Wrap Text
Availability of the Annual Financial Statements for the year ended 30 June 2023 - CTMM
THE CITY OF TSHWANE METROPOLITAN MUNICIPALITY
(A municipality as described in section 2 of the Local Government Municipal Systems Act, 2000, duly
established in terms of Notice No. 6770, promulgated in the Provincial Gazette Extraordinary of
1 October 2000 in terms of section 12(1) read with section 14(2) of the Local Government: Municipal
Structures Act, 1998, as amended)
(Issuer code: CTMM)
("City of Tshwane" or the "Issuer")
City of Tshwane availability of the Annual Financial Statements for the year ended
30 June 2023
Further to the announcement released on the 12 March 2024, The City of Tshwane advises
noteholders it has released its Audit Report for the year ended 30 June 2023 ("AFS"). The auditors of
City of Tshwane, Auditor-General South Africa ("AGSA"), have issued a qualified audit opinion
relating to the AFS. Noteholders are advised that City of Tshwane's Audit Report is now available for
download at the following link:
Report on the audit of the consolidated and separate statements
In addition, the audit report contains emphasis of matters in relation to:
1. Material uncertainty relating to going concern.
With reference to note 51 to the financial statement, which indicates an unfavorable liquidity
position, and a recent negative rating by Moody's, which is unchanged compared to the previous
rating. As stated in note 51, these events or conditions, along with the other matters as set forth in
note 51, indicate that a material uncertainty exists that may cast significant doubt on the
municipality's ability to continue as a going concern.
2. Material impairments
As disclosed in note 5 to the financial statements, material losses of R16 468 028 573 were incurred
as a result of doubtful debts on consumer consumables.
3. Material losses- electricity losses
As disclosed in note 64 to the financial statements, material electricity losses of R2 462 201 794
(2021-22: R2 136 888 812) was incurred, which represents 21.46% (2021-22: 19.44%) of total
electricity purchased. Technical loss of R803 185 911(2021-22: R769 460 158) were due to the
electricity that was lost when it was distributed from the source of generation through the
transmission and distribution network to the consumers. Non-technical losses of R1 659 015 883
(2021-22: R1 367 428 654) were due to administrative and technical errors, negligence, theft of
electricity, tampering with meters and connections which form part of illegal consumption.
4. Material losses- water losses
As disclosed in note 63 to the financial statements, material water losses of R1 115 794 268 (2021-
22: R1 083 402 391) was incurred, which represents 32% (2021-22: 32.6%) of total water
purchased. Technical losses of R892 635 414 (2021-22: R866 721 917) were due to the physical
loss of water through the water distribution network. Non-technical losses of R223 158 854 (2021-
22: R216 680 474) were due to meter inaccuracies, meter estimations, non-metering of water and
unauthorised consumption.
The AGSA audit opinion is not modified in respect of these matters.
As disclosed in note 71 to the consolidated and separate financial statements, the corresponding
figures for 30 June 2022 were restated as a result of an error in the consolidated and separate
financial statements of the Issuer at, and for the year ended, 30 June 2023.
The AFS contain various restatements for the year ended 30 June 2021 ("Prior Period") relating to:
Error 1: Revaluation and correction of inventory
The bulk water inventory was incorrectly captured.
The prior year amounts was recalculated and a journal was passed to correct the bulk water inventory
amount at the end of the 2021/22 financial year.
Other adjustment relates to correction of error in plant inventory and correction of raw material
amount.
Error 2: Overstatement of impairment expenses for exchange Other Receivables
Incorrect calculation of the impairment expense.
Adjustment of impairment allowance expenses for exchange Other Receivables.
Decrease the impairment allowance expenses/ Accumulated surplus.
Error 3: Other receivables from non-exchange transactions
The Aarto debtor prior year balance was revisited for accuracy, validity and completeness. The Enatis
system was used as a 3rd party.
assurance body to ensure that what has been recorded by the City is correct. This led to correction of
previously overstated revenue from fines and correction of a debtor.
Error 4: Consumer receivables: Exchange and non exchange
Overstatement of prior period accruals.
Adjustment to reverse prior period accruals.
Decrease in Consumer Receivables from exchange transactions.
Decrease of revenue accrued in the prior period in respect of deposits
Error 5: Investment property, Property, Plant and Equipment, Intangible assets and Heritage assets
Adjustment were mainly as a result of the following:
Acquisition of land under asset under construction cancelled and refunded to the city. The payment
was for Land purchased but did not get registered through the deeds office and was refunded back to
the city and asset under construction was reversed and restated.
Incorrect measurements and the conditions of assets during verification were provided which resulted
in incorrect calculations.
Impairment assessment for prior year was not done in some of the departments.
Heritage assets not previously accounted for on the FAR
The restatement journal was processed to correct the impairment in the prior year and to correct cost
in the prior year.
Error 6: Long-term receivables
The impairment for Housing Debtors was overstated in the previous financial year which resulted in
an audit finding.
The error on the debtor and the impairment expense was corrected.
Error 7: Redemption fund asset, Interest rate swaps and Redemption fund liability
Interest rate swaps valuation liability was incorrectly disclosed under non-current asset.
A journal was processed to correct the swap liability.
Decrease in redemption fund asset.
Increase in interest rate swaps asset.
Increase in redemption fund liability.
Error 8: Employee benefit obligation
Leave provision was overstated in the prior year.
Reversal and restatement of leave provision for the prior year
Error 9: Understatement Unspent conditional grants and receipts
Acquisition of land under asset under construction cancelled and refunded to the city.
The payment was for Land purchased but did not get registered through the deeds office and was
refunded back to the city and asset under construction was reversed and restated.
Error 10: Payables from exchange transactions
During the audit of trade payable, it was noted that the trade payables were not correctly reconciled to
supplier statement and as a result not all liabilities were recorded. Management has performed a
reconciliation of supplier statements and subsequent restated all prior year's invoices processed in
the 2023 financial year. The restatement resulted in the adjustment to the trade payables, and general
expenditure, other material and contracted services.
Error 11: Overstate VAT accrual
The Debtors Vat accrual was overstated due to incorrect posting of full vat impairment instead of
posting the movement between the two financial years.
Journals were posted in period 14 to adjust the VAT Debtors Accrual in line with the impairment
calculation, adjustment processed against the debt impairment expense
Error 12: Service charges, Interest and property rates
Adjustments on customer accounts in the current financial year relating to prior financial years.
Revenue for prior year was restated.
Error 13: Other income
COT vehicles that were previously leased to the City and ownership was transferred to the City,
however information was provided in the 2023 financial year.
Restatement for leased vehicles taken over by the City in 2022 brought in as newly identified assets
Error 14: Interest received investments
Incorrectly posted to interest received (investment income) during the audit adjustments.
Reversal of the journal incorrectly posted to interest income.
Increase redemption fund assets.
Decrease interest received (investment income).
Error 15: Government grants & subsidies
The prior year revenue for TRT was understated and the restatement journal was processed to
correct the revenue and the debtor in the correct financial year
Error 16: Fines, penalties and forfeits
The Aarto debtor prior year balance was revisited for accuracy, validity and completeness. The Enatis
system was used as a 3rd party assurance body to ensure that what had been recorded by the is
correct. This led to correction of previously overstated fines revenue and correction of a debtor.
Error 17: Employee costs
Leave provision was overstated in the prior year.
Reversal and restatement of leave provision for the prior year.
Recognition of Tshwane Municipal Pension Fund (TMPF) interest cost, current service cost expense
and asset ceiling for prior year.
Error 18: Depreciation and amortisation
The depreciation and useful life adjustment were processed and a journal was posted to correct prior
year.
Assets capitalised to prior periods influencing depreciation accounted for in the incorrect financial
period.
Unplanned depreciation were processed on SAP and restatement journal processed to correct prior
year period.
Error 19: Finance Cost
Correction of the Vat liability interest process incorrectly in the 2022 financial year.
Recognise penalties and interest in the correct financial year.
Error 20: Debt impairment
The Aarto debtor prior year balance was revisited for accuracy, validity and completeness. This led to
correction of aarto impairment.
Error 21: Other materials, Bulk purchases, Contracted services and General expenses
During the audit of trade payable, it was noted that the trade payables were not correctly reconciled to
supplier statement and as a result not all liabilities were recorded. Management has performed a
reconciliation of supplier statements and subsequent restated all prior
year's invoices processed in the 2023 financial year. The restatement resulted in an adjustment to the
trade payables, and general expenditure, other material and contracted services.
