Gauteng metros financial management gone awry

By Ashor Sarupen MPL, DA Gauteng Spokesperson for Finance:

Despite very good audit outcomes for Gauteng’s metro municipalities, extreme concerns relating to their financial performance and management systems persist.

This was part of the presentation of the National Treasury to the Finance Committee of the Gauteng Provincial Legislature.

Gauteng Metro Municipalities plan to spend a combined total of R97,7 billion this financial year, with Johannesburg’s budget coming to R42,6 billion, Ekurhuleni at R 29,3 billion and Tshwane at R25,7 billion respectively.

While audit outcomes by the Auditor-General in each of the Metros were unqualified, with Ekurhuleni achieving a clean audit, this speaks to spending against plans and proper financial controls in expenditure.

The way money is being collected and what is informing spending decisions was flagged as serious concerns.

National Treasury flagged declining cash reserves in metros, particularly in Johannesburg and Tshwane, as a problem, as well as a growing consumer debtor’s book resulting from problems relating to billing and collections.

It was stated that the norm for collection from billing for consumer services (water, utilities, refuse removal, sewage and other services provided by a municipality) is 95%.

No metro achieved this collection rate in real terms, with Ekurhuleni just above 91%, Johannesburg just above 88% and Tshwane not accurately reporting its collection rate.

In short, this means the metros fail to collect hundreds of millions of rand owed to them. In the vast majority of cases, the account holders refuse to pay because of persistent billing errors.

Ekurhuleni is still plagued by supply chain management problems, with Deloitte being appointed in the metro to help sort out its supply chain.

Other problems in Ekurhuleni include an inadequate capital budget (the budget for investment in new assets and machinery for service delivery) relative to other cities of the same size, and not being able to spend its limited capital budget.

Furthermore, Treasury was concerned about the fact that there is no relationship between Ekurhuleni’s budget and its actual plans for the financial year.

Other concerns include unfunded budgets (where the metros will not collect enough money through the course of the year to meet its financial obligations) as well as contract management across the metros.

It would appear that while the ANC-run metros are able to comply with the requirements of the Auditor-General, the situation as assessed by National Treasury in these cities are far more troubling than is being publicly stated.