Only 38 municipalities receive clean audits – auditor general SA

Read More

In what has become an annual plea for leadership and accountability, the auditor general of South Africa on Wednesday highlighted how many municipalities, bar a golden few, are failing on almost every major metric of performance, good governance and integrity.

Only 38 municipalities out of 257 achieved clean audits in the 2021-2022 local government audit outcomes, a consequence of skills shortages, poor accountability and poor leadership, the standing committee on the auditor general heard.

While this number was less than the 41 clean audits of the previous year, there were fewer municipalities that received disclaimer outcomes.

Auditor general Tsakani Maluleke also told the committee that municipalities racked up R4.74 billion in fruitless and wasteful expenditure, R25.47 billion in unauthorised expenditure, and that the R1.6 billion spent on consultants had proven ineffective.

“Local government has been characterised by dysfunctional municipalities, financial mismanagement, council and administrative instability, and crumbling municipal infrastructure.

“This leads to deteriorating standards of living and service delivery failures, resulting in protests.Service delivery improvements will be enabled by capable, accountable and citizen-centric municipal leadership delivering on their mandates to improve the lives of ordinary South Africans,” said Maluleke.

The leading province for clean audits was, again, the Western Cape, with 21 municipalities . However, along with Gauteng, the Western Cape also had the most regressions.

The Free State, Limpopo and North West provinces fared the worst, with no municipalities receiving clean audits.

According to the presentation made to the committee, municipalities had spent R1.61 billion on consultants in the current period. For the 2020-2021 period, they spent R1,36 billion for the same service.

Consultants were mostly used for asset management services (34%), tax services (29%) and the preparation or review of financial statements (26%).

Too, many municipalities were using consultants to do simple tasks, such as compile their VAT returns, said Maluleke, “which is a very basic accounting matter”.

The main reason given for appointing consultants was a lack of skills, while vacancies were also cited as problematic. Forty percent of municipalities cited a combination of lack of skills and vacancies.

“Sixty-two percent (137) of financial statements submitted for auditing included material misstatements in the area of consultant work,” according to Maluleke’s presentation.

The consultants were ineffective, according to the report, because work was not adequately reviewed, there were no records and documentation, they did not deliver, there had been poor project management, or the consultants had been appointed too late.

KwaZulu-Natal spent the most on consultants, with 48 municipalities racking up R309.26 million. In Limpopo, 26 municipalities spent R263.18 million on consultants.

In the North West, 20 municipalities spent R126.95 million on consultants.

In Mpumalanga, 20 municipalities spent R245.37 million on consultants.

Only 4% of municipalities (31) that used consultants received clean audits — at a cost of R58.2 million. Another 74 municipalities that used consultants ended up with qualified findings, having spent R665.04 million on consultants.

Ninety-four municipalities spent R580.96 million on consultants, only to emerge with unqualified findings. Six municipalities spent R176.41 million on consultants and emerged with adverse findings.

Fifteen municipalities spent R128.76 million on consultants, but still received disclaimers with findings.

Maluleke previously said that one of the problems consultants face is poor or non-existent record-keeping at some municipalities.

Poor financial planning and inadequate financial controls and reporting still plagued municipalities, she said in her report, which remained a blight on service delivery and the ability to spend taxpayer money responsibly.

The impact of this was less transparency and accountability and limited return on investment for national and provincial interventions. A lack of stability and political uncertainty resulted in councils not properly fulfilling their oversight role, she said. 

It also had a negative effect on finances and service delivery.

As far as areas noted as achievements by municipalities, Maluleke found the reporting on delivery lacked credibility. There was no evidence to support the reported achievements, and there were inconsistencies in planned versus reported performances.

Despite the AG last year advising incoming councils to fill critical vacancies, there had been an increase in these, according to Maluleke’s report, particularly at the levels of municipal manager and chief financial officer. 

Municipalities also continued to underspend on infrastructure management and maintenance, she said. The average maintenance spend was 4%, and it was not prioritised when budgeting.  

According to the treasury, the maintenance spend over a year should be 8% of the total value of all plant, equipment and infrastructure owned by a municipality.