The multibillion irregular expenditure is revealed in the city’s 2016/17 unaudited financial statement seen by The Star.
Mayor Herman Mashaba and his new DA administration vowed to crack down on graft when they took control of the Joburg purse strings in August last year.
Documents seen by The Star reveal how departments lost millions of rand by procuring services without contracts, rendering services without formal purchase orders and deviating from normal procurement processes. Some of the cases were now being investigated and were before the courts.
The report, in one instance, highlighted how the city lost R480m in contracts “contravening” the Municipal Financial Management Act (MFMA).
Pikitup, the city’s waste management entity, registered almost R240m in irregular expenditure.
The entity shelled out R101m to keep operations afloat during a violent five-week labour strike last year.
During the illegal strike, refuse collection, street sweeping and litter collection services ground to a halt.
Stoppages in refuse collection saw the accumulation of waste, posing severe health risks to poorly developed areas and in the CBD.
Another eye-popping figure was the R43m that Johannesburg Water incurred for continued payments for security services.
“Service providers who were recommended for further evaluation as per the compliance evaluation sheets were not evaluated further based on site visit outcomes, which were not properly highlighted as disqualification criteria in the bid documentation,” the report stated.
According to the report, Joburg’s electricity supplier, City Power, had spent R116m on accruals on a substation without a purchase order.
A series of other expenditures ranging from R60 000 to R68m were listed in the report.
While releasing his report into the financial status of the country’s 263 municipalities for the 2015/16 financial year, Auditor-General Kimi Makwetu revealed that irregular expenditure had soared by 50% to R16bn.
City finance and economic development director Lufuno Mashau acknowledged that old, questionable tenders were responsible for a large portion of irregular expenditure.
He, however, cautioned that it would be premature to respond to the questions regarding the unaudited financial statement, as the figures were subject to changes.
Mashau said the city had reviewed all existing contracts prior to the introduction of the open tender system.
Further, he said there had been an increase in the disclosure of irregularly awarded contracts.
This was “in line with the stance of the new administration to ensure that the auditor-general and our residents are given a true state of finances in the city".
“The new open tender system introduced towards the end of the year under review means the culture of irregularly awarding contracts will come to an end,” Mashau said.
“It is important to note that due to legislation and service delivery imperatives, it is often not always possible to immediately exit an irregularly awarded contract in terms of the MFMA.
"Where possible, the city has terminated such contracts with immediate effect.”
Mashau believed the new administration was winning the war against graft and corruption.
He added that since the new administration took office last year, the city had uncovered more than 2000 cases that demanded investigation. In that period, 13 employees, among them senior officials, “chose to resign rather than face accountability”.
“To date 451 people have been arrested, including city employees. More than 100 city employees have been suspended and seven employees dismissed.”
A local government expert cautioned that irregular expenditure "did not always mean a bad thing”.
Michael Sutcliffe, a former Durban city manager, said there would always be instances of irregular expenditure.
This was because “it won’t always be possible to conform to what are probably the strictest requirements for municipal government anywhere in the world.
“Our compliance laws are tough,” he said.
“In a metro it takes about six months to pass a tender. They have to go through a whole list of processing.”
He said it was impossible to always stick to strict procurement guidelines.
“Look at the recent storms, for example. You can’t plan for this. There are clearly things that you need to do.
"Our law doesn’t allow a degree of discretion. Irregular expenditure doesn’t mean people haven’t looked at the law. It just means one or two aspects of about 100 checks that you’ve got to do were not done,” he said.
Sutcliffe added that once irregular expenditure had been incurred, a council had to regularise or condone it.
“Council needs to satisfy itself that, for example, there was no corruption - that there were no fruitless and wasteful expenditure. Once it has satisfied itself that the expenditure was for legitimate reasons, it then regularises it.”
The figure could still either increase or decrease depending on the audit results to be released by the auditor-general early next year.
The unaudited financial statement for the 2015/16 financial year declared R1.7bn in irregular expenditure.
However, the figure later ballooned to R3.4bn.
Early this year, Mashaba said 69% of last term’s irregular expenditure had been identified during the audit process “and not detected by the city’s monitoring processes”.