Cape Town - The auditor-general, Kimi Makwetu, has made damning findings against Rand Water, which incurred R952 million in irregular expenditure.
This emerged in the entity’s annual report for the financial year ending in June 2019, which was recently tabled in Parliament.
Rand Water was named by Makwetu two weeks ago as one of the entities where the auditors were threatened, intimidated and bribed during the latest cycle of audits in municipalities.
Makwetu told MPs that employees at Rand Water told the auditors their audit findings were costing them bonuses.
In his audit report, Makwetu said effective and appropriate steps were not taken to prevent irregular expenditure totalling R952 778 000.
“Most of the irregular expenditure was caused by emergency procurement and use of a panel of manufacturers.”
He said some of the goods, works and services were not procured through procurement which was fair, equitable, transparent and competitive as required by the Public Finance Management Act.
“The entity deviated from the normal procurement process and declared emergencies in accordance with the supply chain management policy. The reasons for deviating from the normal procurement process were assessed not to be justifiable.”
Makwetu said in some instances the procurement of goods and services was split into smaller parts to avoid procurement through a tender process and there was insufficient evidence that some services were procured in a fair, equitable, transparent and competitive manner.
“Some quotations were accepted from bidders that had not scored the highest points in the evaluation process,” Makwetu said.
The auditor-general put the blame squarely on management for not ensuring compliance with legislation.
Board chairperson Tshidi Hashatse blamed the irregular expenditure on pressure to execute on the capital programme and improvíng on an unsatisfactory prior year’s performance that led to “technical” non-compliance with prescribed procedures.
“The board requires from management that all spending be fully compliant with all aspects of legislation and regulations governing the spending of public funds.
“Consequently, the board has exercised its leadership to direct management to investigate areas of non-compliance and where applicable outline the outcome of consequence management in all matters,” Hashatse said.
Newly-appointed chief executive Sipho Mosai said the entity recorded R824.4m of irregular expenditure, of which R699.2m related to new matters reported in the financial year under review and R125m from prior years.
Mosai said a significant contributor to the irregular expenditure was a tender totalling R463m.
This was awarded to five service providers without applying the preferential procurement preference point system.
“No loss has been suffered by the organisation and significant savings exceeding a billion rands have been realised.”
Mosai also said R118.2m in irregular expenditure has been referred to National Treasury for condonation.
Makwetu also found that Rand Water’s material expected credit losses of R1.1 billion were incurred a result of possible irrecoverable trade debtors.
“The major contributors to the expected credit losses were Gauteng and Mpumalanga local government or municipalities,” Makwetu said.
But Hashatse said Rand Water continued to face the challenge of an increase in debt by municipalities and that some were unable to service their accounts.
“This problem does not only affect Rand Water but threatens the sustainability of the financing and maintenance of water infrastructure, the expansion of services, the security and continuity of supply in most parts of the country,” she said.