Mogale City municipality has paid more than R22 million to companies not listed on their service provider database – and failed to report the expenditure to a full council sitting for its approval.

The municipality’s report on the “2010 expenditure administrative perspective”, drafted by municipal manager Dan Mashitisho, says the over-expenditures happened when the municipality was preparing to host Portugal for the World Cup.

Mashitisho, with mayoral permission, agreed to spend R1.5m to accommodate the Portuguese team at Valley Lodge on the West Rand.

The DA in Mogale City said this money could have gone a long way to assist the council, which was “struggling financially and considering applying for a bank loan for R191m needed to complete capital projects”.

When justification of the expenditure could not be delivered to the council’s audit committee, Maseng-Viljoen auditors were asked to review the expenditure for compliance with the supply-chain management Framework (SCMF) and municipal finance management act.

MasengViljoen stated in its report – which The Star has seen – that the council incurred over-expenditure of R22m after an approved budget of R6.2m in February 2010 ballooned to R28.8m at the end of the World Cup.

The over-expenditure is described in the report as “unauthorised” as it was only approved up to the level of Mashitisho, “without prior approval from the council as is required by the regulations”.

It explained that there were exemptions in cases of unavoidable expense or unforeseen situations, but that in these cases the mayor must report the expense to the next council meeting or seek approval for a budget adjustment.

In its defence, the council said the expenditure was “unforeseen and unavoidable since none of the council’s officials could accurately estimate the cost of establishment of public viewing areas (PVAs)”.

MasengViljoen said there were no records tabling a revised budget to accommodate the extra spending over the approved R6.2m, or proof that the over-expenditure was pre-approved.

It has emerged that Khalipha Entertainment and Ngeti Trading were paid R11m and R5m respectively to host Coronation Park and Tarlton PVAs, which accounted for a large chunk of total expenditure.

MasengViljoen found that the SCMF policy was not followed in appointing the two companies and several others not listed in the council’s vendor database, including Khalipha and Ngeti, while some were not tax-compliant.

The report said companies were appointed to supply goods or provide services without consistently following competitive bidding processes. J&Z Logistics was paid R811 000 to acquire and install flags without following subscribed bidding processes.

The report said the council paid e.tv R250 000 for what was marked as television services; Khalipha for their public viewing area; and DIT 500 were paid R800 000 for marketing material. This was a deviation from the SCmF. The report said J&Z Trading and Sheiza trading, which were paid R138 000 to supply balls and soccer kits, were not tax-compliant when appointed.

In response, the council said that permission was requested from Mashitisho to embark on a limited bidding process in which seven local companies were asked to submit proposals. Mashitisho approved companies such as Ngeti and Khalipha that were not listed on the council’s database of vendors.

Khalipha and J&Z were listed among companies appointed and paid without signing service-level agreements as required.

The DA has refuted a statement by Mogale City spokesman Nkosana Zali that the over-expenditure was condoned by the council.

The DA said questions were posed around Project 2010’s “unacceptable expenditure” several times, but they were yet to get a satisfactory explanation.

Zali said that “no project suffered”, but the DA said that Mogale City was “in the process of acquiring a bank loan for R191m to complete capital projects”.

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The Star