The latest annual municipal auditor-general’s report was released last week with Drakenstein Municipality being highlighted for an incorrect bidding process they had followed.
This means the City of Excellence is not one of the 12 municipalities in the Western Cape which received a clean audit.
Last week the Auditor-General Kimi Makwetu said that 88% of municipalities in South Africa are still awarding tenders unfairly and disregarding supply chain management compliance.
According to the auditor-general’s report, Drakenstein did not follow the correct bidding process to appoint a contractor for construction on the Paarl Wastewater Treatment Works. He said this resulted in irregular expenditure of R46 million and an unfair and uncompetitive procurement process.
Makwetu also said the financial state of municipalities across South Africa continues to worsen. A total of 257 municipalities were audited and the number of clean audits in municipalities declined from 14% in the previous financial year to 8%.
Earlier this year when the annual Good Governance Africa (GGA) report was released naming the 20 best municipalities in the country, Drakenstein did not make the cut, but took 25th place. This report takes into account three factors, namely the quality of administration, economic development and service delivery.
Jacques Carstens, Chief Financial Officer of the Drakenstein Municipality, does not agree with the Auditor-General’s findings.
“Drakenstein Municipality’s management does not agree with the non-compliance opinion of the Auditor-General, and has indicated this in the notes to the annual financial statements. The municipality’s view is supported by the Provincial Treasury as well as the legal opinion of an advocate specialising in supply chain management,” Carstens said.
He explained that for the last 11 consecutive years the municipality has received an unqualified audit opinion. For four consecutive financial years before the 2017-’18 financial year. there were no other findings, giving the Municipality a “clean” audit status.
However, for the 2017-’18 financial year there was, in the opinion of the Auditor-General, one non-compliant matter relating to supply chain management legislation, altering the municipality’s “clean” audit status.
The Auditor-General’s non-compliance finding relates to the expansion of two open tenders that the municipality had awarded to two different contractors for the capital project – the upgrade and extension of the Wellington Wastewater Treatment Works. This project included the upgrade of the Wellington Wastewater Treatment Works as well as the construction of a sewer pipeline to be connected to the Paarl Wastewater Treatment Works (to divert some of the sludge the Wellington Wastewater Treatment Works could not treat while construction was taking place).
“From the onset there was a clear relationship between the two sets of work. Construction started in February 2016. In April 2016 it became clear that the Paarl plant would not be able to treat the sludge to the required standards before releasing treated sewerage water into the environmentally sensitive Berg River. Therefore some urgent upgrades had to take place at the Paarl plant,” he explained.
Carstens said that in terms of the Drakenstein Council’s Supply Chain Management Policy dealing with the expansion of existing contracts, this additional work to the value of R46,2 million was awarded to the two successful contractors already on site.
He said that their intent to expand the awards to the two current contractors was advertised and no objections were received.
Carstens said the performance auditor of the Auditor-General on infrastructure projects could not find any fault with the quality of work performed by the two contractors, including the additional works.
“However, the Auditor-General made the finding that an open tender process for the additional works should have been followed,” he said.
“The municipality’s management does not agree with this finding and raised this with the Auditor-General, who confirmed that they would reconsider the non-compliance finding should National Treasury also support the municipality’s view in writing. Despite numerous requests and efforts by the municipality to discuss the finding with National Treasury, Treasury did not properly consider the municipality’s submission before the Auditor-General released his audit opinion.”
Following the release on 30 November 2018, the executive mayor also submitted a condonation application, in terms of the Municipal Finance Management Act, to the Minister of Finance. “Until today no response has been received.”
He said despite the Auditor-General’s finding, the municipality can confirm that neither the municipality nor the community has suffered any financial losses. “Public funds were in fact saved by not following the process the Auditor General had proposed. This was also confirmed by Provincial Treasury.”
“A ‘clean’ audit means an unqualified audit opinion on the annual financial statements of a municipality, plus no findings of non-compliance to any applicable legislation and on predetermined objectives (indicators and targets set in the Municipality’s Service Delivery and Budget Implementation Plan).” –Jacques Carstens
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