Cogta faces governance and financial management challenges

The Department of Cooperative Governance and Traditional Affairs (Cogta) has published its annual report for the financial year ended March 31, 2020. There is a slight improvement compared with the 2019 annual report, but investigations into financial irregularities are still ongoing.

Read: Cogta fails 2019 audit miserably

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The department has good intentions, as Cogta Minister Dr Nkosazana Dlamini-Zuma states in her foreword to the report: “to secure the well-being of South Africans through a revitalised cooperative governance model” – but has it implemented the requisite systems and oversight mechanisms to manage the R90.3 billion of appropriation funds (2019: R85.1 billion)?

Dlamini-Zuma notes: “Our continued path of adverse findings from the Auditor-General must be reversed.”

And sets out the objective: “Our aim is to be exemplary, to lead from the front.”

Cogta Deputy Minister Parks Tau recognises the challenges:

1. Governance, financial management and administration challenges;

2. Non-viable municipalities due to apartheid spatial planning; and

3. Systemic issues around powers and functions.

And the fact that 2030, the deadline for realising the sustainable development goals, is just around the corner.

Qualified audit opinion

The Auditor-General issued a qualified audit report for the following reasons:

1. There was not sufficient appropriate audit evidence to support the:

  • Payments made to Community Work Programme (CWP) implementing agents in the amount of R2.9 billion (2019: R2.6 billion).
  • Payments made to consultants: business and advisory service in the amount of R372.4 million (2019: R401.7 million).
  • Verification of capital assets amounting to R346.6 million (2019: R277.8 million).

2. The systems to maintain records of prepayments were inadequate, which resulted in prepayments being overstated by R159.4 million (2019: R170.7 million).

Money down the drain

  • Fruitless and wasteful expenditure amounted to R7.5 million.
  • A municipal infrastructure grant payment was made to the incorrect entity in a previous year, and a material loss of R103 million is likely to be incurred. This matter is currently in court.
  • Payments were made to deceased participants in the CWP in 2018/2019. The investigation is ongoing.
  • Payments were made to non-qualifying government employees on the CWP in 2018/2019. The investigation is ongoing.
  • Project management fees paid to implementing agents for services not received in 2018 and 2019. The [respective] investigations are ongoing.
  • Irregular expenditure increased from R1.318 billion in 2019 to R1.330 billion in 2020. The increase relates to the prior year, and is “under investigation”.

Apart from the fruitless and wasteful expenditure of R7.5 million, all of the above relates to previous years.

All investigations are still “ongoing”.

Cogta is silent on whether anyone has actually been fired or jailed.

Notable expenditure

A total of R372.4 million (2019: R401.7 million) was paid to consultants, and a total of R2.9 billion (2019: R2.6 billion) was paid to contractors (casual labourers). Travel and subsistence amounted to R55.1 million (2019: R57.6 million). Training and development amounted to R149 million (2019: R117.8 million).

Total expenditure for the year amounted to R86.9 billion (2019: R81.9 billion).

With inadequate accounting systems, and lack of oversight, a question mark must be raised on whether all fraud has been uncovered.

Governance

Cogta is promoting good governance through “strengthening anti-corruption measures” in local government and district municipalities/metros.

The department is set on improving the “risk culture” and has, among other things:

  • Established a risk management committee;
  • Implemented anti-corruption and whistleblowing policies and strategies;
  • Provided operating guidelines on how to manage conflict of interest; and
  • Implemented the Public Service Code and consequence management for transgressions.

However, until such time that Cogta takes the steps to sanction officials who are guilty of serious transgressions, any talk of improving governance should be taken with a pinch of salt.

No response

Moneyweb submitted the following questions and invited comment from the relevant individuals at Cogta on Monday evening (appropriate background information as per the article above supplied):

1. With inadequate accounting systems, and lack of oversight, a question mark must be raised on whether all the fraud has been uncovered. Any comments?

2. Apart from the fruitless and wasteful expenditure of R7.5 million, all of the above relate to previous years. All investigations are still “ongoing”, however, Cogta is silent on whether anyone has actually been fired or jailed. Any comments?

3. Could you please provide a very brief breakdown of the training and development costs of R149 million?

4. The Auditor-General was not able to find any evidence that disciplinary steps were taken against officials who had incurred fruitless, wasteful (R7.5 million) and irregular expenditure (R1.3 billion). My conclusion: Until such time that Cogta takes the steps to sanction officials who are guilty of serious transgressions, any talk of improving governance should be taken with a pinch of salt. Any comments?

5. Has Cogta implemented the proper systems to record expenditure and improve on internal controls for the year ended 2021?

6. Does Cogta expect to receive an unqualified audit report for the 2021 financial year?

7. Has anyone yet been fired or jailed in regard to the previous years’ transgressions?

No response had been received by the time of publishing.

Source: moneyweb.co.za