AUDITOR-General Tsakani Maluleke has criticised two West Rand, Gauteng, local municipalities after finding that they were unable to properly account for hundreds of millions of rand they spent in the 2023/24 financial year.
Maluleke found that Mogale City in Krugersdorp incurred over R615.54 million in irregular expenditure and failed to take reasonable steps to prevent the wastage.
The irregular expenditure was caused by non-compliance with supply chain management regulations.
In addition, the financial statements submitted to Maluleke’s office for auditing were not prepared in all material respects in accordance with the requirements of the Municipal Finance Management Act (MFMA).
”Material misstatements of service charges, property, plant and equipment, receivables from non-exchange transactions, receivables from exchange transactions, employee-related costs, cash flow statement, statement of changes in net assets, financial instruments (and) segment reporting,” reads the Mogale City report.
And prior adjustments identified by the auditors in the submitted financial statements were subsequently corrected and the municipality received an unqualified audit opinion.
The allowance for impairment of receivables in non-exchange transactions was nearly R588m as a result of the recoverable monies owed to the municipality from property rates and traffic fines revenue.
Maluleke’s Mogale City report also reveals that receivables from the exchange transaction balance have been significantly impaired, with the municipality’s impairment from exchange transactions if nearly R2.5 billion as a result of the irrecoverable monies owed to the council from service charges and other revenue.
Merafong City in Carletonville received a qualified audit opinion after Maluleke uncovered that the municipality estimated the consumption on service charges for electricity, water, sewer and sanitation to bill clients, resulting in consumption utilised to bill customers being inaccurate.
”I was unable to determine the impact on the service charges amount of R806.52m. Consequently, I was unable to determine the impact on consumer debtors from exchange stated as R216m, inventory consumed stated R353.6m … water and electricity losses stated at R150.4m and R222.5m, respectively,” the Merafong City audit report stated.
The municipality has allowed for the impairment of consumer debtors from non-exchange transaction of R2.66bn as a result of the irrecoverable monies owed to the municipality from property rates and penalties revenue.
Other material impairment losses of about R50.7m were incurred as a result of impairment of property, plant and equipment.
The municipality also did not take reasonable steps to prevent irregular expenditure of R209.25m as required by the MFMA and the spending was caused by the contravention of procurement policies.
Merafong City also incurred and failed to prevent unauthorised expenditure of more than R1.03bn also in contravention of the act and the majority of it was caused by overspending on the municipality’s approved budget.
The municipality also failed to investigate irregular, fruitless and wasteful expenditure to determine if any person is liable as required by the MFMA.
According to the report, Merafong City failed to review work done by consultants, which resulted in over R1.03m in payments for work not done and warned that if the expenditure is not recovered it will result in a material financial loss.