Typical Auditor-General findings
This chapter covers some examples of SCM issues raised by the AG during their 2019 audits.
AG summary report on procurement
City of Matlosana
Procurement and contract management
- Some of the goods and services with a transaction value above R200 000 were procured without inviting competitive bids, as required by SCM regulation 19(a). Deviations were approved by the accounting officer even though it was not impractical to invite competitive bids, in contravention of SCM regulation 36(1).
- Some of the invitations for competitive bidding were not advertised for a required minimum period of days, in contravention of SCM regulations 22(1) and 22(2).
- Some of the contracts were awarded to providers whose tax matters had not been declared to be in order by the South African Revenue Service, in contravention of SCM regulation 43.
- Awards were made to providers who were in the service of other state institutions or whose directors or principal shareholders were in the service of other state institutions, in contravention of section 112(j) of the MFMA and SCM regulation 44. Similar awards were identified in the previous year and no effective steps were taken to prevent or combat the abuse of the SCM process, as required by SCM regulation 38(1).
- Contracts were awarded to bidders who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state, as required by SCM regulation 13(c).
- Awards were made to providers who are in the service of other state institutions or whose directors and principal shareholders are in the service of other state institutions, in
contravention of section 112(j) of the MFMA and SCM regulation 44. Similar awards were identified in the previous year and no effective steps were taken to prevent or combat the abuse of the SCM process, as required by SCM regulation 38(1). - Persons in service of the municipality whose close family members had a private or business interest in contracts awarded by the municipality, failed to disclose such interest, in contravention of SCM regulation 46(2)(e).
- I could not obtain sufficient appropriate audit evidence that contracts were only awarded to providers whose tax matters had been declared to be in order by the South African Revenue Service, as required by SCM regulation 43.
Consequence management
- Unauthorised, irregular and fruitless and wasteful expenditure incurred by the municipality was not investigated to determine if any person is liable for the expenditure, as required by section 32 of the MFMA.
- Allegations of financial misconduct laid against officials of the municipality were not investigated, as required by section 171(4)(a) of the MFMA.
Rand Water
- Some of the goods, works or services were not procured through a procurement process which is fair, equitable, transparent and competitive, as required by section
51(1)(a)(iii) of the PFMA. The entity deviated from the normal procurement process and declared emergencies in accordance with the supply chain management (SCM) policy. The reasons for deviating from the normal procurement process were assessed not to be justifiable. - Some of the goods, works or services were not procured through a procurement process which is fair, equitable, transparent and competitive, as required by section 51(1)
(a)(iii) of the PFMA. In some instances, the procurement of goods and services were split into smaller parts to avoid procurement through a tender process. - Sufficient appropriate audit evidence could not be obtained that goods, works and services were procured through a procurement process which is fair, equitable, transparent and competitive, as required by section 51(1) (a)(iii) of the PFMA. We could not verify that the winning bids were received before the closing date and time as the entity does not have adequate controls in place to confirm that bids were received before the closing date.
- Some quotations were accepted from bidders that had not scored the highest points in the evaluation process, as required by section 2(1)(f) of Preferential Procurement Policy Framework Act and Preferential Procurement Regulations
uPongolo municipality
Procurement and contract management
- Some of the goods and services with a transaction value of below R200 000 were procured without obtaining the required price quotations, in contravention of SCM regulation 17(a) and (c).
- Some of the quotations were accepted from bidders who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state, as required by SCM regulation 13(c).
- Some of the contracts were awarded to bidders who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state, as required by SCM regulation 13(c).
- Some of the bid documentation for procurement of commodities designated for local content and production, did not stipulate the minimum threshold for local production and content as required by the 2017 preferential procurement regulation 8(2).
Consequence management
- Unauthorised expenditure incurred by the municipality was not investigated to determine if any person is liable for the expenditure as required by section 32(2)(a) of the MFMA.
- Irregular as well as fruitless and wasteful expenditure incurred by the municipality was not investigated to determine if any person is liable for the expenditure as required by section 32(2)(b) of the MFMA.
Rustenburg municipality
Procurement and contract management
- Sufficient appropriate audit evidence could not be obtained that all contracts and quotations were awarded in accordance with the legislative requirements as supportingĀ documents were not submitted for audit. Similar limitation was also reported in the prior year.
- Goods and services with a transaction value of below R200 000 were procured without obtaining the required price quotations, in contravention of by SCM regulation 17(a) and (c).
- Some competitive bids were adjudication by a bid adjudication committee that was not composed in accordance with SCM regulation 29(2). Similar non-compliance was also
reported in the prior year. - Some contracts were awarded to bidders who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state, as required by SCM regulation 13(c).
- Sufficient appropriate audit evidence could not be obtained that the preference point system was applied in all procurement of goods and services above R30 000 as required by section 2(a) of the Preferential Procurement Policy Framework Act. Similar limitation was also reported in the prior year.
- Sufficient appropriate audit evidence could not be obtained that contracts were awarded to bidders based on pre-qualification criteria that were stipulated in the original invitation for bidding, in contravention of regulation 4(1) and 4(2) of the 2017 Preferential Procurement Regulations.
- A construction contract was awarded to contractors that did not qualify for the contract in accordance with section 18(1) of the CIDB Act and CIDB regulations 17 and 25(7A).
- Some bid documentation for procurement of commodities designated for local content and production, did not stipulate the minimum threshold for local production and content as required by regulation 8(2) of the 2017 Preferential Procurement Regulations.
- Sufficient appropriate audit evidence could not be obtained that the performance of some of the contractors or providers was monitored on a monthly basis, as required by section 116(2)(b) of the MFMA. Similar limitation was also reported in the prior year.
- Sufficient appropriate audit evidence could not be obtained that the contract performance and monitoring measures and methods were sufficient to ensure effective contract management, as required by section 116(2)(c) of the MFMA.
- Awards were made to providers who were in the service of other state institutions, in contravention of section 112(j) of the MFMA and SCM regulation 44. Similar awards were
identified in the previous year and no effective steps were taken to prevent or combat the abuse of the SCM process, as required by SCM regulation 38(1). - Sufficient appropriate audit evidence could not be obtained that persons in the service of the municipality who had a private or business interest in contracts awarded by the municipality disclosed such interest, in contravention of SCM regulation 46(2)(e).
- Sufficient appropriate audit evidence could not be obtained that persons in service of the municipality whose close family members had a private or business interest in contracts awarded by the municipality disclosed such interest, in contravention of SCM regulation 46(2)(e) and the code of conduct for staff members issued in terms of the MSA. Similar noncompliance was also reported in the prior year.
All other audit reports
All the audit reports can be reviewed on https://municipalmoney.gov.za/
Specific examples: