A-G audit flags finance irregularities by metros
STAFF raking in millions of rands for doing nothing, being appointed to non-existent positions, failing to pay employees’ tax and comply with other statutory requirements, as well as companies being paid for not rendering services.
These are among the findings made by Auditor-general Tsakani Maluleke in her 2021/22 annual audit of the finances of the country’s metropolitan municipalities. After the release of Maluleke’s report into the City of Tshwane’s finances, which has been blamed for this week’s resignation of mayor Randall Williams, it has now emerged that some of the other seven metropolitan municipalities have also seen the A-G identify material irregularities.
In 2021/22, the Mangaung Metro incurred a net loss of almost R870 million, which was just over R20m in the previous financial year.
According to Maluleke, the municipality’s current liabilities exceeded its total assets by over R485m, which were R168m in 2021.
“The municipality was experiencing labour difficulties and vacancies in key positions (91%) and the average payment term of suppliers was 165 days,” reads the A-G’S report dated January 26.
Mangaung also owed about R569m for bulk water supplies, which Maluleke described as long overdue. She warned that these events or conditions and other matters indicate that a material uncertainty exists that may cast significant doubt on the municipality’s ability to continue as a going concern.
The Free State capital also incurred nearly R1.5 billion in unauthorised expenditure due to overspending of the budget. Fruitless and wasteful expenditure stood at more than R93.6m, mainly due to payments made on key service delivery projects that were not delivered.
Maluleke revealed that the Hawks were investigating allegations that VIP bodyguards allocated to Mangaung’s political office-bearers between 2017 and 2021 were paid excessive overtime. The municipality has declared irregular expenditure payments made to political staff appointed into positions that were either not vacant or provided for in its organogram in January and February last year.
Mangaung’s municipal public accounts committee has not finalised its report on the irregular appointment and payment of political staff.
Between November 2019 and October 2020, the City of Tshwane paid over R88.4m in salaries to employees for work not done due to proper recruitment processes not being followed, leading to non-compliance with the Municipal Finance Management Act.
Disciplinary action has started against the implicated officials after the City of Tshwane instituted a forensic investigation to identify the staff who paid the salaries without any work being performed, and the possibility of recovering the funds.
In addition, Mangaung withheld pay-as-you-earn from its employees’ salaries but under-declared the amount paid to Sars in contravention of the Income Tax Act, which led to a penalty of about R1.1m as well as R627 282 in interest charged by Sars.
Sars later waived the penalties, with the responsible official subjected to an internal disciplinary process and the matter was resolved, according to Maluleke’s report. The City of Johannesburg was also fined R6.3m by Sars for underpaying its employees’ tax for gratuities, leave and bonus payments to the value of R9.2m between 2014 and 2017 after it incorrectly treated them as severance benefit payments.