Communique from the Board of Umgeni Water: Further progress in respect of various governance-related matters

Communique from the Board of Umgeni Water: Further progress in respect of various governance-related matters

Communique from the Board of Umgeni Water: Further progress in respect of various governance-related matters, 29 July 2021

Progress with audit and forensic investigation matters continues

In March and May 2021 during a series of annual performance results presentations to Umgeni Water’s stakeholders, the Board of Umgeni Water made a full disclosure on irregular, fruitless and wasteful expenditure that was identified in an audit by the Office of the Auditor-General South Africa.

The final report of the Auditor-General made numerous recommendations on remedial action to address, among others, the issue of irregular expenditure with a view to ensuring that there is no financial loss to Umgeni Water or to the national fiscus. Similarly, the Auditor-General expects that measures will be adopted to adequately mitigate and manage future incidences of this nature. In line with the Board’s commitment to ensure proper governance protocols, all of the recommendations in the Auditor-General’s report are being implemented so that the governance vision and objectives set by the Board are achieved. The recommendations of a concomitant independent forensic investigation into three awarded tenders and associated supply chain process are also being implemented with alacrity.

In a communique shared with the investor community in June 2021, the Board reported extensively on progress regarding the Auditor-General recommendations, as well as implementation of corrective action proposals made by SekelaXabiso CA Inc., which conducted the forensic investigation referred to above after being appointed for this mandate through Umgeni Water’s supply chain process.

This communique provides feedback from the Board on additional breakthroughs that have been made as matters pertaining to governance and identified areas of weaknesses in governance and policies and procedures continue to receive increased attention.

Appointment of legal experts to work with the Board on corrective measures

As previously stated by the Board, irregular expenditure identified in the Auditor-General’s findings pertained to contract variations and changes to scope of work that were apparently not approved by the National Treasury, as required by Instruction Note 3 of 2016/17, and where applicable by other appropriately delegated persons. Investigations conducted in response to the Auditor-General’s findings and in terms of the National Treasury Framework for irregular, fruitless and wasteful expenditure have made good progress in unravelling some of the details pertaining to non-compliance regarding approvals and accompanying possible transgressions of the Public Finance Management Act. We are at a stage now where intense examination of these matters has separated possible common errors or deficiencies from issues that could potentially form the basis for disciplinary action and consequence management, including where possible institution of legal action for recovery of monies. This teasing out of issues now creates a clearer picture about what motivations are to be made in terms of the National Treasury Framework for condonation. Amendments to the Public Audit Act No 25 of 2004 have become an important guide in assisting us through this process.

Of specific importance in this regard and to ensure seamless implementation of the recommendations contained in the final reports, the Board resolved at its meeting on 21st July 2021 to appoint a firm of legal experts to guide it on implementation of corrective actions, including conducting consequence management. The legal firm Bowmans was selected through Umgeni Water’s supply chain process for this purpose.