Irregular Expenditure in Mpumalanga doubles to R2.3 billion

James Masango MPL, Leader of the Official Opposition:

The Auditor General (AG) report has revealed that Mpumalanga government departments has spent over R2 billion in irregular expenditure in the past financial year which ended in March 2015.

The AG was presenting the Audit outcomes to the Members of the Provincial Legislature (MPL’s) in Mbombela on Wednesday.

(Click here for the AG’s detailed report)

According to the report, 95% of the irregular expenditure that occurred was contributed by the departments of Health and Education, as well as procurement agents.

The DA notes the trend that Mpumalanga government disregards recommendations made by Chapter 9 institutions and in particular the AG year after year.

This disregard of the AG’s recommendation has now led to the Mpumalanga provincial departments regression in the audit outcomes in the last financial year.

Regression in the overall provincial outcomes is evident with clean audits decreasing from 5 to 4, unqualified with findings decreased from 8 to 7, and qualified increased from 4 to 6.

The AG noted with concern that the audit outcomes converted to Rands, indicated that Mpumalanga departments were responsible for 71% of the R37 billion budget allocation which resulted in a qualified audit.

A DA government would strive to obtain clean audits in all its departments.

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Audit outcome shows need for immediate action

By Andrew Louw, MPL, DA Provincial Chairperson in the Northern Cape:

The 2014/15 audit outcomes for the provincial government, released today, shows that immediate action must be taken to clean up the provincial administration and to improve service delivery. While there are some positives, the report from the Auditor-General shows that there has been an overall regression in the province.

Contrary to our hopes and the few highlights, the audit report for

2014/15 is terrible.

Three auditees regressed from clean audits to unqualified audits, including the department of Economic Development & Tourism and the Northern Cape Provincial Treasury. Their strategic priorities include the stimulation of economic growth to ensure job creation, support to municipalities to improve service delivery at grassroots level and ensuring clean provincial administration.

Instead of achieving these goals, the department and Treasury both had findings on non-compliance. It is then no wonder that unemployment is so high, especially among the youth, and that municipalities are dysfunctional!

We are also concerned about the poor management of asset registers. If asset registers are not managed properly, they can become breeding grounds for corruption. Late completion of the fixed asset register at the Northern Cape Fleet Management Trading Entity meant that the audit is still outstanding. This is an unwanted first for the past three financial years.

We welcome the 80% decrease in fruitless and wasteful expenditure. We cannot condone it when government fritters away the money meant for the poor, but we can see from this drastic change that there has been an honest attempt to improve and we appreciate it.

We are, however, alarmed that there is a 20% increase in irregular expenditure, as it indicates that departments are not using their funds for its intended purposes.

It is also a matter of extreme concern that one of the most crucial service delivery departments, namely Health, remains the largest contributor to irregular, fruitless and wasteful expenditure.

Historically, Health has struggled to achieve good audit outcomes and had disclaimer audits from 2003 to 2013. Are we going to see Health reverting to ten years of disclaimers again?

In the past financial year, provincial departments incurred at least

R1.582 billion in unauthorized, irregular, fruitless and wasteful expenditure. The total figure could be higher, as many departments have not disclosed the full amounts of irregular expenditure that they incurred.

Using the R1.582 billion which was lost through mismanagement and maladministration, we could have doubled the funding for the Economic Growth and Development Fund to R72 million. In so doing, we could have doubled the support given to emerging entrepreneurs and SMMEs requiring financial assistance to succeed. We could also have converted the contracts of 1 240 teachers appointed by school governing bodies to departmental posts to a total cost of R360.840 million. We could further have increased access to Early Childhood Development by building 279 classrooms.

To improve emergency services, we could have used R32.194 million to procure 67 emergency medical vehicles. This would be enough to bring the amount of ambulances operating in the Northern Cape in line with the national targets. We could also have built 52 satellite fire stations at a cost of R10.660 million each in the 24 municipalities that still don’t have adequate fire prevention services.

