KZN lambasted for ‘shameful’ R6.5bn irregular expenditure
The Auditor-General (A-G), Kimi Makwetu, has lambasted the KZN local government for failing on its promises to society, lacking accountability and allowing irregular expenditure to balloon. Makwetu found that the irregular expenditure in the province had almost doubled to R6.5bn. He said it was “shameful” that it was so high.
While an overview of his findings was released late last week, Makwetu’s comprehensive report, titled “Not much to go around, yet not the right hands at the till”, on the audit outcomes for municipalities in the 2018/2019 financial year, was released yesterday.
Makwetu found that in KZN, local government persistently failed to implement legislation coupled with policies and procedures to enforce compliance.
“Consequently, there is often a blatant disregard for the legislation that governs good administration, without punitive measures being actioned against errant officials.
“Moreover, consultants continue to be appointed in many instances while officials are in positions to execute these functions. This promotes indolence among officials as well as a wastage of funds,” the report noted.
In the eThekwini metro, a panel of service providers had been appointed to construct washing facilities and toilets for informal settlements and schools within the greater Durban area, the report read.
The A-G’s report said it could not confirm that proper supply chain management processes had been followed in establishing this panel and the subsequent awarding of contracts to suppliers on the panel.
“Sufficient and appropriate audit evidence was also not provided to establish whether the performance of some of the contractors on the panel was monitored on a monthly basis,” the report stated.
The total value of irregular expenditure arising from awards to suppliers on the panel was R424m.
The report revealed that in another instance irregular expenditure totalling R816m arose from the appointment of a service provider for the development of an information technology management system.
The A-G said that although investigations into irregular expenditure the previous year were taking place, they were not conducted properly or not completed within a reasonable time in some instances.
Additionally, he found that where investigations had been completed, “effective disciplinary steps were not always taken against officials”.
The Msunduzi Municipality received an unsatisfactory municipal audit. However, the audit opinion improved from adverse in 2017/18 to qualified in 2018/2019.
Makwetu said the Msunduzi management had managed to clear some of the qualifications from the previous year, however, it continued to have challenges with the SAP accounting system for debtors and revenue.
The municipality’s irregular expenditure of R214m indicated that goods or services had not been procured through a fair, competitive and transparent process due to a lack of preventive controls in awards made to suppliers, the report read.
Last year, the Msunduzi Municipality was placed under administration due to poor management and governance.
Makwetu found that the administrator had assisted the municipality with the filling of key vacancies, fast-tracking the finalisation of investigations and implementing consequence management.
While consultants had been appointed to assist with its financial reporting services, it was at a cost of R6m, without much improvement in controls, the A-G found.
The total salary bill of the finance department amounted to R134.18m last year.
“The poor control environment resulting from the lack of consequence management and ineffective investigations also resulted in increased irregular expenditure.
“Despite the high irregular expenditure, there was no indication that goods or services were not received,” the A-G reported.
The Msunduzi Municipality received and spent the full R42.76m of the water services infrastructure grant.
But the A-G found that there was still a backlog in the provision of water and sanitation services to various areas due to insufficient funding.
He said the finding correlated with the protest action that took place this year, with residents complaining about constant water shortages and ageing infrastructure.
The poor budgeting in road infrastructure had an impact on residents as they complained about potholes and the poor condition of roads as well as refuse not being collected, the report stated.
Insufficient budget was cited as one of the main reasons for the municipality having a backlog of service delivery initiatives. But Makwetu said they found that R3.21bn of the R3.67bn consumer debt was declared doubtful and was not collected by the municipality.
“If stringent practices were in place to collect the debt owed to the municipality, there would have been sufficient cash to address the backlog in water and sanitation services and infrastructure, as well as routine road maintenance,” he said. Makwetu also lashed out at Msunduzi’s public accounts committee, internal audit unit and audit committee for their lack of commitment.
“It is of concern that R57.48 million was paid to councillors and internal audit committees, yet value for money from these structures was not evident as poor audit outcomes persisted,” he said.
Makwetu recommended that more focus must be placed on exercising political oversight and addressing the aspirations of citizens.
He said that municipal managers, with their management teams, must set an ethical tone to solidify systems and processes as well as preventive controls, which should operate on autopilot and set accountability in overdrive.
He added that the levels of tolerance for non-compliance needed to be minimised, with transparent reporting to councils and the public.
Both the Msunduzi and eThekwini municipalities noted the report, saying they were currently studying it and would comment later on the findings.