The office of the auditor-general [AG] has raised concerns about the City of Ekurhuleni’s “weak” oversight of procurement processes, warning that failures in bid controls are leaving the municipality vulnerable to fraud and manipulation.
This comes as the metro continues to struggle with compliance with legislation governing procurement and financial management and with auditors flagging persistent breakdowns in supply chain management [SCM] and contract oversight.
Business unit leader in the AG’s office Tlamelo Ramantsi said inconsistencies in how bids are evaluated, coupled with excessive discretion exercised by officials, have created an environment prone to abuse.
Ramantsi was making a presentation before the standing committee on public accounts (Scopa) in parliament on Tuesday as part of the committee’s oversight into municipalities.
Repeated issues in procurement, such as unfair bidders, evaluations, inadequate contract monitoring and deviations worth R32.7m without justification, were identified.
“We also see potential misrepresentations, indicating possible susceptibility to fraud and maladministration.
“We have identified possible collusion between officials and bidders, as well as significant gaps in due diligence processes. Bid evaluation committees continue to miss critical fraud risk areas.”
Ramantsi noted that the city’s SCM training failed to improve skills, which has eroded public trust and increased risks of fraud and improper contract awards.
The metro also faces irregular expenditure, the closing balance for which hit R1.08bn, which increased from R929m in the previous year. Meanwhile, fruitless and wasteful expenditure stood at R69m and unauthorised expenditure at R397m.
ALSO READ | Julius Mkhwanazi and Kagiso Lerutla released on bail
Water losses stood at R1.26bn and electricity at R3.06bn; material losses include R2.7bn in impaired traffic fines.
Ramantsi revealed that IT controls have regressed, showing cybersecurity vulnerabilities.
He said the primary issues were a lack of ICT skills, siloed operations and weak consequence management.
He also noted concerns around the outcomes of the Madlanga commission.
“The office is co-ordinating an evaluation of the findings from various commissions, including the Madlanga commission. We are evaluating these outcomes alongside our audit work from both the current and previous cycles and will share these insights with the oversight committee,” said Ramantsi.
Meanwhile, AGSA senior manager Xolani Zicwele revealed that the City of Tshwane is continuing to struggle with producing credible financial statements without relying on the audit process, and there has been little progress in reducing unauthorised and irregular expenditure.
Zicwele said it was found that unauthorised expenditure increased to R3.4bn, up from R2.1bn the previous year, while irregular expenditure rose from R16.9bn to R18bn.
On the other hand, the city is saddled with R20.9bn in consumer debt impairment and R1.4bn in other receivable impairments as well as the city’s R3.2bn electricity loss and R1.7bn water loss.
ALSO READ | Suspended City of Tshwane CFO denies tender interference allegations
Zicwele added that the city still relies too heavily on the audit process to fix errors.
“We continue to observe reliance on the audit process itself to correct material misstatements, which is not sustainable. The city must be able to produce credible financial statements without waiting for audit intervention. On compliance with legislation, most audit priority areas still have material findings,” Zicwele said.
“In procurement, we found material breakdowns in tax compliance, non-adherence to preferential procurement regulations, and, to a lesser extent, uncompetitive and unfair procurement practices, including awards made to state employees where it is prohibited.”
He said Eskom and water board debt arrears in Tshwane stand at R5.6bn, while findings also revealed illegal procurement deviations and suspected fraud, including collusion and document misrepresentation, across multiple contracts.
Sowetan
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.