We congratulate the department of Social Development, the department of Environment and Nature Conservation as well as the Northern Cape Tourism Authority with their clean audits. We also congratulate the department of Education for improving from a qualified audit to an unqualified audit. We trust that this improvement will also translate into higher quality education, which will be reflected in improved matric results.

Departments can prepare themselves for a thorough interrogation from the Democratic Alliance when they come to table their annual reports.

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Western Cape Education Department (WCED) is first Education Department in South Africa to achieve a clean audit

By Minister Debbie Schäfer, Western Cape Minister of Education:

The Auditor General has presented the Western Cape Education Department with a clean audit for the 2014/2015 financial year.

The clean audit means the WCED’s 2014/2015 financial statements were free from material misstatements and there were no material findings on reporting on performance objectives or non-compliance with legislation.

Ivan Meyer, Western Cape Minister of Finance, announced this morning that all 13 provincial departments received unqualified audit results, with 12 of the 13 receiving clean audits.

“I want to in particular join the Auditor General of South Africa in congratulating the Western Cape Department of Education for achieving a clean audit and becoming the first department of education in South Africa to do so.”

“The clean audit outcome is the reflection of the leadership provided and the dedication of senior management and staff,” said Penny Vinjevold, Head of Education in the Western Cape.

“Over the years the WCED ensured adequate implementation of the Public Finance Management Act (PFMA) and continuous improvement of internal and financial control. There have been consistent improvements in the WCED’s audit outcomes over the years.”

WCED Superintendent General (SG), Ms Penny Vinjevold said in 2013, the WCED established a new Internal Control Directorate, which, until April 2015, reported directly to the Head of Department.

“At its inception, the Internal Control Directorate was tasked with improving the application of internal controls which included payments processed by the Department accompanied by the diligent execution of roles and responsibilities of  staff members  which contributed significantly to achieving the Clean Audit status.”

“Although the department achieved the Clean Audit status, the challenge now becomes to maintain it in financial years ahead as internal controls are each and every individual’s responsibility and should be embedded in our culture.”

This is an excellent achievement and I would like to take this opportunity to congratulate Ms Vinjevold SG, Mr Ely (Chief Financial Officer) as well as their respective officials and teams and thank them for their hard work in ensuring that the Western Cape Education Department has come out on top.

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Gauteng government does not use lifestyle audits

By Jack Bloom MPL, DA Gauteng Spokesperson for the Office of the Premier:

Gauteng Premier David Makhura said today that no lifestyle audits to detect possible corruption have ever been conducted by the provincial government.

In an oral reply to my questions in the Legislature on this matter, he said that the provincial government had no force of law to conduct such audits, unlike the National Prosecuting Authority and the SA Revenue Service.

Makhura said that efforts were focused more on proactive prevention in terms of the provincial Anti-Corruption Strategy and Integrity Management Framework.

I am disappointed with this reply, as lifestyle audits are a valuable tool to fight corruption.

There are private companies that can do a legal assessment whether employees are living way beyond their means, which could prompt further investigation.

A selective lifestyle check will also ascertain whether employees have truthfully declared their business interests.

Corruption is a many-faceted monster, and should be tackled with all available tools, including lifestyle audits.

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What happened to Operation Clean Audit in Mpumalanga?

By Bosman Grobler, MPL, DA Spokesperson on CoGTA:

Municipalities in Mpumalanga have failed to achieve their target of obtaining 100% clean audit outcomes for the 2013/14 financial year; this after the national department of Cooperative Governance launched Operation Clean Audit in 2009 which promised that all municipalities would achieve 100% clean audits by 2014.

Of the province’s 21 municipalities, only Steve Tshwete local municipality and Ehlanzeni district municipality have managed to achieve clean audits.

According to the Auditor General the overall audit outcomes of Mpumalanga have regressed since the 2007/08 financial year, with far fewer auditees now in the clean or unqualified column.

The AG also states that, “Although some municipalities improved their audit outcomes over the period (2007/08 – 2013/14), regressions by others had a negative impact on the overall audit outcomes of the province.”

