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Council to write off a whopping R465.5M

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At a Special Council meeting held at The Links, St Francis Bay on Tuesday, 10 February 2015 the ANC-led Kouga Council used their single vote majority to bulldoze through a shocking decision in which they resolved to write off no less than a total of R465.5m unauthorized, irregular, fruitless and wasteful expenditure. Unauthorized expenditure totalled R364.9m, fruitless and wasteful expenditure totalled R31.4m and irregular expenditure was R69.1. All these exorbitant expenses and irregular expenditure occurred over a period of 5 to 6 years and it is a clear indication of extremely poor administration.

Although it is a generally accepted practice in local government finances to write off some unavoidable expenses, it is alarming that in a municipality of Kouga’s size the unauthorized, fruitless, wasteful and irregular expenditure reach such huge amounts. When viewing this waste it becomes clear why Ratings Africa, a nationally renowned municipal ratings agency, placed Kouga Municipality the very last on financial sustainability in Eastern Cape municipalities and fourth last in all of South African municipalities.

The unauthorized expenditure includes items like the following:

  • Employee related costs R50.8 m
  • Loss on disposal of property, plant and equipment (2010/11 and 2011/12) R2.287m
  • Over expenditure on budget vote: remuneration of Councillors (2012/13) R211 970

The fruitless and wasteful expenditure included:

  • Interest and penalties R23.7m
  • Payments made to directors while on suspension for more than 6 months R23.7m
  • Legal costs relating to unfair dismissal R1.5m
  • Settlement paid out to previous Municipal Manager R859 401

Irregular expenditure included:

  • Study loans granted to employees contrary to section 164(c) of MFMA R401 371
  • Performance bonuses paid to section 57 employees contrary to legislation R368 665
  • Receipts misappropriated from caravan park R40 000
  • Forensic investigation implicating two officials in SCM irregularities R1.8m
  • Forging of signature for service provider procured for cutting of grass R19 500
  • Tender awarded to business associate of a director of Kouga Municipality R13.8m

It remains an open question how many millions of the above transactions, in which the municipality actually lost money, could have been wisely spent on infrastructural deficiencies and proper service delivery in both poorly developed Kouga areas as well as much needed attention in all of Kouga’s towns.

The DA component in Kouga Council tried in vain to spell out the correct MFMA legislatory, National Treasury (Circular 68) and Regulation 32141 steps to be taken which inter alia require that:

  • After investigation by a Council Committee a full report must be submitted to Council;
  • Grounds must be shown as to why an expenditure should written off;
  • Council can only write off an expenditure when it is certified irrecoverable;
  • Only unauthorized expenditure from the previous financial year may be written off in an adjustment budget.

None of the above legislatory or National Treasury’s regulations were adhered to by the ANC-led Council. The writing off even included those unauthorized and wasteful expenses from previous years that were made by previous Councils and administrations. In the Council agenda the exact wording of a regulation was even changed from “…may only deal with unauthorized expenditure from the previous financial year” (own underlining) to ”…previous financial years”. The legality of this ought to be determined.

Many councillors, officials and the general public present experienced the most heated and explosive debate in the history of Kouga Council’s 16 year existence. The ANC component all voted for the writing off of the expenditures and the DA voted against the recommendations by voting by division i.e. all their names were recorded as a vote against the resolution.

With irrational resolutions like the above it is clear why the Kouga community is demanding a change to the DA at the helm of Kouga Municipality.

Regards

Chimpie Cawood

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