Error 22: Gains and losses on disposal of assets
Refer to note 5.
Error 23: Actuarial gains and losses
Recognition of actuarial gains and losses as per the actuarial reports for employee benefit obligations
as per GRAP 25 for prior year.
Error 24: Impairment loss
Impairment assessment for prior year was not done in some of the departments.
Restatement journal was processed to correct the impairment in the prior year.
Error 25: Loss on redemption fund
Refer to note 7.
Full details of the restatements are disclosed in Note 71 to the Audited Consolidated Annual Financial
Statements.
The AGSA further identified material irregularities and is in the process of evaluating further actions to
be taken to ensure resolution of the material irregularities:
Material irregularities
In accordance with the PAA and the Material Irregularity Regulations, the AGSA has the responsibility
to report on material irregularities identified during the audit and on the status of material irregularities
as previously reported in the auditors report.
Material irregularities identified during the audit -
1. Inadequate controls designed to monitor the work of the consultant
Reasonable steps were not taken to ensure that the municipality implements and maintains an
effective system of expenditure control, including procedures for the payment of funds, as there
were no controls to verify the work done by the consultant before processing payments in the 2021-
2022 financial year in contravention with section 65(2) of the MFMA.
The non-compliance is likely to result in a material financial loss, if not recovered.
The accounting officer was notified of the material irregularity on 19 Arpil 2023 and invited to make
a written submission on the actions taken and that will be taken to address the matter.
The accounting officer appointed a panel of service providers in June 2023. In addition, he had
committed to finalise the value for money audit by October 2023, however, due to the lack of
required skills to perform the value for money audit by the initial service provider, the committed
date could not be met. A request for quotation was issued to another service provider in November
2023 and it is anticipated that a final report will be finalized by March 2024.
The accounting officer plans to take action based on the outcome of the audit.
The AGSA will follow up on the implementation of these actions during their next audit.
Status of previously reported material irregularities
1. Overpayment to the fuel purchase.
Reasonable steps were not taken to ensure that the municipality implements and maintains an
effective system of expenditure control, including procedures for the payment of funds, as the
municipality overpaid three suppliers for the supply and delivery of fuel between February 2019 and
June 2020 in contravention of section 65(2) of the MFMA.
The non-compliance is likely to result in a material financial loss, if not recovered. The amount is
disclosed in note 76 as a comparative to the 2020-21 annual consolidated and separate financial
statements.
The accounting officer was notified of the material irregularity on 8 June 2021.
The AGSA has recommended the accounting officer take the following actions to address the
material irregularity by 8 August 2022. The accounting officer failed to implement the below
recommendations:
• Appropriate action should be taken to ensure that the investigation into all overpayments is
finalized.
• Appropriate action should be taken to recover all financial losses suffered by the
municipality from the three suppliers.
• Disciplinary or when appropriate criminal proceedings should commence against any
official who has allegedly committed an act of financial misconduct or an offence, as
required by section 62(1)(e) of the MFMA and in the manner prescribed by the Municipal
Regulations on Financial Misconduct procedures and Criminal Proceedings.
The AGSA notified the accounting officer of the following remedial actions to address the material
irregularity, which should have been implemented by 4 March 2023:
• The investigation into the non-compliance with section 65(2)(a) of the MFMA must be
completed to determine if any official might have committed an act of financial misconduct
or an offence in terms of Chapter 15 of the MFMA.
• disciplinary proceedings must commence, without undue delay, against all officials who
have allegedly committed an act of financial misconduct or an offence, as required by
section 62(1) of the MFMA and in the manner prescribed by the Municipal Regulations on
Financial Misconduct Procedures and Criminal Proceedings.
• if a senior manager of the municipality has allegedly committed an act of financial
misconduct, the accounting officer must report the allegation to the municipal council, the
provincial treasury and the National Treasury, as required by regulation 3(1) of the
Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings.
• effective and appropriate steps must be taken to monitor and support the recovery
process of the financial loss through the litigation process and a progress report to this
effect must be provided to the AGSA at the due date for the implementation of the
remedial action.
The accounting officer instituted legal action to recover the financial loss suffered and the matter is
currently before the court of law.
