Endumeni ‘scolded’ by AG for millions of Rands wasted

Endumeni Municipality racked up R118,8-million in irregular expenditure in the 2018/2019 financial year.

While the municipality managed to retain its audit status as ‘unqualified with findings’, which is regarded as second-best in auditing terms, the Auditor-General was scathing in its report when highlighting ‘improper and unbudgeted for expenditure’.

The R118,8-million is a large jump from R74,7-million of irregular expenditure incurred during the previous financial year. According to Mlungisi Sithole of the Auditor-General’s office, who addressed Friday’s Council meeting, this irregular expenditure was incurred in contravention of applicable laws and legislation.

This was on top of R20,3-million (up from R10,8-million in the previous financial year) in unauthorised expenditure which the municipality was guilty of, expenditure in excess of the approved budget vote.

Disturbingly, the Auditor-General found fruitless and wasteful expenditure was not investigated by the municipality, to determine if any person was liable for the expenditure as required by legislation.

Most of the irregular expenditure, around 67 per cent, resulted mainly from awards (tenders) made by a Bid Adjudication Committee which was not properly constituted. Electricity distribution losses amounted to R38,18-million – up from R25,77-million – with theft amounting to R26.68-million and the rest blamed on technical losses.

It was pointed out that the municipality was spending ‘millions for a private company to audit every meter, yet the theft continues to rocket and impacts severely on Endumeni’s budget’.

Parties react to AG Report

In his reaction to the Auditor-General’s report on Endumeni’s 2018/2019 finances, Mayor, Sduduzo Mdluli said the audit opinion was a ‘true reflection of the real situation’ and to a larger extent ‘a testimony to our assertion that we inherited a municipality whose dynamics needs boldness and decisive leadership’.

“The negative findings by the Auditor-General are matters we have consistently raised with our ratepayers and the public. We need to impose strict measures to reduce irregular expenditure and curb wasteful and fruitless expenditure, to focus our resources on basic service delivery priorities in a manner consistent with SCM [Supply Chain Management] policies, MFMA [Municipal Finance Management Act] and within our approved budget.”

Mayor Mdluli said audit findings had pointed out there were no reasonable steps taken to prevent irregular expenditure, amounting to R44,12-million, thus bringing the municipality to R118,8-million in total irregular expenditure.

“Irregular expenditure is not monies squandered, but expenditure incurred in contravention to SCM regulations, thus giving a rise to possible manipulation of SCM processes for unscrupulous activities,” he explained. “Unauthorised expenditure [R20,3-million from R10,8-million] is due to poor planning and expenditure outside approved budget votes. Council has already come up with ways to clamp down on unauthorised, fruitless and wasteful expenditure.”

Turning to rampant electricity theft, Mayor Mdluli said the losses were exorbitant and if not eliminated, had the potential to collapse the municipality.

“Money we are supposed to be saving for maintenance and future capital projects now have to fund losses caused by power theft. In future, we may find it hard to pay salaries. Last year, we conducted public meetings raising concerns over losses due to electricity theft and have developed plans to counter it. People have to understand that service delivery is a collective effort wherein citizens pay for services to be rendered. A culture of paying for services is needed.”

DA’s calls for strict action to turn Endumeni around

DA Councillor, Anthon Raubenheimer commented on the matter as follows:

“Although the municipality received a so-called second-best audit opinion of ‘unqualified with findings’, it is shocking to note unauthorised expenditure is up from R10,8-million to R20,3-million, and irregular expenditure from R74,7m to R118,8m. The three areas which stand out are: procurement and contract management; expenditure management; the lack of consequence management. The MFMA clearly prescribes that a municipality must recover unauthorised, irregular or fruitless and wasteful expenditure from those people liable for such expenditure. Disciplinary and criminal charges have been instituted against some individuals, but too many have been suspended with full benefits and are still sitting at home with no real consequences.”

Cllr Raubenheimer stated further electricity losses due to theft would not decrease until there was ‘the political will to act decisively and prosecute those with illegal connections’. He said these kinds of criminal acts had to be dealt with accordingly.

“The municipality does not have an overdraft and no outstanding debt with Eskom, but the cash coverage ratio of 1,59 means the municipality will only be able to meet its monthly obligations for the next 1,59 months. The audit opinion of ‘unqualified with findings’ creates an impression of a patient with a slight bout of flu, while a careful analysis shows a very sick patient in the ICU. Things can be turned around, but only with a very disciplined approach and hopefully the newly appointed Section 56 managers will be able to do just that. Ironically, the only ‘green’ in the report is on page 12 for ‘Policies and procedures’. Follow them in accordance with the applicable legislation and things will improve.”

EFF blames cadre deployment on ‘the mess’

EFF Councillor, Nathi Khanyile commented on the matter as follows:

“The audit report outlined that municipal SCM regulations were not followed, especially in the expenditure report. Hence, we have lazy people who knew the G4S contract was ending but didn’t do anything about it. The right processes should have been done in order to acquire the position. Deploying a person who is not able to do the job has resulted in the municipality not getting a clean audit – this is cadre deployment. There should be time frames for minor things such as contracts ending and so forth.”

The IFP was also contacted for comment and this will be published once it has been received.

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