Sedibeng Water gets 6th consecutive qualified audit as irregular spending hits R1.7bn | Fin24

• Sedibeng Water has received another qualified audit from Auditor-General Tsakani Maluleke. Its last unqualified audit was in 2015-16.
• The water board, which services more than a million residents in south Gauteng, has seen irregular expenditure of R1.7 billion in the past year.
• The AG’s office says it struggle to confirm some of the board’s spending.
• Get the biggest business stories emailed to you every weekday, or go to the Fin24 front page.

Auditor-General (AG) Tsakani Maluleke slapped Sedibeng Water with another qualified audit opinion after finding that the entity’s financial statements understated its irregular as well as its fruitless and wasteful expenditure by millions.

The water board serves more than a million residents in the Sedibeng District Municipality in south Gauteng, which includes Vereeniging, Midvaal, and Emfuleni. Its last unqualified audit was in 2015-16.

READ | Seven months on, Umgeni Water appoints yet another acting CEO

Maluleke said Sedibeng Water’s annual report and financial statements for 2020/21 showed contracts where it paid more than the agreed-upon amount. It also didn’t adequately account for financial transactions. 

Maluleke said Sedibeng Water did not include all of its irregular expenditure in the notes to its financial statements, as required by the Public Finance Management Act. Irregular expenditure stood at R1.7 billion after the audit.

“This was due to payments made in excess of contract amounts, which resulted in irregular expenditure being understated by R273.5 million,” Maluleke said. 

“In addition, I was unable to obtain sufficient appropriate audit evidence to confirm the irregular expenditure included in the notes to the financial statements, as sufficient appropriate audit evidence was not provided. I was unable to confirm this by alternative means.” 

Maluleke said she could not determine whether any further adjustments were necessary to the irregular expenditure, which is up from R1.4 billion in the previous year.

READ | SA’s new water agency to seek private money to fund projects

Maluleke said Sedibeng Water did not include all fruitless and wasteful expenditure in the notes to the financial statements, due to payments as a result of the extension-of-time fees paid to contractors and consultants.

This resulted in an understatement of fruitless and wasteful expenditure by R116 million. Fruitless and wasteful expenditure stood at R1 billion after the audit.

“I was unable to determine whether any further adjustments were necessary to the fruitless and wasteful expenditure stated at R1 billion in the financial statements,” she said.

Sedibeng employees downed tools in October last year over the late payment of salaries.

In May this year, Water and Sanitation Minister Senzo Mchunu dissolved the entity’s board, and appointed a new interim one. 

Abe Mbulawa was appointed as CEO of Sedibeng Water in January 2021 but later died due to Covid-19 complications in June of that same year. Mbulawa was replaced by Toto Molobye.

In his comments in the entity’s annual report, Sedibeng Water interim chair Sphetho Siyengo said the negative impact of escalating outstanding municipal debt on Sedibeng Water’s liquidity and financial sustainability remained an “alarming” risk factor during the 2020/21 financial year.