KNYSNA NEWS - Knysna Ratepayers Association: At last Wednesday’s special council meeting [on 28 February], ratepayers learned that Knysna Municipality had lost its “clean audit” status.
Although the audit was financially unqualified (meaning the financial statements themselves were correct), other problems were identified that caused the municipality to forfeit the clean audit status it has enjoyed for a number of years.
(In its report, the Knysna Audit Committee reviewed the findings of the Auditor General, and offered its own comments).
Some of the issues that require urgent attention relate to procurement, such as too many deviations from the regulations, and poor contract management (the municipality does not have a contract management programme in place for outside contractors).
A “deviation” occurs when the normal competitive bidding process is not followed in selecting a contractor. Sometimes this is unavoidable, such as when only one contractor can provide the goods or services (“sole supplier”), or in an emergency, when there is no time for competitive bidding, and in a narrowly circumscribed number of cases, when competitive bidding would be “impractical”.
Of course, this sort of situation is ripe for abuse.
In the municipality’s case, a full R87.25-million in goods and/or services were procured during the 2016/17 financial year by means of deviations, versus R36.60-million the previous year.
Proper planning needed
The audit committee noted that the Auditor General (AG) had effectively warned the municipality to ensure that demand and procurement are properly planned in future, in order to limit deviations to situations where they are genuinely unavoidable.
The committee pointed out that the claimed irregular expenditure of just over R5.80-million for the year due to deviations accounted for only four of the very many deviations that occurred during the year.
"This is not a new issue, and we strongly encourage council to do something about giving MPAC capacity, and teeth."
In the opinion of the audit committee, “it stretches credulity to believe that these four were the only instances of improper deviations in the year, in view of the lack of controls referred to by the AG”.
Of particular concern was the lack of implementation of the AG's recommendations and the failure to recover irregular, fruitless, wasteful and unauthorised expenditure.
The AG stressed that these must be investigated to determine if any official was liable for the losses incurred as a result of such expenditure.
He also found that disciplinary steps must be taken against officials who caused or permitted such expenditure, and losses incurred must be recovered from the person responsible. He stressed that this had not yet been done for the 2015/16 and 2016/17 financial years.
This expenditure amounts to millions of rand, and the complete lack of consequences to date does not serve as a deterrent against such illegal expenditure in future.
The reason for the above may in part be due to the fact that the financial oversight committee, MPAC, is under-capacitated and has become dysfunctional.
This is not a new issue, and we strongly encourage council to do something about giving MPAC capacity, and teeth.
These problems should be addressed as a matter of urgency. The KRA committee looks forward to exploring these and other issues with the municipal manager at our meeting later this month.
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