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MBABANE COUNCIL SPENDS E6M ON CORPORATE STRATEGY

25/09/2022 15:31:00 Welcome Dlamini

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MBABANE – Over the past two years, the Municipal Council of Mbabane spent an amount of E6 million in what it says is corporate strategy implementation.

A huge portion of this amount – E4 085 940 to be exact – was spent during the 2021/2022 financial year, which ended on March 31. 2022. The other portion of E1 992 906 was spent in the 2020/2021 financial year. The expenditure rises to about E10 million when an amount of E4 211 060 that the council spent in the two years on what it calls Corporate Image and International Relations is taken into consideration. For this, council spent E2.2 million during the 2021/2022 financial year and E1.9 million in the 2021/2021 financial year.

operating costs

The expenditure on Corporate Strategy Implementation as well as for Corporate Image and International Relations had remained hidden in an amount of about E70 million classified under what the municipality termed as ‘operating costs’. It has now come into the open following Auditor General (AG) Timothy Matsebula questioning what was in the ‘operating costs’ and called upon the municipality to disclose what constituted such cost. He said the E70 million was not disclosed in the notes to the financial statements, the notes detailing the make-up of the ‘other costs’. The AG noted this when auditing the municipality’s annual report for the 2020/2021 financial year. “In essence, the ‘other operating costs’, as a significant element of the statement of comprehensive income, had no disclosure note to the financial statements. These costs were 54 per cent of the total expenses amounting to E131 127 541.00,” Matsebula said.

Before the AG raised the issue of the ‘operating costs’ in his audit report, the same concern was expressed by ratepayers during the council’s annual general meeting held at the Mountain Inn in 2021. Among the ratepayers was well-known Mbabane resident and former Senator Walter Bennett, who called upon the council to explain what the ‘operating costs’ consisted of.
During an interview yesterday, Bennett thanked the AG and the Public Accounts Committee for getting the municipality to disclose what was in the ‘operating costs’. “I really thank the PAC and AG for bringing to the public domain all that was hidden,” he said. The AG noted hiding what was in the ‘operating costs’ was against the principles of transparency and accountability. He said he even directed the attention of the controlling officer to IAS 1 (Fair Presentation and Compliance with IFRSs), which states that the Financial Statements must ‘present fairly’ the financial position, financial performance and cash flows of an entity.

liabilities

“Fair presentation requires the faithful representation of the effects of transactions, other events, and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Conceptual Framework for Financial Reporting,” the AG said. He said he advised the controlling officer to furnish the Office of the Auditor General with a breakdown of the operating costs, general ledgers and supporting documents, for the financial year ended March 31, 2021. “In response, the controlling officer stated that going forward the council will consider grouping these items and show them as a note in the notes to the Financial Statements,” Matsebula said. He said omitting the expenditure in the financial statements may result in many users, to whom these were shared, taking uninformed decisions relating to the financial performance of the municipality. “Hence, I recommend that the financial statements should present the breakdown of the operating costs, starting from the financial year ended March 31, 2022. The matter of the non-disclosure of operating cost will be followed up in the next audit,” the AG said.

Indeed, for the financial year ended March 31, 2022, the council provided this note, which is where the money spent on the corporate strategy implementation has been disclosed.
Responding to questions from the Times SUNDAY, the council’s Public Information Officer, Lucky Tsabedze, said these payments were for activities related to the implementation of the organisation’s five-year Integrated Development Plan (IDP) for 2019 to 2024. He said the Corporate Strategy referred to council’s restructuring programme, which he said was not a new thing. “The programme’s implementation costs have been spread over a number of financial years. The 2019-24 IDP was approved by council and the Ministry for Housing and Urban Development in 2019, after the current councillors assumed office,” he said.

Tsabedze was then asked to explain the difference between the Corporate Strategy Implementation versus the costs attributed to the Corporate Image and International Relations. To this, he said the latter costs were payments for activities related to council’s public relations and media relations programmes to manage and improve the image of council. “This is a programme that is also embodied in the IDP 2019-24. International relations refers to sister relationships that the council has with cities around the world: South Africa (Mbombela, Nkomazi) Mozambique (Matola and Maputo city) and other relations outside the continent (USA - Fort Worth), Taiwan (Taipei city),” he said.

strategic

Tsabedze said these were strategic relations that continued to benefit council through technical skills sharing and also benefitted Mbabane residents through cultural exchange and people-to-people diplomacy. A resident of Mbabane, who preferred to remain anonymous, said there was need for council to explain the expenditure in more detail because as far as he was concerned, the restructuring was financed separately from whatever was being done through the corporate strategy. “The IDP that council is speaking about is too broad and it is easy to make a blanket statement and say ‘money was spent in implementing the IDP’ and get away with it. He said when the council spoke about retrenchments; they should come out with the specific amounts paid to those employees who had been retrenched to see if indeed that money was part of the costs attributed to Corporate Strategy Implementation.

For the 2021/2022 financial year, the municipality reported that it retrenched 13 employees as part of the restructuring programme. The retrenchments commenced in 2016, after a nine-year deadlock, when the municipality and its employees reached an agreement on exit packages to be offered to redundant employees as a result of the implementation of the restructuring.
The restructuring cost millions of Emalangeni as revealed by the then Minister of Housing and Urban Development, Lindiwe Dlamini, the current Senate President. Dlamini disclosed in Parliament in October 2012 that an amount of E37.6 million had been requested by the council for purposes of the restructuring programme. The council first requested E16 million and then came back with another request of 21.6 million after Parliament had resolved in July 2012, that the Redundancy and Retrenchment Policy of 2021 should be declared invalid and that the 2007 Collective Agreement and Policy remained in force.