AG reports: Almost R1-bn in contracts for municipal staff, families

Auditor General Terence Nombembe this week released audit outcomes on municipalities across the country. Video: eNCA

Johannesburg - R885-million. That’s how much municipalities paid to companies owned by government employees, councillors and their close family members in the 2011/12 financial year.

The vast majority of the contracts – R793,4-million worth - went to companies directly under the control of government employees and councillors, some of whom work within the municipality where the contracts originate. Others work in other government departments.

The payments are in violation of government supply chain management regulation 44, the Auditor General has said in his detailed provincial reports on spending in municipalities. These contracts form a large part of the R9,27 billion in irregular expenditure in municipalities.  

With R464,4-million in contracts for government staff, Limpopo tops the list of offenders. The province has been plagued by allegations of corruption and maladministration, and earlier this year Premier Cassel Mathale resigned.

“A total of 20 (69%) auditees made awards to the value of R464, 64 million to suppliers in which officials, councillors and officials of other state institutions had an interest. This represents a significant increase from the R1, 2 million identified in the previous year,” the AG’s report on Limpopo said.

“Where interest was identified, the suppliers did not declare the interest in 41% of the instances and the employee did not declare in 23% of the instances,” the Limpopo report reads.

In Gauteng, R280-million was paid to companies owned by government staff and councillors. “The majority of these contracts were awarded by the Tshwane municipality – with 281 contracts going to staff and councillors in the employ of the municipality. Another 2074 contracts went to the companies owned by government employees in other institutions. “This was a significant increase from R89,4-million in the prior year,” the AG says in the report. The AG also noted that the tripling of contracts awarded to municipal staff “indicates that auditees did not make progress in the screening of tenders to employees and councillors”.

“The City of Tshwane ran computer-assisted audit techniques to detect and prevent awards to employees, close family members of employees and councillors. However, awards made to officials of other organs of state, who made false declarations on their tender documents, were difficult to detect due to a lack of adequate systems to identify instances of false declarations,” the report said.

Supply Chain Management regulations prohibit tender awards to persons or entities owned or managed by staff in the employ of the municipality. It also prohibits the awards to anyone “in the service of any other state institution”.

“Such expenditure is also considered irregular,” the AG says in his reports. The AG also points out that that while awards to close family members are not prohibited, awards over R2000 must be disclosed in the municipal financial statements and officials should declare the interest of a close family member doing business with the state.

“A close family member is defined as a spouse, child or parent of a person in the service of the state,” the reports say. When it comes to contracts awarded to close family members, the Western Cape tops the list with R37,4m in contracts going to family. The majority of these contracts were awarded in the City of Cape Town.

Of the 47 contracts awarded, officials did not declare the interests of the family members in 32 instances, and in 37 instances the owner of the company did not declare their family ties.

The Eastern Cape follows closely behind, with with R26,4m in contracts going to family members.  In total companies owned by close family members of municipal officials made almost R92-million. Staff at all levels, including senior managers, were guilty of not declaring their interests or family interests.


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