Third Special Report

Covid-19municipal relief funding (CMRF) 59 Recommendation (poor-quality workmanship on installation of water tanks to supply emergency water to communities; water tanks installed were not adequately secured; municipality paid for supply of water projectswithout any proof of delivery or distribution) Management should:  conduct detailed inspections to assess the quality of the installations  address all project defects and delays promptly within a strict timeline  investigate the conduct of the consultants or contractors and take appropriate action (including recoveringmoney paid for poor/substandard work performed)  investigate the actions of municipal officials who have failed to ensure that the water projects met the required quality standards and timelines, and implement consequence management where appropriate  stringently enforce project management processes and contractual arrangements on all projects  investigate the failure to impose retention or penalties per the contracts, as this could result in financial loss for the municipality, and take remedial action  implement proper security measures in partnership with the community or relevant stakeholders to prevent damages to the water projects, with formal reporting of damages incorporated in the water tanker services. Covid-19 goods and services procured from ‘management-preferred’ suppliers Municipalities were required to ensure that a readily available supply of water was provided to informal settlements, rural areas, healthcare facilities and schools in order to curb the spread of covid-19 infections. The procurement of water tanks to provide for the abovemust adhere to SCM regulations and prescripts. We identified that one of the 12 municipalities selected for auditing providedwater tank projects that did not conform to SCM regulations and prescripts, as management-preferred suppliers were used for the procurement of these covid-19 goods and services. We further identified onemunicipal entity that did not comply with SCM regulations when requesting proposals for the de-densification of hostels and informal settlements froma panel of contractors, in which we noted the possible preferential treatment of suppliers on a panel. We highlighted findings relating to procurement processes for covid-19 expenditure identified at the two auditees included below. Note that we identified findings relating to non- compliance in the area of procurement at both audits during the 2018-19 regularity audit, while one audit (eThekwini Metro) had findings on this audit focus area in the 2019-20 audit. eThekwini Metro Themunicipality appointed 11 service providers to supply and install 100water tanks each at R22 000 per tank, amounting to R2 200 000, without following a fair and proper supply chain process. We noted non-compliance and possible fraud red flags in evaluating the appointment of, and payments to, these suppliers, which collectively could indicate preferential treatment of certain suppliers. These non-compliances include: • the deviation process not being properly followed for the supply of static/water tanks (i.e. deviation not supportedwith reasons, and not approved by the accounting officer) • the supplier scoring the highest points not being selected • the necessary CIDB requirements for the installation of water tanks not being considered for the water tank contract. On the last point, we found that three of the 11 suppliers appointed did not have the CIDB grading suitable for the type of work, while two suppliers’ CIDB registrations had expired and two suppliers were not registered with the CIDB. In addition, when we performed a physical site verification, we established that one supplier (with no suitable CIDB grading) did not install the water tanks as specified in the plans.