
The City of Tshwane has received a qualified audit report for the 2023/24 financial year from Auditor-General (AG) Tsakane Maluleke, revealing a concerning level of stagnation.
After an adverse opinion was issued in the previous financial year, causing significant shock within the council, Tshwane has been working diligently to improve its audit results. This situation was a key factor in the resignation of former mayor Randall Williams, who was replaced by fellow DA member Cilliers Brink.
ADVERTISEMENT
CONTINUE READING BELOW
Brink was ousted from office in September, when ActionSA’s Dr. Nasiphi Moya, in coalition with the ANC and EFF, took over his role.
Although the city managed to achieve a qualified audit report during Brink’s administration, it has yet to attain an unqualified status.
“While some qualification issues have been resolved, the overall stagnation in results signals that management’s audit action plan has not been effective,” the AG noted in a document reviewed by Moneyweb.
“Additionally, substantial weaknesses in internal controls remain apparent, as evidenced by material misstatements found within the financial statements.”
The formal release of the report is expected to happen during an upcoming council meeting later this month.
Debt to creditors
Robert Cameron-Ellis, chair of the city’s independent audit and performance committee, confirmed the AG’s findings to Moneyweb.
He highlighted that the AG indicated the city’s debt to creditors might be understated by R3.6 billion.
“This is an ongoing issue. Numerous invoices are not being recorded in the system, and the AG is increasingly identifying these discrepancies,” he explained.
If correct, the apparent surplus in the city’s financial reports would in actuality demonstrate a deficit.
Service delivery …
The AG’s concerns reach beyond financial statements.
Regarding performance reports, she commented: “The quality of reports generated by the municipality remains concerning, as we continue to witness material findings about the usefulness and reliability of reported performance information and the actions taken to address the shortfalls in achieving planned objectives.”
A specific target that was not met was the installation of new sewerage pipelines; the target was 550 meters, yet not a single meter was completed.
Only 15% of pothole complaints were responded to within the “standard municipal response time,” well below the 60% target. The definition of standard municipal response time remains ambiguous.
Nonetheless, she did acknowledge some improvements in compliance.
“Material non-compliance has been recorded over the last three financial years; however, in some instances, although still materially non-compliant, the frequency of these instances is declining.”
She added: “Compliance monitoring controls were not effectively implemented, and the policies and standard operating procedures meant to ensure compliance with laws and regulations were neglected, resulting in material non-compliance findings.”
Audit results per outcome area
The city reported R2.3 billion in irregular expenditure (in breach of the law) for 2023/24, marking an increase from R1.9 billion in the prior fiscal year.
Fruitless and wasteful expenditure (funds spent without value) remained largely unchanged at R347 million.
Unauthorised expenditure (not accounted for in the budget) skyrocketed from R423 million to R2.1 billion.
“None of the past year balances were rectified,” the AG pointed out, emphasizing that processes were ongoing at the time the annual financial statements were submitted.
Cash collections stagnant
Cameron-Ellis raised alarms that even with efforts to improve the collection of consumer debt, cash collections have not increased compared to the previous financial year. “The cash deficit persists unresolved.”
He attributes this challenge to corruption within the municipality’s revenue management division.
ADVERTISEMENT:
CONTINUE READING BELOW
“We disconnect customers for non-payment, and within three days, corrupt officials reconnect them,” he claimed.
This issue went unnoticed for an entire year until the city made attempts to disconnect services again.
“No follow-up was carried out. We implement that now, returning every three days until we confirm that payment has been made.”
He commended DA politicians for spotting this issue, noting, “It wasn’t the officials who recognized it.”
AG calls for a ‘culture change’
The AG urges a cultural transformation within Tshwane to improve financial controls and audit outcomes. She mentioned that “we are beginning to see a gradual shift,” but stressed that significant work still lies ahead.
Cameron-Ellis mentioned that a formal process is in motion for cultural change in Tshwane, but cautioned that it will take time.
“It necessitates discipline, discipline, discipline, along with system changes, and accountability must be upheld. This will require an additional five years.”
He acknowledged that senior management is moving in the right direction and valuing accountability, but that progress will be incremental.
“As I indicated last year, structural changes are essential, implying the city must downsize its workforce,” he added.
This cannot be accomplished solely through natural attrition.
“It’s vital to keep the right personnel and eliminate wastefulness.”
DA unhappy
The DA voiced disappointment over the city’s failure to secure an unqualified audit “despite extensive and meticulous efforts toward this aim.”
The party asserts that the cultural shift advocated by the AG “will only materialize if decisive actions are taken against officials responsible for the misuse of taxpayer funds.”
Read:
The DA highlights “worrisome practices by the current government that signal a lack of commitment to this cultural transition.”
According to the DA, these include:
- An unwarranted attack on the city manager by the EFF;
- Failure to convene meetings for the oversight committee tasked with investigating public funds misspending;
- Neglect in scheduling meetings for the executive audit tracking committee created by Brink to monitor accountability for audit results.
Metro still designated as ‘Doing harm’
Councillor Lex Middelberg of the Republican Congress of Tshwane, a member of the financial oversight committee, accused the DA of attempting to “downplay the worsening outcomes as a work in progress.”
“All year long, the coalition government delivered messages suggesting that finances were improving under Brink’s leadership and Councillor [Jacqui] Uys as MMC for Finance,” he asserted.
“The AG’s findings contradict that narrative,” he added.
“In her presentation, she explicitly stated that: Based on the 2023/24 audit results, the municipality is still categorized as ‘Doing harm’.
“The municipality has not progressed compared to the previous year.”
Read: Municipal ‘Get out of debt free’ cards left standing … [Jun 2024]
Follow Moneyweb’s in-depth finance and business news on WhatsApp here.