Renthia Kaimbi
The Otjiwarongo municipality spent nearly N$394 000 outsourcing the recruitment of four strategic executives, despite having an internal human resources function, only for one of the four positions to remain vacant after the recruitment exercise.
A damning ministry of finance internal audit report dated 18 August 2026 and seen by the Windhoek Observer has exposed questionable procurement decisions, excessive expenditure, weak financial controls and inadequate management oversight at the municipality, raising serious questions about how public funds were administered during the 2024/2025 financial year and the first quarter of 2025/2026.
The report, compiled by the Directorate of Government Internal Audit and Policy Coordination (DGIAPC), found that the municipality engaged Aruak Infinite Investments CC to facilitate the recruitment of strategic executives, at a cost of approximately N$393 875, excluding daily subsistence allowances for panel members and advertising expenses.
The outsourcing covered four positions including Strategic Executive for Infrastructure, Water and Technical Services; Strategic Executive for Community Development Services; Strategic Executive for Finance; and Strategic Executive for Human Resources.
The recruitment company initially quoted N$138 000 for two positions and N$131 000 for the other two, bringing the combined quotations to N$269 000.
However, the eventual expenditure increased to approximately N$393 875, with additional costs incurred along the way.
Despite the substantial expenditure, the position of Strategic Executive for Infrastructure and Technical Services remained vacant at the time of the audit and had to be advertised again, exposing the municipality to further recruitment costs.
The arrangement is particularly questionable given that the municipality already has an internal human resources function, which had previously handled the recruitment of the municipality’s chief executive officer.
The audit questioned why the municipality considered it necessary to outsource the recruitment exercise without demonstrating that its internal capacity was inadequate or that outsourcing represented the most economical option.
Management attempted to justify the decision by arguing that all strategic executive positions were vacant and that managers who were acting in those positions had expressed interest in applying for the permanent posts.
In its response, management stated: “It was more appropriate for Council to outsource the Recruitment of SEs because the same people who were going to facilitate the process were going to apply for positions.”
Management further claimed that its reasoning was supported by the fact that two of the staff members who were acting in the positions were eventually appointed to strategic executive positions.
However, the explanation raises questions about the municipality’s decision to spend hundreds of thousands of dollars on an external recruitment company when its own human resources function had previously undertaken executive recruitment.
The audit also questioned the procurement process itself, finding that Aruak Infinite Investments CC, allegedly owned by an individual employed at Cenored, was awarded the contract despite failing to attach mandatory documents to its quotation.
The missing documentation was required under Section 50(2) of the Public Procurement Act of 2015, which provides for the disqualification of bidders who fail to submit prescribed documents, including tax and Social Security Commission compliance certificates and affirmative action compliance documentation where applicable.
The auditors found that management proceeded with the appointment despite these requirements not being met.
Management’s explanation was equally concerning, with the municipality admitting that it had overlooked the mandatory requirements.
“It was oversight from management to request mandatory documents we take full responsibility for the oversight,” management stated.
The auditors classified the finding as high risk and warned that allowing a bidder without the required documentation to secure a public contract could undermine fairness and transparency while giving non-compliant suppliers an unfair advantage over those who complied with procurement requirements.
Management undertook to ensure that future requests for quotations were accompanied by all mandatory documentation.
Massive overspending
Beyond the executive recruitment controversy, the audit uncovered substantial overspending across several municipal expenditure votes, with some items exceeding their approved budgets by hundreds of percentage points.
The municipality spent N$1.22 million on legal fees against an approved allocation of N$450 000, resulting in an over-expenditure of N$769 981, or approximately 271%.
The auditors found no evidence that the council had approved a budget transfer or supplementary budget to authorise the additional expenditure.
Other expenditure overruns included bank charges, which reached N$1.37 million against an allocation of N$1 million, exceeding the budget by 37%.
The municipality also spent N$301 444 on the rental of faxes and copiers against a budget of just N$32 000, representing an extraordinary 842% overspend.
Information technology expenditure reached N$406 203 against an approved budget of N$200 000, exceeding the allocation by approximately 103%.
Telephone expenses were equally concerning, with actual expenditure reaching N$786 738 against a budget of N$250 000, representing an overrun of approximately 215%.
The auditors warned that the municipality’s expenditure beyond approved allocations raised concerns about compliance with the Local Authorities Act, which restricts councils from spending public money outside approved budgetary authorisations.
Management attributed the legal expenditure to unforeseen litigation matters that arose during the financial year and required legal representation to protect the council’s interests.
In its response, management stated that the matters “could not reasonably have been anticipated during the budget preparation process.”
Management undertook to prioritise the use of the Government Attorney for legal representation and advisory services where possible, limiting the engagement of external legal practitioners to specialised matters or situations where the Government Attorney could not assist.
However, the audit recommended that management strengthen budget monitoring and obtain council approval for budget transfers or supplementary allocations before incurring expenditure beyond approved limits.
Management unable to explain financial position
Perhaps more troubling were management’s responses to some of the municipality’s wider financial management problems, with the auditors documenting several instances where management said it could not comment on figures contained in its own financial records.
The municipality generated revenue of N$155.1 million against a projection of N$217.7 million, achieving only 71.2% of its revenue target.
Revenue from the sale of erven was particularly poor, with the municipality collecting only N$3.9 million against a projection of N$25.5 million, representing just 15.3% of the target.
