City of Tshwane Obtains Another Qualified Audit Opinion

The City of Tshwane has obtained a qualified audit report from Auditor-General Tsakane Maluleke for the 2023/24 financial year, highlighting a concerning stagnation.

After receiving an adverse opinion in the preceding financial year that shocked the council, Tshwane has been making efforts to improve its audit results. This situation significantly contributed to the resignation of former mayor Randall Williams, who was followed in office by fellow DA member Cilliers Brink.

Brink was ousted from his position in September when ActionSA’s Dr. Nasiphi Moya, leading a coalition with the ANC and EFF, assumed his role.

While the city did manage to enhance its audit outcome to a qualified report during Brink’s tenure, it has not progressed to an unqualified status.

“Although some of the qualification issues have been tackled, the overall stagnation in outcomes suggests that management’s audit action plan has been ineffective,” the AG noted in a document reviewed by Moneyweb.

“Additionally, considerable weaknesses in internal controls are still apparent, as demonstrated by material misstatements found in the financial statements’ line items.”

The official release of this report is expected to take place during an upcoming council meeting later this month.

Debt to creditors

Robert Cameron-Ellis, chair of the city’s independent audit and performance committee, confirmed the AG’s observations to Moneyweb.

He emphasized the AG’s remark that the city’s debt to creditors might be underreported by R3.6 billion.

“This has been an ongoing issue. Numerous invoices are not properly recorded in the system, and the AG is increasingly uncovering these discrepancies,” he explained.

If this projection is accurate, the currently reported surplus on the city’s financial statements could actually be a deficit.

Service delivery …

The AG’s concerns reach beyond the financial statements.

Regarding performance reports, she stated: “The quality of performance reports produced by the municipality remains alarming, as we continue to observe significant findings regarding the usefulness and reliability of the reported performance information and the measures taken to rectify the underachievement of planned targets.”

One target that was not met was the installation of new sewerage pipelines; the target was set at 550 meters, but no meters were installed.

Only 15% of pothole complaints were addressed within the “standard municipal response time,” failing to meet the 60% target. The definition of “standard municipal response time” is still unclear.

However, she noted some improvement in compliance.

“Material non-compliance has been observed over the past three financial years, but in some instances, while still materially non-compliant, the frequency is decreasing.”

She further elaborated: “Compliance monitoring controls were not effectively implemented, and policies and standard operating procedures meant to ensure adherence to laws and regulations were not followed, resulting in material non-compliance findings.”

Audit results per outcome area

Source: Auditor-General

The city reported a total of R2.3 billion in irregular expenditure (in breach of the law) for the 2023/24 financial year, indicating an increase from R1.9 billion in the prior year.

Fruitless and wasteful expenditure (money spent without value) remained largely unchanged at R347 million.

Unauthorized expenditure (not accounted for in the budget) escalated from R423 million to R2.1 billion.

“None of the previous year’s balances were addressed,” the AG remarked, noting that processes were ongoing at the time of the submission of the annual financial statements.

Cash collections stagnant

Cameron-Ellis expressed concerns that cash collections have not improved compared to the previous financial year, despite efforts to enhance the collection of consumer debt. “The cash deficit remains unaddressed.”

He links this issue to corruption within the municipality’s revenue management division.

“We disconnect customers for non-payment, and within three days, corrupt officials reconnect them,” he stated.

This issue previously went unnoticed for a year until the city attempted to disconnect services again.

“No follow-up was conducted previously. We now revisit every three days until we ensure that payment has been made.”

He praised DA politicians for spotting this oversight, saying, “It wasn’t the officials who caught it.”

AG wants to see a ‘culture change’

The AG is advocating for a culture shift within Tshwane to improve financial controls and audit results. She stated that “we are witnessing a gradual change,” but stressed that significant work still lies ahead.

Cameron-Ellis affirmed that a formal process is underway to transform the organization’s culture in Tshwane but cautioned that it would require time.

“It demands discipline, discipline, discipline, along with necessary system changes, and accountability must be enforced. This will take at least another five years.”

He acknowledged that senior management is on the right path and values accountability, but that progress will be gradual.

“As I mentioned last year, structural changes are essential, meaning the city must reduce its workforce,” he opined.

This cannot be achieved solely through natural attrition.

“It’s essential to retain the right personnel and eliminate inefficiencies.”

DA not happy

The DA expressed discontent with the city’s failure to achieve an unqualified audit “despite extensive and diligent efforts towards this goal.”

The party argues that the culture change endorsed by the AG “will only be realized if decisive actions are taken against officials guilty of misusing taxpayer funds.”

Read:

The DA has also pointed out “concerning practices by the current government that suggest a lack of commitment to this cultural shift.”

According to the DA, these practices include:

• An unprovoked attack on the city manager by the EFF;
• Failure to schedule meetings for the oversight committee responsible for investigating the misappropriation of public funds;
• Neglect in organizing meetings for the executive audit tracking committee established by Brink to oversee accountability regarding audit results.

Metro still plotted as ‘Doing harm’

Councillor Lex Middelberg of the Republican Congress of Tshwane, also a member of the financial oversight committee, accused the DA of trying to “downplay the alarming outcomes as a work in progress.”

“Throughout the year, the coalition government promoted narratives that finances were improving under Brink’s leadership and Councillor [Jacqui] Uys as MMC for Finance,” he asserted.

“The AG’s findings undermine that narrative,” he added.

“In her presentation, she notably stated that: Based on the 2023/24 audit results, the municipality is still categorized as ‘Doing harm’.

“The municipality shows no progress compared to the previous year.”

Read: Municipal ‘Get out of debt free’ cards left standing … [Jun 2024]

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