Pretoria - 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.
Critics have slammed the DA-led multi-party coalition government for the worst financial performance in the history of the municipality.
A leaked audit report, dated November 2022, came a month after municipal manager Johann Mettler sacked chief financial officer Umar Banda for financial misconduct after he misrepresented the City’s 2021/22 financial statements to the AG. Banda’s court bid to overturn the decision to fire him was dismissed at the High Court, Pretoria, in December.
The AG report, seen by the Pretoria News, flagged the municipality for failing to account for millions of rand it claimed to have spent on various service delivery activities.
In many instances, the City was found wanting for submitting incorrect and incomplete financial statements, resulting in the AG issuing adverse audit findings.
According to the AG, an adverse audit opinion is given when the financial statements contain material misstatements that are not confined to specific amounts, or the misstatements represent a substantial portion of the financial statements.
The audit report showed that the AG was unable to determine the impact on the disclosed net carrying amount of property, plant and equipment, stated at R52 847 571 646, as it was impracticable to do so. The City was flagged for not correctly valuing assets relating to electricity, roads and stormwater infrastructure assets, as well as community, in accordance with the Standards of Generally Recognised Accounting Practice.
Assets under construction relating to electricity infrastructure were incorrectly classified as completed assets.
“This resulted in infrastructure: assets under construction being understated and depreciation being overstated by R2 165 599 021,” the audit said.
“The municipality did not correctly account for accrued leave pay due to the incorrect calculation of the employee leave balances and daily rates. This resulted in the accrued leave pay and leave pay provision charge being overstated by R858 349 158,” the AG said.
The AG was unable to determine whether any further adjustments were necessary to retention creditors and other creditors, stated at R623 013 615 and R1 245 107 628, respectively.
The City’s internal control system came into question after the municipality was unable to provide information and supporting documentation for the amount recorded for salaries and wages.
The municipality also did not correctly account for unauthorised expenditure incurred in the current year as required by section 125(2)(d) of the Municipal Finance Management Act (MFMA). “This resulted in unauthorised expenditure being understated by R646 593 600,” the audit said.
The AG bemoaned the City’s status of accounting records after it surfaced that the municipality did not have an adequate system for identifying and disclosing all irregular expenditures incurred, as required by the MFMA.
“Consequently, I was unable to determine the full extent of the adjustment necessary to the balance of irregular expenditure, stated at R10 455 255 414 as disclosed in note 56 to the financial statements,” the AG said.
The municipality also did not record all fruitless and wasteful expenditure as required by the MFMA. This resulted in fruitless and wasteful expenditure being understated by R1 028 544 104.
Failure to disclose the deviation from supply chain management (SCM) regulations in accordance with municipal supply chain management regulation 36 (2) resulted in the deviation being overstated by R488 411 847.
Sufficient audit evidence could not be obtained that all contracts and/or quotations were awarded in accordance with the legislative requirements, as the procurement process was not substantiated by supporting documentation.
The AG said: “Some of the goods and services of a transaction value above R200 000 were procured without inviting competitive bids, as required.”
Allegations of fraud and extortion which exceeded R100 000 were not reported to the SAPS as required by section 34(1) of the Prevention and Combating of Corrupt Activities Act.
The AG also noted that the troubled Rooiwal wastewater treatment works was operating over capacity, with the necessary repairs and maintenance being delayed or not done.
Finance MMC Peter Sutton didn’t respond to a request for comment.
Former ANC Tshwane regional chair Kgosi Maepa criticised the DA-led coalition for taking the City’s financials back. “We are vindicated, DA has completely damaged Tshwane!” he tweeted.
Pretoria News