AG paints grim picture of Madibeng municipality amid mounting financial, governance challenges

The troubled Madibeng local municipality in the North West is playing hardball with auditors, hiding the true extent of its irregular expenditure, which increased from R61 million to close to half a billion rand in just a year.

The Auditor-General (AG) painted a grim picture of the municipality’s finances during a virtual meeting of Parliament’s cooperative governance and traditional affairs committee on Wednesday.

Municipal officials and North West Finance MEC Motlalepula Rosho presented details of their interventions amid the financial and governance challenges.

Success Marota, the AG’s executive in North West, said there appeared to be a disregard for compliance with legislation.

Added to that, annual irregular expenditure increased from R61.1 million in the 2017/18 financial year to R443.8 million in 2018, while municipal audits had regressed since the 2014/15 financial year.

“This amount is not a true reflection of the full extent of the irregular expenditure at Madibeng, due to the municipality being qualified for incomplete disclosure of all irregular expenditure incurred.

“The root causes for the irregular expenditure incurred, related to bid adjudication committees that were not properly constituted, unfair procurement processes, inadequate contract management and a tolerance for deviations from competitive processes without sound reasons,” Marota said.

Madibeng municipality, placed under administration in July, also invested millions in the now defunct VBS Mutual Bank.

“The municipality’s financial situation worsened in the previous year after it invested R31.5 million in VBS Mutual Bank, which was written off as a financial loss. The municipal manager and chief financial officer resigned in December 2018 following an investigation into the matter,” Marota said.

City Press reported in July that taxpayers’ money was used to pay DSTV accounts, cookware and clothing accounts of private individuals through unauthorised debit orders against the municipality’s bank account.

“During the 2017-18 audit, we identified unauthorised debit orders against the municipality’s bank account indicative of an environment that was vulnerable to misappropriation, wastage and the abuse of funds.”

Marota continued:”The sum total of these debit orders could not be quantified due to a lack of records and documentation at the municipality. These were used to pay accounts of private individuals for items such as clothing, DSTV and AMC cookware – and are definite indicators of fraud.”

“These matters have been reported to the municipal manager and executive mayor to empower them to act in preventing further losses by putting in place and strengthening access controls to accounts,” Marota said.

He said no action had been taken on the VBS matter, pending the finalisation of the investigation and the unauthorised debit orders.

Municipal administrator Monnapula Motlogelwa said those involved in the unauthorised debit orders were handed over to the Hawks.

He said action on irregular expenditure was dependent on the processes of the reports being tabled in council.

“It should have been reported [to] the municipal public accounts committee (MPAC) and then reveal the types of misconduct that are indicated.

“It has not been actioned purely [because] it took time to go to council for tabling and MPAC for investigation. Part of our post-audit action plan is to deal with issues of irregular expenditure,” he said.