  • Unauthorised expenditure stands at R740 million for the 2013/14 financial year. This is an increase of R199 million from the previous financial year’s R 541 million.
  • Unauthorised expenditure to the value of R859 million from previous financial years is yet to be investigated and dealt with as required by the Municipal Finance Management Act (MFMA).
  • Irregular expenditure increased significantly (from 2012/13’s R445 million) to R557 million this year. This is more than double the 2011/12 financial year figure which was R204 million.
  • 032 billion of irregular expenditure from previous financial years is yet to be investigated and dealt with in accordance with the MFMA.
  • The cost of fruitless and wasteful expenditure has more than doubled in the 2013/14 financial year where it was recorded at R 118 million. This figure was recorded at R 50 million and R 23 million in the 2012/13 and 2011/12 financial years respectively.
  • There were 1 210 instances of fruitless and wasteful expenditure in 2013/14, compared to 313 in the previous financial year. This indicates that municipalities did not exercise due diligence, resulting in wasteful expenditure that could have been avoided.
  • R 58 million of wasteful expenditure from previous financial years is yet to be investigated and dealt with in accordance with the MFMA.

To disguise this financial calamity, the ANC in Mpumalanga, abandoned its Operation Clean Audit objectives for the next publicity stunt: Back to Basics. What is clear is that neither of these programs has worked, and the finances of Mpumalanga Local Municipalities are at their most critical state ever.

It is becoming increasingly clear that the ANC’s “cadre deployment strategy” is failing dismally because only 33% of Municipal Managers and 60% of Chief Financial Officers meet the required competency levels.

What the citizens of Mpumalanga need are municipalities staffed by professional, qualified and competent officials, who are dedicated to serving the people and delivering quality basic services. The DA delivers on its mandate as can be seen in all municipalities that we govern, including the DA-run Western Cape Province, which has once again topped the list of provinces with the number of municipalities receiving clean audits.

A DA led government will curb wasteful expenditure which will in turn make government-run entities more efficient and ensure that audit outcomes are clean.

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No clean audits as FS Municipalities waste R3,5 billion

By David van Vuuren, DA Chief Whip in the Free State Provincial Legislature:

Not a single Free State municipality obtained a clean audit for the 2013/14 financial year. As a result of this entrenched culture of financial mismanagement, the province lost almost R3,54 billion in irregular, unauthorised and fruitless and wasteful expenditure as per the Auditor-General (AG) Municipal Audit Outcomes report for the 2013/14 financial year.

We are extremely concerned at the 49% or R89 million increase in fruitless expenditure from the previous financial year to R272 million. Irregular expenditure also increased by R24 million to R934 million.

Free State municipalities carry a collective household debt of R9,1 billion of which only R2,3 billion is expected to be recovered.

The AG also reported that Free State municipalities collectively owed ESKOM in excess of R1,5 billion as at 30 June 2014. This debt has grown by R200 million since then and the province owes ESKOM more that R1,7 billion.

Our claims that the ANC in government seeks only to line the pockets of its most loyal cadres have been vindicated by the AG. Through abuse of the tender process, Free State municipalities awarded 233 contracts worth R165,2 million to ANC councillors, municipal employees, close family members and political friends.

The financial health of Free State municipalities are dire. Ironically the lofty ideals of ‘Operation Clean Audit 2014’, which has evidently failed, has been replaced by ‘Operation Back to Basics 2015’, which will also fail due to the lack of accountability in ANC-led municipalities.

The AG has shown that all ANC-led municipalities in the Free State have flouted almost all good financial practises resulting in a deterioration in the audit outcomes of all municipalities within the province. In fact, all Free State municipalities relied on consultants, at a cost of R130 million, to assist in their financial reporting due to a lack of skills by municipal finance managers and CFOs.

The province is in a critical state of dysfunction. It is unable to deliver the most basic of services in most of the municipalities such as the collection of refuse, the maintenance of roads, and the smooth operation of water and sanitation services.

The DA is the only party with a credible track record in governance. All Western Cape municipalities received unqualified audit opinions, 18 of these received completely clean audits and 14 received unqualified opinion outcomes with minor findings. Compared to the Free State which received nine disclaimer opinions, six qualified with findings and 14 unqualified with findings, it is evident that the DA is by far the better party at local governance.

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Letter to the Editor – Interpreting municipal audit outcomes

By Mark Steele, MPL, DA KZN Spokesperson on Scopa:

Interpreting audit outcomes is an annual statistical minefield for journalists and political parties alike.  MECs and political parties have a vested interest in ‘shaping’ the results so as to show themselves or their party in the most favourable light.  The AGSA does his best to present a user friendly document but by its very nature a consolidated report of municipal outcomes for the whole country for a financial year (in the most recent case 2013/14) is going to be a mass of complicated statistics graphs and diagrams.

Take one simple measure.  Gauteng got 13 clean audits, KZN 20 and the Western Cape 18.  At first sight this puts KZN in the lead, but not for long.  If you look at the percentages for these numbers against the number of actual auditees in a province then it’s quite a different story.  Gauteng’s 13 is only 39% of its auditees, KZN’s 20 is even less at 28% of its auditees and the Western Cape surges ahead with its 18 clean audits being 55% of its auditees.

Then there is the question of what is an auditee.  The AG’s report puts together in a single statistical lump metropolitan municipalities, district municipalities, local municipalities and municipal entities.  It could well be argued that if you want to have any meaningful comparison then each category of municipality should be treated separately, while municipal entities are quite clearly a different kind of creature to any category of municipality.

Be that as it may, that is what the AGSA has done in this report but one cannot conflate ‘auditees’ with ‘municipalities’ as some news reports have done.  KZN has 61 municipalities (1 metro, 10 districts and 50 locals) but only 13 (21%) received clean audits.  The Western Cape has 30 municipalities (1 metro, 5 districts and 24 locals) but of these 17 (57%) received clean audits.

Both provinces have done well but only one can claim truly outstanding municipal government.

In a time when the public is starved of good news stories it is understandable that figures that look good will get big, positive headlines.  If one doesn’t take care however the good news becomes just another con story and no different to any of the other political scandals sweeping the country from the Nkandla whitewash report to the irregularities around the 2010 SA bid for the FIFA World Cup.

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Audit outcomes show more Limpopo mayors must face the music

By Jacques Smalle (MPL), DA provincial Leader:

It is a crime against the people of Limpopo that all 30 Limpopo municipalities received qualified, adverse or disclaimer opinions from the Auditor General in the 2013/14 financial year findings.

This is due to lack of consequences for transgressions and lack of political leadership in Limpopo. Weak financial controls have rendered the municipal system vulnerable to widespread abuse and often a loss of adequate audit trails to substantiate transactions.

Poor systems and lack of supply chain management in Limpopo municipalities remain a challenge, with the irregular expenditure incurred of about R818 million this year.

According to the AG, quality of the financial statements remain poor at between 92% and 97% of the auditees in Limpopo not providing sufficient records of their financials, pointing to a poor internal control environment at most municipalities.

The people of Limpopo are the real victims of this horrible state of affairs.

The DA has long held that corruption, lack of oversight and financial mismanagement continue to cripple service delivery, yet the ANC does nothing to improve things for the people of Limpopo.

The DA has been exposing poor municipal roads, lack of water supply, nepotism in allocations of RDP houses, wasteful and fruitless expenditure, fraud and corruption yet the ANC turns a blind eye on calls made by the DA.

This is because the DA believes in government that serves the people, with commitment and dedication to clean governance and financial controls.

The ANC must now acknowledge that its municipalities in Limpopo keep on regressing while taxpayers money is wasted on poor service delivery – and as leaders of those governments, Mayors must be called to account. This may include recalling repeat offending mayors, who are failing the people.

