The eThekwini Municipality’s Mayor Zandile Gumede together with the
executive committee are determined that checks and balances are in place to
ensure that the City will achieve a clean audit going forward.

A report back from the Auditor-General of South Africa (AGSA) was delivered
by Charmaine Maharaj at the eThekwini Municipality’s first Full Council
sitting for 2019 on 30 January 2019.

Maharaj reported that the City has received an unqualified report with
findings.

She praised the City‘s entities, uShaka Marine World Theme Park and the
Chief Albert Luthuli International Convention Centre for clean audits for
the fifth consecutive year.

The status of finding of predetermined objects did not have any exceptions,
and the City received thumbs up.

“The consolidated finances of the City continue to be in a healthy state
with strong liquidity and low gearing; however stronger oversight measures
will be implemented to ensure the City will achieve a clean audit, Mayor
Zandile Gumede said.

Findings

The main issues raised in the report emphasised the following:

1. Material debt impairments and loses:

– The provision of bad debt of R4.65 billion (2016-17, R3.31billion)on
consumer debtors

– Material water loses 105.22 million kilo-litres resulted in R714 million
revenue loss due to ageing and deteriorating infrastructure coupled with
illegal connections.

– Material losses of R1.413 million (2016 -17: R830 million) due to write
offs on irrecoverable debts relating to rates, services, housing and sundry
accounts.

2. Fruitless and wasteful expenditure:

– R29.5million accumulated by the City due to payments not being made
within agreed timeframes that resulting in interests being paid to
suppliers.

3. R736.56 m of irregular expenditure due to:

– Non-compliance with supply chain management regulations with respect to
the procurement of goods and services.

– Rejected quotations due to non-compliance by bidders.

Consequence Management

The necessary steps and measures have been put in place to reduce irregular
expenditure, especially the monitoring of compliance.

– All irregular expenditure is reported to ensure transparency.

– All instances of irregular expenditure are investigated by City Integrity
and Investigations Unit (CIIU).

– Based on the outcome of the CIIU report, consequence management will be
instituted.

– In terms of consequence management, and where necessary, disciplinary
action, criminal action, and/or recovery will be instituted.

– The regularization process is also robust and rigorous. It requires sign
off from the relevant Head, Deputy City Manager and vetting by the Bid
Adjudication Committee (BAC). The City Manager also signs off the BAC
minutes.

Following the unqualified opinion from the Auditor General (AG) Mayor
Gumede has vowed that there would be dire consequences as a result of the
irregular expenditure, in excess of 7 00 million, that city has incurred.

“We have got all the capacity and resources that you can think of. I do not
want anything but a clean audit, and we can achieve it provided our
officials pull up their socks and roll up their sleeves and get dirty” said
Gumede.

“KZN Cogta as the Department that plays oversight and support role to all
municipalities issued a directive that no municipality should reward
managers directly responsible should the municipalities’ audit outcomes
regress. As eThekwini we are no exception if we need bonuses we need to get
our ducks in the row.”

The Mayor is resolute that managers who shirk their responsibilities at the
expense of taxpayers and the reputation of the city will be held
accountable. She has instructed CIIU to leave no stone unturned in its
investigation of the irregular expenditure. Depending on the outcomes of
the CIIU report, consequence management would be instituted.

The Chief Audit Executive has been requested to provide a full review of
the internal control processes. A report will be provided to the Audit
Committee, who requested the review, for further discussion and review. The
Auditor-General will also continue to monitor this.

In addition, consequence management will be monitored on a monthly basis
with reports being provided to the Municipal Public Accounts Committee
(MPAC) to monitor progress being made. Instructions have also been issued
to all Deputy City Managers and Heads that all disciplinary cases /
consequence management must be expedited. The Financial Disciplinary Board
will provide oversight and monitor progress in this regard.

Chief Financial Officer, Dr Krish Kumar said, “We have engaged with
Internal Audit on auditing and strengthening SCM processes end-to-end and
improving transversal SCM controls coupled with continuous control
monitoring. We also have controls in place to detect and/or prevent
irregular expenditure. We are committed to continue improving
implementation of controls and any breaches in controls will be followed
with consequence management action as we are still fully committed to
achieving zero irregular expenditure. Our key focus going forward will be
consequence management.”

Secondly, despite the current economic climate and the downgrade in the
sovereign credit rating, the City remarkably managed to maintain its
outstanding credit rating of A1+ in the short-term and AA+ in the long-term
with a stable outlook. As CFO Kumar said, “The municipality continues to be
in a strong financial position underpinned mainly by a good cash collection
rate, growth in revenue, moderate gearing, and strong liquidity. The
history of unqualified audit reports also helped.”

In addition, in terms of the triple bottom line and future sustainability
of the City and the planet, the City is committed to growing the green
economy and reducing its carbon footprint. Alternate sources of energy and
water, as well as electric buses are being explored. The City is committed
to the Paris Agreement target of 1.5% and zero carbon emissions by 2050.
This will help the City achieve its vision of becoming the most caring and
livable City in Africa. As Mayor Gumede said, “Ultimately, we want to
uplift the quality of life of our people socially, environmentally and
economically.”

Issued by eThekwini Municipality.

For more information contact Mayoral Spokesperson Mthunzi Gumede on 071 412
7701 or Municipal Spokesperson Msawakhe Mayisela on 060 966 4220.

Ends.

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