Third Special Report

Covid-19municipal relief funding (CMRF) 71 Ngaka Modiri Molema District Themunicipality, which is one of four district municipalities in NorthWest with a main seat inMahikeng, spent R2 766 948 on accommodation for water service employees. Spending on accommodation was, however, not allowed in terms of the approval provided by the National Treasury for the reprioritisation of 2019-20 conditional grant funding. The accommodation was provided for twomonths, from27 March to 31 May 2020. During this period, the country was on lockdown level 5 (27 March to 30 April 2020) and lockdown level 4 (1 May to 31 May 2020) and essential service workers were allowed to travel to and fromwork with relevant permits. Therefore, there was no justifiable reason for these employees to stay at guesthouses when they could have used permits to travel from their homes to work. This would have saved themunicipality R2 766 946 in accommodation costs and contributed to covid-19 funding being spent more efficiently. Furthermore, the invoices provided by the guesthouses did not list the names of the employees staying at the guesthouse and there was no proof attached in the payment vouchers of howmanagement confirmed which employees actually stayed in the guesthouses before payments weremade. We could therefore not confirmwhether the accommodation paid for was actually for water service employees and if the spending was related to covid-19. Recommendations Municipalities should ensure compliance with applicable laws and regulations and put measures in place to avoid incurring fruitless and wasteful expenditure. Municipalities should ensure that expenditure relating to conditional grants adheres to the relevant requirements of the Division of Revenue Act. Municipalities not following required procurement processes for covid-19 expenditure Municipalities did not always follow SCM processes, which resulted in non-compliance with legislation as well as possible fraud and corruption. At sevenmunicipalities, we identified non-compliance and fraud risks relating to this focus area. According to ISA 240, the primary responsibility for preventing and detecting fraud rests with both themanagement of an entity and those chargedwith governance. The standard states that it is important that management, with the oversight of those chargedwith governance, places a strong emphasis on fraud prevention, whichmay reduce opportunities for fraud to take place, and fraud deterrence, which could persuade individuals not to commit fraud because of the likelihood of detection and punishment. We highlighted findings relating to procurement processes for covid-19 expenditure identified at the five auditees included below. Note that we identified findings relating to non-compliance in the procurement focus area at all five audits during the 2018-19 regularity audit, and at all except for City of Ekurhuleni Metro during the 2019-20 audit. All five also had findings on the SCM focus area during both the 2018-19 and 2019-20 audits. Johannesburg Water In April 2020, JohannesburgWater, a municipal entity of the City of Johannesburg Metro, appointed a supplier (with which it previously had a contract) to assist with deep-cleaning depots and disinfecting vehicles, for a total amount of R4 760 655. We noted the following non-compliance aspects and possible fraud red flags in evaluating the appointment of, and payments to, this supplier, which collectively could indicate preferential treatment of the supplier: • An uncompetitive procurement process was followed to appoint the service provider for deep-cleaning depots and disinfecting vehicles, as themunicipality approached just one supplier, using the fact that it previously had a contract