Housing in Southern Africa March 2015

News

R744m unauthorised spending A forensic investigation into R744munauthorisedexpenditure by the Nelson Mandela Bay Metropolitan Municipality for the 2013/2014 financial year has been requested by the Shadow Minister of Cooperative Governance and Traditional Affairs, Kevin Mileham.

L ast year, the Auditor General stated that the amount of R744 million might not be the full unauthorised expenditure incurred. Mayor Benson Fihla has requested that the council write-off R744 mil- lion (R743 928 574) of unauthorised expenditure. “A forensic audit needs to be done to determine the full extent of this

from those who acted in contraven- tion of the act. In addition, the MFMA provides for disciplinary proceedings to be initiated into any official or political office bearer responsible for permitting unauthorised or irregular expenditure, whether deliberately or negligently. It is incumbent on the council to utilise these powers at all times. ■ • Average settlement period of creditors at 51 days is in contra- vention of section 65 (2)(e) of the Municipal Financial Management Act. This worsens to 104 days when the broader view of ‘trade creditors’ is considered; No reports submitted to council on irregular and unauthorised expen- diture, despite a legal obligation to investigate and report on the same; • The failure to recover the illegal and irregular expenditure onward committees from the municipal councillors who voted in favour of this illegal activity; • The failure to maintain an ad- equate municipal asset register; • The expenditure of approximately R100 million on Tshwane House, with nothing tangible to show for it; • The inability of the City to meet its financial obligations (Current ratio of 0.72:1 and Acid Test ratio of 0.66:1). This implies that the City is technically bankrupt; and the failure of the auditor general to qualify the annual financial state- ments Despite the Provincial Auditor-Gen- eral's concerns the City received an ‘unqualified audit’. ■

financial mismanagement, so that those responsible can be held to account,” says Mileham. He explains that it is vital that state officials begin to take the rights steps to procure finance for projects in accordance with the regulations and prescripts. Section 32 (2) of the Municipal Finan- cial Management Act (MFMA) allows the metro council to recover funds

City on brink of bankruptcy

The City of Tshwane’s financial statements for the 2013/14 financial year shows that the City is on the verge of bankruptcy. Considering that debts are not being collected, the DA projects that the City will run out of operating cash says Kevin Mikeham, Shadow Minister of Cooperative Governance and Traditional Affairs.

H e says, “We have written to the Portfolio Chairperson on Cooperative Governance and Traditional Affairs (COGTA) request- ing that the Gauteng COGTA MEC, City of Tshwane Municipal Manager and Chief Financial Officer and the Provincial Auditor-General of South Africa account for the discrepancies.” Some of the major concerns in- clude: • The increase in unauthorised ex-

penditure to R1,2 billion; • The increase in irregular expendi- ture to R451 million; • The significant restatement in the prior year’s financial statements (amounting to R705 million). A further restatement to correct er- rors amounted to R57 million; • A decreasing collection rate of mu- nicipal debts, and an impairment of consumer debts of R1.4 billion;

March 2015