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Third consecutive NMB qualified audit shock

By

Dear MyPE

The Democratic Alliance notes with extreme concern the fact that the Auditor General has expressed a third consecutive qualified audit opinion for the NMB municipality. There are a number of reasons for this and it is our considered opinion that the situation is unlikely to change. It is incumbent on ourselves as the official opposition to present the public with the unvarnished truth as to the extent of the challenges that face our city.

Dealing specifically with the Mid-Term Budget and Performance Assessment, Audit Committee Report and the audit report of the Auditor-General for the year ending 30 June 2014, the following critical areas were raised – Unauthorised, irregular, fruitless and wasteful expenditure has seen a massive increase from R756,7 million to R1,523 billion. This is based on the finding that the municipality “did not have adequate systems in place to disclose and identify irregular expenditure”.

Alarmingly, water losses surged to R329,1 million, an significant increase of R120,7 million over the previous financial year. One will recall the eagerness with which the metro were pursuing both water restrictions AND tariff increases late last year which was vehemently resisted by the DA. Electricity losses increased as well to a record loss of R234,7 million. Empty promises to eradicate the bucket system again came to nothing with barely a cent of the small budget set aside spent to improve the lives of these long suffering residents.

In spite of the critical state of our crumbling city infrastructure and a rapidly growing repair and maintenance backlog, the metro was only able to achieve an embarrassing 35.9% spend against the approved capital budget by the end of last year.

Supply chain management came in for fierce criticism with numerous matters being reported all pointing toward a free for all where many staff members as well as friends and family members of staff members were proven to be involved in municipal tenders in contravention of the Municipal Finance Management Act (MFMA).
In addition, bid adjudications were not always done by committees nor were bids always evaluated by the bid evaluation committees.

In the area of Budget and Expenditure Management – expenditure was incurred in excess of the approved budget. An adequate management, accounting and information system was not in place as required by the MFMA and reasonable steps were not taken to prevent unauthorised, irregular, fruitless and wasteful expenditure.

A pattern continues of a frightening lack of accountability causing the AG to be particularly harsh in stating that unauthorised, irregular, fruitless and wasteful expenditure was not investigated to determine if any person is liable for the expenditure. In addition, such expenditure was “not always recovered” as required by law. Certain cases of such expenditure which could have constituted a criminal offence were not reported by the accounting officer to the SAPS as required by law.

Appropriate action was not taken against officials and role players where investigations proved fraud, corruption, favouritism, unfair or irregular practices or failure to comply with the supply chain management system as is legally required.

The AG goes on to claim that allegations of fraud, corruption, favouritism, unfair or irregular practices were not investigated by the accounting officer (Municipal Manager). Investigations were not instituted into all allegations of misconduct against municipal officials. When such investigations warranted, disciplinary proceedings were not instituted against the officials involved and cases of financial misconduct not always reported to the police.

In summarising the AG concludes that “leadership have not instituted all the disciplines necessary to enable effective oversight and monitoring”, thus “not setting the correct tone or building a high performance environment that promotes accountability.

Many of the same findings are to be found in the metro Audit Committee report including concerning comments of a lack of commitment by management to implement action plans, little or no consequence management is evident for poor performance and transgressions, required daily and monthly financial disciplines are not consistently implemented and monitored, inadequate document and records management.

The report concludes with the following specific “serious concerns” of a qualified audit for the past three years with stagnant or little progress in addressing risk areas, six forensic reports for investigations submitted to the municipal manager with little or no action taken to date, poor attendance of Audit Committee meetings by Executive Directors and Audit Committee meetings not being effective because departmental representatives are unprepared.

This horror show was presented to a full sitting of council on 22 January. In spite of a significant amount of spin and promises of better things to come, a picture emerges of an institution that continues to be riddled with waste, inefficiencies and a virtual absence of any meaningful accountability or consequence for wrong doing.

Continued lack of direction, stability and strong leadership has a significant effect on the entire city economy. It negatively affects business and investor confidence and desperately needed jobs are simply not being created quickly enough as a result, leaving our city adrift on a sea of corruption and mismanagement. The good news though is that things can be different, there can be a good story to tell.

Regards

Dean Biddulph

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Port Elizabethan

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