AG report shows that VDM is in shambles

Date: 17 February 2019 By: Anton van Zyl

Viewed: 1237

The Vhembe District Municipality is in shambles. Apart from continuous strikes, non-existent service delivery and allegations of massive fraud, the Auditor-General (AG) has stopped short of describing their bookkeeping as being in total chaos.

Last week the Democratic Alliance (DA) called on the Public Protector to probe the district municipality. This followed the release of the Auditor General’s report. According to the DA, the report highlights that over R1,2 billion of Vhembe’s expenditure can be described as unauthorised, irregular or fruitless.

The Vhembe District Municipality (VDM) received a disclaimer of opinion from the AG. When a disclaimer of opinion is stated, it effectively means that the information provided was so inadequate that the AG could not determine the real state of affairs. In one section of the report the AG even mentions that, were it not for the legislative requirement to perform the audit of the municipality, “I would have withdrawn from the engagement…”

“The DA can confirm that the municipality has incurred R486 million in irregular expenditure, R640 million in unauthorised expenditure and R17 million in fruitless and wasteful expenditure in the 2016/2017 financial year and no steps were taken to recoup the money,” said Jacques Smalle, the DA’s provincial leader.

The pathetic state of administration at the VDM is evident in remarks made throughout the AG's report. Residents are well aware of the fact that accounts have not been sent out for what feels like years. The AG touches on this when he mentions that just about no evidence could be found that the management had charged consumers for water transactions in the current and prior year. “Meter readings were not consistently done on a monthly basis, which resulted in consumers' not being billed,” the report reads.

The administrative chaos means that the AG found it almost impossible to determine the real state of affairs at the VDM. This includes all spheres of accounting, starting at the inventory where incorrect valuations were used to state the value of property, plant and equipment. It also dates back to previous years, where adjustments needed to be done. In the case of the VDM’s cash and cash equivalents, the AG picked up a difference between the cashbook and the financial statements amounting to over R281 million.

The VDM came under scrutiny the past year for its shady dealings with VBS Mutual Bank. “(The) AG has also confirmed that they invested R800 million into the VBS mutual bank, in contravention of municipal investment regulations,” said Smalle. When the bank went bust, the municipality was still owed more than R311 million.

The AG was very critical about the manner in which VDM had spent taxpayers’ money. He found that payments were made from the municipality's bank account without the approval of a properly authorised official. Unauthorised expenditure was estimated by the AG to total an incredible R640,6 million.

Based on the AG report, most of the R486,2 million in irregular expenditure was a result of the awarding of contracts in contravention of regulations. The AG points out various irregularities as far as the awarding of contracts are concerned. These include not advertising contracts, awarding contracts to people who work for State institutions and not monitoring contractors.

The AG was also concerned about the fact that some of the cases of irregular expenditure that constituted a criminal offence were not reported to the South African Police Service,

As far as fruitless and wasteful expenditure is concerned, just over R17 million was lost. The AG ascribes this mostly to overpayment of suppliers and penalties on late submission to SARS. The AG notes that these losses were written off by the VDM without proper efforts to try and recoup the money.

Unauthorised expenditure amounted to R640,6 million for the financial year.

The fact that allegations of financial misconduct laid against senior managers and officials at the VDM were not always investigated also concerns the AG. “Furthermore, the municipality is a defendant in various legal claims amounting to over R350 million,” said Smalle. “It is clear that, besides the VBS scandal, the municipality’s financial affairs are in distress, which needs an urgent investigation.”

Smalle said the Public Protector was urged to accelerate the investigation into the matter and ensure that not only should the implicated individuals pay back the money, but they should end up in jail.




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Anton van Zyl

Anton van Zyl has been with the Zoutpansberger and Limpopo Mirror since 1990. He graduated at the the Rand Afrikaans University (now University of Johannesburg) and obtained a BA Communications degree. He is a founder member of the Association of Independent Publishers.



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