The Mandela Bay Development Agency (MBDA) has been dealt a blow, with the municipality cutting R10-million from its budget for the rest of the financial year.
Budget and treasury head Retief Odendaal said the budget cut was due to the agency’s failure to spend and was the first one in the history of the MBDA.
Odendaal was speaking at a municipal public accounts committee (Mpac) meeting yesterday as councillors interrogated the MBDA’s financial statements and the auditor-general’s report.
The budget cut is expected to come into effect as the city finalises its adjustments budget later this month.
Odendaal said the MBDA had spent only 14% of its capital budget.
“Simply because of its inability to spend, I can already see it won’t be able to spend its entire capital budget and we, as a metro, can rather use that money towards service delivery,” Odendaal said.
Odendaal said R7.5-million of the R10-million would be reinstated in the 2018-19 financial year.
The R10-million reduction comprised R7.5-million from the capital budget and R2.5-million operating budget.
“Because we [the municipality] have the ability to spend it in this financial year still,” he said.
“Council, by this move, is essentially telling the MBDA that it has to get its house in order as far as keeping its capital spending on track.”
At the beginning of this month, the MBDA announced Ashraf Adam as its new chief executive after a year of not having a permanent one.
Odendaal admitted that the city had made a habit of pushing projects to the MBDA when it got stuck.
“We have red lights flashing and those need to be dealt with.
“The MBDA needs to decide what projects it is going to champion and their planning needs to be proper.
“We are not going to have an entity sitting with a cash-flush bank account while the municipality budgets for a deficit.”
In the 2016-17 financial year, the MBDA was allocated a total of R62 138 589.
Sandile Hlatshwayo, of the AG’s office, said the MBDA’s audit finding had regressed due to a breakdown in its system controls.
“In the prior year, the MBDA received a clean audit, which was unqualified with no findings.
“And in the current year, [in] the financial statements that we received we identified material misstatements which had to be corrected for the entity to receive an unqualified opinion,” he said.
“There was a breakdown in terms of the systems and processes in place for the preparation of the financial statements.”
ANC councillor Rory Riordan said the underspending was a tragedy.
“Is it surprising that this happens when we allowed the board to pay a very large golden handshake to a chief executive, and over a year after that he was not replaced permanently,” he said.
Riordan said they hoped things would settle down at the MBDA after Adam’s appointment.
MBDA spokesman Luvuyo Bangazi said the agency was not represented at the meeting as the information formed part of the municipality’s adjustment budget.
“The original budget funded by [the municipality] of R146.925-million has been reduced to R136.9-million for the 2017-18 financial year,” Bangazi said.