Nelson Mandela Bay CFO Jackson Ngcelwane says, ‘At the end of the day, it’s a qualified audit outcome, which is the same as last year, so we have not regressed.’ (Photo: Nelson Mandela Bay municipality) 
Nelson Mandela Bay’s audit outcomes for the 2024/25 financial year have significantly deteriorated. For the second consecutive year, the Auditor-General has issued a qualified opinion, citing seven material findings — even worse than the four reported in the previous year.
A qualified audit opinion means an auditor found significant errors or issues in a company’s financial statements, but these problems are limited to specific areas and don’t affect the overall fairness of the report.
The Eastern Cape division of the Auditor-General’s office identified issues in:
- Contracted services;
- Capital commitments;
- Property;
- Plant and equipment;
- Service charges; and
- Non-current and current provisions.
The draft annual performance report is expected to be presented at a special council meeting on 29 January.
The auditors also found that the metro was overstating its service delivery achievements based on set targets, without any proof to corroborate the claims it made in its annual performance report.
The audit report highlights how expenditure that the municipality incurred in previous years was incorrectly recognised in the current year.
As a result, contracted services in the consolidated and separate statements of financial performance were overstated by R466-million and trade payable from exchange transactions in the consolidated and separate statements of financial position were overstated by the same amount.
The report highlighted how repairs to the Matanzima Bridge in KwaNobuhle, which was damaged by a flood in 2024, were conducted through a deviation without following the competitive bidding process.
/file/dailymaverick/wp-content/uploads/2024/06/matanzima.jpeg "The bridge on Matanzima Road over the Brak River collapsed in 2024. (Photo: Joseph Chirume)")
Regarding service charges, the report states that the auditors could not obtain sufficient appropriate audit evidence that indigent subsidies for service charges had been properly accounted for, due to the status of the accounting records.
“I was unable to confirm whether these subsidies were properly recorded by alternative means. Consequently, I was unable to determine whether any adjustment was necessary to service charges stated at R9-billion to the consolidated and separate financial statements.”
The report said the service charges for water in the previous year were recognised in the current year. As a result, revenue from water service charges in the consolidated and separate statements of the metro’s financial performance was overstated by R387-million and receivables from exchange transactions in the consolidated and separate statements were overstated by the same amount.
Regarding property, plant and equipment, the report said that assets completed before the 2023/24 financial year were incorrectly disclosed as completed in that year.
“Consequently, I could not determine the full extent of the misstatement in the 2023/24 additions stated at R1.3-billion and the carrying value of the 2023/24 construction work-in-progress stated at R686-million as it was impractical to do so,” it reads.
“My audit opinion on the consolidated and separate financial statements for the 2023-24 year was modified accordingly. My opinion on the current year consolidated and separate financial statements was also modified because of the possible effect of this matter on the comparability of the property, plant and equipment and the deficit and accumulated surplus for the period in the consolidated and separate financial statements.”
River rehabilitation
Regarding current financial provisions, the report said the municipality had not provided a reliable estimate of the costs required to rehabilitate a river that was polluted.
“I could not determine the full extent of the misstatement of the provision for the rehabilitation of Swartkops River stated at R133-million to the consolidated and separate financial statements,” the report reads.
“Consequently, I could not determine the misstatement in land stated at R1.36-billion included in property, plant and equipment disclosed to the consolidated and separate financial statements.”
Regarding non-current financial provisions, the auditors were unable to obtain sufficient appropriate audit evidence for the provision of the rehabilitation of landfill sites due to the status of the accounting records.
“I was unable to determine whether any adjustments were necessary to the provision for the rehabilitation of landfill sites stated at R600-million to the consolidated and separate financial statements. I could not determine the misstatement in land stated at R1.36-billion included in property, plant and equipment disclosed to the consolidated and separate financial statements.”
On capital commitments, the report said the Auditor-General was unable to determine the full extent of the understatement of capital commitments, stated at R1.25-billion, as it was impracticable to do so.
The auditors were engaged to evaluate the reported service delivery performance information for the selected development priority against the criteria developed from the performance management and reporting framework.
“Some supporting evidence was not provided for auditing; where it was, I identified material differences between the actual and reported achievements. Consequently, the achievements might be more or less than reported and were not reliable for determining if the targets had been achieved.”
