Picture: Supplied
Picture: Supplied

AG audit picks up billions spent on municipal irregularities

By Mayibongwe Maqhina Time of article published Jun 23, 2021

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Cape Town - The office of the auditor-general has notified municipal managers of 96 material irregularities with a financial loss of about R2.04 billion picked up during the audit of local government finances in the 2019/20 financial year.

This emerged when Auditor-General Tsakani Maluleke briefed three parliamentary committees about the audit outcomes in municipalities.

The amended Public Audit Act empowers Maluleke upon picking up non-compliance, fraud or theft to refer it for investigation and also issue recommendation.

Maluleke said they were now implementing the second phase of the legislation and that they identified 57 entities in the local government sphere.

“We looked at transactions in different parts of the country,” she said.

Maluleke also said they continued to track the irregularities up to fair conclusion as part of a continuous process.

In the case of the latest referrals from the latest instalment of audits, she told the MPs that they have looked at those municipalities with repeat disclaimer audits and notified managers about 21 material irregularities.

There was one material irregularity with R2.5 million estimated loss for non-compliance in procurement processes resulting in overpricing of goods and services procured.

The AG also found 18 material irregularities with R285.9m loss arising from payment for goods or services not received.

Maluleke said in the OR Tambo District Municipality a water supplier contract was issued to a supplier other than the one that scored higher points at the bid evaluation stage.

She also said they also found payment for goods not rendered or payments made to wrong accounts.

In KwaZulu-Natal, Newcastle and Msunduzi municipalities paid salaries to ghost employees.

“One left the municipality and the other never started a job at the municipality. It raises the type of controls in payroll that ought to be in place.”

Maluleke stated that they have taken up the issues of interests and penalties charged to municipalities by SARS, water boards, Eskom and other creditors for not being paid on time.

She said for as long as chief financial officers and municipal managers were not seized with prioritising creditors and meeting obligations, there would continue to be leakages resulting in few and failure to deliver services.

There were 23 material irregularities with an estimated R979m losses in interest incurred and 11 material irregularities from penalties estimated at R54.7m loss.

Maluleke said some of the transgressions related to payment not made to medical aid schemes and pension funds where deductions happened.

“We do believe they need attention and have a detrimental impact on the institution and financial health of the institution.”

Maluleke told the MPs that they have set their sights on revenue management where revenue was not billed in eight material irregularity instances estimated at R182.3m and debts not recovered in two material irregularities of about R149.4m.

“This is an internal control issue that needs attention.”

She said municipalities that don't attend to revenue management continue to lose money and struggle to maintain semblance of operations and ability to deliver services on a sustainable basis.

Maluleke said they were also targeting investments and assets of municipalities.

There were three material irregularities in investments with about R264.9m loss and nine material irregularities for assets not safeguarded resulting in about R116.6m loss.

The investments related to VBS by North West municipalities as well as Tshwane reservoir and waste water treatment infrastructure that were vandalised .

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Political Bureau

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