New councils told to tackle billions of rands lost to irregular, fruitless, wasteful expenditure
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Johannesburg - Councils elected after last month’s local government elections have been urged to adopt measures to stop the loss of billions of rands due to unauthorised, irregular, fruitless and wasteful expenditure.
The National Treasury has told new councillors that they must support the municipal public account committees and municipal councils to fulfil their legislative responsibilities in terms of the Municipal Finance Management Act (MFMA) to reduce incidences of unauthorised, irregular, fruitless and wasteful expenditure.
They have also been asked to introduce preventative controls to address further and future non-compliance with the legislative prescripts and implement consequence management to ensure that strong ethical, accountable and transparent financial governance and institutional arrangements are implemented in all municipalities and municipal entities.
A circular dated November 16 sent by TV Pillay, Treasury’s chief director responsible for the implementation of the MFMA, said that since the municipal polls had been concluded and there were a number of new councillors elected, a copy of the document must be provided to councillors at its meeting scheduled for January/February 2022 or sooner.
Auditor-General Tsakani Maluleke revealed earlier this year that by the end of June 2020 the cumulative amount of irregular expenditure not dealt with in municipalities stood at R79.22 billion, which she said demonstrated that municipalities do not implement consequence management.
Maluleke said non-compliance with supply chain management legislation was prevalent and significantly contributed to the irregular expenditure of R26bn incurred in the 2019/20 financial year.
In addition, she was also unable to audit contracts worth R1.43bn as municipalities did not provide the required documentation and evidence to support the procurement processes.
Maluleke added that local government loses billions of rand annually because of interest and penalties, which form a significant portion of the R3.47bn of the fruitless and wasteful expenditure reported in 2019/20.
According to Treasury, there has been an increase in incidences of unauthorised, irregular, fruitless and wasteful expenditure in recent years.
”This is attributable to factors which include but are not limited to the repeated failures by municipalities and municipal entities to prevent non-compliance, introduce timely and decisive corrective measures and internal controls to ensure effective implementation of relevant laws and regulations,” reads the circular.
Treasury said the lack of decisiveness in dealing with the unauthorised, irregular, fruitless and wasteful expenditure by many municipal councils and administrations had resulted in a negative public perception and narrative.
”Lack of focus and implementation of current measures on consequence management was identified as additional contributing factors,” it noted.
The government has set a 2024 deadline to ensure measures are introduced to reduce irregular expenditure by 75%, and fruitless and wasteful expenditure is completely eliminated.
Municipalities have also been informed that they must simultaneously address the growing incidents of unauthorised expenditure.
They must have an unauthorised, irregular, fruitless and wasteful expenditure reduction strategy and implementation plan, as well as a council resolution confirming previous decisions.
Municipalities must also reinforce the measures through adoption of a new resolution reflecting the commitment of the new council to attend to historical and recent unauthorised, irregular, fruitless and wasteful expenditure matters.