Underspending
The report also highlighted the city’s underspending on its conditional grants by R452.28-million.
The city’s chief financial officer, Jackson Ngcelwane, said a delegation from the city met last week to discuss the each of the identified findings.
“When it comes to invoice payments, for the past 10 years, the Auditor-General has said we make payments to service providers later than the stipulated 30 days; all audit findings in the past 20 years said the same thing.
“The problem is that invoices are not received in a central place within the metro; they go to individual officials in the various departments, and as the CFO, I don’t always know what’s been paid or is still outstanding.”
Ngcelwane said the solution was to centralise the payment of invoices so that the city can access them and provide information at the click of a button.
“Currently, we only find out if there are issues with an invoice at the end of the process and rectifying them takes a while because the system is not centralised.”
Asked why the city’s audit outcome was worse than the previous year, Ngcelwane said, “At the end of the day, it’s a qualified audit outcome, which is the same as last year, so we have not regressed.”
Decisive leadership
Mayor Babalwa Lobishe said the audit outcome marked a moment for decisive leadership and reform.
/file/attachments/orphans/Babalwa_530406.jpg "Nelson Mandela Bay’s mayor, Babalwa Lobishe. (Photo: Andisa Bonani)")
“We accept the Auditor-General’s findings without hesitation, and we accept our responsibility to correct what is not working. As the political leadership of the municipality, we are not interested in excuses or cosmetic compliance.
“We are focused on fixing root causes, enforcing accountability, and building a culture of ethical, professional and transparent governance. Our residents deserve a municipality that is credible, disciplined and fit for purpose; that is exactly what we are working towards.”
ACDP councillor Lance Grootboom said residents were once again facing the consequences of poor leadership.
/file/attachments/orphans/LanceGrootboom_133737.jpg "ACDP councillor Lance Grootboom. (Photo: Deon Ferreira)")
“The city’s latest audit report has been released; it shows that under the current administration, the city has received another qualified audit opinion, this time with seven qualifications.
“These highlighted serious concerns are not just technical accounting issues; they directly affect your daily lives, from water supply to roads and public services. We have seen what responsible leadership can achieve. In 2023, when the ACDP was part of a coalition government, the metro achieved a clean audit. That was proof that accountability, transparency and proper governance are possible.”
Grootboom said the city was sliding backwards because of the coalition’s failure to manage finances properly, placing the environment, public services and the trust of residents at risk.
DA councillor Gert Engelbrecht said the audit report once again exposed deep ongoing problems in the municipality’s management.
/file/attachments/2985/Andisa-Gert2_992039_7bd94006cc0ddf92ea4d0c4a59a5774d.png "DA councillor Gert Engelbrecht. (Photo: Supplied/ Gert Engelbrecht)")
“Basic service delivery is in crisis. The city is losing R1.48-billion on electricity, an increase of over R200-million compared to last year, while water losses are approaching R400-million.”
Engelbrecht said the figures revealed serious inefficiency and a failure to maintain and manage essential infrastructure.
“Residents continue to bear the consequences as the municipality struggles to collect revenue and keep services running. Adding to this, R453-million in conditional grants remain unspent.
“These funds meant for service improvements and infrastructure maintenance sit idle while potholes, broken streetlights and other pressing issues go unresolved. Maintenance planning remains below standard, with essential projects delayed or poorly executed."
Engelbrecht said that although the report would once again be submitted to the municipal public works accounts committee for investigation, the remarks made there would not be afforded the necessary consideration, as accountability in the city was a myth.
Municipal spokesperson Sithembiso Soyaya said the findings were historic and systemic in nature, with many recurring over several financial years, and did not reflect a collapse of governance or the city’s ability to deliver services.
“The municipality accepts accountability for the weaknesses identified by the Auditor-General. These findings are being addressed through focused corrective action rather than short-term compliance measures,” he said.
“Where failures in controls, processes or oversight have occurred, they are being confronted directly, and consequence management is being enforced in line with legislative and governance prescripts.
“Concrete actions are under way to strengthen contract management, asset and work-in-progress controls, revenue recognition and billing integrity, and the management of unauthorised, irregular, fruitless and wasteful expenditure.”
Soyaya said the municipality was accelerating the automation of financial reporting, procurement, document management and performance management systems to reduce reliance on manual processes and improve audit reliability, accuracy and compliance. DM