Madibeng’s lack of record-keeping deliberate to hide irregularities

The Auditor-General (AG) has expressed his concern in the 2018-19 audit over the Madibeng municipality’s blatant disregard of his recommendations to investigate fraudulent payments of individuals’ accounts for items such as clothes and cookware, in the previous audit.

AG, Kimi Makwetu, also said the municipality’s “lack of proper record-keeping at times appeared deliberate in order to hide the extent of irregularities.”

The AG said that during the 2017-18 audit, the team identified unauthorised debit orders against the municipality’s bank account indicative of fraudulent activity. The sum total of these debit orders could not be determined due to a lack of documentation and records. “These were used to pay accounts of private individuals for items such as clothing, DSTV and AMC cookware.”

Makwetu said despite reporting this to the mayor, municipal manager and the municipal public accounts committee, “no investigation or action has been taken to stop these transactions or to recover the money from the individuals and safeguard the municipality from continuing to incur financial losses. We remain concerned by this lack of action and the continued disregard of our recommendations.”

The AG report, titled “Not much to go around, yet not the right hands at the till,” found that Madibeng depended on funding like the equitable share allocation and conditional grants to pay operational expenses like salaries and wages of R513.1 million. “Of their total revenue of R1.9 billion, R625 million (33%) was from the equitable share allocation and R233.6 million (12%) from conditional grants.”

At the year-end, Madibeng’s cash reserves were only R89.2 million and their outstanding payables a whopping R.1 billion. “However, this was not the full picture because an overdue loan to the Public Investment Corporation of over R1.1 billion was not included in the financial statements.”

Madibeng’s financial situation further deteriorated with its investment of R31.5 million in VBS Mutual Bank.

The AG also expressed concern that Madibeng’s finance section paid more for consultants than its staff members. “The finance section’s salary cost was R33.6 million for 105 staff members whilst a further R35.4 million was spent on consultants. This is the highest cost of consultants in the province and yet no value was realised due to a lack of proper record-keeping.”

The AG said even provincial treasury staff could not make head or tail of Madibeng’s financial statements due to lack of records and incomplete ledgers and trial balances.

Madibeng has received a disclaimed audit for the fourth consecutive year.