*This article has been edited
Johannesburg - The City of Joburg has spent R1 billion on unauthorised, irregular, fruitless and wasteful expenditure in the past financial year alone.
Of this, R1.26 million was paid into a fraudulent bank account for the delivery of R240-litre bins. By the time someone realised the money had been paid into the wrong bank account, it was too late.
This was revealed in the 2014/15 annual report released on Thursday by the auditor-general’s office to the Municipal Public Accounts Committee.
The committee is the municipal equivalent of Parliament’s standing committee on public accounts, which has an oversight role and assists in holding officials to account.
The auditor-general’s senior manager Mthokozisi Sibisi presented the report to councillors and explained why the city had not received a clean audit.
Other expenditure incurred included interest and penalties for late payment to service providers, accepting flawed quotations, irregular spending on catering, the purchase of antique furniture as well as non-compliance with supply-chain management processes and late submissions of VAT documents and expired contracts.
With regards to the R126m, a request had been made to the city to change banking details before the money was paid to the contractors.
Payment was then made, but it was later established that it had been made into a fraudulent account.
By the time the account was suspended, five days had lapsed and R126m of the original payment had been withdrawn or transferred.
The matter is still being investigated.
Other expenditures include:
* The purchase of antique furniture for R125 780.
* The Johannesburg Development Agency paid R859 800 for a contractor’s standing costs when a manager delayed providing the project’s professional team with the approval of the application for a road closure.
* The Housing Department’s office of the member of the mayoral committee requested catering for the launch of the allocation of units to the beneficiaries in Jabulani extension 1, Soweto, for 2 000 people. The department followed the normal procurement process, but this was not completed in that they engaged the service provider without their report being signed by the delegated official. This was for the amount of R178 293.
* The splitting of contracts to avoid thresholds of maximum values for contracts – in one instance an amount of R83.9m was involved.
Virgil James, city spokesman, said the irregular expenses cut across various expenditure lines and were disclosed in detail on the financial statements.
“The city’s forensic department has investigated a large percentage of these irregularities and made various recommendations to departmental heads and entities to take appropriate action.
"The outcomes of these investigations will be reported to the Municipal Public Accounts Committee and to council, and where amounts have been proved to be irrecoverable, a recommendation for council write-off will be done before the end of the current financial year,” he said.
Among other reasons for the unqualified report were:
* Traffic fines not being received on time, rendering them invalid. This was caused mainly by the SA Post Office strikes. The city said it would now request data from the post office on a monthly basis.
* Several instances of goods and services of a transaction value of up to R200 000 were procured without inviting competitive bids.
* Persons in service of the state whose close family members had private business interests being awarded contracts, and people in the service of the municipality who had a private or business interest were awarded contracts.
* Inaccurate water and electricity readings. The city said daily validations of suspected incorrect readings were now being forwarded for confirmation of their accuracy. The management system had been automated between City Power and the Revenue Shared Services Centre to improve meter updates.
* There are doubts around the accuracy of the Rea Vaya rider-ship, which the city said stood at 37 580.
“We have action plans as well as measures and processes being implemented to ensure the findings do not recur in the 2015/16 financial year,” said James.
Unauthorised expenditure means any expenditure incurred by a municipality otherwise than in accordance with Municipal Systems Act.
It includes: Overspending of the total amount appropriated in the approved budget; overspending of the total amount appropriated for a vote in the approved budget; expenditure from a vote unrelated to the department or functional area covered by the vote, among others.
Irregular expenditure means expenditure incurred by a municipality in contravention of, or not in accordance with, a requirement of the act, and which has not been condoned in terms, which is in contravention of a requirement of the MFA, and which has not been condoned.
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