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Auditors report - financial irregularities - Adjustment budget

The auditors report for Kouga for 2010 has not been distributed publicly as yet.

It has been suggested that the adjustment budget was recently approved in a way that is not consistent with current legislation.

The AG supplied various reasons why the audit for the pre­vious financial year (2009/2010) is deemed to be qualified. These include
  • Insufficient evidence in the awarding of tenders to the value of R15.7-million due to "incomplete bid documentation and tender files."

  • Fruitless and wasteful expenditure of nearly R6-million.

  • The KM did not implement an effective revenue collection system which resulted in the under­statement of bad debts by R40-million.

  • Unauthorised spending of R75-million due to "over spending of the operating budget.

  • The AG also noted "significant uncertainty" from lawsuits where the KM is the defendant in a number of land and civil claims. They warn that the KM is bound to receive a fine for not having a permit from the Department of Economic and Environmental Affairs for operating the three landfill sites under their control.

  • The KM did not implement a proper Performance Management System.

  • They did not set key performance indi­cators.

  • They contravened regulations by allowing councillors and employees that were "overpaid" to repay the money as a loan over time.

  • The KM contravened various municipal supply-chain management regulations including the non-existence of a Bid Specification Committee during the period under review.

  • They contravened the National Water Act by not dealing properly with the sewerage spill from the Humansdorp Sewer Treatment Works into the immediate environment.

  • Management did not promptly report fruitless and wasteful expenditure.

  • Documented financial policies and procedures were not in place.

  • The AG rapped the KM over the knuckles for not taking corrective actions against Abdullah for his involvement in the pre-paid electricity debacle. They refer to a KPMG forensic audit that revealed he was involved in all stages of the tender process without declaring that his brother-in-law was a co-owner of the company that was eventually awarded the tender. KPMG recommended that he should have withdrawn from the process. Instead, he allegedly took possession of the bid documents, compiled the assessment report, acted as chairman of the Bid Evaluation Committee and attended the Bid Adjudication meeting where the tender was awarded. In their report, KPMG recommended that corrective action be taken. Electro-on-the-Move, the company that was awarded the tender, subsequently defaulted on payment of more than R6-million and it is speculated that this triggered the KM's current debt problems with Eskom. 

  • The AG also reported that there were inadequate controls over activities performed by service organisations, including the supplier of pre-paid electricity, and he expressed concern that nothing was  done about irregular expenditure of R27-million during 2008/2009.

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Date raisedRaised byOwnerIssueResolution
Date raisedRaised byOwnerIssueResolution
April 15, 2011 T Watkins R Abdullah Comments in auditor's report  
March 3, 2011 JBRA at monthly KM meeting Ridwaan Abdullah, Financial Services When will the auditors report be released? Was the approval of the adjustment budget legal?   
Showing 2 items