On 14 March 2023 and 4 April 2023, the accounting officers responses and substantiating
documentation on the implementation of the remedial action were received. Further information
was received on 21 June 2023. The AGSA evaluated the accounting officer's responses and
substantiating documentation received. As some of the actions taken to address the material
irregularity were still in progress and not yet completed. I granted the accounting officer and
additional six months up to February 2024 to implement the remedial actions.
On 5 February 2024, the accounting officer's response was received on the progress made in
completing the outstanding action on the implementation of the remedial actions.
The AGSA is in the process of assessing the progress made with the implementation of the actions
to address remedial actions.
2. Interest not levied on outstanding sundry consumer debtors
Interest was not charged on outstanding sundry consumer debtors between 1 July 2019 and 30
June 2020 as required by section 64 (2) (g) of the MFMA and the approved credit control and debt
collection policy of the municipality.
The non-compliance is likely to result in a material financial loss if not recovered.
The accounting officer was notified of the material irregularity on 8 June 2021.
The AGSA recommended that the accounting officer should take the following actions to address
the material irregularity by 8 August 2022. The accounting officer failed to implement the below
recommendations:
• Quantify the full extent of the interest that should have been charged in accordance with
the credit control and debt collection policy of the municipality.
• The non-compliance should be investigated to determine if any official might have
committed an act of financial misconduct or an offence in terms of Chapter 15 of the MFMA.
• Disciplinary or, when appropriate, criminal proceedings should commence against any
official who has allegedly committed an act of financial misconduct or an offence, as
required by section 62(1)(e) of the MFMA and in the manner prescribed by the Municipal
Regulations on Financial misconduct procedures and Criminal Proceedings.
• Appropriate action should be taken to ensure that interest is levied against all sundry
debtors in accordance with the municipality's credit control and debt collection policy as
required by section 64(2) (g) of the MFMA. This should include interest that was not
previously charged in accordance with the policy.
The AGSA issued a directive to the accounting officer to determine the amount of the financial loss
and recover such loss, or make progress with the recovery of the loss, from the responsible
person(s) by 15 May 2023. In addition, I notified the accounting officer of the following remedial
actions to address the material irregularity, which should be implemented by the same date:
• The investigation into the non-compliance with section 64(2)(g) of the Municipal Finance
Management Act, 2003 ("MFMA") and Credit Control and Debt Collection policy must be
completed to determine if any official might have committed an act of financial misconduct
or an offence in terms of Chapter 15 of the MFMA.
• Disciplinary proceedings must commence, without undue delay, against all officials who
have allegedly committed an act of financial misconduct or an offence, as required by
section 62(1 )(e) of the MFMA and in the manner prescribed by the Municipal Regulations
on Financial Misconduct Procedures and Criminal Proceedings.
• If a senior manager of the municipality has allegedly committed an act of financial
misconduct, the accounting officer must report the allegation to the municipal council, the
Provincial Treasury and the National Treasury as required by regulation 3(1) of the
Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings.
On 13 May 2023, the accounting officer's response with the substantiating documentation on the
implementation of the remedial action was received. Further information was requested on the
actions implemented which were received on 14 July 2023 and 11 August 2023. I evaluated the
responses and the substantiating documentation received. To implement the remedial action, the
municipality revised its credit control and debt collection policy to provide for the charging of interest
on outstanding sundry debtor accounts and implemented the policy retrospectively by charging
R133 million of interest to the sundry debtors with the outstanding balances.
A further request for information was issued on 15 November 2023 on the steps taken to finalise
the investigation into the non-compliance and to identify any responsible officials for consequence
management. On 6 February 2024, a supplementary response was received whereby the
accounting officer indicated that the Group Audit and Risk department has been requested on 22
November 2023 to appoint a service provider to investigate the non-compliance and to identify any
responsible officials. The appointment of the service provider is in process.
The AGSA will follow up in the next audit on the outcome of the investigation and the additional
actions taken to implement the remedial action.
3. Procurement of software licenses not utilised
Resources of the municipality were not utilized economically as the municipality paid for
maintenance and support costs on software licenses procured between September 2019 and
December 2020 but not used, as required by section 62(1)(a) of the MFMA.
The municipality is likely to suffer a material financial loss if the maintenance and support costs
spent on software licenses not used are not recovered. The financial loss is disclosed in note 49 of
the consolidated and separate financial statements for the period ended 30 June 2022.
