PRESS STATEMENT
 
03/02/2019
 
For Immediate Release
 
Re: EThekwini Municipality Gets Unqualified Audit Report
 
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.
 
  
Please read this confidentiality disclaimer: http://www.durban.gov.za/Pages/edisclaimer.aspx