CITY OF CAPE TOWN GOVERNMENT INCREASES PROFITS BY ANOTHER BILLION RAND AS AUDITOR GENERAL’S REPORT EXPOSES DECLINING GOVERNANCE, POOR FINANCIAL MANAGEMENT AND FALLING DELIVERY
2 FEBRUARY 2020
STATEMENT BY BRETT HERRON, GOOD MEMBER OF WESTERN CAPE PROVINCIAL PARLIAMENT
As Cape Town politicians vote to absorb a bonus R1 billion extra income extracted from residents through high tariffs, the Auditor-General reports R950 million in irregular expenditure.
Last week the City of Cape Town announced an increase of its revenue by almost R1 billion this year.
The overwhelming majority of this bonus income – R745 million of the R981 million – is coming from extra profit from electricity tariffs.
Despite ongoing load-shedding, the City has raised an additional three quarters of a billion Rand profit in electricity sales because the new tariffs are so high.
Overall, the city’s income – the money extracted from its residents – is up, but spending by the City on those residents is down by R4.7 billion in underspending.
In the same week, investigations from the Auditor-General’s office have uncovered almost one billion Rand of irregular expenditure by the city last year.
The Auditor-General’s report makes some alarming findings which expose deteriorating governance, financial mismanagement and declining delivery.
The AG reports that he experienced significant difficulties in obtaining information requested for audit purposes. This was so serious that he regarded as a “key audit matter” to be included in his report.
In his report to the City this week, the AG’s expressed his concern that “reasonable steps were not taken to prevent irregular expenditure” amounting to R950 370 000 (nine hundred and fifty million three hundred and seventy thousand Rand) and that “the majority of irregular expenditure was caused by non-compliance”.
The AG found that some goods and services were procured without inviting competitive bids and that deviations from sourcing competitive bids were approved when it was possible to go out on proper tender.
Contracts were extended or modified without following proper procedures and performance of contractors was not monitored on a monthly basis as is required by legislation.
He even found goods and services, below the value of R200 000, were procured without obtaining required quotations.
Staff and their families are doing business with the City. The AG identified that municipal staff had close family members with private or business interests in contracts with the municipality. These actions contravene the Municipal Systems Act of 2000 and the Public Service Regulations of 2016.
The AG also recorded that there was a failure to ensure appropriate contract management and regular contract performance monitoring.
For example, somehow the city managed to incur expenditure on contracts that had expired.
It seems not even the City’s Legal Services Department were following the law. The AG found that the City’s well-staffed Legal Services Department procured legal services, of external attorneys, without following the required Supply Chain Management regulations.
The AG also fingered “internal control deficiencies”. These included that the City’s financial management system does not prevent payments being made in excess of contract amounts which resulted in expenditure incurred in contravention of the Supply Chain Management regulations
The Mayor and City Manager need to act decisively and consistently. This means that responsible Executive Directors be charged and disciplined.
Employees who illegally do business with the state must face criminal and civil charges.
The results are not surprising to me. Over the past year reports have indicated that Mayor Plato and his government have paralysed the administration with ongoing political infighting and interference in the administration.
Heads should roll. Starting with the Mayor and the Deputy Mayor, who is responsible for Finance.
Ends…