The non-compliance is likely to result in a material financial loss, if not recovered.
The accounting officer was notified of the material irregularity on 30 November 2022.
A credit note of R22 310 000 was issued by the service provider in December 2022 that will be
used towards future annual maintenance.
The accounting officer has taken the following actions to address the material irregularity:
• Terminated software licenses that were not in use.
• Negotiated a new maintenance base on licenses that remained in use with the service
provider that resulted in the reduction of corresponding annual maintenance from R63 180
487 to R52 150 540, resulting in saving of R11 029 947.
• Instituted an audit into the utilization of software licenses which was finalized in July 2023.
• Initiated discussions relating to the design of controls to prevent re-occurrence, recovery of
any remaining financial losses, and agreement on pricing options for the new contract
which is expected to be finalized in March 2024.
• Outcome of the authorisation review license assessment and proposals among others
presented by the service provider will be considered to determine the need for future license
requirements when finalizing the new contract.
The AGSA will follow up on the implementation of these actions during the next audit.
4. Vandalism of the bulk water infrastructure at Refilwe Manor
An effective system of internal control for assets was not in place as assets were stolen and vandalized
between December 2018 and January 2020 in contravention of section 63(2)(c) of the MFMA.
The non-compliance is likely to result in a material financial loss of R 4 970 982 if not recovered. The
amount is disclosed in note 74 as a comparative to the 2021/2020 annual consolidated and separate
financial statements.
The accounting officer was notified of the material irregularity on 30 November 2021.
The accounting officer has taken the following actions to address the material irregularity:
• appointed a security company through the contractor in December 2020.
• The contractor acknowledged responsibility for the damages due to vandalism at Refilwe Manor
in January 2021 and has since replaced some electrical and mechanical items. In addition, the
service provider has purchased all the material required for the completing of pump stations
• Repairs of the reservoir were completed in December 2022.
• The municipality has policy that adequately covers roles and responsibilities relating to the
safeguarding of assets.
The following actions are in the process of implementation by the accounting officer:
• The accounting officer had committed to complete pump stations 12 and 15 by November 2022,
however, the committed date was not met pending an electricity connection which is required
before the finalisation of the pump stations. In addition, due to community disruptions, the
accounting officer has committed to complete pump stations 12 and 15 by 30 April 2024.
• Electrical cables and transformers have been installed, however, connection to the main feeder
line has not been undertaken. This is required to prevent further theft and vandalism. The
accounting officer plans to have the connection installed before the end of March 2024.
The AGSA will follow up on the implementation of the planned actions during the next audit.
5. Pollution of water resource not prevented at Rooiwal Waste Water Treatment Works (WWTW)
The municipality did not take reasonable measures at the Rooiwal Wastewater Treatment Works
(WWTW) to prevent pollution or degradation of the environment and water resources from occurring,
continuing or recurring, as required by section 28(1) of the National Environmental Management Act
107 of 1998.
The Rooiwal WWTW has not been functional since 2010 due to neglected maintenance that has
resulted in the discharge of inadequately treated effluent into the Apies River and Leeuwkop Dam over
a number of years. The Apies River feeds the Leeuwkop Dam, which is the extraction of the Temba
water treatment plant.
This has resulted in the continued and long ongoing discharge of inadequately treated effluent,
exceeding the discharge limits, into main water resources such as the Apies River and Leeuwkop Dam
as well as groundwater pollution of the surrounding environment, and also has a devastating effect on
the water, its eco-systems and the people who use the water. These contaminated water resources
provide water for consumption and recreational services for the surrounding communities, as well as
water to neighboring farmers for consumption by livestock and irrigation of crops (boreholes and
irrigation ponds)
The accounting officer was notified of the material irregularity on 15 December 2021.
The accounting officer included the planning of Rooiwal phase II in the integrated developmental plan
of the municipality. The accounting officer had initiated section 33 of the MFMA process, which was
expected to be finailised by February 2023. Subsequently, the accounting officer put the section 33 of
the MFMA process on hold as the municipality adopted a new approach to address issues at Rooiwal
WWTW.
The process to complete Rooiwal Phase 1 project will require a new consulting engineering firm to be
appointed. The scope of work for the appointment of the consulting engineering firm to be appointed.
