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DA lashes Joburg over qualified audit

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 05 Feb 2013
The City of Johannesburg missed performance levels on metering infrastructure and meter reading due to capacity constraints.
The City of Johannesburg missed performance levels on metering infrastructure and meter reading due to capacity constraints.

The City of Johannesburg, SA's largest municipality and home to 1.4 million households, has again received a qualified audit report from the auditor-general (AG), because it could not provide accurate revenue figures.

The qualified audit, the third consecutive one, has been attributed to the ongoing issues with billing within the city. For the 2010/11 year, the AG qualified the city's financials in its general report on the audit outcomes of local government, because of data discrepancies.

The official opposition, the Democratic Alliance (DA), highlights the fact that the AG points out that the city is unable to produce accurate figures for water and electricity billing.

As a result, the municipality is relying on estimated revenue figures instead of actual meter readings, which would provide it with a clear indication of income, says the DA. "The AG's report affects the city's credibility with banks and other lenders, as well as it may affect the ability to raise critical funds for the city."

Data lacking

John Mendelsohn, the DA's shadow MMC of municipal public accounts in the city, says the AG was not happy with the accuracy and completeness of the revenue and debtors' book. "The AG highlighted the city's over-reliance on billing estimates. It also ignores accurate meter readings in many instances by inserting estimates instead," says the DA.

The city could not attain targeted performance levels on metering infrastructure and meter reading, says the draft annual report, available on the city's Web site. "This has an adverse effect on the revenue value chain, in particular billing accuracy and revenue collection."

The dilemmas in the report, which covers the year to June 2012 and has only recently been released, have been laid at the foot of the years-long billing crisis, which occurred as a result of post-implementation issues with the city's move to SAP.

Project Phakama, which cost at least R580 million, had post-implementation problems after June 2010, which led to thousands of residents complaining about grossly-inflated readings and inaccurate bills.

Mendelsohn says while the number of issues with bills seems to have dropped, the city is not providing councillors with regular revenue and collection information.

The city has been sorting out the issues and, of the total of 199 000 queries that dated back to 31 October 2011, only 437 issues still had to be dealt with by 26 August last year. In terms of "current" queries, of a total of 277 000 issues that were logged between November 2011 and 26 August last year, 50 000 still had to be sorted out, most of which were under 30 days old.

Limited capacity

The city says it missed its meter infrastructure and reading target, because of "internal capacity constraints, which require improved planning, improved implementation of the plan, better interdepartmental teamwork, and better process implementation, management and control".

According to the annual report, the key focus areas for its accelerated service delivery programme in the 2011/12 financial year included turning around its billing system and enhancing revenue collection. However, the city's target of 94% revenue collection was not met, as it ended the year at 89.8%.

"Although some of the billing and revenue issues were resolved, in the latter months the issue resurfaced in the public realm as a recurring concern. Revenue challenges may also be attributed to the nature of the solutions required to turn around the current challenges. These solutions often need longer lead times and concerted efforts to realise positive spin-offs in the long run," notes the report.

The city continues in its attempt to solve the billing crisis, but an unfortunate result of this is a third qualified audit report, says the DA. Mendelsohn says, on an anecdotal basis, the party is receiving fewer billing complaints this year than in 2012.

"These problems stem from the highly-publicised billing crisis, which has been well documented over the past three years and has been a serious source of concern to DA councillors and Joburg residents alike."

The report adds that the city is in a "financially stable position". However, it has persistent liquidity pressure, which is improving, and challenges associated with its billing system, which diminishes the effectiveness of operating activities, says the report.

"Johannesburg's financial leverage has been reduced considerably in the past two years, and is expected to decrease further, but will stabilise in the short- to medium-term."

The city did not immediately respond to a request for comment as it was waiting for a response from the CFO's office.

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