Government subsidy receipts also fell substantially short of expectations, with N$23 million received against a budgeted N$74.9 million.
The audit further found that the municipality’s cash reserves had deteriorated from N$81 million in the previous financial year to N$20.5 million, representing a decline of approximately 75%.
Its operational cash balance had fallen to approximately N$18.3 million, while management projected reliance on about N$38 million in government subsidies to meet payroll obligations.
Asked to explain the deterioration in cash reserves, management offered a response that raised further questions about its understanding of the municipality’s financial position.
“Management unable to comment, more clarity is needed here to understand where these figures come from,” the response stated.
The auditors also found that trade receivables had increased from N$9.1 million to N$19.7 million, while total consumer debtors stood at N$68.8 million.
Of the consumer debt, N$54.3 million, representing 79%, had remained outstanding for more than 150 days.
Despite the figures appearing in the municipality’s financial statements and management reports, management again indicated that it could not explain the figures.
“Management unable to comment on Trade receivable balance, more clarity is needed to understand the reflected amount,” its response stated.
Management acknowledged the consumer debt problem and indicated that measures, including establishing a call centre to improve debt collection, were being introduced.
It also reported that the council had resolved to write off pensioners’ debts amounting to N$10.57 million, although ministerial approval was still awaited.
Millions in unexplained financial adjustments
The audit identified further weaknesses in the municipality’s financial reporting, including an unreconciled suspense account balance of approximately N$1.71 million and outstanding discrepancies involving a government loan.
It also found that revenue adjustment transactions amounting to approximately N$5.9 million could not be adequately supported.
The auditors warned that the unsupported adjustments could indicate billing errors or unauthorised amendments to financial records.
Management’s explanation for the unreconciled government loan was that the ministry of finance had not provided the information needed to complete the reconciliation.
“The ministry of finance is unable to provide us with the period claimed unpaid, to reconcile with our file. The reconciled file from our side is available,” management stated.
The audit also found that no depreciation had been processed during the reporting period, despite the municipality holding substantial infrastructure and property assets.
Management’s response was that depreciation calculations were performed only at the end of the financial period.
Similarly, management explained the absence of recorded fixed asset additions and disposals by stating: “Additions & disposal Journal is also performed at the end of financial period.”
The auditors nevertheless identified the absence of these accounting entries as part of broader weaknesses affecting the reliability of the municipality’s financial reporting.
Procurement and payment controls under scrutiny
The report further exposed weaknesses in the municipality’s procurement and payment procedures, including payments processed without confirmation that goods had been received or services satisfactorily completed.
In four sampled transactions, auditors found that supplier invoices had been processed and paid without evidence of certification by the relevant user departments.
The finding was classified as high risk because payments could potentially be made for goods not received or services not rendered.
Management acknowledged the finding and undertook to introduce mandatory certification before payments were made.
Auditors also found that most sampled procurement activities had been undertaken without certification confirming the availability of funds.
Management described the omissions as an oversight that did not reflect the council’s intended procurement and financial control processes.
The municipality also lacked adequate controls over low-value procurement transactions below N$1 000, which were processed through a manual requisition book system.
Although each transaction required approval by the CEO, the auditors found that there were no controls to monitor cumulative spending or identify repeated purchases from the same supplier.
This created opportunities for procurement requirements to be circumvented through the splitting of purchases into smaller transactions, while increasing the risk of excessive expenditure, favouritism and irregular procurement.
Capital projects stalled
The municipality’s poor financial management was also reflected in its failure to implement major infrastructure projects.
Capital expenditure amounted to only N$19.5 million, representing 29.8% of the approved capital budget.
The audit specifically identified the Emergency Response Unit and Sewer Line Construction projects as major strategic infrastructure projects on which no expenditure had been recorded.
The auditors warned that the poor capital budget performance indicated significant delays in infrastructure delivery and the municipality’s service delivery objectives.
Management’s responses did not provide detailed explanations for the absence of expenditure on the projects.
The report also raised concerns about a cyber incident reported by management, which allegedly resulted in significant unplanned expenditure on information technology infrastructure and telecommunications.
However, auditors were not provided with sufficient evidence establishing the extent of the breach, its financial impact, forensic investigation outcomes, corrective measures implemented or whether all affected systems had been secured.
The report further identified apparent commingling of unrelated entity information in financial reporting packages, raising concerns about access controls and the integrity of the municipality’s financial reporting systems.
Full audit recommended
In its overall conclusion, the ministry of finance’s internal audit team described the municipality’s financial, operational, information technology and governance weaknesses as indicative of a “high-risk control environment”, requiring immediate corrective action.
Among the recommendations was an independent forensic investigation into the reported cyber incident, a complete verification of fixed assets, investigations into unsupported revenue adjustments and the reconciliation of outstanding government loan balances.
The auditors also called for stronger budget monitoring, improved segregation of duties, better procurement controls and the prioritisation of payments to strategic creditors to minimise possible disruptions to essential services.
In a particularly significant recommendation, the audit team called for a full audit of the municipality’s accounts.
The report, dated 18 August 2026, was addressed to chief executive officer Mberipura Hifitikeko and distributed to finance minister Erica Shafudah, urban and rural development minister James Sankwasa and the executive directors of the two ministries.
It warned that failure to address the identified deficiencies could expose the municipality to deteriorating cash flow, increased risks of fraud and financial irregularities, interruptions to essential services, regulatory non-compliance and further deterioration in its financial sustainability.
