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Nelson Mandela Bay and OR Tambo District biggest culprits in irregular expenditure

May 23, 2018
Nelson Mandela Bay and OR Tambo District biggest culprits in irregular expenditure

The Nelson Mandela Bay Metro and the OR Tambo District Municipality top the list of municipalities that incurred the biggest irregular expenditure in the 2016/2017 financial year, according to a report released by Auditor-General, Kimi Makwetu on Wednesday.

He said that the Nelson Mandela Bay incurred R8.18 billion in irregular expenditure, far surpassing the OR Tambo District Municipality, which came in second at R3.082 billion. The Buffalo City Metro came in at number eight nationally with R584 million in irregular expenditure.

"The trend of improvements in the past few years in the Eastern Cape did not continue. Six municipalities in the province improved their outcomes but seven regressed," the AG described.

"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."

He said that infrastructure projects were not delivered as a result of poor planning and project management.

Makwetu said that the Eastern Cape is topping the list of defaulting provinces with R13.5 billion (or 48% of the total irregular expenditure of the national total), followed by the North West and Gauteng. The Eastern Cape figure also represented 35% of its provincial local government expenditure budget.

Meanwhile, the Free State, Limpopo and North West municipalities have not received a single clean audit.

In terms of the unauhorised expenditure, the Nelson Mandela Bay Metro was on number six nationally after overspending its budget by about R432 million. The other Eastern Cape municipality was the Enock Mgijima Local Municipality at number 10 after also overspending its budget by about R323 million.

The Nelson Mandela Bay Metro was also on position three in terms of fruitless expenditure after spending around R100 million to fix shody work following court rulings. It was the only Eastern Cape in the top ten.

See the full report HERE.

Nationally

Nationally, irregular expenditure now stands at over R28 billion and Makwetu said that most municipalities are barely going concerns.

“We are drawing attention to the vulnerable financial position of municipalities, where 31% per cent of the municipalities, which represent 73 of them disclosed in their financial statements that they might not be able to continue operating," he said.

He added that municipalities were not heeding his advice as shown by the continued regression in outcomes - with irregular and fruitless and wasteful expenditure each ballooning more than 70% for the 2016/17 year.

“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," Makwetu said.

"When we released the 2011/12 municipal audit outcomes in August 2013, we highlighted amongst others, a lack of decisive leadership to address the lack of accountability by ensuring consequences against those who flouted basic processes that hampered effective municipal governance.

“We reported weaknesses in internal control risks that needed attention in local government by providing root causes for audit findings and recommendations to remedy underlying causes. There has been no significant positive change toward credible results; instead we are witnessing a reversal in audit outcomes."

Of the audited municipalities, he said that 45 regressed and only 16 showed improvement.

Irregular expenditure now stands at over R28 billion.

Nationally, only 33 municipalities (13%) received Clean Audits. 

Although irregular expenditure increased, Makwetu said that municipalities had made efforts to identify and 'transparently' report irregular expenditure from previous years.

Makwetu also raised concern on the financial health of municipalities, which are at risk due to the inability to collect revenue from consumers.

About 31% of municipalities disclosed a deficit amounting to R5.6 billion.

According to the AG, the amount of municipalities needing interventions are as follows; Eastern Cape (26% of municipalities); Free State - 100%; Gauteng - 36%; KZN - 23%; Limpopo - 22%; Mpumalanga - 25%; Northern Cape - 56%; North West - 59%; and Western Cape - 7%.