Nelson Mandela Bay draws up action plan after receiving qualified audit opinion

The Nelson Mandela Bay metro has drafted an audit action plan to address the seven serious failings that resulted in the Auditor-General giving the metro a qualified audit opinion for the 2024/25 financial year.

The plan was presented by Section 154 support team member Luyanda Ndeya, after a presentation of the audit outcomes by the Auditor-General of South Africa’s Eastern Cape business unit leader, Thobile Nteta.

At a council meeting on Thursday, Ndeya said the outcomes revealed systemic governance, compliance and financial management weaknesses across the administration.

The results, he said, highlighted not only material misstatements and errors in the preparation of the annual financial statements but also persistent deficiencies in supply chain management, performance monitoring, asset management, ICT controls and human resource administration.

Ndeya said if implemented properly, the action plan should yield improved results for the current financial year.

“We need to review the city’s budget processes to see if they are in line with the regulations and if they are allocated in a manner that assists the city. The city needs to deal with the revenue losses and accurate and complete billing through revenue enhancement initiatives.

Risk for record-keeping

“The municipality is still using manual systems to record information while we are in the [fourth industrial revolution], and this poses a risk for record-keeping.”

Ndeya said the city’s waste management plan had to be completed by April to reduce illegal dumping and keep the city clean.

He said the council had approved the establishment of a project management unit.

“The resolution just needs to be implemented, which will assist with contract management and projects that are delayed. Some subdirectorates in the city need to be rearranged — functions such as Payroll are with the Human Resources Directorate, when it should be at Finance, as it is part of expenditure.”

Audit findings

The Auditor-General’s report highlighted some of the issues that contributed to the qualification and need to be addressed, including:

• Financial reporting: Material misstatements occurred in key financial reporting areas, including revenue recognition, consumer debtors, property rates, water and sanitation adjustments and debt impairment.
• Expenditure and supply chain management: Non-compliance with the Municipal Finance Management Act, including unjustified deviations, poorly recorded reasons for deviation, and awards made without obtaining the prescribed number of quotations.
• Asset management and infrastructure: The audit identified substantial gaps in asset management and infrastructure reporting. Work-in-progress balances contained historical errors that had not been corrected, and several assets could not be physically verified.
• Human resource management and performance: These were flagged as areas in which the municipality did not fully comply with the Municipal Systems Act. The audit revealed that several employees did not have approved performance agreements, while others acting in senior roles for extended periods were not issued amended agreements.
• Information and communications technology (ICT): Underlying all these challenges is the municipality’s outdated ICT environment. The absence of an approved ICT strategy, coupled with vulnerabilities identified across multiple legacy systems, exposes the institution to cybersecurity threats and operational failure risks.
• Environmental and service delivery: The integrated waste management plan remained in draft form and had not been submitted to the Cogta MEC as required. Certain wastewater treatment works operated without valid licences, while air quality monitoring stations were non-operational or required relocation.

Councillors warned that the metro was sliding deeper into a financial and service delivery crisis.

Governance failure

DA councillor Gert Engelbrecht said the qualified audit outcome reflected sustained governance failures under the current administration, pointing to prolonged electricity outages, ongoing water disruptions and chronic underinvestment in infrastructure maintenance.

“Under your leadership, we received yet another qualified audit report,” said Engelbrecht, accusing the mayor of presiding over a city where residents were left without electricity for more than five days and where “we are still without water in certain areas”.

Engelbrecht said the mayor had misrepresented the scale of electricity losses, insisting that the R1.5-billion loss cited in the Auditor-General’s report related to a single financial year — not an eight-year period.

“The reality is that R1.5-billion was only for the last financial year, and that R1.5-billion has increased by R200-million from the last financial report,” he said.

Audit outcome regression

UDM councillor and Municipal Public Accounts Committee (Mpac) chair Luxolo Namette described the audit outcomes as a “clear regression”, noting that the number of audit qualifications had increased from three to seven year-on-year.

“This represents a clear regression, not progress,” Namette said, adding that two of the qualifications were repeat findings. “This tells us plainly that management has failed to correct issues that were already identified and communicated in prior years. This is unacceptable.”

Namette warned that electricity and water losses were spiralling out of control, with electricity losses rising to R1.48-billion and water losses exceeding R392-million.

“These figures are not just numbers on paper. They represent lost revenue, compromised service delivery, and a failure to safeguard public resources,” he said.

He also criticised the underspending of R452.28-million in conditional grants, calling it “indefensible” while communities continued to experience service delivery failures.

“If plans are not working year after year, then something fundamental is broken — either in leadership, oversight or consequence management,” said Namette.

He said the Matanzima Bridge project had been specifically highlighted, warning that non-compliance exposed the municipality to “financial risk, legal challenges and reputational damage”.

“These findings cannot be normalised. They cannot be explained away. And they cannot be allowed to repeat themselves yet again,” said Namette.

He stressed that consequence management was critical, warning that officials who repeatedly failed to comply with legislation or ignored audit action plans could no longer be shielded.

“Officials who contribute to financial losses must be held accountable, not protected, not recycled, and not rewarded,” he said.

Without visible accountability, Namette warned, audit action plans would remain meaningless and public confidence in the municipality would continue to decline.

“This council owes the people of Nelson Mandela Bay more than explanations,” he said. “We owe them improvement. We owe them discipline. And we owe them leadership prepared to make difficult decisions in the interest of good governance.”

Infrastructure maintenance spending

ANC councillor Xolani Notshe said the AG’s findings confirmed long-standing concerns raised by his party, particularly around inadequate spending on repairs and maintenance.

“This morning the Auditor-General said exactly what we have been saying in our own reports as an institution,” said Notshe. He said that maintenance budgets had consistently been too small and called on the council leadership to ensure the recommendations from Mpac were implemented.

“We believe that through our leadership … the items we highlight will not just gather dust somewhere, but will be ... acted upon on a daily basis,” he said.

Deep-rooted failures

Freedom Front Plus councillor Bill Harrington said the report confirmed “deep-rooted failures in financial management, compliance and oversight”, warning that superficial fixes would not reverse the metro’s decline.

“Cosmetic interventions will not be sufficient,” said Harrington. “What is required is decisive action, firm political will and an end to the culture of tolerance for incompetence and non-compliance.”

He said repeat audit findings showed that internal controls were either weak or ignored. “These failures must result in consequence management, not further reports or task teams with no accountability.”

A city in decline

ACDP councillor Lance Grootboom said the Auditor-General’s report exposed “a city in decline”, noting that audit qualifications had more than doubled in a single year.

“Last year, this municipality had three audit qualifications. This year it has seven. That is not improvement — that is regression under this administration,” said Grootboom.

He pointed to significant underspending on infrastructure maintenance, despite widespread service failures. “You cannot speak of performance when lights are off, taps are dry, and audit findings are rising,” he said. DM