The increase in allowances for councillors of the Makhado Municipality once again sparked allegations of irregularities and self-enrichment, with some people referring to the council’s actions as financial terrorism. Apart from this, the municipality’s woes in its financial department also seem to continue.

Following the publication of Government Gazette No. R653, dated June 30, 2006, in which the Minister of the Department of Provincial and Local Government determined the upper limits (the total remuneration package, including basic salary and all allowances and benefits) for councillors, the Makhado Municipal Council approved an increase in councillors’ allowances in July of that year. This brought Council’s expenditure for the 2006/7 financial year for councillor allowances to R11 373 607, close to R4,2 million rand more than the R7 106 018 initially budgeted for.

This was despite a warning in Government notice R653 that a municipality should determine whether that municipality could actually afford such an increase. During the same time (July 3, 2006) SALGA released a circular warning municipal managers not to implement any payments in this regard, if the municipality had not catered for such an increase in its annual budget.

"This implies that the budget for the year in question must reflect the liability to pay the level of remuneration determined by the council and this in turn must be cash funded," the circular read. Trying to work around the "affordability" issue, Council then decided to apply for a grant from the Department of Local Government and Housing (Item A48.24.07.06), but with payments already started, the Makhado Municipality’s municipal manager, Ms Faith Muthambi, was soon faced with a huge problem.

The PriceWaterhouseCoopers Report

Upon Ms Muthambi’s request, PriceWaterhouseCoopers released a report in September 2006 which made for some interesting reading, regarding Council’s decision to approve an increase in allowances.

"It is clear from this resolution (A48.24.07.06) that the Municipality had not secured the necessary funding through its budget before the upper limits have been approved. The council decision is therefore in conflict with the SALGA notice and the Auditor General will have to express an adverse opinion on the 2005/6 and the 2006/7 financial statements," the report reads. The report states that Council should have secured funding before any increases were made in Councillors’ remuneration.

Salary Office Blunder

As for the implementation of Council’s decision, the report states: "According to the report prepared by the Acting Chief Financial Officer on the implementation of Council resolution A48.24.07.06, the Council decision was incorrectly implemented. The terms basic salary, upper limits and total remuneration were incorrectly interpreted by the salary office, resulting in an overpayment to Councillors. The salary office added medical aid and pension fund payments to the upper limits of Councillor’s remuneration. These payments are already included in the upper limits as set out and should have been deducted from the basic salary component of the upper limits payable to Councillors." This means councillors received a double allowance every month.

Recommendation

The PriceWaterhouseCoopers report states that, according to Section 167 of the Municipal Finance Management Act, "any remuneration given otherwise than in accordance with the Public Office Bearers Act, including any bursary, loan, advance or other benefit, is an irregular expenditure, and the municipality i) must, and has the right to, recover that remuneration from the political office bearer or member; and ii) may not write off any expenditure incurred by the municipality in paying or giving that remuneration." PriceWaterhouseCoopers recommended that amounts paid to Councillors in excess of the approved budget as "backpay" should be recovered from Councillors to the extent that these were not budgeted for.

Reaction

In reaction to the news of this "overpayment" of Councillors and the administrative blunder in the salary office, Mr Dries Joubert, chairman of the TAU SA North, again warned local government that their continued incompetent wastefulness with regard to taxpayers’ money will at some stage force residents to withhold their taxes. He said Council did not follow the correct procedure upon deciding to approve the increase in allowances and accused councillors of self-enrichment in a process he compared to financial terrorism.

"This is seen in light of the fact that councillors do not even adhere to the laws, regulations and advice of goverment-controlled structures. They just lawlessly continue with what openly looks like theft and fraud," Joubert said. He added that Council does not comply with the conditions as set out in the Public Office Bearers Act.

Council’s Response

In response to the whole issue, Ms Muthambi confirmed on Wednesday that Council had indeed approved an increase in their allowances before securing any funding. To help remedy the situation, Council applied for a R4,2 million grant from the Department of Local Government and Housing. This, Ms Muthambi said, they did not get, but in November secured the money needed through an Equitable Share grant from the national government.

"In the meantime, we have referred the matter regarding the R4,2 million to our adjustment budget this month," Ms Muthambi said. During the adjustment budget, Council determines which departments have not spent their budgets and transfers leftover money to other departments in need of funds.

As for the blunder in the salary office regarding the double payment of allowances, Ms Muthambi said that Council has already started recovering money from the two funds (medical and pension) in which the duplicate allowances were paid into.

"This double payment only occurred for two months," Ms Muthambi concluded.