By Lehlohonolo Lehana.
The City of Tshwane has come under fire for incurring an adverse audit opinion from the Auditor-General of South Africa (AG) for the 2021/22 financial year.
The leaked 28-page report found the city’s finances are seriously irregular, while officials and councillors benefit from flawed procurement processes and irregularities.
In her report, the AG highlighted “significant difficulties encountered” in obtaining information requested from the accounting officer for audit purposes.
The AGSA highlighted a litany of issues in the report, including “material differences” between municipality’s incorrectly recorded budget and the actual amounts it spent.
The municipality also did not correctly prepare and disclose its net cash flows from operating, investing and financing activities. It further duplicated contingent liabilities, causing the contingencies disclosure to be overstated by R3.93 billion.
Unauthorised expenditure was not correctly accounted for, resulting in such expenditure being understated by R647 million. Poor record keeping saw fruitless and wasteful expenditure being understated by over R1 billion.
The municipality also did not have an adequate system for identifying and disclosing all irregular expenditure incurred, as is required by law, and so the AGSA could not determine what adjustment was needed to the stated irregular expenditure of R10.45 billion.
Trade payables were not correctly reconciled to supplier statements. As a result, not all liabilities were recorded, and in some instances, trade payables recorded in the accounting records could not be substantiated. This resulted in trade payables; and general expenses, bulk purchases, contracted services and property, plant and equipment additions being collectively understated by R4.93 billion.
The AGSA was also unable to obtain sufficient appropriate audit evidence for salaries and wages stated at R7.42 billion because the municipality could not provide information and supporting documentation “due to an inadequate system of internal control”.
The AGSA’s report will first be presented to the Mayoral Committee, after which it will be brought to the Tshwane Council meeting scheduled for 26 January.
Mayor Randall Williams confirmed the adverse opinion by the auditor-general saying he would investigate the culprits listed in the report.
“Alarmingly the auditor-general has also identified officials and councillors who benefitted from supply chain processes. The law makes it very clear that no official from local, provincial, and national government departments or municipal councillors may benefit through supply chain processes.”
“A proper investigation will be conducted into the list of names compiled by the auditor-general and appropriate action will be taken to recover the monies and bring the culprits to justice,” Williams said.
Williams said the adverse opinion for the City of Tshwane is a disappointment.
“It is not an outcome that is remotely acceptable within the context of good governance. We have already begun the work to set the city right. We are working closely with National Treasury and the auditor-general to address the findings.”
Without directly blaming Chief Financial Officer Umah Banda, Williams said: “The contract of Banda, was terminated on 31 December 2022 and we are in the process to appoint a new Chief Financial Officer.
“National Treasury is further providing us with additional professional staff (two former CFOs) to assist the city. We will also be bringing in an external auditing firm to begin provisionally auditing the first half of this financial year ending 31 December 2022.”
Williams added the city of Tshwane is “firmly committed” towards ensuring that it improves the city’s future audit outcomes.