There will be consequences: Eastern Cape premier on R13.5bn irregular expenditure

Eastern Cape premier Phumulo Masualle addresses residents of Engcobo outside the local municipality offices. Picture: Ziyanda Zweni
Eastern Cape premier Phumulo Masualle addresses residents of Engcobo outside the local municipality offices. Picture: Ziyanda Zweni

The Eastern Cape premier says there will be consequences following findings by the Auditor-General that the province’s municipality used up to R13.5 billion in irregular expenditure for the 2016/17 financial year.

Auditor-General Kimi Makwetu released the shocking findings in Parliament in Cape Town on Wednesday last week which showed that the province, often the last when it comes to matric pass rate results, this time came number one, albeit for all the wrong reasons.

The general report on local government audit outcomes nationally showed a 75% increase in municipal irregular expenditure, from about R16.21 billion in the previous year to about R28.38 billion in the year under review.

The Auditor-General audited 257 municipalities and 21 municipal entities, nationally.

The Eastern Cape consists of 49 auditees, made up of 39 municipalities and 10 municipal entities.

Speaking on the sidelines of a report back meeting following service delivery protests in eNgcobo local municipality, Premier Phumulo Masualle promised measures will be put in place to turn the situation around.

“We have set in place a team comprising of Treasury, the office of the premier and Cogta [Cooperative governance and traditional affairs] that will be going in each of the affected municipalities to look at the remedial steps because part of the problem is that this R13.5 billion is building over time in that certain actions that should have been done we not done such that these are cleared in their books.

“We are going to ensure that we work systematically with these municipalities to ensure that there are measures taken to attend to these matters.

“More importantly, its consequences because those who do these things nothing happens to them. We want to make sure that there is a very clear consequence management process that is going to help us clear these out of their books,” Masualle said.

The premier said before the Auditor-General released the findings he visited the provinces and the provincial leadership had been exposed to the gravity of the situation in municipalities.

“We have really looked at it and taken quite a beating on it. It shouldn’t have been like this. We are looking at the areas of deficiencies in our municipalities starting from the stability of councils themselves, the calibre of people that are appointed. We want to strengthen systems and procedures applicable in that regard.

“Other matters are in the domain of political echelons because also the calibre of people that are deployed in these areas also have to do with the capacity they have to discharge their responsibilities,” Masualle said.

Makwetu said the expenditure budget for the municipal sphere, nationally in 2016/17 was R362.13 billion.

Municipalities with clean audit opinions represent R25.68 billion (7%) of this amount, while those with unqualified opinions with findings represented R243.82 billion (68%).

Also, municipalities with qualified audit opinions make up R61.14 billion (17%) of the total budget, while those with adverse and disclaimed opinions represent R22.81 billion (6%).

The municipalities with outstanding audits constitute R8.68 billion (2%) of the total expenditure budget.

He said the trend of improvements in the past few years in the Eastern Cape did not continue as six municipalities in the province improved their outcomes but seven regressed.

“We warned these municipalities to keep the administration as stable as possible, fill vacant positions, and not underestimate the complexities of the mergers of municipalities. Of greatest concern in this province were the accountability failures in the areas of supply chain management and infrastructure development,” said Makwetu.

“Infrastructure projects were not delivered as a result of poor planning and project management. Irregular expenditure of about R13.56 billion [48% of the total irregular expenditure] was incurred by municipalities in the Eastern Cape. This represented 35% of their provincial local government expenditure budget.”

Fikile Xasa, MEC for cooperative governance and traditional affairs in the province, said they were disappointed but not sad about the negative findings.

“Indeed these findings particularly on the R13.5 billion irregular expenditure by the province is not a good picture. We are disappointed. I wouldn’t say we are sad. It’s something that we anticipated. Normally after local government elections as it happened in the financial year 2011/12, we regressed as a province in most of the municipalities and we knew what was the cause. We put up a plan on how we could minimise the challenges of dropping after elections and it looks like our plan did not work,” he said.

He said what made him more concerned was that the province was the worst in the country in terms of irregular expenditure.

“We have taken steps already. We have written to all the municipalities in the province who have got irregular expenditure and demanded an explanation as to what was the cause, what is the plan of action to deal with that and we are expecting feedback.

“We know, like I am saying, what constitutes irregular expenditure is when you don’t respect the laws that regulate spending public funds. And we are saying to accounting officers across the province who are the municipal managers, they must not take illegal instructions from anybody and if the political authority is insisting in them doing something wrong, they must demand a written instruction from such political authorities. From now on, all municipal managers in their contracts there will be performance agreements and in included in that would be for them not to allow irregular expenditure,” he said.

Xasa said part of the reason for the high irregular expenditure in the province’s municipalities was the general abuse of the Municipal Finance Management Act.

“We are saying that should come to a stop. People must follow proper procedures. Action must be taken against municipal managers where such things occur. And them in turn must take action on anybody who has caused municipalities to be in this situation, that equally goes to the councils, because they are the authority. We have written to them and we expect them to give us feedback in writing and indicate the plan of action.

“Generally all the municipalities are expected after these outcomes to produce audit turnaround plans. We are positioning ourselves as the department to support municipalities. We are sending multi-disciplinary teams to regions headed by people at the level of general managers,” said Xasa.

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