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AG report flags City of Cape Town for R950m in irregular expenditure

Auditor-general, Kimi Makwetu. Picture: GCIS

Auditor-general, Kimi Makwetu. Picture: GCIS

Published Jul 7, 2020


Cape Town - The auditor-general (AG) has taken the City to task for irregular expenditure to the tune of R950 million.

This emerged when the AG, Kimi Makwetu, released his audit report on municipalities last week.

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Makwetu said that while the metro had devised an audit action plan, the implementation of the plan did not have the desired impact during 2018/19.Overall, 55% of the municipalities in the Western Cape failed to comply with legislation, with procurement and contract management findings raised at 12 (41%).

“Contract management is especially of concern, as the metro has been plagued with issues in this area for some years. The metro’s systems are not adequately designed or configured to monitor expenditure on contracts,” Makwetu said.

For example, the financial system was not configured to prevent payments being made after the expiry date of contracts or in excess of the contract amounts. This resulted in expenditure being incurred in contravention of supply chain management prescripts, which was then consequently classified as irregular expenditure.

Makwetu said that the issues surrounding contract management had hindered the metro’s ability to deliver housing projects, contributing to capital underspending of R1.3 billion. He said that despite highlighting these issues, they had worsened annually.

Responding to the AG’s report, Deputy Mayor and Mayco member for Finance Ian Neilson said: “These findings are not related to fraud or corruption. The contract value highlighted has also not been lost.

"It has been spent on service delivery. However, at its core, it is about optimal contract management and complying with the accounting standards that are set. We are now in the 2020/21 financial year, so much time has passed since the findings about the 2018/19 financial year, and much progress to enhance contract management and compliance has been made.”

Neilson commented on the AG’s findings that contract management had hindered the metro’s ability to deliver on housing projects: “Many of the issues raised by the auditor-general with regards to housing projects were as a result of project planning that was not optimal, and project management and delays in the completion of work due to factors within and also outside of the City’s control.”

Makwetu’s latest report is not the first in which the City has been flagged for irregularities. In February, the AG lashed the City for materially underspending its operating budget by R2.4bn and its capital budget by R1.3bn. The City said the underspending was due to contractual disputes.

The Socio-Economic Rights Institute of SA’s research and advocacy officer Edward Molopi said: “The AG’s report raises a number of concerns for local governance across the country.

“The report demonstrates that the City is failing to use its available resources to bring about a progressive realisation of the right to housing. This will certainly be disappointing for communities who have continually raised the need for affordable, well- located housing within the City.”

Stop CoCT founder Sandra Dickson said: “It is hard to fathom that the City underspent their housing budget by R1.3bn We strongly urge the City to return to the core reason it exists, which is service delivery for all Capetonians, not just a privileged few.”


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Cape Argus

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City of Cape Town