The ANC’s delay in managing the recent fiasco at Mogalakwena municipality where mayor, Thlalifi Mashamaite, had brought the municipality to its knees, simply undermines good governance, and undermines delivery.

The DA will continue to press for better financial controls, and improved financial processes, with full accounting to council and full disclosure of all public accounts.

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Clean audit increase marred by massive rise in irregular and wasteful expenditure

By George Mari, MPL, DA KZN Spokesperson on COGTA:

A 13% improvement in the number of clean audits for KZN municipalities and their entities for the 2013/14 financial year has been marred by a massive increase in irregular, unauthorised expenditure, fruitless and wasteful expenditure.

The figures were announced yesterday by Auditor-General Kimi Makwethu.  According to his report on KZN municipalities;

–          Fruitless and wasteful expenditure sky-rocketed by 440% from R10million to R54million mostly as a result of overdue accounts, penalties, litigation, claims and “poor project management by Umtshezi municipality” on a R29million hostel rehabilitation

–          Irregular expenditure jumped by 30% from R1.78billion the previous year to R2.31billion for 2013/14, indicating that “systems and controls to detect irregular expenditure were absent or not effective”

–          R104million was spent by municipalities on external consultants for financial reporting, indicating a “skills gap” and “weaknesses in internal controls”.

The AG again found the DA-led Western Cape to be the best run province, with 71% of municipalities and their entities receiving clean audits.  This was followed by Gauteng with 40 % and KZN with 26%.

While this may be an improvement on previous years, 26% is in fact a fail.  It is not a figure to be celebrated.  Nor is the fact that KZN municipalities have failed to achieve the objectives of Operation Clean Audit 2014.

Service delivery to the people of KZN depends entirely on how a municipality is run.  Poor financial management leads to poor service delivery.

The increase in violent protest action by communities who are sick and tired of non-existent service delivery is testament to the fact that our municipalities are still not performing as they should.

There is a recurring theme in the AG’s report for KZN municipalities – one which confirms that internal controls in KZN municipalities are pathetic.  That 34 auditees would have received qualified audits had the Auditor’s department not stepped in is proof of this.

The DA expects MEC Dube-Ncube to sit up and take notice of the AG’s comments.  It is unforgivable that the same issues are raised year after year.

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Audit outcomes: West Rand municipalities on a continued decline

By Fred Nel MPL, DA Gauteng Shadow MEC for Cooperative Governance and Traditional Affairs:

The DA in Gauteng welcomes the improved audit performances of municipalities across the province as it is an indication of improved financial management.

Although improved audit outcomes do not automatically imply financial stability, they are a good gauge of improved financial sustainability.

Unfortunately the complete picture of audit outcomes in the province is not so rosy – particularly the negative audit outcomes among various West Rand municipalities and their entities.

The West Rand District Municipality, Randfontein Municipality and the West Rand Development Agency all deteriorated in their audit outcomes, while Westonaria failed to submit financial statements for auditing.

A major concern is that this occurred despite the Gauteng Provincial Department for Cooperative Governance and Traditional Affairs (COGTA) taking extensive measures to assist these municipalities in improving their audit outcomes.

MEC for COGTA in Gauteng, Jacob Mamabolo, must explain how his department failed to improve the financial standing of these municipalities.

These municipalities have been identified to be merged into a West Rand metropolitan municipality – a move the DA vehemently opposes.

Municipalities should not even be considered for mergers unless all the constituents are financially and managerially sound.

Lumping failing municipalities together will only cause financial mismanagement on a grander scale. The proposed West Rand Metro is destined to fail before it gets off the ground putting the lives of residents at serious risk.

Even if the proposed Metro merger does not take place, the two most dysfunctional municipalities, Westonaria and Randfontein, will be merged after the 2016 local government elections.

MEC Mamabolo should step up and take responsibility for his department’s failure in dealing with the managerial woes of West Rand municipalities.

He should also show leadership and halt the current attempted formation of a West Rand Metro until all its constituents have sorted out their financial affairs – failure to do so would be irresponsible.

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