Following adverse and disclaimer audit opinions of the previous year/s by the Auditor-General (AG)of South Africa, Makana Municipality decided to take corrective action and be proactive in detecting and putting controls in place to improve the AG’s opinion findings.
Following adverse and disclaimer audit opinions of the previous year/s by the Auditor-General (AG)of South Africa, Makana Municipality decided to take corrective action and be proactive in detecting and putting controls in place to improve the AG’s opinion findings.
Some of the issues the AG raised are as follows: unauthorized expenditure, irregular expenditure, and fruitless and wasteful expenditure. They are referred to as Section 32 matters. How section 32 items are identified:
– Through internal audits conducted by Municipal Internal Auditors (Kabuso).
– Through the audit work performed by external auditors (Auditor General).
– Day to day activities by Senior Management and Municipal Manager performing their duties.
– Forensic Audit Reports performed to date.
– Effective management of the Risk Register & Risk Operational Plan.
Categories of Section 32 as defined in the Municipal Management Finance Act are:
1. Unauthorised Expenditure In relation to a municipality, means any expenditure incurred by a municipality other than in accordance with section 15 or 11(3), and includes: (a) Overspending of the total amount appropriated in the municipality's approved budget. (b) Overspending of the total amount appropriated for a vote in the approved budget. (c) Expenditure from a vote unrelated to the department or functional area covered by the vote. (d) Expenditure of money appropriated for a specific purpose, other than for that specific purpose. (e) Spending of an allocation referred to in paragraph (b), (c) or (d) of the definition of "allocation" other than in accordance with any conditions of the allocation; or (f) A grant by the municipality other than in accordance with this Act.
2. Irregular Expenditure In relation to a municipality or municipal entity, means: (a) Expenditure incurred by a municipality or municipal entity in contravention of, or that is not in accordance with, a requirement of this Act, and which has not been condoned in terms of section 170; (b) Expenditure incurred by a municipality or municipal in contravention, or that is not in accordance with, a requirement of Municipal Systems Act, and which has not been condoned in terms of that Act. (c) Expenditure incurred by municipality in contravention of, or that is not in accordance with, a requirement of the Public Office-Bearers Act, 1998 (Act No. 20 of 1998) or (d) Expenditure incurred by a municipality or municipal entity in contravention of, or that is not in accordance with, a requirement of the supply chain management policy of the municipality or entity or the supply chain management policy, or any municipality's by-laws giving effect to such policy, and which has been condoned in terms of such policy or by-law, but excludes expenditure by a municipality which falls within the definition of Unauthorised Expenditure.
3. Fruitless and Wasteful Means expenditure that was made in vain and would have been avoided had reasonable care been exercised. Corrective Action Unauthorized expenditure is normalized through adjustment budget (January) and condoned by council decision. Irregular and fruitless and wasteful expenditure must be recovered from the responsible official and it is reported to the South African Police Service and transferred to debtors and recovered (in principle). The municipality has introduced systems and processes for this to take place by first introducing a register for section 32 matters maintained by the Municipal Manager’s office to be investigated. That process of investigation has commenced and we are currently having 15 matters and the number is increasing. The matters incorporated in the register will be disclosed when completing the annual financial statements. The matters have to be identified throughout the year and ensure that appropriate and remedial action is taken. Therefore it cannot be a matter of someone sitting in the corner and making a list at the end of the financial year. At the last meeting of the FAME committee a draft policy on fruitless and wasteful expenditure was tabled indicating how the Section 32 issues will be treated. It is proposed that such matters be reported to the Audit Committee. These Section 32 items are disclosed on an annual basis in the Annual Financial Statements of the Municipality.
The Municipal Manager is compelled to report to the Member of the Executive Committee for Local Government, the Auditor General and to the South Africa Police Service (SAPS) where money must be recouped in the case of fruitless and wasteful and irregular expenditure.
