2009 prescribes the following:

(Unaltered)

"31(1) The mayor's quarterly report on the implementation of the budget and

financial state of affairs of the municipality as required by section 52(d) of the Act must be-

• submitted to the National Treasury and the relevant Provincial

Treasury within five days of tabling of the report in the council."

The report was signed by Acting City Manager on 13 October 2016. It was submitted to the Executive Mayor's office on 13 October 2016 due date was 14 October 2016.

95

The report served at mayoral committee 19 October 2016 and served at Council on 27 October 2016.

The approved report was placed by the Council Secretariat Services on the intranet on 4 November 2016 and submitted to National Treasury on the same day (both electronic and hard copy) (Proof attached as Annexure A to this report).

(vi) That the Acting Chief Financial Officer submit a report explaining the City's

funding mechanisms as well as how the funds are utilized to MPAC at its meeting to be held in February 2017.

An overview per division of the Treasury Office is provided as Annexure B of this report.

5. INTERDEPARTMENTAL AND CLUSTER IMPACT

None.

6. COMMENTS OF STAKEHOLDER DEPARTMENTS 6.1 COMMENTS OF THE GROUP LEGAL COUNSEL

None required.


Not applicable. 7.2 FINANCES (Budget and value for money).

Not applicable. 7.3 CONSTITUTIONAL AND LEGAL FACTORS

The implication of approval of this report is compliance to legislative requirements (Sections 52(d) and 71 of the MFMA) and NT regulations GG 32141 of 17 April 2009.

7.4 Communication

Not applicable.

96 7.5 PREVIOUS COUNCIL AND MAYORAL COMMITTEE RESOLUTIONS

Not applicable. 8. CONCLUSION

This report addresses the resolutions taken by the Section 79 Oversight Committee: Municipal Public Accounts (MPAC) held on 13 January 2017.

ANNEXURES: A. Communications between: 1. Council: Secretariat Services and Group Financial Services: Budget Office; and 2. Group Financial Services: Budget Office and National/ Provincial Treasury. B. Overview per Division. RECOMMENDED: That cognizance of the contents the report be noted.

ANNEXURE 1

97

ANNEXURE 1

98

ANNEXURE 1

99

ANNEXURE 1

100

ANNEXURE 1

101

ANNEXURE 1

102

ANNEXURE 1

103

ANNEXURE 1

104

ANNEXURE B

105

ANNEXURE B

106

ANNEXURE B

107

ANNEXURE B

108

109

ST-818/1 U Banda (012 358-8100) COUNCIL: 30 March 2017 7. GROUP FINANCIAL SERVICES DEPARTMENT

(FINANCIAL REPORTING AND ASSETS) EXPLANATIONS OF DEBIT BALANCES AND DISCREPANCY OF TRADE CREDITORS’ BALANCES BETWEEN CREDITORS’ AGE ANALYSIS AS AT 30 SEPTEMBER 2016 FOR THE CITY AND THE SEPTEMBER IN-YEAR REPORT (From the Section 79 Standing Committee: Public Accounts: 10 February 2017)

1. PURPOSE

The purpose of this report is to provide explanations to section 79 Committee: Public Accounts of creditors with debit balances as reported in the Creditors Age Analysis as at 30 September 2016 and the discrepancy of trade creditors between the said report and the September 2016 in-year report.

2. STRATEGIC OBJECTIVE

To ensure financial sustainability

3. BACKGROUND During the meeting of the Section 79 Standing Committee: Public Accounts held on 18 November 2016, it was resolved by the members that Group Financial Services provide the reasons to creditors with debit balances as reported in creditors age analysis as at 30 September 2016 for the City. It was required that each line item be explained individually with the reasons that led to creditors' account to be in debit as at the 30 September 2016. It was further required that Group Financial Services clarify the difference between the balances of creditors' age analysis as at 30 September 2016 of R74 590 320,52 and the September 2016 in-year report of R 153 677 484,23. It was also noted that the in-year report indicated trade creditors balance as current (0 - 30 days) whereas creditors age analysis report indicated some items that where over 31 days with reasons.

4. DISCUSSIONS

After investigations into creditors with debit balances, below table provides suppliers and amounts involved with reasons to the effect. VENDOR AMOUNT

(R) REASON

Aquazania (pty)ltd 359,10 The vendor overcharged the City on invoice JBI0803261 and subsequently issued a credit note JAl1480834. Awaiting to capture invoices in order to set-off the credit note.

lmatu Traduna 1 989,41 lmatu Traduna is one of lmatu

110

VENDOR AMOUNT (R)

REASON

initiated schemes, some members cancelled membership as a result the contributions were reversed and the scheme is now owing the City. With the contribution of the remaining members, the balance owed is cleared every month by R161,22

Tshwane University of Technology

19 720,00 A cancelled cheque 696208 was incorrectly replaced by cheque 775216 which was subsequently cleared on the 13th December 2016

City of Tshwane 20 836,81 Stop and replacement of cheque number 775546 replaced by cheque number 775551 which was subsequently cleared on the 09 November 2016

Bokosi Projects cc 115 229,68 CoT bank account was attached and the bank paid the supplier from court order. A debit was posted to the supplier's account to clear the bank clearing account. User department must create an expense through procure to pay processes in order to clear the debit balance

Lorcom 142 Pty Ltd 380 233,00 CoT bank account was attached and the bank paid the supplier from court order. A debit was posted to the supplier's account to clear the bank clearing account. User department must create an expense through procure to pay processes in order to clear the debit balance.

Auditor-General of South Africa

2 041 537,61 There was a problem with registration of AGSA on the CSD and e-procurement systems and as a result invoices could not be processed on the system. Due to invoices being overdue, an online payment was done and a debit was posted to the supplier's account to clear the bank clearing account and subsequently clear the supplier's balance once purchasing documents were captured on the system, which was cleared on the 18th October 2016.

