The mid-term budget report for 23/24 of the J.B. Marks Municipality already paints a picture of financial concern.
This was highlighted in the report during the first regular council meeting for 2024 at the Dan Tloome Chambers on 31 January.
According to the report, the municipality is overspending R71 million if measured against the year-to-date budget.
A serious concern was the outstanding debtors the municipality is struggling with. This amounted to R1,171 billion at the end of December 2023. It can be subdivided into residential debt of R727.6 million and commercial and organs of state amounting to R362.9 million and R80.5 million.
The highest unpaid sources of income for the municipality were electricity (R277.8 million), property rates (R162 million), water (R145.5 million), sewerage (R142 million), and refuse (R113 million).
“Accounts should be handed over to lawyers, and electricity cut-offs should be re-implemented to all consumers from both regions as a collection measure to improve the current hobbling cash flow status of the municipality,” stated the municipal manager, Kgomotso Kumbe, in the report.
The Auditor-General (AG) report for the financial year 22/23 further illustrated the need for the municipality to take measures to stop the ongoing downward spiral. It highlighted the need for a general culture shift in how finances are run.
The AG’s report based its findings on three root causes for J.B. Marks Municipality’s financial issues:
- Insufficient capacity of MPAC, resulting in the committee not performing its oversight function
- Vacancies in senior management positions that affect stability, especially the CFO position
- Over-reliance on consultants due to the lack of skills and capacity in the finance unit.
The AG’s report noted that various projects were incomplete, and progress had halted due to strikes and delayed payments, among other factors.
One major project the report highlighted was the construction of the 25-megalitre Ikageng reservoir.
Here are some snippets of the AG-report:
According to the report, the consulting engineer finalised the design report in October 2021, but the municipality only appointed a contractor on 7 November 2022, 13 months later. The anticipated completion date is 6 August 2024.
The report emphasised that the council should prioritise filling key vacant positions like those of senior managers to prevent delays with projects that affect service delivery.
The AG’s report also frowned upon the quality of financial reporting.
According to the report, material errors in the AFS system inhibit the council and other stakeholders from making an informed assessment of the state of municipal financial affairs.
One root cause was that payments were made without confirming if the service had been rendered for contracted services.
The report also highlighted R5.9 million in fruitless and wasteful expenditure and R33 million in unauthorised expenditure due to financial pressures.
The AG report stated that a lack of accountability regarding irregular expenditure was one of the major pitfalls of the municipality. Irregular expenditure stood at R286 million at the end of the 22/23 financial year.
The AG report specified that one of the reasons for non-compliance and accountability regarding irregular expenditure was that the Municipal Public Accounts Committee (MPAC) was insufficiently capacitated to perform investigations effectively.
The AG’s report made recommendations for improving the municipality’s situation.
- Senior management positions must be filled.
- Performance management and reporting systems should be developed to ensure credible performance reporting by the municipality.
- Internal audits should be performed quarterly, and MPAC should be capacitated with qualified and competent resources.
- The financial recovery plan developed should be diligently implemented.
* The Herald sent an enquiry to the municipality on Monday, 5 February, but have not received a reply at the time of publication.
