R50m spent without checking

An Eastern Cape municipality has been accused of irregular expenditure of close to R50-million.

The shocking amount is related to paying service providers who are also state employees, or paying providers who are linked to state employees.

This is revealed by the auditor-general (AG) in an audit report on the Chris Hani District Municipality’s (CHDM) financial performance in the 2016-17 provincial financial year, which ended in June.

The municipality spokeswoman has disputed the figure, arguing that the amount is under R3-million.

The AG blames it on inadequate oversight by management at CHDM.

The district incorporates Cradock and Middelburg (Inxuba Yethemba local municipality); Hofmeyer, Tarkastad and Sterkstroom (Tsolwana); Molteno (Inkwanca); Komani and Whittlesea (Lukanji); Cofimvaba and Tsomo (Intsika Yethu); Lady Frere, Indwe, and Wodehouse (Emalahleni); and Engcobo, Elliot and Cala (Sakhisizwe).

An amount of R33-million was declared irregular expenditure as a result of eight state employee-owned companies being awarded tenders and a further R14-million paid to 32 companies linked to municipal employees.

“Inspected the declarations of interest of suppliers of CHDM and noted no declaration that members of the entities were state employees.

“Management does not check the National Treasury’s database prior to awarding any contract to ensure that no recommended bidder, or any of its directors, is listed as a person prohibited from doing business with the public sector. The finding results in irregular expenditure amounting to R33737003.77,” revealed the AG in his report.

The 32 companies identified as having traded with the municipality should have been flagged and stopped, said the AG, blaming this on poor management.

“Employees of state institutions who may have an interest in said suppliers and supporting documentation were not received for audit purposes. This is due to a lack of oversight by management.

“The non-submission of information required for audit purposes results in irregular expenditure amounting to R14897312.57,” said the AG.

Of these 32 contracts, only eight were resolved, meaning the AG was supplied with information or supporting documentation from the municipality. In others, the AG said, although a payment voucher was received, “declaration of interest was not noted in the supporting documentation received for audit”.

Individual contracts worth anything from R400 to R17.9-million were awarded to these officials or companies they have interests in.

Irregularities exposed include:

lA national correctional services department official with an interest in a construction company was awarded a tender worth R 17.9-million;

lA health department employee’s company was awarded a contract worth R11.5-million for civil and construction work;

lAn employee of the OR Tambo District municipality was paid R347000 for supplying security services; and

lAn employee for co-operative governance and traditional affairs was awarded work worth more than R160000.

The AG blamed an amount of R533000 paid to spouses or partners of employees on internal controls.

CHDM spokeswoman Thobeka Mqamelo said the municipality did not agree that this was the “related parties” amount. “According to the audit report from the AG which was tabled in council in January, the amount for the related parties R2.9-million only,” she said.

Mqamelo said in terms of relatives of government employees trading with the state, the municipality relied on information provided by the service provider to the central suppliers database and they were unable to immediately detect discrepancies prior to awarding any contract.