Multiparty coalition to meet Tshwane leaders about adverse audit opinion

Just days after the news of the City of Tshwane’s disastrous audit report leaked, the ruling multiparty coalition announced on Sunday (8 January) that it will meet the mayoral committee about the matter.

This comes after a meeting Democratic Alliance (DA) mayor Randall Williams held with the local leaders of the DA’s coalition partners on Friday.

Read: City of Tshwane no longer a going concern – AG

The coalition comprises the DA, ActionSA, the Congress of the People (COPE), Freedom Front Plus (CF+), Inkatha Freedom Party (IFP) and the African Christian Democratic Party (ACDP). Williams and member of the mayoral committee for finance Peter Sutton are both from the DA.

In the leaked report, which has been confirmed by Williams to be authentic, Auditor-General Tsakani Maluleke expressed an adverse opinion about the city’s financial statements for 2021/22.

The statements were so full of material errors that they do not fairly represent the state of the city’s financial affairs. Maluleke expressed doubt about the city’s ability to continue as a going concern and found, among other things, that the it understated its trade creditors at year-end on 30 June 2022 by almost R5 billion. In fact, the amount totalled more than R11 billion.

Extensive audit

Leon Claassen, analyst at Ratings Afrika, says he has never before seen such an extensive audit report.

“The adverse opinion is definitely appropriate,” he adds.

Claasens says it looks as if there is a large skills deficit in the city as well as inadequate accounting systems for the keeping of proper accounting records.

“The internal controls are not enough to ensure the accuracy of accounting records. As a result, the Auditor-General does not have confidence in the numbers as reported in the financial statements.”

The City of Tshwane has repeatedly performed poorly in Ratings Afrika’s municipal index of financial sustainability, with a score of only 29 out of 100 in 2021.

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In a statement issued on behalf of the coalition, Dr Corné Mulder calls for urgent remedial action, deep reform and real accountability.

“Our efforts to displace failed ANC governance can never see regressions in the standards of good governance,” he says.

Mulder also points out that Tshwane was for the first five months of the reporting period under administration by the Gauteng Provincial Government.

In October 2021 the Constitutional Court found that the decision in March 2020 by Gauteng MEC for local government Lebogang Maile to place the city under administration was unlawful and invalid.

It was only after this ruling that the DA-led coalition resumed its rule, which was confirmed in the November 2021 municipal elections.

Coalition management

Mulder says: “While every effort is made to localise coalition management, the national coalition structures must be briefed on the causal factors behind the audit findings as well as the measures that will be undertaken for remedial action.”

He added that while “there are deep historical problems underpinning the report predating even that financial year, the multi-party government is, nonetheless, committed to address the historical root causes of adverse findings and hold those responsible accountable”.

This will be the second time in a few months the coalition leadership meets about matters in Tshwane.

In August it met to resolve a dispute between ActionSA and Williams about his conduct around an unsolicited bid to redevelop the city’s two derelict power stations at Rooiwal and Pretoria West. ActionSA refused to continue working with Williams, but after an investigation he was cleared of charges of transgressing procurement regulations.

An investigation by Tshwane speaker Murunwa Makwarela into a complaint by ActionSA that Williams unlawfully interfered with the city administration in the same matter is still ongoing.

In the meantime, former Tshwane CFO Umar Banda indicated that he is consulting his lawyers about efforts by Williams to place the blame for the adverse opinion on him.

Read: Tshwane CFO challenges dismissal

Banda held the city’s purse for more than six years, during which it got unqualified audit reports. His contract came to an end at the end of June but was twice extended for three months at a time. On 24 November the Tshwane council approved a further extension, but days later, when it became clear that the audit report would be bad, he was first suspended for, among other things, allegedly misleading the city’s leadership to think the statements submitted to the Auditor-General were compliant.

A day after being suspended, the suspension was withdrawn and Banda was summarily fired without being given an opportunity to state his case. He went to the high court where his application to get his job back was dismissed due to a lack of jurisdiction. He then reached a settlement with the city, which saw him leaving Tshwane at the end of December. The other terms of the settlement have not been made public.

Williams said in a statement responding to the report that, as part of a response plan, criminal charges will be laid against Banda. “The poor quality of the financial statements is in flagrant abuse of the Municipal Finance Management Act. Further reports on financial misconduct will be brought to Council.”

Among the steps Williams announced:

• Appointment of professional external auditors to support the auditing process;
• Secondment of additional support from National Treasury (two former CFOs) to support the city;
• Initiate an audit on the city’s performance in the first half of this financial year and thereafter every quarter;
• Continued engagements with the Auditor-General to systematically address audit findings to prepare for the next audit;
• Implementation of disciplinary processes against any officials whose performance led to the poor audit outcome;
• Investigations to be initiated into councillors and officials who may have benefitted from supply chain processes;
• Appointment of a full time city manager (who assumed his duties in August) – the administrative leadership vacancy was flagged by the Auditor-General “which we ensured that we addressed last year”; and
• Appointment process for filling of Section 56 top management positions (including the CFO). This recruitment process has been initiated and will be concluded in the first half of this year.