Speculation that is doing the rounds in the public space about the role of CDM in the VBS and a report that classifies CDM as ‘dysfunctional and distress’ is a cause for concern as it makes severe negative perceptions about CDM’s financial management, internal controls and good governance. It is therefore hoped that the following will provide the public with true, mature and transparent context of municipality’s position regarding VBS.
The report makes mention of CDM as one of the municipalities in the country that need urgent intervention on the basis of a deposit made to the VBS which was later withdrawn. Its context is that CDM made a R60m deposit to the VBS in January 2016 and after due consideration and alleviation of risk of loss, the money was withdrawn in June 2016, thus saving CDM from any loss.
This is because we know that the Municipal Finance Management Act (MFMA) requires a municipality to only invest with banks that are registered in terms of the Banks Act (commercial banks), and thus precludes investments by deposit in mutual banks, such as the VBS. Furthermore, our investment policy also clearly states that investments can only be made with institutions with a BBB or higher rating investment grade from one of the major rating agencies. This was done by the new council when it assumed office and disciplinary action was taken against those that facilitated the unlawful deposit.
Therefore it is unfortunate that a report has classified CDM as dysfunctional only on that basis. This is because CDM is one of the best performing municipalities in terms of financial management and good governance. This is confirmed by the following strides that define CDM as a functional municipality – as confirmed by COGHSTA and Treasury provincial.
Unqualified audit opinion, which is for the fourth time in a row.
The Municipality was able to resolve almost all the audit findings by the Auditor General of South Africa for the 2016/17 audit.
Tremendous improvement on MIG spending, which has even drawn the attention of the Premier and declared CDM the best performing district in the Province in terms of financial management.
CDM owes no debts to any of the government utilities.
The Municipality has retained its Grade 5 status for the 2017/2018 financial year, which is mainly determined by a municipality’s total income.
The municipality has got revenue enhance strategy in order to increase revenue and reduce debt owed in rates.
We are therefore surprised that a municipality with such performance could be listed as a dysfunctional and distressed. We have however written to CoGTA for clarity in this regard and we are waiting for their response in clarifying the meaning of dysfunctional municipality.
The date of the correspondence to the Minister was done in June.