The Office of the Auditor-General (AG) has raised concerns about eThekwini’s finances, pointing to slow debt collection, failure to pay creditors on time and the billions of rand incurred as irregular expenditure.
The metro achieved an unqualified audit opinion with findings.
AG official Nomalungelo Mkhize, from the business unit, detailed the financial concerns and said all indicators pointed to the municipality being under financial pressure.
“We have noted slow payments from our consumer debtors, we see that as a challenge,” she said.
“At the end of the financial year June 2023, the municipality had to impair over R13 billion in consumer debtors which equated to 53% of their debtors book.
“This means there is a risk in terms of cash collection and therefore available resources to fund some self-funded programmes by the municipality aimed at service delivery.
“Also, on the expenditure side, with the average creditor days being 60 days and above, there is a risk that interest will be incurred and, as we are aware, that will result in fruitless and wasteful expenditure,” she said.
The AG official said the audit of the performance information found that the information was not reliable. This was due to supporting documentation not being available to verify what had been reported as achievements.
There were also “material differences between what had been achieved and what had been reported as achieved based on the audit”.
“We must note that this had been a trend in the last three years; it does require attention and intervention of council as performance information is critical in terms of work that the council needs to do.
“Simply put, if you do not have reliable information then you are not able to make critical decisions that need to be made in terms of where the service delivery should be directed if the information coming through is not reliable,” she said.
On consequence management, there was a slow response in dealing with staff accused of wrongdoing, she said.
“There is slow response in the municipality, disciplinary processes are not being instituted by council where reports have indicated financial misconduct of senior managers, and also management not acting on reports that prove financial misconduct of officials.”
In terms of irregular expenditure incurred in the last financial year of R2.4 billion – the root causes identified were weaknesses in the internal control of the supply chain management processes.
She said the City is struggling to deal with irregular expenditure; 25% of what had been sitting as irregular expenditure at the start of the year had not been dealt with.
“We also note that there is a large amount that is being written off.”
DA councillor Mzamo Billy said the AG report was very disturbing.
“What the AG has reported proves that (things are not right in the city).” He took issue with the irregular expenditure which he said has doubled since 2019, moving from R1.1 billion then to R2.4 billion now.
ActionSA councillor Alan Beesley said the situation in the municipality was dire.
“Among the numerous findings by the auditor-general are concerns about the slow collection of monies owed to the municipality.”
He warned that this slow collection rate would impact on the cash flow of the municipality and as a result affect service delivery, which was already inadequate.
The slow payment of creditors was another issue, he said.
“One of the serious findings raised by the auditor-general is the slow payment of invoices to creditors. The auditor-general notes that the creditors’ invoices are paid by the municipality on an average of 68 days. This is far in excess of the set standard of 30 days.”
DA councillor Warren Burne questioned the AG staff as to whether it had investigated what he termed the City’s “absurdity” regarding the Tansnet debt, which he said is about R1 billion – and which increased by an average of R30 million each month.
The issue has been the subject of some form of litigation for years.
The DA’s Thabani Mthethwa said they cannot celebrate a metro getting an unqualified audit opinion with findings.
EFF councillor Thabane Miya said the fact that the City obtained an unqualified audit meant it had the potential to be great, however, there were concerns especially around debt collection and creditor payments.
“Why are we not collecting, why do we not pay our creditors on time when we have a CFO in the office every day,” he asked.
IFP councillor Mdu Nkosi said the matters raised by the AG were repeat findings.
In response to the issues raised, mayor Mxolisi Kaunda said the municipality was resilient and was implementing what the residents of the city wanted but there were challenges.
In terms of financial sustainability, he said the City was on sound footing and if the national Treasury was called to speak on financially stable municipalities in the country, eThekwini would be named among the best.
The Mercury