THE Mangaung Metropolitan Municipality has been told by the Auditor-General South Africa (AGSA) that it is under financial distress and that its current liabilities exceed its current assets by over R468.2 million.

In its 2023/24 audit of the Free State capital’s finances, the AGSA stated that the municipality was under financial distress requiring the implementation of a mandatory financial recovery plan (FRP) in the year that ended on June 30, 2024.

”There was also slow progress in dealing with financial difficulties, as only 28% of the activities contained in the FRP were fully implemented during the year,” the report noted.

The national government intervened in the municipality in 2020 and the FRP imposed on it due to its failure to fulfil its obligations.

According to the AGSA, its creditors’ payment period was 229 days, owed the water board nearly R922m, and Eskom about R1.1 billion, which was long overdue.

In addition, the Auditor-General’s office stated that there were events or conditions indicating that a material uncertainty exists that may cast significant doubt on the municipality’s ability to continue as a going concern.

The municipality also materially under spent on the conditional grants by R193.6m due to not properly monitoring the usage of grant funding and the National Treasury withheld over R296.6m in conditional grants due to the slow implementation of projects.

The report revealed that unauthorised expenditure of R1.812bn was incurred, due to overspending of the budget, irregular expenditure stood at R278m due to non-compliance with supply chain management requirements while the full extent of irregular expenditure is still being determined.

Fruitless and wasteful expenditure of R130m was incurred due to interest paid on late payments to suppliers and delays in capital projects.

Other AGSA findings include the municipality being unable to obtain sufficient appropriate audit evidence for R246m in overtime.

The report explained that inadequate processes were in place to ensure that a need was determined for overtime to be worked or to confirm that the municipal officials worked the overtime claimed.

The DA has indicated that it will take urgent action by escalating the municipality’s financial mismanagement to the Free State provincial legislature to demand accountability.

The party is demanding a full investigation into the almost R2bn in unauthorised, irregular, and wasteful expenditure and the R1.3bn debt owed to Centlec, a state-owned entity distributing in Mangaung, and which led to the disconnection of electricity to key government buildings last week.

The Free State provincial government said the affected Premier MaQueen Letsoha-Mathae’s office, provincial treasury, the departments of education, human settlements, public works and infrastructure, and co-operative governance and traditional affairs (Cogta) but insisted that disruptions had minimal impact on service delivery as the affected buildings have back-up generators.

The Mangaung Metro has admitted that it was placed under financial recovery as a result of unfavourable going concern ability.

It said the last of the members of the rescue team deployed by the National Treasury and Cogta left in November last year and undertook that all rescue phase and stabilisation recommendations will be implemented simultaneously and should be completed by the end of 2026.

”From January 1, 2027, the city should be moving towards sustainability with the focus on tariffs, revenue generation capabilities, billing and high quality property register ensuring that rates are levied in an equitable manner,” the municipality promised.

Its municipal public accounts committee met on Wednesday to deliberate on the AGSA report and the performance report for the six months up to the end of December last year.

loyiso.sidimba@inl.co.za