The Mangaung metro municipality in Bloemfontein is in terrible shape as it continues to overspend on its budget, while only meeting half of its service delivery targets, the Auditor-General (AG) has told the standing committee on public accounts (Scopa).
The AG was delivering the latest audit outcomes of four metropolitans on Tuesday, which are Mangaung, Ekurhuleni, Tshwane and eThekwini.
Mangaung has over the past three financial years received qualified audit opinions, as unauthorised expenditure was above R1.3 billion during the period.
Concerns found in Mangaung
During the presentation led by the AG’s office, members of Scopa were told that five concerns were found that led the metro to receive a qualified opinion.
The first one was service charges – the AG said it could not verify water revenue from conventional meters due to unreliable consumption data. Some of the residents had not been charged for services for years.
The second concern is bulk water purchases – the AG could not verify water distribution losses due to unreliable data on units sold. Another concern was property, plant and equipment – the AG found that failure to impair infrastructure assets is causing a material understatement in impairment losses. It was highlighted that this is a new concern.
The concern of employee costs, which is not a new one, as the AG could not verify overtime due to inadequate controls about confirming overtime worked. A concern of commitments also contributed to the qualified audit opinion as these were materially understated due to incorrect recognition, calculation and classification.
Lack of discipline in Managung
The AG told members that the metro has a lack of discipline to comply with laws and regulations. “We continued to report the unauthorised irregular, fruitless and wasteful expenditure because of the lack of discipline to prevent these unwanted expenditures,” said the AG’s office.
It was found that irregular expenditure increased to R324 million, while fruitless and wasteful expenditure increased to R190 million. Findings included non-compliance on revenue management, which is one of the reasons why Mangaung received a qualified audit opinion.
“Strategic management, utilisation of the conditional grants where they are not used to their intended purposes, procurement management, HR management and environmental management,” said the AG.
“What is the concern is if you look at the areas that we report material non-compliance with laws and regulations is almost every area that we scope in for audit purposes, which means it is the area that is needed to be attended to because there is no discipline.”
Plan not working
The AG told Scopa members that the plan Mangaung has to turn around its financial situation is not working. Mangaung was placed under national administration on 26 April 2022.
When a municipality is placed under national administration, the national government takes control of its operations to fix serious financial or governance problems and ensure services continue.
The AG’s office said Mangaung still owes bulk power utility Eskom R1.6 billion, while the municipality’s water board debt sits at R642 million.
The metro has multiple loans, including R300 million from Absa, which started on 07 November 2016. One from Standard Bank, also worth R300 million – started on 30 December 2014. Three ones from DBSA, collectively worth R500 million, two started on 29 January 2012 and one on 30 June 2015. All these are still being repaid.
Most of the money the municipality receives goes to salaries, while service delivery suffers.
Service delivery suffers
Scopa was told that grants received also end up being repurposed to operations of the municipality.
The AG also identified 27 material irregularities, including 12 cases involving financial losses estimated at R112m and 14 cases causing substantial harm to the public.
Procurement challenges in other metros
Moving on to the City of Ekurhuleni headquartered in Germiston, Gauteng – the AG found it has also been deteriorating in the past three years. For the financial year 2024-25, the city received a qualified audit opinion.
The AG found that there is project delays and poor project management, just like Mangaung. The city’s findings reflect ongoing governance and financial management challenges.
It was highlighted that the City of Tshwane in Pretoria continues to face weaknesses in financial reporting and internal controls, including failure to produce credible financial statements without audit intervention and persistent non-compliance with procurement regulations.
The AG also found procurement challenges in eThekwini metro municipality. It has highlighted that the municipality has shown improvement in reporting. However, procurement controls, consequence management and infrastructure maintenance continue to affect service delivery reliability.
