Another qualified AG opinion earns past DA tenure criticism

The Tshwane metro is facing another hurdle, as it failed to secure an unqualified audit opinion for the second consecutive year, leading to criticism of the previous administration.

As things stand the city has obtained a qualified opinion, with improvements for the 2023/24 financial year, however the Auditor-General report points out that a change of organisational culture in Tshwane has not yet been achieved and irregular expenditure had sky-rocketed.

– An unqualified opinion with findings means that the auditee was able to produce quality financial statements but struggled to produce quality performance reports and/or comply with key legislation.

– A qualified opinion with findings means that the auditee’s financial statements contained material misstatements that were not corrected before publishing.

According to an article published by MoneyWeb, Tshwane incurred R2.3-billion in irregular expenditure in 2023/24, up from R1.9-billion in the previous financial year.

Fruitless and wasteful expenditure remained largely unchanged at R347-million.

These staggering figures paint a grim picture of the metro’s persistent financial mismanagement.

The AG report also reveals that Tshwane incurred significant distribution losses for water of R223-million and R1.6-billion for electricity.

A detailed audit report is expected to be tabled in council on January 30.

DA spokesperson for finance Jacqui Uys expressed her disappointed in the failure of the city to obtain an unqualified audit for the 2023/24 financial year, despite serious and diligent work being done towards this objective.

Uys said after clearing two of the three obstacles to an unqualified audit last year, the city has not been able to persuade the AG that the valuation of property, plant and equipment in its financial statements is credible.

“While the audit report does indicate significant improvement of governance and accountability, the AG points out that a change of organisational culture in Tshwane has not yet been achieved.”

She said all of the 12 material irregularities discovered in previous financial years have been resolved while R11-million in financial losses were prevented, R7-million is in the process of recovery, and R50-million has been recovered.

“But the AG has identified the theft of water and electricity as a new material irregularity, pointing to the prevalence of criminality overwhelming the capacity of the municipality and law enforcement agencies.”

Uys said there is no doubt that internal weaknesses, including corruption inside Tshwane’s revenue management division, enable the theft of services to continue undeterred.

Tshwane metro said it has prepared a detailed remedial audit action plan with the aim of improving audit issues flagged by the AG.

MMC for Finance Eugene Modise said as a starting point the city conducted a city-wide audit workshop on December 19.

“The purpose of the workshop was to unpack the major qualification areas with a view of thoroughly dissecting the root causes and developing action plans at addressing the findings from a root cause perspective.”

Modise said an itemised quantification on the value of assets is currently underway.

This is after the AG findings reported that valuation of property, plant and equipment in its financial statements is credible.

Modise said this process aims to attach a fair value to all property, plant, and equipment inherited through the amalgamation process.

“The focus is on roads, electricity and sanitation infrastructure which make up a significant portion of the misstatement.

“An interim set of financial statements will be prepared and submitted to the Auditor-General before the end of March 2025 for scrutiny.”

He said this is a process which will assist in obtaining validation from the AG that the mitigation plan has extensively covered the shortcomings which had been identified.

Modise added that the major obstacle is in reference to the lack of sufficient and credible valuation of assets which were inherited from the amalgamation process in the formation of the City of Tshwane.

He said the metro is committed to ensuring improvements in governance and accountability.

“Clear timelines and responsible individuals have been attached to all findings on the action plan. Accountability and transparency will be a major point of focus from all governance structures which have been established by the metro.”

Other political parties have criticised ousted former mayor Cilliers Brink’s tenure as a failure and cause of the qualified opinion.

Brink was ousted in September in a vote of no confidence.

GOOD Party secretary general Brett Herron said his party notes the findings AG for the 2023/24 year, DA mayor Cilliers Brink’s last full term of office.

Brink was mayor of Tshwane from March 2023 to September 2024 while the AG’s 2023/24 report audits the period from July 1, 2023 to June 30, 2024.

Herron said the AG’s report is quoted as finding that Brink’s administration:

– Had received another qualified audit opinion
– Had increased unauthorised expenditure to a whopping R2.1 billion, up from R423 million the previous year;
– Had increased irregular expenditure to R2.3 billion, up from R1.9 billion the previous year;
– That, although a target of just 550m of new sewerage pipes was set for the 2023/24 year, not a single metre was laid;
– That only 15% of reported pothole complaints were resolved within “standard municipal response time”;

He said the AG is quoted as reporting that there was “overall stagnation” and that the outcome of the audit was a testament to an ineffective action plan being implemented by Brink’s administration.

“GOOD agrees with the AG that a further qualified audit opinion finding against the administration of the former DA mayor Brink, is indeed testament of their turnaround plans being ineffective.”

He said further evidence is the reported R4.4 billion of irregular and unauthorised expenditure for the July 2023 to June 2024 period.

“Given these very poor audit result outcomes and findings from the Auditor General, GOOD is reassured of its decision to support a leadership change in September 2024 that is already starting to yield results for Tshwane.”

Herron said following years of poor audit outcomes and failing service delivery under the DA leadership, GOOD in September 2024 supported a motion to remove mayor Brink and instal Dr Nasiphi Moya, from ActionSA, as the new mayor.

“Since this time, the mayor and her leadership team, including GOOD councillor Sarah Mabotsa, a property professional, have been visiting communities across the widespread metro to encourage residents to pay their outstanding rates [municipal bills] and to comply with relevant city bylaws or face the consequences.”

Herron said these actions have already increased revenue collection in Tshwane, alleviating a key concern of the AG regarding declining revenue collection.

GOOD awaits the final report from the AG, which will be tabled on January 30 before commenting further.

Republican Conference of Tshwane councillor Lex Middelberg said the AG report shows that the overall audit outcomes for Tshwane have stagnated compared to the prior financial years.

He said the city failed to meet its objectives while the reliability and usefulness of its performance reports were wanting.

“Pre-determined objectives of the city stagnated in the year and performance reports produced by the city were found to be concerning with material findings regarding their reliability and usefulness.”

He said compliance also stagnated because of ineffective executive control and where standard operating procedures were documented and in place, they were not adhered to.

Middelberg said this audit is damning of the legacy of the former mayor, Brink and his Finance MMC, Uys.

“The premise for Brink’s continued mayoralty was that the city’s finances was (sic) fast improving with actual financial results on the horizon. According to the AG’s dispassionate presentation, that narrative was pure fiction,’ he said.

He added that in an apparent attempt to manage the messaging of these worse than expected audit outcomes, the DA’s finance shadow team put out a statement highlighting alleged audit improvements over the year and minimising the deteriorating outcomes pointed out by the AG as work in progress.

“That statement is deliberately misleading. The AG’s presentation is unambiguous that overall audit outcomes have stagnated. The few improvements over the year is (sic) by far outweighed by the regression in many more other areas.”

The AG identified five root causes for the city’s failure – both in accounting and performance. All five speak to the weak leadership of the former coalition government’s executive team, including:

– A lack of Standard Operating Procedures (SOP)s;

– A lack of record management;

– The absence of any internal control culture;

– The inadequate capacity and competence; and,

– The failure of governance and oversight.

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