Major warning for Tshwane

Despite some audit improvements for Gauteng’s major metros, the auditor general (AG) warned that it has doubts that the City of Tshwane can continue as a going concern.

The AG presented its 2022/23 audit outcomes for Gauteng Metropolitan Municipalities to the Standing Committee on Public Accounts on Wednesday (29 January).

The AG said that all the metros had material non-compliance findings, adding, “There is a regression in compliance with legislation”.

However, the City of Tshwane stood out as a significant risk factor.

The City of Tshwane achieved a qualified audit, whereas the City of Johannesburg and the City of Ekhuruleni received unqualified audits with findings. 

While Tshwane had improved from an adverse opinion to a qualified opinion over the year, the AG credits this improvement to the assistance of stakeholders and consultants.

The city did not improve its internal capacity, i.e., competence and resources, or systems. The AG noted significant weaknesses in the metro’s internal controls. 

The AG also warned that the City of Thswane’s financial position may not improve to the point where it can pay creditors on time, threatening its status as a going concern.

The city’s financial health continued to regress in the current year, with worsening solvency and liquidity ratios, the AG said.

Despite reporting a surplus in the current period, its creditor-payment period was 215 days. Debt collection, meanwhile, happened in 60 days, showing a huge mismatch.

Additionally, more is owed to creditors than the cash available at year’s end, and despite spending 97% of its budget, it only achieved 53% of its goals. 

The AG also found that the city’s employees are not capable, productive, or effective at managing the complexity of its issues. It also fails at effective consequence management.

The metro’s host of financial issues is evident in the fact that the city passed an unfunded budget in council, the AG said. While the municipality did have a funding plan to address this, it proved ineffective.

A large contributor to the financial woes has been the revolving door of political leadership in the metro, where politicians have been unable to bring stable leadership to the municipality.

“There is doubt whether the city can continue as a going concern,” the AG said.

Irregularities

The Auditor General flagged a host of material irregularities in the metros that are still weighing on the various cities’ finances.

For Tshwane, these include:

• The overpayment of fuel in February 2019 and June 2020,
• Rooiwal Wastewater Treatment Works operating over capacity without necessary maintenance leading to the long-term release of poor-quality wastewater, and
• Ongoing costs for unused software licenses.

Tshwane contributed more than R3.8 billion to irregular expenditures in the province. 

The AG’s verdict on the City of Johannesburg, meanwhile, was that the audit action plans were not adequately implemented and monitored to address the prior year findings. 

The City of Johannesburg also had a few material irregularities that it needed to address. However, the AG determined that the accounting officer took or is taking appropriate action to address these. 

Five of the material irregularities have been resolved by recovering financial losses, implementing consequence management on affected officials, and improving the internal control environment to avoid the recurrence of the irregularities.

The remaining actions for the three active material irregularities include updating the Group Treasury policy to ensure that investments with branches of foreign banks do not recur, finalising the investigation initiated by the DC board, and recovering the funds from the service provided.