Department of Water Affaiars

9 481 435,13 The current debit balance on the vendor is due to an overpayment of R37 288 856.25 for invoice 91436196 . This resulted from an incorrect invoice issued by the Department Water Affairs which was not picked up by the user department who created the

111

VENDOR AMOUNT (R)

REASON

purchase order for an incorrect amount as per the incorrect invoice amount. In a meeting with Department Water Affairs to recover the overpayment it was then resolved that the overpaid amount be used to settle long overdue invoices of the then disestablished municipalities that merged with CoT (Kungwini, Nokeng and Metsweding) and the balance was to be set off against due invoices and future invoices to be issued by the Department Water Affairs

AIG South Africa Ltd 16 031 524,26 An online payment was effected to CoT insurers which is supposed to be paid in advance to ensure that the City is fully covered. Due to e- procurement and CSD challenges, procure to pay processes could not be applied in time. A debit was posted to the supplier's account to clear the bank clearing account and subsequently clear the supplier's balance once purchasing documents were captured on the system, which was cleared on the

Centriq Insurance Company

20 000 000,00 An online payment was effected to CoT insurers which are supposed to be paid in advance to ensure that the City is fully covered. Due to e- procurement and CSD challenges, procure to pay processes could not be applied in time. A debit was posted to the supplier's account to clear the bank clearing account. A creditors’ debit balance was subsequently cleared on the 2nd

December 2016. One Time Vendor 2 (TRT and TAO)

25 898 527,02 An online payment was effected to TRT and TAO due to a strike action that affected bus operations. Due to e-procurement and CSD challenges, procure to pay processes could not be applied in time. A debit was posted to the supplier's account to clear the bank clearing account. A creditors’ debit balance will be cleared once all documents are processed.

Lion of Africa Insurance

57 134 097,50 An online payment was effected to CoT insurers which are supposed to be paid in advance to ensure that the City is fully covered. Due to e- procurement and CSD challenges, procure to pay processes could not be applied in time. A debit was posted to the

112

VENDOR AMOUNT (R)

REASON

supplier's account to clear the bank clearing account. A creditor’s debit balance was subsequently cleared on the 18th

October 2016.

Below is the explanation of differences between in-year report and creditors age analysis report as at 30 September 2016 It was established during investigation that the format of the in-year report required that actual payments be reported on compared to the creditors' balances as at the end of the month. Creditors age analysis report reports on open invoices (processed invoices not yet paid) to be paid within 30 days from date of receipt and in-year report reports on actual payments effected for the month.

A formulae used to calculate the amount of trade creditors by preparers of the in-year report is as follows: Total trade creditors per balance sheet R341 737 396,23 Less: Bulk water accrual (R188 059 907,00) Trade creditors per in-year report R153 677 484,00 According to NT in-year reporting template, the formulae to calculate actual payment to trade creditors for the month should be as follows: Actual total creditors payments R1 637 649 645,00 Less: Bulk electricity (Eskom) (R1 081 374 178,00) Less: Bulk water (Rand Water) (R 199 179 000,00) Less: AGSA {R 0,00) Trade creditors per in-year report R 357 096 467,00 It was resolved that the corrections will be implemented as from the December 2016 reports as the investigations was concluded in on the 13th December 2016.



6. COMMENTS OF STAKEHOLDER DEPARTMENTS

6.1 FINANCIAL PERFORMANCE MANAGEMENT

(Unaltered)

“Cognizance is taken of the contents of the report.

The purpose of this report is to update the Municipal Public Accounts Committee of the creditor's age analysis for the City.

113

(Unaltered)

This report does not initiate any actions that may result in any additional financial implications for the CoT.”

6.2 GROUP LEGAL SERVICES

(Unaltered) “

“The purpose of this report is to provide explanations to section 79 Committee: Public Accounts of creditors with debit balances as reported in the Creditors Age Analysis as at 30 September 2016 and the discrepancy of trade creditors between the said report and the September 2016 in-year report. The report renders a bird eye account of the total performance in respect of expenditure management as required in terms of Section 65(e), of the Local Government: Municipal Finance management Act, 2000. This Group Legal Services Department has perused the documentation favoured to us and wish to express its' view that the same is legally in order. The report is indeed in line with matters concerning performance management as provided for is Chapter 6 of the MSA, 2000.”

7. IMPLICATIONS

7.1 HUMAN RESOURCES Not applicable 7.2 FINANCE Refer above. 7.3 CONSTITUTIONAL AND LEGAL FACTORS Refer above. 7.4 COMMUNICATION Not applicable. 7.5 PREVIOUS COUNCIL AND MAYORAL COMMITTEE RESOLUTIONS Not applicable 8. CONCLUSION

Invoices submitted timeously without errors and or queries were processed and paid within 30 days of receiving statements as required by section 65(e) of the MFMA.

Invoices with queries were followed up with relevant officials from creditors and user departments within the City.

114

After the Chairperson put the matter for discussion at the Section 79 Standing Committee: Public Accounts on 10 February 2016, Councillor OM Mathafa in referring to the report which explained how the trade creditors in the in-year report and creditors’ age analysis are calculated and the fact that changes would be implemented in December 2016, he posed the question as to whether it would not be in conflict with the prescripts of National Treasury. The Deputy Director: Finance, Ms K Ramjee responded to Councillor Mathafa’s Question by confirming that it would not be in conflict with the prescripts of National Treasury. The Section 79 Standing Committee hereafter resolved to recommend as set out below. RECOMMENDED: That cognizance is taken of the explanations provided as requested by the section 79 Committee: Public Accounts pertaining creditors with debit balances and the in-year report for the month ended 30 September 2016.

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