The Auditor General of South Africa (AGSA) had referred two material irregularities (MI) they found in the Umzinyathi District Municipality to the Special Investigating Unit (SIU) in April 2025. 

This was in regard to the uneconomical cost paid for the purchase of a backup electricity generator and also poor internal controls, and inadequate contract performance management on the fuel and oil supply expenditure contract.

The AGSA report on the municipality for the 2023 and 2024 financial year, which ended June 2024, was presented to the KwaZulu-Natal Legislature’s Cooperative Governance and Traditional Affairs (COGTA) Portfolio Committee on Tuesday. 

The AGSA found that there was a lack of reliable financial information that hinders effective decision-making and oversight, leading to mismanagement and inefficiencies caused by weak internal controls. The AGSA stated that this resulted in numerous errors and insufficient supporting evidence across transactions and balances in the financial statements.

The AGSA also found that there is a lack of consequence management, which limits accountability for repeated misstatements and control deficiencies.

The municipality was also found to be reliant on external service providers, with limited efforts to build internal capacity to manage core operational functions.

One of the infrastructure delivery projects, delayed for eight years, affected infrastructure delivery to support the Craigieburn Dam to Gaywood Reservoir scheme. The AGSA stated that the site was left unprotected, was vandalised, and not in use. One of the factors contributing to the project delays was due to late payments by the municipality and continuous unresolved work stoppages by the community.

Marlaine Nair, the COGTA Portfolio committee chairperson,  said the committee had resolved to hold meetings with worst-performing municipalities which have received adverse audits, disclaimer audits, and qualified audit reports from the AGSA in the last financial year.

“We held two successful meetings as part of our responsibility to conduct formal oversight over the municipality’s annual report and the findings of the Auditor-General. This is an important part of our work in ensuring financial accountability, good governance, and service delivery,” added Nair.

She described the engagement with uMzinyathi District Municipality as crucial because the municipality has been under a Section 139(1)(b) intervention since 2016, which saw the provincial government taking over certain functions of the municipality due to serious failures in governance and administration.

“Despite this intervention, the municipality has continued to perform poorly. The Auditor-General has issued an adverse audit opinion for the third consecutive year, meaning the financial statements are not reliable and there is serious non-compliance with laws and regulations,” she said. 

In the 2023/24 financial year, the AG identified R1.4 billion in irregular expenditure, R323 million in unauthorised spending, and R42 million in fruitless and wasteful expenditure.

The  AGSA stated that they were unable to obtain sufficient appropriate audit evidence that the receivables from exchange transactions debtors balance has been properly accounted for, due to the status of accounting records.

The municipality had water distribution loss of R36 million (2022/23: R23 million) due to water leaks caused by aging infrastructure and illegal connections. The municipality is also failing to replace broken meters which impacts revenue collection

With regard to debtors, the highest debt is owed by households with a total of 80% of the total debt followed by organs of the state with 10%. The government department has a total debt of R35 million.

“Most government departments have started paying for debt that has been reconciled, and further reconciliations are being done to ensure the correct government department is billed for the services consumed. 

“There are investigations that are currently ongoing and are expected to be completed before the end of the financial year. Consequence management is being implemented to employees and legal actions are also being taken against service providers to recover monies lost,” the municipal report stated.

zainul.dawood@inl.co.za

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