Red flags over city’s audit report

The report, which was released by the auditor-general at a council meeting on Wednesday, 29 January, “cites several issues that cast dark shadows on the state of the municipality’s governance and the material losses it is incurring,” said ward 66 councillor, Duncan Du Bois.

Irregular expenditure amounted to R325,5-million from contracts awarded to suppliers in violation of regulations. City manager, Sibusiso Sithole said significant progress has been made by the municipality to reduce irregular expenditure, which was sitting at R1.3-billion in the 2010/11 financial year and reduced in 2012/13 from R782,5-million in 2011/12.

“What the auditor-general terms ‘significant uncertainties’, referring to objections lodged in terms of the municipal Property Rates Act, amount to R217-million. Losses relating to water and electricity cost the municipality R513-million and R386-million respectively,” said Du Bois.

Most notable is the R1,98-billion in debt payable to the municipality. “These are consumer debtors whose recoverability is doubtful. It was also noted that family members had been awarded contracts by persons in the service of the municipality and that disclosure of those interests had not been made,” said Du Bois.

Sithole said the outstanding debt was of great concern and includes business debt of R654,4-million that is subject to litigation and has been handed over to attorneys. “The amount of R35,6-million owed over 90 days for section 21 schools will be recovered from the Education Department. Other outstanding debt is related to valuation disputes and that matter is being addressed,” said Sithole.

The municipality underspent on its capital budget by R792-million. “This is a deplorable state of affairs as it means that projects that were in budget did not happen. In effect it means the money was lost because it cannot be rolled over into the new financial year. The auditor-general calculated that 32% of planned targets were not achieved,” said Du Bois.

According to the municipality, they are likely to reach their service delivery targets because of an increase in capital expenditure in the first six months of the 2013/14 financial year. The mid-year budget and performance assessment report shows an increase of 38.8%, compared to 27.5% last year.

“The departments have pulled up their socks. We have improved on capital expenditure, which is very good,” said deputy mayor Nomvuzo Shabalala.

According to Du Bois, the fundamentals of the municipality are sound, “what is of real concern is the ability of ratepayers to continue footing the bill for debts and material losses, which never diminish and currently amount to over R3-billion. If even half that debt was pruned or recovered, it would allow for a rates reduction and bring relief to ratepayers while simultaneously serving to incentivise investment in eThekwini.

The municipality aims to achieve a clean audit for the 2013/14 financial year. ‘Operation clean audit’ will be part of the city’s vision to make Durban the most caring and liveable city in Africa. “This must be accompanied by tangible achievements of performance and meeting service delivery targets. There can be no genuine clean audit without service delivery,” said Sithole.

The public may comment on the municipality’s draft annual report for the 2012/2013 financial year, via its website, www.durban.gov.za or at the City Hall, city libraries and Sizakala centres. Closing date for comments is Saturday, 1 March.

– erinh@dbn.caxton.co.za