A small municipality in the Free State is technically insolvent, as it has not been able to pull in revenue, because it was unable to send out statements for about 18 months.
Nala municipality has now replaced its enterprise resource planning (ERP) system and is trying to clear a backlog of about 16 months' worth of bills. The new system is set to cost taxpayers almost double the price of the canned solution.
The municipality hired Pastel to implement an ERP system in 2009, without success. It canned the contact and hired Quill Associates to implement its BIQ system, says acting municipal manager Boitumelo Mokomela.
Nala's failure to collect rate bills means it is several months in arrears in paying suppliers, says Democratic Alliance council member Bully Botma. He says the provincial government had stepped in, as the municipality is technically insolvent.
Botma says residents will be receiving inflated bills as only a few were paying small monthly amounts and the arrears must be paid. He says the collection rate is about 30% at the moment, although ITWeb understands Nala is still pondering how to resolve the cash flow problem.
Nala municipality serves the towns of Bothaville, Kgotsong, Wesselsbron, Monyakeng and surrounding farms. The municipality's outstanding collections total about R200 million from its 22 500 account holders, but this amount cannot be verified as it has been outstanding since July 2010.
Stalled system
Softline Pastel - which was unofficially booted off the project - says it walked off site in March because Nala staff would not buy into the R2.4 million ERP system and it could not get projects signed off.
Quill was brought in at the end of February to sort out the problem, which was caused by Pastel's inability to issue statements and get the financial system working, alleges MD Danie van Heerden.
According to BIQ's Web site, the system is being used at several councils, including the West Rand district municipality, Upington, Westonaria, Merafong, Mogale, Randfontein, Ditsobotla and Nala. It is also being used in two Zimbabwean and two Namibian councils.
Quill is now being paid about R4 million to get bills out and sort out the backlog, says Van Heerden. He adds that no salary costs have been processed by the general ledger since July 2010.
Van Heerden says Quill has, so far, completed the January and February runs, and is in the process of compiling March statements. He says the company is also helping sort out a statement backlog.
Mokomela says the municipality has billed clients and customers for the past two months with minimal queries and has committed to restoring the credibility of its financial information within the next six months.
“The new system's targets include ensuring credibility of the municipality's financial information. This will address the current situation adequately,” says Mokomela.
No buy in
Ashley Pillay, Pastel Evolution divisional director, says it was hired in December 2009 to implement an ERP system. At the time, the municipality was under administration, he says.
However, the troubled council did not buy into the solution and Pastel battled to get projects signed off, says Pillay. The last interaction Pastel had with Nala was in February, when it told Pastel it intended to cancel the contract; giving Pastel seven days in which to provide written reasons as to why the deal should not be binned.
The letter, a copy of which is in ITWeb's possession, says the municipality is “of the view that you have not performed your duties properly in terms of the contract”. It says payments were made despite non-performance, which led to the council incurring serious and substantial financial losses.
Pastel had no choice but to walk off site and has not received an official letter confirming its deal was binned, says Pillay. Pastel is still owed about R1 million of the R2.3 million deal to implement payroll and ERP software to handle the municipality's financial system as well as training and associated costs, state letters in ITWeb's possession.
Nala's challenges included legacy data that was inaccurate and the staff did not want to buy into its software, which impacted implementation, says Pillay. He adds 46 municipalities and three water boards use the company's system without any problems.
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