Municipalities’ irregular expenditure exposed
AUDITOR-GENERAL Tsakani Maluleke has highlighted the high incidence of irregular and wasteful expenditure incurred by Northern Cape municipalities, without any consequence management.
According to the 2022/23 audit outcomes, irregular expenditure amounted to R3.4 billion, while fruitless and wasteful expenditure totalled R417.5 million.
Maluleke pointed out that no action was taken against the officials responsible.
“Municipal public accounts committees should urgently investigate all instances of non-compliance to ensure that the irregular expenditure closing balance is dealt with in line with legislation,” said Maluleke.
REVENUE MANAGEMENT
She stated that 65 percent of municipalities in the Northern Cape did not have the liquidity to cover fixed monthly operating expenses for at least one month.
“Most municipalities with unfunded budgets are using cash on hand to pay salaries. This leaves very little for service delivery, infrastructure maintenance and to pay suppliers such as Eskom and the water boards on time.”
Maluleke added that poor revenue management and poor debt collection continued to stifle municipalities.
“More than half of the municipalities in the Province are financially distressed, where 61 percent of municipalities are uncertain about its financial sustainability.”
She reported that 73 percent of municipalities would use more than half of next year’s budget to pay for previous years’ expenditures.
“Most municipalities depend on equitable share funds as 67 percent of municipal debt is not recoverable, mainly because proper credit control policies are not in place.”
Maluleke also pointed to the “obvious” lack of maintenance in the Province, where residents in the Sol Plaatje Municipality experienced frequent water interruptions and water shedding.
“The municipality experienced significant water distribution losses of 63.99 percent in 2022 and 64.63 percent last year. This is more than double the National Treasury norm of 30 percent. Existing infrastructure has not kept pace with the growing demands in the Province. There are delays in building the new infrastructure needed to provide basic services.”
She added that “little to no action” was taken to address material irregularities at the Sol Plaatje Municipality.
Maluleke identified “significant underspending” on infrastructure development, maintenance, bulk infrastructure and water services at 15 municipalities in the Northern Cape.
She added that time lines on key infrastructure projects had been missed and were not properly monitored to prevent overspending.
“Projects were significantly delayed by poor planning, vandalism and a lack of contract management disciplines. We remain concerned about non-compliance relating to supply chain management legislation, which is one of the main contributors to irregular expenditure.”
Maluleke stated that !Kheis Municipality utilised grant money to fund its operations because of cash-flow constraints.
She explained that inappropriate spending or underspending of grants resulted in delays in completing infrastructure projects aimed at improving service delivery, including access to water, sanitation, housing and public transport.
Maluleke added that municipalities in the Northern Cape experienced poor water quality and a lack of water infrastructure maintenance.
“Businesses are closing because of persistent challenges with water, electricity and road infrastructure.”
She pointed out that the Emthanjeni Municipality had suffered a loss of R1.5 million due to fraud and suspected fraud.
“Between April 2013 and
August 2019, an employee intentionally changed supplier banking details, where payments intended for suppliers were fraudulently processed as payments to their own bank account. The accounting officer reported the matter to the SAPS and the Hawks for criminal investigation in February 2021.”
Maluleke added that the municipality had since implemented internal controls to manage spending and verify supplier banking details before payments were processed, as a precautionary measure.
DYSFUNCTIONAL
The auditor-general stated that the situation at Renosterberg Municipality remained “particularly dire”.
“The municipality has not prepared a performance report for the past 14 years. It did not have an approved service delivery and budget implementation plan. The municipality has been dysfunctional for many years.
“There is a 100 percent vacancy rate at senior management level and a weak control environment, while most employees lack appropriate skills and competencies.”
She added that senior management positions had not been filled at the municipality.
“It was able to improve its outcome due to the good work done by staff that were seconded by the provincial government.
“We are concerned whether this improvement is sustainable, as it may depend on the continued secondment of staff from the Provincial Treasury and Coghsta.”
Maluleke stated that the regression at the Hantam Municipality from a clean audit to an unqualified opinion with findings was due to non-compliance after the chief financial officer’s position became vacant during the audit.
She added that out of 31 municipalities in the Province, only the Frances Baard District Municipality and the Namakwa and ZF Mgcawu municipalities achieved clean audits due to stability and skills at senior management level.
She said the overall audit outcomes for the Province had improved slightly due to the Kgatelopele and Renosterberg municipalities improving their audit outcomes.
“The improvement at Kgatelopele can be attributed to filling the posts of municipal manager, chief financial officer and deputy chief financial officer with skilled and experienced individuals.”
The MEC for Co-operative Governance, Human Settlements and Traditional Affairs (Coghsta) and Transport, Safety and Liaison, Bentley Vass, was disappointed that only the Kgatelopele and Renosterberg municipalities showed significant improvement, where they received qualified opinions during the 2022/23 financial year.
“Despite some improvement in annual financial statements submissions, four municipalities did not meet the deadline for auditing and another 13 municipalities could not publish credible reports.”
Vass emphasised the need for continued support to enhance service delivery and address the auditor-general's recommendations for better audit outcomes.
He urged councils to ensure that corrective action was taken promptly.
DA provincial spokesperson on Coghsta, Gizella Opperman, believed that residents continue to suffer under service delivery challenges and crumbing administrations.
“Ratepayers had to cough up R432.73 million for staff in municipal finance units in the Province. This is while 25 municipalities still spent an additional R127 million on financial reporting consultants who were brought in to do the jobs of officials,” Opperman pointed out.
“Municipalities in the John Taolo Gaetsewe District alone are responsible for nearly 60 percent of the bill, where three local municipalities spent R70.1 million on consultants, with the district spending another R4.96 million.”
She noted that while residents were effectively forced to pay twice for the same tasks to be done, there was no real improvement in tangible service delivery.