Third Special Report

Third special report on the financial management of government’s covid-19 initiatives 70 Spending of covid-19 funding for non-covid-19 purposes The allocation letters from the National Treasury, informingmunicipalities of the amounts approved for spending for covid-19 purposes fromuncommitted conditional grants relating to the 2019-20 allocation, as well as the grant framework relating to the 2020-21 allocation, were clear on the purpose of the amounts allocated for covid-19. Municipalities were therefore only meant to spend the additional allocation and repurposed funds for the purposes specified in the relevant guiding documents and not for any other purpose. At four (9%) of the 43 municipalities selected for auditing, we identified that not all covid-19-related funding had been spent in line with the requirements specified in the allocation letters/grant framework. The amount of covid-19 funding spent for non-covid-19 purposes relating to this area was R105 900 449, and is summarised in the table below. Covid-19 funding spent for non-covid-19 purposes Province Name of municipality Amount (R) Gauteng City of Tshwane Metro 102 722 208 North-West Ngaka Modiri Molema District 2 766 948 Gauteng RandWest City 411 293 Total 105 900 449 The findings below are an example of what our teams found during the audits. City of Tshwane Metro At City of Tshwane Metro, we identified a fraud risk that relates to themisrepresentation of the information in respect of the actual and budgeted expenditure for covid-19-related initiatives. We noted instances where the covid-19 allocated funds were not used for the intended purposes, as explained by the examples below, and that the true state of affairs was not correctly reported. This is due to the lack of controls to ensure that accurate and valid information is contained and included in the special adjustment budgets (SAB) or other relevant reports and that it provides a fair reflection of the budget and actual expenditure for the covid-19 initiatives undertaken by the City of Tshwane Metro. In addition, we noted that the application of the funds reallocated from the urban settlements development grant was not monitored against the stipulations of section 20(6)(a), (c) and (d) of the Division of Revenue Act and the approval granted by the National Treasury for the reallocation of grant funding. This fraud risk and control weaknesses are supported by the following examples, totalling R102 722 208:  An expenditure amount of R18 681 040 fromown funding was not related to covid-19 but was included in the SAB, as there was a misunderstanding when the departments within themetro were requested to report on covid-19-related expenditure. This was confirmed by the relevant department in themetro.  A line itemon the SAB included an amount of R80 255 645 under a specific metro department. This was not covid-19 related, as the funds were used to pay for the specific department’s day-to-day expenses for the specific service (refuse removal) and were not in line with the stipulation of the grant funding. This was confirmed by the department.  The SAB reflected that the specific department within the metro spent R3 785 523 on PPE-related items for homeless shelters. The department confirmed that the amount was spent for its own employees and that the reference to homeless shelters was incorrect. The grant conditions did not allow for themunicipality to use the funds for its own employees, as the funds were earmarked for a specific project.