ROLIVHUWA SADIKI
INVESTING hundreds of millions of public funds into the VBS Mutual Bank has had an adverse impact on some Limpopo municipalities’ ability to deliver services in the 2018-2019 financial year.
The impact of the R1.2 billion loss following the liquidation of VBS Mutual Bank is still being felt by the municipalities concerned, where service delivery has been affected, said Auditor General (AG) advocate Kimi Makwetu in his Municipal Audit outcomes for the financial year 2018/2019.
Makwetu also said conditional grants provided for infrastructure development and maintenance were not always used for their intended purposes or were poorly managed.
“The province further reported water losses of R341 million due to poor management and monitoring,” he said.
During the previous financial year, eight municipalities in Limpopo namely Vhembe district, Fetakgomo Tubatse, Collins Chabane, Makhado, Lepelle-Nkumpi, Greater Giyani, Elias Motsoaledi and Ephraim Mogale suffered a bulk loss of 72% in investments with the now defunct VBS bank.
This resulted in a failure to complete major water projects in the province after the billions could not be recouped when the bank collapsed.
Makwetu announced that two of the errant municipalities, Vhembe district and Collins Chabane local municipalities managed to improve their audit opinions from disclaimers to qualified opinions.
The AG’s report revealed that Vhembe incurred a loss of R369 millions of own revenue invested in the bank.
“The adverse impact on the district’s ability to deliver services continued in the 2018-19 financial year as the district was unable to pay for repairs and maintenance of water pipes and boreholes due to the lack of funds, which resulted in water interruptions for citizens and escalated water losses,” Makwetu said.
Meanwhile, Makhado, Greater Giyani and Lepelle-Nkumpis’ opinions remained unchanged as qualified audit opinions.
Makhado lost R63 million of the equitable share invested resulting in the municipality being unable to fill critical positions and to address service delivery objectives due to a lack of funds.
Municipal managers at Lepelle Nkumpi and Greater Giyani resigned and the term of the then acting municipal manager for Makhado ended while he was on suspension, with the council taking a decision not to renew his contract.
Elias Motsoaledi and Ephraim Mogale municipalities regressed from unqualified audit opinions to qualified ones with findings.
Elias Motsoaledi municipality appointed the same consultants as in the previous year to prepare the financial statements and assist in addressing the challenges relating to asset management at a total cost of R11 million.
Fetakgomo Tubatse’s opinion remained unchanged with a qualified audit opinion after incurring losses on the balance of the VBS investment amounting to R243 million.
“This put strain on the municipality’s ability to deliver services to communities. The basic service delivery and infrastructure development and the local economic development objectives of the municipality were not fully met due to the lack of funds,” the AG said.
Despite six municipalities having improved their audit outcomes, R122 million was spent on consultants for financial reporting purposes.
“The improvements were mostly consultant-driven, but despite the province having spent a total of R249 million on consultants for financial reporting purposes, many municipalities continued to receive qualified opinions,” he said.
“Of this, R127 million was spent by municipalities whose audits had not been finalised by the cut-off date of the report,” added the AG.
The report titled Not much to go around, yet not the right hands at the till to reflect the state of financial management in local government, reveals that there was a high reliance on consultants and skills were not transferred.
“Some officials became complacent when consultants were appointed and did not perform the jobs they were appointed to do, raising questions about municipalities paying for officials and consultants to do the same job,” said Makwetu.
“Millions were spent to improve the outcomes, but there were no consequences for poor performance,” he said.
(Compiled by Inside Metros staff)