No clean audit for Msunduzi

2017-06-22 13:45
AG report highlights lack of accountability and control in Msunduzi.

AG report highlights lack of accountability and control in Msunduzi. (File)

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Auditor-General Kimi Makwetu on Wednesday called on the leadership in municipalities to ensure that competent people were employed in financial and supply chain management positions.

This, as he confirmed that staffing issues, a lack of oversight, the high vacancy rates and lack of control in key financial areas were behind Msunduzi Municipality receiving a qualified audit for the past financial year.

“These individuals [those in financial and supply chain management posts] should embrace accountability and take responsibility for their actions, coupled with a comprehensive understanding of key policies, processes and procedures,” Makwetu said.

He said the administrative and political leadership should set a tone of zero tolerance for transgressing legislation and insisted that punitive action should be taken against those that breach legislative requirements.

“Councillors need to fully understand their oversight responsibilities to be effective in their roles,” he said.

The AG report released on Wednesday confirmed that Msunduzi Municipality had regressed from a clean audit to a qualified audit opinion.

Makwetu reported limited improvements in the audit results of South Africa’s municipalities, saying that more than half of the municipalities desperately needed intervention.

The report revealed that only 11 out of 61 municipalities in KwaZulu-Natal received clean audit opinions, compared to 18 last year.

Makwetu released his overall audit findings for all local municipalities in the country, with Msunduzi mentioned as one of five municipalities in the province that contributed to R1,24 billion in irregular expenditure.

The report highlighted that procurement without competitive bidding or proper quotation processes was rife, which saw irregular expenditure levels increasing from R1,60 billion in 2014/15 to R2,43 billion in 2015/16.

Makwetu said in his findings that the majority of accounting officers in the province did not adequately oversee the preparation of financial and performance reports or compliance with legislation.

In addition, Makwetu said senior management at 49 municipalities did not “stringently and diligently review the credibility of financial, performance and compliance reports”.

“The main cause of this irregular expenditure was deviations that were either not approved or not justifiable,” said Makwetu in his report.

Msunduzi was also one of four in the country, and the only in KwaZulu-Natal, to have underspent their Public Transport Network Grant by more than 10%.

Makwetu said this was mainly due to delays in procurement processes and designs, which resulted in work on some projects starting late.

He said overall the municipalities had failed to maintain the promising five-year momentum — gained in the years 2010/11 to 2014/15 — that he reported on last year.

The AG’s report highlighted the importance of accountability in the management of municipal affairs.

“Starting with appropriate planning focused on the needs of citizens, instituting appropriate internal control and supervision that will ensure proper financial and performance management,” he reported.

Makwetu also mentioned respect for the law in the running of municipalities, monitoring by all political and administrative leadership that budget and performance targets are appropriately achieved, and that there are consequences for mismanagement and non-performance.

Makwetu said disciplinary boards had not been set up to deal with and investigate instances of fraud and misconduct. In addition, policies and procedures to deal with consequences and performance management were not strictly applied, and investigations into unauthorised, irregular and fruitless and wasteful expenditure were “unduly delayed”.

“This created an environment where poor performance was tolerated, which was not conducive to good governance and accountability. Other common findings related to the quality of submitted financial statements, the prevention of unauthorised, irregular and fruitless and wasteful expenditure, and Supply Chain Management,” Makwetu said.

In February this year senior manager of AG South Africa, Sinenhlanhla Sibiya, presented the findings in detail to the Msunduzi council.

At the time, Sibiya said inadequate accounting management, mistakes in the financial statements and an overall lack on the basic implementation of internal controls resulted in the qualified audit.

Reporting on material losses and impairments, Sibiya revealed that Msunduzi had recorded a loss of R181, 96 million as a result of illegal electricity connections and a R119,72 million water loss was recorded.

Newcastle improves audit outcome

Notably in KwaZulu-Natal, Newcastle improved its audit outcome from a qualified opinion with findings to an unqualified opinion with findings for the first time since 2007/08.

Auditor-General Kimi Makwetu said that this improvement stemmed from “resolute leadership and a decisive approach to oversight and monitoring”.

uMgungundlovu District Municipality was one of three of the 10 district municipalities that “led by example” in retaining their clean audits since 2013/14.

“These municipalities were characterised by leadership’s zero tolerance for poor performance and commitment to good governance, coupled with institutionalised sound financial management disciplines and internal controls.”

He said the provincial treasury, provincial Department of Co-operative Governance and Traditional Affairs and the premier’s office provided intensive support to Newcastle, Jozini, Hlabisa, Amajuba District, uThukela District and
uMkhanyakude District, which had displayed persistent control weaknesses. The slow collection of debt also raised alarm bells in the province’s municipalities, with 72% of the municipalities estimating that more than 10% of the amounts owed to them would not be paid.

Makwetu said the severe drought in the province also resulted in revenue from water decreasing due to restrictions. “The drought crisis was made worse by the high amount of water losses reported. Water losses can be reduced by effectively maintaining water infrastructure ... and replacing assets at proper intervals,” he said. 

Read more on:    pietermaritzburg

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