Home News Renosterberg Municipality in dire financial position – AG

Renosterberg Municipality in dire financial position – AG

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Municipality’s non-compliance with supply chain management regulations a cause for concern, says auditor-general

AUDITOR-General Tsakani Maluleke stated that Renosterberg Local Municipality was in a “dire” financial position.

The municipality was placed under administration in September 2020, while R5.5 million was spent on the use of financial reporting consultants.

Income received by the municipality included an equitable share of R24 million and conditional grants of R16.9 million, while the total bank balance at year end was R700 000 according to the unaudited annual financial statements note.

Maluleke said that they were auditing the financial statements of Renosterberg for the past two years.

“The audit outcomes are thus still outstanding. The late submission of financial statements shows a lack of leadership accountability and a blatant disregard for legislative timelines and oversight processes. Without an audit, it is difficult for oversight structures to adequately hold leadership accountable for the municipality’s performance.”

She stated that management could not provide information relating to the procurement processes followed.

“The extent of the municipality’s non-compliance with municipal supply chain management regulations and officials’ inability to apply the principles of fairness, competitiveness, equality and transparency, as enshrined in the Constitution, warrant great scrutiny and should concern the council as well as other oversight departments in the Province.”

She added that management could not quantify the municipality’s irregular expenditure and no consequences were instituted against officials found to have been negligent in their duties.

Maluleke was also concerned that the municipality incurred a deficit for the year of R35.4 million (an increase of R13.8 million from the previous year) and reflected a net current liability position.

“This indicates that the municipality is unable to meet its short-term obligations, showing its dire financial situation.”

She indicated that the municipality was plagued by political and administrative challenges.

“The significant number of vacancies in key management positions also hindered its ability to exercise accountability due to the continuous vacancies and rotation of staff acting in these positions. The positions of municipal manager and chief financial officer have been vacant for a number of years, contributing to the municipality’s instability and lack of accountability.”

She pointed out that the vacancies of key management positions resulted in the municipality being heavily dependent on consultants to prepare the financial statements.

“This situation was made even worse as the money spent on consultants did not yield any return on investment. The municipality also had no audit committee, internal audit unit or municipal public accounts committee.

“Furthermore, the council failed to exercise its duties and enforce accountability within the municipality. This created an environment where staff continued to transgress without any consequence.”

Maluleke said that attempts to intervene, including placing the municipality under administration in September 2020, were not successful.

“The municipal council failed to implement and support the National Treasury’s discretionary financial recovery plan that ran from 2018 until November 2019. The municipality also refused to co-operate with, accept, support or subject itself to monitoring by two other arms of government, namely the National Treasury and the provincial legislature. The municipality requires strong and stable leadership to instil a culture of discipline, consequences and effective preventative controls.”

She encouraged the municipality to permanently appoint a municipal manager and chief financial officer as these positions were currently filled by acting personnel who were seconded to the municipality.