The Makhado Municipal Council just can’t seem to escape its financial woes.

Just over two weeks ago, it was the release of a PriceWaterhouseCoopers report on the sorry state of Council’s financial affairs which sparked allegations of irregularities and self-enrichment. This week, Council’s municipal manager, Ms Faith Muthambi, was again in hot water over the findings of the Auditor-General’s report with regard to Council’s financial statements for the 2005/6 financial year, ending June 2006.

Auditor general’s Report

For months, the findings of the auditor general’s report, completed in November last year, was closely guarded by Council. With reason, apparently, as the findings, which the Zoutpansberger gained access to this week, paints a very, very grim picture and explains why Council was at one stage declared financially unsound. Whether it is because of irregularities, corruption or just incompetence within Council’s financial department, the auditor general’s report provides some shocking revelations.

The report literally consists of pages and pages of comment on irregularities, incorrect entries, misstatements, unknown amounts, discrepencies and more. The list just goes on and on. Some of the more noteworthy findings of the report include Council’s failure to supply supporting documents to explain expenses totalling R6,3million, Council’s failure to pay VAT to the amount of close to R500 000 to the South African Receiver of Revenue, the fact that no provision had been made at the financial year-end for councillors’ backpay to the amount of almost R1,8million and Council’s failure to bank cheques to the value of almost R1,4million and the fact that, because the cheques were older than six months, they would no longer be honoured by any financial institution.

In the end, the auditor general was left with no other choice than to express an adverse opinion on Council’s financial statements, saying that "the financial statements do not present fairly, in all material respects, the financial position of the Makhado Municipality at 30 June 2006 in accordance with the basis of accounting and in the manner required by the MFMA (Municipal Finance and Management Act)". The auditor general emphasised several of his findings. This included that, although a credit control policy was approved by Council, it was not enforced strictly and implemented effectively by management. This resulted in the balance of Council’s debtors at that stage increasing by about R14,6million in 2006, representing an increase of 29,9% since 2005. The auditor general also states that, taking into account that all fund balances should be supported by cash, an overall cash shortfall of almost R80million existed within the municipality at the end of June 2006.

Heads on the chopping block

During a meeting of Council’s executive committee (Exco) last week to discuss the auditor general’s report, consensus was apparently reached to ask for the axing/suspension of Council’s municipal manager, Ms Muthambi, and the then acting CFO (chief financial officer), Mr Thomas Nephawe. The matter was brought before Council during their meeting on Tuesday this week.

ANC councillors divided

The auditor general’s report and Council’s possible course of action to remedy the problems highlighted in the report sparked widespread differences of opinion, also exposing a division between local ANC councillors. This became very clear during Tuesday’s Council meeting. Local Chief Whip for the ANC Cllr Rufus Selepe quoted from the Municipal Finance and Management Act the proper procedure a Council has to take when faced with this type of financial crisis, allowing for intervention by the MEC for Local Government. He then proposed that the Mayor, Cllr Glory Mashaba, should intervene in the matter and approach the provincial government for help.

Cllr Selepe’s proposal was immediately shot down, with several fellow ANC councillors contesting his proposal. Among them was ANC councillor J Dzhombe who proposed not involving the provincial government in the matter. He said that the auditor general’s report had brought several aspects regarding Council’s financial affairs to the councillors’ attention and that he did not think it was fair to them as councillors to just refer the matter to the provincial government. He stated that, as councillors, they had the ability to check first whether it was necessary at that stage to involve the provincial government. This argument also formed the basis of Cllr Dzhombe’s proposal to "check first and not involve" the provincial government.

DA asks for suspension of MM and CFO

It was at this stage that Cllr Jacques Smalle, DA councillor and member of the Exco, stood up and proposed that the persons responsible for Council’s finances, namely Ms Muthambi and Mr Nephawe, should be suspended until Council could find out what, amongst others, had happened to the missing money.

The all-powerful majority vote

Needless to say, Cllr Smalle’s proposal was not received very well by the majority-controlled ANC Council and by means of the all-powerful majority vote, his and Cllr Selepe’s voices were silenced when Cllr Dzhombe’s proposal was accepted. And that was that. End of discussion. Ms Muthambi and Mr Nephawe stay in office while Council themselves try and sort out the mess.

Reaction

Following Tuesday’s Council meeting, Cllr Brian du Plooy from the DA pulled no punches when stating that Council is trying to hide their "failures amidst the chaos". He added that the DA was going to ask for a forensic audit of Council’s financial affairs, while also referring the matter to the Public Service Commission and the Public Protector. Cllr Du Plooy seriously questioned the levels of competency of members in Council’s financial department and repeated the DA’s demand for the suspension of Ms Muthambi and Mr Nephawe.