City responds to Auditor General report

The City of Cape Town notes the Auditor General's (AG) General Report on the audit outcomes for the 2010/11 Financial Year, of the Western Cape Local Government, released yesterday 23 July 2012.

It is important to note that the information in this report reflecting the City of Cape Town is a repeat of the AG's report that was released in January this year and refers to the financial year that ended over a year past.

The City received its eighth unqualified audit from the AG. This remains unprecedented in any municipality across the country and points to this administration's commitment to the highest standards of financial management.

The AG found that the City's financial statements were in order and did also not make any adverse findings against the reporting on predetermined objectives. The AG did find that, in a number of instances, there were administrative irregularities in the awarding of tenders - but that did not result in a qualification of the report.

The City of Cape Town noted the AG's findings and has investigated all instances reported by the AG.

All administrative irregularities were referred to the Municipal Public Accounts Committee (MPAC) which, in the interests of fairness and transparency, is headed by an opposition party member. The MPAC found that there was no graft and that the administrative irregularities amounted to minor administrative infringements. The City received fair value in the delivery of the contracts.

However, given our commitment to constant improvements, we have since implemented further corrective measures and created stricter due-diligence processes, which should limit any further irregularities.

In summary, the findings include:

• An award of a contract to a Councillor. Note that this award was in the period before he became a Councillor and he was fully entitled at that stage to bid on a tender. He is not a member of the governing party in Council.
• Awards of tenders to 12 City officials. These cases are being dealt with by the City's Forensic Services Department and all business dealings with the affected staff members were halted. A legal opinion is being sought on further action against the employees. Additional control measures have been put in place to ensure early detection of such bids in the future.
• There was an instance of an award to a supplier on the national list of prohibited suppliers and an award to a supplier that is not on the list, but which has a director who is on the list. Additional control measures have been put in place to remedy any oversight.
• In other cases, awards were made to employees of organs of State. In only one of these cases was the City aware of the situation, but controls failed to prevent the award. In all other cases, the City did not have access to the information that the supplier was a State employee. The City has asked for access to the same database of State employees that is available to the AG.
• In 28 cases out of the 572 contracts concluded in that year, the advertising period was less than the required 30 days because consideration had not been given to the weekend at the end of the advertising period.

The City has taken the AG's comments seriously, despite the minor nature of the findings and has instituted a more comprehensive due-diligence process in the assessment of suppliers to weed out tenders from suppliers who are prohibited from doing business with the City.

Statement issued by Executive Deputy Mayor of Cape Town, Alderman Ian Neilson, July 24 2012

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