Johannesburg - The City of Joburg has racked up nearly R3.1billion in irregular expenditure by failing to comply with its rules, and its audit committee has warned that this was preventing it from running a clean administration.
But the R3.1bn is not all, as management was still in the process of quantifying the full extent of the irregular expenditure.
“The majority of the disclosed irregular expenditure was caused by non-compliance with the municipal supply-chain management regulations,” reads Auditor-General Kimi Makwetu’s report, which was approved by the council at its meetings on March 27 and 28.
He said some of the irregular expenditure incurred by the municipality was not probed to determine if any officials were liable for it. The irregular expenditure stood at R3.4bn in the 2015/16 financial year.
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The city has also failed to take reasonable steps to prevent the unauthorised expenditure of nearly R675million.
In its response to Makwetu, the city said it had identified gaps in its internal controls that prevent irregular expenditure resulting from procurement processes.
“These gaps relate mainly to the lack of follow-through in respect of compliance documents, which cannot be produced as evidence during the audit,” the municipality claimed.
It said it had put in place corrective measures through the establishment of a compliance unit to address such gaps.
Heads of departments would take responsibility to ensure that practices that might result in irregular expenditure were identified and did not occur.
The report also reveals that the city has failed to spend nearly R2.2bn of its capital budget, and its bosses are concerned about the underspending.
The money represents nearly a quarter of the municipality’s capital expenditure (capex) budget, according to Makwetu’s report.
Capex are funds used to acquire, upgrade and maintain physical assets such as property, infrastructure and equipment.
“The underspending on capex is, however, a matter which management is concerned about, and measures have been put in place to address this,” the city said in its response to Makwetu’s findings.
It said it was the highest investor in capital infrastructure among the country’s eight metropolitan municipalities.
A new system to track expenditure and delivery of all capital projects has been implemented in the 2017/18 financial year, and the municipality hopes this will improve not only the expenditure, but also the quality of capex projects.
The city’s audit committee said it had seen that the city’s overall control environment had not improved in the year under review, compared to previous financial years.
“The committee has noted a huge number of findings on non-compliance with the supply-chain policy contributing to the non-achievement of the clean administration,” the committee said in its report.
The committee also raised concerns about the high vacancy rate of 48% in the internal audit unit.
It warned that for the unit to function optimally, the shortage in human resources should be addressed without delay.
Makwetu also expressed his unhappiness with the municipality’s failure to provide documents on time, which adversely affected the completion of his audit.
ANC councillor Jeff Makhubo said the solution to the city’s financial woes was to cut the budget by R1.5bn to balance its books.
The former mayoral committee member for finance echoed the audit committee’s concerns, saying the municipality had no capable staff as they had been purged, released or were facing spurious allegations.
“The state of affairs is worrying. The numbers are not looking good and are showing a city in decline,” said Makhubo, adding that the city had lost millions of rand in grants for failing to spend the money.
Last month, The Star reported that Finance Minister Nhlanhla Nene stopped the transfer of R363m to the City of Joburg, while Cape Town forfeited about R176m allocated as part of the urban settlement development grant, due to poor performance.
The current finance MMC, Funzela Ngobeni, disputed the ANC’s claims, saying he did not know where they got their facts from.
Ngobeni replaced Dr Rabelani Dagada after claims of nepotism and undue influence against him. Mayor Herman Mashaba later laid criminal charges against Dagada.