Auditor’s report reveals irregularities

PARRA (Port Alfred Ratepayers’ & Residents’ Association) represent the interests of those living, working and those who own property in Port Alfred, Ndlambe, Stationhill and Thornhill.

We act as a watchdog over the interests of our town and one of the core areas of focus is the spending by Ndlambe Municipality.

We received the latest Auditor-General’s report this past week for the year ending 30 June 2021. Some of the findings in the report are of great concern to PARRA.

The full report can be seen on our website at www.parra.org.za/latestnews. See some of the extracts below which we would like to highlight for our residents and ratepayers attention.

The financial statements submitted for auditing were not prepared in all material aspects in accordance with the requirements of section 122(1) of the MFMA.

Material misstatements of disclosure items identified by the auditors in the submitted financial statements were subsequently corrected and the supporting records provided subsequently, but the uncorrected material misstatements and supporting records that could not be provided resulted in the financial statements receiving a qualified audit opinion.

Consequence Management The irregular expenditure incurred by Ndlambe LM was not investigated to determine if any person is liable for the expenditure as required by section 32(2)(b) of the MFMA.

Expenditure Management Persons in the service of the Ndlambe LM who had private or business interests in contracts awarded to Ndlambe LM failed to disclose such interest, in contravention of the SCK regulation 46(2)(e)

Internal Control Deficiencies - Leadership did not adequately discharge its responsibility of oversight over the implementation and monitoring of internal controls to ensure sound financial and compliance with legislation.

Consequently the correct tone was not set to ensure that all municipal officials were held accountable for their actions through consequence management. Management did not effectively review and monitor financial reporting and compliance with laws and regulations. Record keeping remains a challenge.

Control over daily and monthly processing and reconciling of revenue transactions with respect to free basic services were not properly implemented. Consumer households received these benefits when the municipality had not sufficiently maintained record confirming their eligibility terms of the indigent policy.

The impaired functioning of the internal audit unit greatly affected the effectiveness of the audit committee.

Investigations were conducted and finalised relating to fraudulent qualifications of employees in the financial division and outstanding monies not banked by the Traffic Department.

Material losses for water and electricity are as follows.

Water losses amounted to R17.4m which amounts to 40% of total water purchased. Losses were due to physical losses, leaks, burst pipes, reservoir overflows, metering inefficiencies, meter faults and unauthorised and unmetered consumption.

Electricity losses amounted to R6.5m which amounts to 13.3% of total electricity. These losses were mainly due to MV and LV losses in switchgear, overhead lines obsolete aluminium lines, underground cables and transformers.

Furthermore losses are attributable to metering meter reading losses and tampering of electricity.

Impairments of R45.6m relating to receivables from nonexchange and R93m relating to receivables from non-exchange transactions incurred as a result of irrecoverable debtors.

Reasonable steps were not taken to prevent irregular expenditure amounting to R187.5m. Unauthorised expenditure amounting to R33.2m was caused by overspending of the budget per department on cash and noncash items.

Ndlambe LM do not have proper systems in place to confirm the indigent status of the consumers who were not billed for service charges.

I was unable to determine whether any adjustments were required to service charges of revenue of R149.6m (in 2020 it was R137.7m).

This report is set to be heard and discussed at the Ndlambe LM Council Meeting on 29 March 2022 at 10am at the Council Chambers. PARRA will attend this event.

PARRA has also been provided with Ndlambe LM “Budget Related Policies 2022/2023” document and is in the process of reviewing. Mr Shaun Burrow (head of our Financial Management Portfolio) and Mr Dawie van Wyk (Chairman of PARRA) have arranged with the Finance Department to have monthly meetings to discuss expenditure.

We are working hard for you and if you would like to support us, please consider joining PARRA. Help us hold the Municipality accountable where it not performing and commend it where it is.

We have many community projects we would like to attend to but need funding, resources and skills to make these a reality. Membership forms can be found on our website (www.parra.org.za).

Join us and be part of helping us work together to build a better Port Alfred.