Merafong’s debts are increasing

The West Rand District Council noted the Auditor-General’s (AG) report on the annual financial statements at its last council meeting.
This was for the district municipality and all its constituent municipalities, including Merafong City Local Municipality. The report was for the 2016/17 financial year that ended on 30 June 2017.
It is important that the residents of Merafong have insight into the comments raised by the AG.
For the period in question, Merafong Municipality incurred a nett loss of R86 049 954. As at 30 June 2017, the municipality’s liabilities exceeded its assets by R173 650 707.
The AG states and I quote ‘that material uncertainty exists that may cast significant doubt on the municipality’s ability to continue as a going concern’. The DA has seen and predicted for years now that the council would find itself in this situation within a few years at the rate that it was going.
The AG further notes that:
1. Consumer debtors have significantly been impaired (grown worse). The 2015/16 (previous financial year) debtor balance was R719 141 682. The 2016/17 balance was R940 805 837. It increased by R221 664 155 in one year. The two main contributors to these losses are commercial debtors and ordinary households. In the latter instance, the council is failing dismally in applying its credit control and debt collection policies in areas where payment figures are very bad. These include most areas of Merafong excluding Carletonville and Fochville.
2. Material electricity losses of R60 778 294 occurred for the period in question. In 2015/16, the losses were R58 765 650 of the total electricity purchased. In two years, Merafong had lost R119 543 944.
Technical losses amounted to R51 431 557 in 2016/17 and R49 728 426 in 2015/16 i.e. a grand total of R101 159 983 over two years. The AG says that losses are due to unauthorised consumption, tampering and faulty meters.
3. In Note 12 to the financial statements, the municipality is the defendant in various lawsuits. The outcomes of the lawsuits cannot be predicted, therefore, no provision for any liabilities was made in the financial statements.
4. The municipality is not in a position to pay money it owes within the 30- day legislated period.
As a matter of fact, the municipality generally cannot pay within a six-month period.
5. Merafong incurred R16 371 945 in fruitless and wasteful expenditure contravening Section 62(1)(d) of the Municipal Finance Management Act (MFMA). The expenditure was due to penalties and interest incurred through the late payment to suppliers. The AG also indicated that effective steps were not taken to prevent this wasteful expenditure.
6. Allegations of financial misconduct against officials of the municipality were not investigated as required in terms of Section 171(4)(a) of the MFMA.
7. In the procurement of some goods and services with a transaction value of above R200 000, competitive bids were not invited as required by the supply chain management regulations (19(a)) Deviations from the supply chain processes were approved by the accounting officer, even though it was not impractical to invite competitive bids. Supply chain management regulations 36(1) was contravened in the process.
8. Awards were made to providers who were in the service of the state or whose directors were in the service of state institutions contravening supply chain management regulation 44 and MFMA regulation 112(j) in the process.
9. Merafong Council revised its SDBIP (Service Delivery and Budget Implementation Plan) during the year without obtaining council approval as required in terms of Section 54(1)(c) of the MFMA.
The AG found some significant internal control deficiencies as follows:
1.The accounting officer did not exercise adequate oversight regarding the performance reporting and compliance reporting with applicable laws and regulations.
This resulted in adjustments to the annual performance report. Previous years’ findings were not properly monitored and resulted in repeat findings
2. Senior management also did not adequately monitor controls to ensure that performance reports are properly completed.
3. There is an investigation in progress conducted by an independent consultant due to allegations of possible irregularities in relation to supply chain management regulations and human resource management.
Although the AG’s final audit opinion was that of ‘unqualified’ meaning the financial statements of Merafong conform to generally accepted accounting principles, the mayor can surely not be proud of the contents of the report. Over the last six-and-a-half years under her leadership, Merafong Council had regressed to become a bankrupt institution which, I predicted, she has no way of stopping. I still have no reason to change my mind.

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