The scope of work for the appointment of the consulting engineering firm to render professional services
has been compiled. The preparation of specification was expected to be finalized by March 2023;
however, the accounting officer has considered an alternative approach for the execution of Rooiwal
Phase 1, and this will be the appointment of an implementing agent to oversee the execution of the
project.
The accounting officer has taken the following actions to address the material irregularity:
• Ensured continuous repairs and maintenance of the machinery and equipment at the Rooiwal
WWTW.
• Service providers were appointed in August 2021 for the provision of water tanker services to
Hammanskraal residents affected by the water quality issues.
• Appointed a contractor to contract phase I upgrade and refurbishment at the Rooiwal WWTW.
However, the contractor's contract was terminated in July 2022 due to poor performance.
• An early business case was submitted to Infrastructure South Africa in April 2023 and the
accounting officer is awaiting feedback.
• A total of R450 million has been allocated for Rooiwal WWTW Phase 1 project on the 2023-24
Medium Term Revenue and Expenditure Framework, with R150 million split from 2023-24 to
2025-26 financial years. The allocated budget will be utilised for the completion of the Rooiwal
WWTW phase I upgrade and the execution of new upgrades identified to improve the quality
of the effluent discharged.
• A preliminary technical meeting between the municipality and Development Bank of Southern
Africa (DBSA) took place in June 2023 to discuss the scope of works and possible signing of
memorandum of understanding for the execution of the project.
• A mayoral committee meeting took place in July 2023 to consider the appointment of DBSA as
the implementing agent. DBSA was appointed as an implementing agent in September 2023
and a service level agreement between DBSA and the municipality was finalized in October
2023.
• DBSA appointed a general building turnkey contractor for the design and construction of the
Rooiwal WWTW in February 2024.
The following actions are in the process of implementation by the accounting officer:
• DBSA in in the process to appoint a professional service provider and mechanical engineering
turnkey contractor.
• The accounting officer is in the process to submit intermediate business case application to
Infrastructure South Africa.
• Application for funding will be submitted to Budget Facility for the Infrastructure upon approval
of the intermediate business case by Infrastructure South Africa.
The AGSA will follow up on the implementation of the planned actions during the next audit.
6. Payment made for an informal trading facility that was not constructed
A payment of R4 990 281 was made on 30 June 2016 to a contractor for an informal trading facility that
was not constructed at Barolak Taxi rank as effective internal controls relating to expenditure
management were not in place as required by section 65(2)(a) of the MFMA.
The non-compliance is likely to result in a material financial loss of R 4 990 281 if not recovered. The
amount is disclosed in note 76 as a comparative to the 2020-21 annual financial statements.
The accounting officer was notified of the material irregularity on 25 March 2021.
The accounting officer has taken the following actions to address the material irregularity:
• Commissioned a forensic investigation to determine the officials responsible, and the
investigation was completed in November 2021. The investigation concluded that three officials
are responsible for the payment made for an informal trading facility that does not exist. One
official resigned before finalisation of the investigation and the other resigned after the
investigation was finalised.
• Had committed to take disciplinary action against the third implicated official on or before March
2022. The disciplinary process could not be finalised by the committed date due to the request
for an extension by the implicated official. The disciplinary process commenced in October
2022. The employee representative requested an extension until April 2023 due to ill health
and the implicated official subsequently resigned in June 2023.
• Summons were issued against the service provider and two ex-officials in March 2023;
however, they could not locate one of the officials at his last known address. The application
for substituted services has been served and was heard in December 2023.
• The service provider and one of the ex-officials have indicated their intention to defend the
summons issued through filing pleas.
• A criminal case that was opened in December 2021 is still ongoing.
• To prevent a re-occurrence, the accounting officer strengthened controls relating to the
monitoring of projects and processing of payments.
The material irregularity is resolved.
7. Payment of incorrect beneficiary
A payment amounting to R53 444 860 was made to an incorrect beneficiary on 30 August 2019
as effective internal controls relating to expenditure management were not in place as required
by section 65(2) (a) of the MFMA.
The non-compliance is likely to result in a material financial loss of R53 444 860 if not
recovered. The amount is disclosed in note 77 to the 2019-20 annual financial statements.
The accounting officer was notified of the material irregularity on 5 March 2021.
