Eastern Cape municipalities racked up R10.6bn in irregular expenditure, auditor-general Tsakani Maluleke’s report has revealed.
Buffalo City Metro led the pack at R6.5bn, with R5bn of this amount incurred in the previous years “but reported in the current year [2021/2022] to resolve last year’s qualification on completeness of irregular expenditure”.
The councils amassed R1.8bn in unauthorised expenditure while fruitless and wasteful expenditure amounted to R0.22bn.
This was reported in the 2021/2022 financial year.
The report on Municipal Finance Management Act (MFMA) material irregularities tabled in the provincial legislature last week laid bare how the municipalities bled money.
The province registered 43 material irregularities on noncompliance and suspected fraud.
Material financial loss estimated at R632.82m was recorded.
According to the report, Buffalo City Metro lost R96.72m in estimated financial loss because of four material irregularities.
The AG cited failure to safeguard assets, resulting in loss, and unbilled revenue.
On the assets that were not safeguarded, the report listed vandalism of the completed phase of a multiphase road project.
“The road is not in use and management did not ensure that the completed asset has been safeguarded between June 2020 and July 2021,” it said.
“The accounting officer responded by indicating that there is a lack of own revenue and grant revenue forecast to complete the remaining phase of the road to bring it to use.
“The accounting officer committed to secure funding for the remaining phases by June 30 2023.”
The metro recorded an unqualified audit opinion in the 2021/2022 financial year and qualified findings between 2020/2021 and 2017/2018.
In the King Sabata Dalindyebo municipality, the AG flagged five material irregularities resulting in a R39.16m loss.
“Employees received both the housing and rental allowance from July 2019 to June 2022 in contravention of the municipal policy,” the report states.
“Another material irregularity] related to the municipality paying former councillors’ salaries after their terms of office had ended and they were not re-elected.”
The Makana municipality, which is under provincial intervention on section 139(5) of the constitution for financial recovery, received another disclaimer after it did not keep full proper records of its financial affairs.
The Amathole and Sundays River municipalities had not submitted their annual financial statements for auditing for the year on June 30 2022.
Co-operative governance and traditional affairs (Cogta) MEC Zolile Williams’s spokesperson, Pheello Oliphant, said various factors contributed to irregular, wasteful and fruitless expenditure, lamenting the use of consultants in the drafting of municipalities’ financial statements.
Oliphant said consultants charged municipalities exorbitant amounts and were reluctant to transfer skills to internal staff.
He admitted that irregular, fruitless and wasteful expenditure remained high in municipalities.
“Skills deficit, particularly the financial engineering [accounting], is chronic in municipalities,” Oliphant said.
“The project management unit( was incapacitated and staffed with unqualified personnel.
“The combination of all these factors contributes to delay in projects such as the construction of roads, bridges, stormwater drainage, parks and other amenities.”
Oliphant said to tackle the challenge, the department had deployed engineers and town planners to the district hubs to help municipalities with the needed technical skills.
“The officials report to the province quarterly,” he said.
DA MPL Vicky Knoetze slammed the “financial chaos” in municipalities.
Knoetze said the people of the Eastern Cape deserved accountable and responsible governance that put their wellbeing first.
“The DA echoes the AG’s call on the portfolio committee for Cogta and other role players, including heads of departments, MECs of co-ordinating departments, audit committees and council members, to follow up on accounting officers’ actions to recover and prevent further losses,” she said.
The AG urged administrative leadership to hold officials accountable for effective action plans that would ensure adequate implementation of controls over financial reporting, financial management and compliance with legislation, as well as effective responses to material irregularities and financial wastage.
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