ANC-run metros collectively incurred R8.4 billion in dubious expenditure

10 April 2015

In a recent reply to a DA parliamentary question Finance Minister, Nhlanhla Nene, has revealed that 7 of the 8 Metropolitan Municipalities in the country collectively incurred R8.4 billion (R8,402,877,343) in dubious expenditure.

This figure is made up of fruitless and wasteful, irregular and unauthorised expenditure. Fruitless and wasteful expenditure alone amounted to R359,3 million.

This wasted money could have been spent on the delivery of quality basic services, dignified housing opportunities and improved health care facilities for the Metro's residents.

The top 5 worst offenders in terms of unauthorised expenditure are:

City of Tshwane: R1,193 billion

Nelson Mandela Bay: R1,016 billion

Mangaung: R892,5 million

Buffalo City: R186,7 million

City of Johannesburg: R53,1 million

Buffalo City and the City of Johannesburg further misspent R1,330 billion and R1,120 billion in irregular expenditure respectively.

This is in stark contrast to the DA-run City of Cape Town with not a cent misspent in unauthorised expenditure. The City of Cape Town only accounted for 0.005% of the total amount of R8, 402 billion incurred by all Metros in fruitless and wasteful, irregular and unauthorised expenditure.

Therefore, I will today write to the Chairperson of the Portfolio Committee on Cooperative Governance and Traditional Affairs, Richard Mdakane, to request that he summon the municipal officials and political office bearers of the top 5 worst offenders to account for the ludicrous amounts incurred during the 2013/14 financial year.

I will also be submitting further parliamentary questions to ascertain what exactly this money was spent on.

This is indicative of a complete failure to implement proper supply chain management processes, and to properly apply the requirements of the MFMA. It is further a complete indictment of the ANC-run metros in their failure to recover these funds.

The DA will continue to demand full accountability from municipal officials and public representatives, and will demand that misappropriated public funds are recovered in terms of section 32 of the MFMA.

Text of parliamentary reply:

NATIONAL ASSEMBLY

QUESTION FOR WRITTEN REPLY

QUESTION NUMBER: 366 [NW394E]

DATE OF PUBLICATION: 20 FEBRUARY 2015

366. Mr K J Mileham (DA) to ask the Minister of Finance:

For each metropolitan municipality, based on the 2013-14 audited annual financial statements, what amount of (a) irregular expenditure, (b) unauthorised expenditure and (c) fruitless and wasteful expenditure was (i) reported, (ii) condoned, (iii) written off in an adjustment budget and (iv) recovered in terms of section 32 of the Local Government: Municipal Finance Management Act, Act 56 of 2003? 

     NW394E

REPLY:

Honorouble Member to note that the MFMA defines irregular expenditure to mean:

a) Expenditure incurred by a municipality or municipal entity in contravention of, or that is not in accordance with a requirement of the Act and which has not been condoned in terms of section 170;

b) Expenditure incurred by a municipality or municipal entity in contravention of or that is not in accordance with a requirement of the Municipal Systems Act and which has not been condoned in terms of that Act;

c) Expenditure incurred by a municipality in contravention of, or that is not in accordance with a requirement of the Public Office Bearers Act, 1998 (Act No 20 of 1998); or

d) Expenditure incurred by a municipality or municipal entity in contravention of, or that is not in accordance with a requirement of the supply chain management policy of the municipality or entity or any of the municipality's by-laws giving effect to such policy, and which has not been condoned in term of such policy or by-law.

The MFMA defines unauthorized expenditure to mean any expenditure incurred by a municipality otherwise than in accordance with section 15 or 11(3) and includes:

a) overspending of the total amount appropriated in the municipality's approved budget;

(b) overspending of the total amount appropriated for a vote in the approved budget;

(c) expenditure from a vote unrelated to the department or functional area covered by the vote;

(d) expenditure of money appropriated for a specific purpose, otherwise than for that specific purpose;

(e) spending of an allocation referred to in paragraph (b), (c) or (d) of the definition of "allocation" otherwise than in accordance with any conditions of the allocation; or

(f) a grant by the municipality otherwise than in accordance with this Act.

The MFMA defines fruitless and wasteful expenditure to mean expenditure that was made in vain and would have been avoided had reasonable care been exercised.

Section 32(2) of the MFMA sets out the procedural matters which should be undertaken by municipalities in handling or treating each of these expenditure types once identified. These procedures include investigations by a council committee who will provide recommendations to council on how to proceed in terms of recovery or writing off the expenditure as irrecoverable. In the case of unauthorized expenditure, section 32(2) also requires that such expenditure be authorized via an adjustment budget.

In addition to the above, section 125(2)(d) also requires municipalities or municipal entities to disclose particulars of any material losses and any material irregular or fruitless and wasteful expenditure, including in the case of a municipality, any material unauthorized expenditure, that occurred during the financial year and whether these are recoverable.

Having provided the applicable legal framework above, the table below reflects the amounts incurred by each metropolitan municipality for unauthorized, irregular, fruitless and wasteful expenditure as reported in their 2013/14 audited Annual Financial Statements as part of the section125(2)(d) of the MFMA disclosure requirements.

Nelson Mandela Bay Metro Council has unauthorized non-cash flow items amounting to R622 551 908 on 22 January 2015, listed below:

R605 508 471 land and building being an old Telkom Park rugby stadium that was demolished after the supplementary valuation roll commissioned was completed and after the 2014 adjustment budget process, and

R17 043 437 consisting mainly of safety and security assets that reached their useful depreciation life span. Due to assessed good condition of the assets, the useful life had extended, resulting in changes in calculations of the depreciation, which was based on the revalued amount.

Unauthorized expenditure of R121 386 666 related to the Public Transport Integrated Systems grant and is being addressed through the Municipal Public Accounts Committee system. The Committee is expected to make recommendations to Council and the Accounting Office, who will then deal with this matter in terms of MFMA section 32.

An amount of R270 777 602 in respect of the 2012/13 financial year was authorized by Council during the 2013/14 financial year.  

Buffalo City Metropolitan Municipality did not table any special adjustment budget to authorize any unauthorized expenditure reported in the 2013/14 AFS.

eThekwini has also not incurred any unauthorized expenditure for the 2013/14 financial year, hence, the adjustment budget which was passed during the month of February 2015 would not have dealt with any unauthorized expenditure.

The City of Cape Town has not incurred any unauthorized expenditure for the 2013/14 financial year, hence, the adjustment budget which was passed during the month of February 2015 would not have dealt with any unauthorized expenditure.

Ekurhuleni Metropolitan Municipality did not table any special adjustment budget to authorize any unauthorized expenditure as none had been incurred for the 2013/14 financial year.

City of Johannesburg Metropolitan Municipality did not table any special adjustment budget to authorize any unauthorized expenditure reported in the 2013/14 AFS. Processes are underway to submit a report to Council to have the unauthorized expenditure identified during the 2013/14 financial year authorized during the special adjustment budget process.

The City of Tshwane did not table any special adjustment budget to authorize any unauthorized expenditure reported in the 2013/14 AFS.

Mangaung Metropolitan Municipality has referred all the identified expenditure to the Council who has referred same to the Municipal Public Accounts Committee for investigation and recommendations. Once recommendations have been received, it will be dealt with via the special adjustment budget process.

ENDS

Statement issued by Kevin Mileham MP, DA Shadow Minister of Cooperative Governance and Traditional Affairs, April 11 2015

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