The National Prosecuting Authority recovered an amount of R 23 169 447 and paid it over to the
municipality in November 2021.
The actions taken to resolve the material irregularity by the accounting officer were as follows:
• Had committed to award a banking tender to allow host-to-host for payments by March 2022.
A service provider was appointed in April 2022.
• Human resource third-party beneficiaries are created on the banking system and the banking
details are locked and cannot be edited when payments are made effective September 2019.
• A phase one investigation into the matter by the internal forensic services unit was concluded
in February 2020, which identified that unauthorised monitoring software was installed into 70
workstations and it further recommended that an investigation be conducted to identify the
person responsible for the installation of the monitoring software over the network. The
accounting officer did not conduct a phase 2 investigation as the matter had already been
referred to the Directorate for Priority Crimes in September 2019 for investigation.
• The criminal case that was opened in September 2019 is still ongoing.
The material irregularity is resolved.
8. Salary payments made to employees for work not done
The municipality paid salaries to employees between November 2019 and October 2020 for work not
done due to proper recruitment process not being followed as no work was allocated to employees.
This resulted in non-compliance with section 65(2) (a) of the MFMA.
The non-compliance is likely to result in a material financial loss of RBS 412 643, if not recovered. The
municipality disclosed R34 048 301 and R53 846 760 in note 76 to the 2020-21 annual financial
statements as the current and prior year financial loss respectively.
The accounting officer was notified of the material irregularity on 20 May 2021.
The actions taken to resolve the material irregularity by the accounting officer were as follows:
• Commissioned a forensic investigation to identify officials responsible for payments made
without any work having been performed and the likelihood of recovering monies paid. The
accounting officer initially committed to finalise the investigation by March 2022, but it was only
finalised in July 2022.
• A criminal case was opened in December 2022 against the former governance and support
officer and the member of the municipal council who are no longer in the employment of the
municipality. The case was transferred to Pretoria Central Specialised Commercial Crime Unit
in May 2023.
• Finalised the disciplinary process that was initiated in October 2022 and dismissed the
implicated official in August 2023. The official lodged a dispute with the South African Local
Government Bargaining Council and the matter is set for hearing in April 2024.
• The criminal case that was opened in December 2022 is still on going.
• To prevent a re-occurrence, the accounting officer has strengthened controls relating to the
appointment of contract workers.
The material irregularity is resolved.
9. Inadequate system of internal controls to safeguard assets (Baviaanspoort wastewater treatment works)
The municipality did not take all reasonable steps to ensure that it has adequate systems of internal
controls for the purpose of safeguarding its assets, as assets were stolen and vandalised resulting in
contravention of section 63(2)(c) of the MFMA.
The non-compliance resulted in a material financial loss of R3 904 346 for the municipality based on
the value of the assets that were stolen and vandalised on 1O February 2016 as disclosed in note 74
to the 2018-19 financial statements.
The accounting officer was notified of the material irregularity on 17 December 2019.
The actions taken to resolve the material irregularity by the accounting officer were as follows:
• Reported the matter to SAPS for investigation in February 2016. Two arrests were made in
March 2016. The perpetrators were sentenced to 12 years and 1O years, respectively.
• Some of the minor assets that were stolen or vandalised were insured and in February 2017,
the insurance company reimbursed the municipality with R174 716 for the loss.
• Commissioned an investigation which was finalised in November 2021, which concluded that
the site did not have sufficient controls in place to mitigate theft and vandalism of assets
because no security policy and guidelines were in place.
• Increased security personnel in all buildings housing motor control equipment and electrical
transformers were reinforced with grating in September 2019.
• Approved the appointment of a contractor to erect a security fence in December 2019 to prevent
further losses. The erection of the security fence was completed in March 2021.
• Had initially committed to appoint a security company to safeguard assets and prevent further
losses by March 2020. However, due to budget constraints, the accounting officer deployed
security personnel from other departments within the municipality from Dec0mber 2020 as an
interim measure.
• A security company was appointed in February 2022 to safeguard assets of the municipality for
a period of three years.
• Referred the matter to the internal forensic services division for investigation in February 2020,
which was completed in June 2020. However, it did not cover adherence to the asset
management policy of the municipality at the time of the incident, verification and quantification
of the financial loss as well as whether there was any fraud, corruption or misconduct related
to the material irregularity.
