31 January 2018
Full Council Decisions
EThekwini Municipality’s Annual Report for the 2016/17 financial year was noted at a Full Council meeting held today, 31 January on the basis that it be submitted for public participation in February 2018.
A presentation of the findings of the report for the City and its Municipal entities was made by the Auditor-General South Africa (AG). The City achieved an unqualified audit report.
Futhi Mhlongo from the office of the Auditor-General South Africa, in her presentation, said the AG exists to strengthen South Africa’s democracy by enabling oversight, accountability and governance in the public sector through auditing, and thereby building public confidence.
She said their annual audit examines three areas namely:
• Fair presentation and absence of significant misstatements in financial statements,
• Reliable and credible performance information for predetermined objectives and,
• Compliance with all laws and regulations governing financial matters.
Mhlongo said emphasis on matters with regard to the Municipality’s performance includes the uncertainty relating to the future outcome of litigation, adding that this however does not impact on the AG audit outcome opinion.
Elaborating on this point, she said a number of legal claims have been lodged against the Municipality as disclosed in note 39 to the consolidated and separate financial statements. The ultimate outcomes of these claims was not determinable at year-end and no provision for any liability that may result was made in the consolidated and separate financial statements.
Commenting on material water losses and debt impairments, she said the Municipality recognised a provision for bad debts of R3.31 billion compared to R3.01 billion in 2016 on consumer debts, as the recoverability of these amounts were doubtful. She said an amount of R904.1 million that related to the 2016 provision was written off as irrecoverable during the year.
She said material water losses of 108.83 million kilolitres (compared to 132.51 million kilolitres in 2016) resulted in revenue losses of R645.90 million, compared to R710.90 million in 2016, as a result of illegal connections and deteriorating infrastructure. Mhlongo said there has been a reduction in this regard and she expected it to be further reduced.
Outlining predetermined objectives of selected plans for auditing, the City achieved no material findings on the usefulness and reliability of Plan 3 which is creating a quality living environment, Plan 8 which is a financially accountable and sustainable City and Plan 23 (sub plan of Plan 2) relating to Moses Mabhida Stadium.
Regarding expenditure management, the AG report highlighted irregular expenditure of R514,8 million, of which the majority of the irregular expenditure was caused by the Municipality not complying with supply chain management (SCM) regulation.
Elaborating on this finding, Deputy City Manager for the Finance Cluster Krish Kumar said this was a result of a company tendering for a job as a close corporation and then registering as a Pty (Ltd) company. The award was made to the CC company which had duly registered to be a Pty (Ltd) and as a result there was a discrepancy with the tax clearance certificate of the company which was raised as an irregular expenditure in the AG’s report.
On the status of key control, the AG found eThekwini Municipality seeing improvement in effective leadership, oversight responsibility, policies and procedures and audit action plans across financial statements, performance reporting and compliance with legislation.
Areas of improvement in financial and performance management include proper record keeping and daily and monthly controls. With regards to governance, the City has also improved in terms of risk management, internal audit and the audit committee across financial statements performance reporting and compliance with legislation.
Mhlongo also highlighted key areas for attention in financial management, procurement and contract management, compliance management, HR management and IT management.
In her presentation she said management have to a large extent implemented the necessary controls and processes to address matters raised in the action plan. However, certain control initiatives over the areas of consequence management, effective procurement planning and compliance monitoring over bid documentation by certain departments are still in progress.
She said this has resulted in new and repeat audit findings which requires follow up action.
She also added that Council, through the Municipal Public Accounts Committee have discharged their mandate by providing the necessary oversight in ensuring that significant business and audit risks and audit findings are timeously and appropriately addressed and management are held accountable for their actions.
An update on the progress of commitments made by eThekwini Mayor Zandile Gumede and the Accounting Officer was also presented. This includes procurement and contact management to intensify oversight over the controls, processes and policies pertaining to the awarding of Section 36 contracts, Section 116(3) extensions arising from inadequate contract monitoring and planning.
Commitment was also made with regard to consequence management with a zero tolerance approach to irregular expenditure, by ensuring appropriate disciplinary action arising from investigations are taken against councillors and employees who transacted with the Municipality and/or have breached Supply Chain Management processes.
Further commitments include filling long-standing critical vacancies by the end of June 2018 and monitoring progress with the design and implementation of IT governance framework and IT controls.
Mayor Gumede welcomed the report saying it provides clarity on where the City needs to focus its efforts.
She emphasised that the report was done within a specified timeframe and a number of issues that were raised have been addressed. This included the hiring of senior management.
“We have implemented many measures which will reflect in the next report by the AG.”
Kumar said the City achieved an unqualified audit adding that good progress has been made in several areas.
He said irregular expenditure has been reduced with no further major findings apart from the one SCM issue raised.
“From that perspective we have done well,” Kumar said.
EThekwini Mayor Zandile Gumede reiterated that section 21 schools that had outstanding utility bills would not automatically be disconnected.
She was speaking at a Full Council meeting today, 31 January where the Mid-Year Budget and Performance Assessment Report for the period 31 December 2017 was tabled.
The report outlined outstanding government debt which included section 21 schools who have outstanding debt of R80 365 730.
While the report, which was initially tabled at an Executive Committee (Exco) meeting yesterday, 30 January, recommended that disconnection notices be sent to the affected schools with disconnection being effected at the schools - a decision was taken to send the notices but suspend any disconnections.
Speaking at the Full Council meeting, Mayor Gumede said opposition parties were grandstanding and distorting the facts saying electricity at schools would be disconnected.
“There is no way the Municipality is saying schools will be disconnected. I reiterate what I said yesterday (at Exco) that while we won’t stand in the way of officials doing their work they must send notices so we can see in reports what the situation is. Those schools who receive the disconnection notices are welcome to come the Municipality to make payment arrangements. You have to pay for services rendered, it is very important,” she said.
Mayor Gumede said as the mayor she will not allow schools in poor communities to have their electricity disconnected.
“They must come to us and make payment arrangements so that we can continue to provide services. If anyone alleges electricity has been disconnected at a school let us know in writing so we can investigate. We will always liaise with principals,” she said.
Chairperson of the Human Settlements and Infrastructure Committee Councillor Mondli Mthembu welcomed the report and reiterated what Mayor Gumede had said.
“Mayor Gumede did not say electricity must be disconnected at schools. She said notices of disconnection must be sent as processes have to be followed,” he added.
The replacement of vehicles in the City Fleet will assist to strengthen the City’s service delivery efforts.
A report outlining the purchasing of new vehicles for the City was tabled at a Full Council meeting today, 31 January.
The report stated that the replacement of vehicles is critical to provide efficiency in service delivery, reduction in repairs and maintenance costs, reduction in fuel consumption, hiring costs as well as the additional vehicles assisting with safety and security.
Vehicles will be replaced in the City Fleet which will cover services required for the provision of water, cleansing and solid waste, electricity, fire and emergency services and small plant operators among others.
This will result in R190.4 million being identified in the 2017/18 financial year for the replacement of critical vehicle requirements to achieve efficiency in the provision of service delivery to local communities.
Chairperson of the Human Settlements and Infrastructure Committee Councillor Mondli Mthembu said it was important to replace vehicles as it affects service delivery.
He said the report initially requested funding for three years, which was amended to one year so that the Executive Committee could review the matter annually.
Issued by eThekwini Municipality’s Head of Communications, Tozi Mthethwa.
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