Metro gets unqualified AG report

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Mangaung Metro Municipality has received an unqualified audit report for the year 2015/16. During a special council meeting held in Bloemfontein last Tuesday, the Auditor-General revealed that the consolidated financial statements of the metro remain stagnant at financially unqualified, with findings.
The AG also indicated that there has been an increase in fruitless and wasteful expenditure. Mangaung Metro Major, Olly Mlamleli, said the municipality is working towards getting a clean audit.
“What is interesting, though, and makes me feel good, is the decrease in unauthorised expenditure and irregular expenditure. Therefore, it means if we can deal with this fruitless expenditure, we’ll be near to a clean audit,” she said.
The AG added that a decrease in unauthorised expenditure has incurred but the cumulative balance is still significant at R2,7 billion. While incurred irregular expenditure has decreased, the cumulative unresolved balance is still significant at R312 million.
The report revealed that penalties and interest for late payments to creditors account for 75% of the fruitless and wasteful expenditure in the metro. The fact that the municipality’s payment period for its creditors is 78 days while it’s 99 days for its debtors, means it pays its debts before receiving payment from those that owe the municipality.
The AG also looked at the key projects currently being conducted by the municipality. With regard to the heavy rehabilitation of Kenneth Kaunda Road, the AG found that the project is behind schedule and possible overspending could occur in the next financial year.
With regard to the upgrading of Maphisa Road, which is linked to the Integrated Public Transport Network grant, it was found that the project is behind schedule but still on budget. However, access of residents living along the road has been identified as a risk as the road is planned on the Bus Rapid Transit (BRT) route. The metro is still in a process of finalising the BRT planning and feasibility studies to access all of the available grant money.
The north-eastern water treatment project is the metro’s infrastructure project with the highest value. Phase 1 has been completed on budget and Phase 2 is currently in progress. The AG found that no quality risks had been identified, the plant is in a testing phase and operating. Operations were observed by the audit team and reputable contractor was used.
The AG reported that the financial health of the metro is deteriorating, with municipal finances being the highest contributor. After 3 years of generating operating surpluses, the metro has incurred a significant deficit. Revenue has increased by 5.5% in 2015-16 whilst expenditure increased by 8.7%, and material expenditure that is not budgeted for, is acquired.
The municipality wrote off a total of R264 million in debt, while R146 million was lost due to water loss. Electricity distribution losses amounted to R180 million.
The AG report has been referred to the Municipal Public Accounts Committee (MPAC), who will discuss it and make recommendations in the next 60 days. – Seithati Semenokane