• The accounting officer had also committed to develop a policy or guideline, which will inform
the municipality on roles and responsibilities relating to security, frequency of monitoring, and
evaluation activities by March 2022. The municipality has a policy that adequately covers roles
and responsibilities relating to the safeguarding of assets.
• Had committed to initiate the process to recover funds lost by March 2022; however, due to the
late involvement of legal representatives of the municipality, the recovery process could not be
initiated. A legal firm was given instructions in February 2023 to assess the feasibility of a
successful civil claim and criminal prosecution based on the outcome of the investigation.
• The legal firm provided a legal view in May 2023 which concluded that the debt might have
prescribed if raised by the security company.
• The accounting officer could not continue with the recovery of the financial loss suffered as the
reduction of security personnel at the reservoir was as a result of mayoral committee resolution
taken in June 2016.
The material irregularity is resolved.
10. Rental account at Bothongo plaza not paid within 30 days
The municipality did not make payments within 30 days for the rental of the Bothongo Plaza building
resulting in interest charged and paid on 30 July 2020 in contravention of section 65{2)(e) of the MFMA.
The non-compliance is likely to result in a financial loss amounting of R7 106 066 if not recovered. The
amount is disclosed in note 76 as a comparative to the 2020-21 annual financial statements.
The accounting officer was notified of the material irregularity on 20 May 2021.
I recommended that the accounting officer should take the following actions to address the material
irregularity by 8 June 2022. The accounting officer failed to implement the below recommendations:
• The non-compliance with section 65(2)(e) of the MFMA should be investigated to determine if
any official might have committed an act of financial misconduct or an offence in terms of
Chapter 15 of the MFMA.
• Any person(s) liable for the losses should be identified and appropriate action should
commence to recover the financial loss.
• Disciplinary or, when appropriate, criminal proceeding should commence against any official
who has allegedly committed an act of financial misconduct or an offence, as required by
section 62(1)(e) of the MFMA and in the manner prescribed by the Municipal Regulations on
Financial misconduct procedures and criminal proceedings.
I issued a directive to the accounting officer to determine the amount of the financial loss and recover
such loss, or make progress with the recovery of the loss, from the responsible person(s) by 1
November 2022. In addition, I notified the accounting officer of the following remedial actions to address
the material irregularity, which should be implemented by the same date:
• The investigation into the non-compliance with section 65(2)(e) of the MFMA should be
completed to determine if any official might have committed an act of financial misconduct or
an offence in terms of Chapter 15 of the MFMA.
• Any person(s) liable for the losses should be identified and appropriate action should
commence to recover the financial loss.
• Disciplinary proceeding should commence, without undue delay, against any official who has
allegedly committed an act of financial misconduct or an offence, as required by section
62(1)(e) of the MFMA and in the manner prescribed by the Municipal Regulations on Financial
Misconduct Procedures and Criminal Proceedings.
• If a senior manager of the municipality has allegedly committed an act of financial misconduct,
the accounting officer must report the allegation to the municipal council, the Provincial
Treasury and the National Treasury as required by Regulation 3(1) of the Municipal Regulations
on Financial Misconduct Procedures and Criminal Proceedings.
• If it appears that the municipality suffered the financial loss through criminal acts or possible
criminal acts or omission, this must be reported to the South African Police service, as required
by section 32(6)(b) of the MFMA.
On 4 and 28 November 2022, the accounting officer's responses and substantiating documentation on
the implementation of the remedial action were received. Additional information that was required to
finalise the assessment was received on 17 January 2023.
In implementing the remedial action, the accounting officer requested the Group Audit and Risk
Department to conduct an investigation into the non-compliance to identify any responsible official(s)
for consequence management. The investigation found that fruitless and wasteful expenditure was
incurred resulting from interest charged on arrear rental not settled. The investigation further found that
no official(s) could be held liable for interest incurred, as the non-payment of the rental and subsequent
interest charged resulted from a dispute between the municipality and the landlord of Bothongo Plaza.
The material irregularity is resolved.
The City of Tshwane audited annual financial statements are still available for download at the
following link:
(https://www.tshwane.gov.za/?page_id=11042)
19 March 2024
Debt Sponsor
Absa Bank Limited (acting through its Corporate and Investment banking division)
Date: 19-03-2024 03:30:00
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