By Kwazi Dlamini Auditor-General (AG) Tsakani Maluleke continues to raise concerns with the way local governments have handled the Covid-19 relief funds. Maluleke released the third special audit report on Covid-19 related initiatives, together with the 2019/20 Municipal Finance Management Act report – which we cover in an upcoming article – and 43 municipalities were put under the microscope for several reasons. They include municipalities which contributed the highest amount for irregular expenditure in the previous financial year, as well as municipalities identified through media reports, Public Protector reports and Special Investigating Unit reports. The Auditor-General of South Africa (AGSA) also audited municipalities that received more than R16-million for Covid-19 initiatives. The remaining 214 municipalities not selected for the real-time audit, were audited as part of the normal 2019-20 audit cycle. This AGSA special audit report, Maluleke noted, shows “striking similarities” to the poor outcomes and several other findings in the previous year’s general report. The AG indicates that poor financial and performance management is more prominent during the pandemic because while Covid-19 might have struck unexpectedly, Maluleke said, “emergency response and quick actions are required, but these are not supposed to be at the expense of careful planning and the disciplined execution of controls that prevent transgressions, fraud, loss and project failures.” Covid-19 funds used recklessly Local governments received approximately R24-billion as part of the municipal response to the pandemic. The 43 municipalities audited for this special Covid-19 report received just over R14-billion of that amount, and had spent 42% of the latter amount by 31 March 2021. The AG report found that poor planning was at the core of the irregular spending. Some municipalities used the funds for quarantine sites and temporary shelters; however, these ended up being over- or under-used. Municipalities also failed to effectively assess community needs for water and sanitation, leaving the poor more vulnerable to the virus. “Poor workmanship, project delays and non-adherence to infrastructure-related requirements were observed on water and sanitation projects, and on projects related to providing shelters for the homeless. The water tanks were not always filled and, where sanitation facilities were provided, they were not serviced regularly, resulting in the required impact not being achieved.” Maluleke highlighted that communities did not benefit from the envisaged delivery of water tanks, because contractors were paid for no work done or the money was diverted elsewhere. To illustrate the grim picture of widespread misuse of these funds, Maluleke said, one municipality in the Eastern Cape used Covid-19 funds meant for water and sanitation to buy a car for their mayor. Maluleke repeated the call to heed proper procurement practices, as municipalities failed to follow proper procurement processes in the procurement of personal protective equipment (PPE). She says PPE contracts were given to family members or employees of the municipality, and companies were paid without evidence that the procured goods were delivered. These municipalities failed to conduct proper needs analyses, resulting in either insufficient or excess procurement of PPE. Storage, management and use of PPE is also an issue with local government, and the AG found deficiencies in the storage of PPE, resulting in the valuable items being unusable. Maluleke called for municipalities to prevent misuse of Covid-19 funds, highlighting deficiencies in the procurement and contract management processes, particularly unfair awarding of tenders without preventative measures against overpricing. These municipalities ended up paying exorbitant prices for goods and services. Poor leadership and planning The AG also noted a recurring occurrence in local government, whereby municipalities are not able to provide procurement documents for auditing, so that the auditing process is frustrated by claims that documents are missing. “We are particularly concerned about the municipalities’ inability to produce records to support the current spending as the Covid-19 relief spend has occurred recently and therefore it should not be a struggle to produce these documents. We will continue to audit the covid-19 funding as part of our normal annual audit, including at those municipalities not selected for this real-time audit, and will report further observations in our next general report for local government.” Maluleke said these municipalities missed an opportunity to display the responsive, ethical and accountable leadership required in a time of a pandemic. She added that municipalities continue to plan poorly and misappropriate the funds made available to them, however, the AGSA will continue to work with these municipalities, monitoring them and advising based on audit outcomes for improved financial management.