Endumeni Municipality facing ‘contractual’ issues over financial system

Endumeni Municipality is facing a lawsuit from a company called CCG Systems, which is one of the two current financial management systems used by the municipality. CCG Systems took the municipality to court because they hired MunSoft while they were still under CCG’s contract.

Although the municipality’s contract with CCG expired in September last year, the municipality chose to extend it on a month-to-month basis. The municipality received a court interdict on March 24, restraining the municipality from using MunSoft. This resulted in a special council meeting being called on March 28.

Councillors found themselves in ‘hot water’, as they are still using both CCG and MunSoft. This, according to the lawsuit, is in contempt of court.

Municipal Manager S Ntombela told the meeting that CCG’s contract expired in September 2022 and the municipality decided to extend their contract on a month-to-month basis.
The municipality then appointed another service provider, MunSoft, as not having any financial system in place would bring the municipality to its knees.

“The current yearly license fee for CCG has already been paid by the municipality, as they had not terminated their contract. The Finance Department is a crucial department in the municipality, as it supports all the other departments.
“The municipality is going to comply with the decision of the judge.

“The Municipal Finance Management Act mandates that municipalities should ensure sound and sustainable management of their financial affairs. This would be violated if the municipality failed to take the terms of the court interdict into consideration,” explained Ntombela.
He added that the municipality would suffer financial losses, conditional grants, non-payment of goods and services, non-payment of council members and employees, and delays in service delivery; and all of these things could cause unrest in the community because essential services would not be provided.
In the event that the municipality did not consider the terms of the court interdict, then it would be in contempt of the court order.
All councillors agreed that the new system had ‘dismally failed implementation for the Supply Chain Management (SCM)’.

“The CCG System is presently not assisting the municipality. In 2020, we had major challenges with our audits, as well as asset management. If we try and continue using the CCG System, we are doomed. But then again, if we terminate CCG’s contract, we will automatically lose all the financial records that will be used during the audit,” explained Mdluli.
He added that, on the other hand, if the municipality terminates MunSoft, the municipality will not be able to efficiently collect revenue.

He explained that the municipality’s legal team is taking the matter lightly, as this could result in the municipality being in a serious financial crisis.

“We are still using the dual systems of CCG and MunSoft, which is wrong. We need to discuss what it will take to live up to the court order and also question whether we can afford to terminate either of the two systems now,” said Mdluli.

He also questioned what would happen if both systems were terminated.
“What would we be using in the first 24 hours, as it would take approximately 14 days to get a new operating system up and running?” asked Mdluli.
He suggested that council approach the KZN Provincial Treasury on how best the situation can be resolved without putting further strain on the already dented municipal finances.

“Let us look at different options and get a second legal opinion on the matter. We should also acquire knowledge of how to run and handle the transfer of data from one system to the other, as I am sure that the process will be costly,” said Mdluli.
Cllr Abdool echoed the same sentiments that they must seek a second opinion, as well as advice from the KZN Provincial Treasury.