Government calls for harsh consequences for worst-performing municipalities

Auditor General Kimi Makwethu releasing the audit outcomes of South Africa's 263 municipalities. Seated next to him is Andries Nel, deputy minister of cooperative governance.

Auditor General Kimi Makwethu releasing the audit outcomes of South Africa's 263 municipalities. Seated next to him is Andries Nel, deputy minister of cooperative governance.

Irregular expenditure at municipalities has increased by over 50%.

Poorly performing South African municipalities, which perennially attain disclaimers from the Auditor-General, should face harsh consequences, Deputy Cooperative Governance Minister Andries Nel said on Wednesday.

“What concerns us very deeply is the fact that even though the number of municipalities getting disclaimers has decreased dramatically, from 104 to 25, within those 25 municipalities getting disclaimers there is a group of about 21 or slightly more that are persistent. They have had disclaimers for more than five years in a row,” Nel said while addressing a media briefing with Auditor-General Kimi Makwetu in Pretoria.

“For us as a department, together with our partners Salga [the South African Local Government Association] and National Treasury, those are the municipalities that we really want to home in on. We want to make it very clear that there must be leadership, and in the absence of that leadership and results, there must be consequences.”

Nel pointed out there were numerous Mpumalanga municipalities, including Thaba Chweu, eMalahleni, Lekwa and Mbombela, where mayors had already been axed for non-performance.

“The second thing that concerns us very deeply is the increase in the level of irregular expenditure, especially irregular expenditure linked to issues of supply chain management. There we will continue working very closely with the National Treasury, our provincial treasuries and Salga to make sure that we address that. We are confident that the introduction of the municipal standard chart of accounts … in promoting centralised procurement will go quite some way to address that,” said Nel.

“The third area that concerns us greatly is the financial health of our municipalities – both the amounts owed to municipalities as well as the amounts owed by municipalities, especially to bulk service providers. On both those fronts, we are working to increase the capacity of our municipalities to generate revenue. We are also working with them, with the water boards and Eskom, to resolve the issue of outstanding amounts [owed by the municipalities].”

Key outcomes from the 2015/16 local government audit outcomes report released by Makwetu on Wednesday show that the audit opinions on the financial statements only improved marginally from 60 percent to 62 percent unqualified opinions. Disclaimed and adverse opinions decreased from 13 percent to 10 percent.

“The revised medium-term strategic framework targets 65 percent unqualified opinions, 20 percent qualified opinions and a maximum of 15 percent disclaimed or adverse opinions by 2018/19 can therefore be achieved,” said Makwetu in his executive summary of the report.

Among other revelations, the local government audit outcomes report released on Wednesday shows that irregular expenditure, or spending outside the prescripts of the law, at the municipalities increased by over 50 percent to R16.81 billion.

Makwetu noted that the figure could be much more as one-third of the country’s municipalities disclosed they did not know what amount was spent irregularly or that the amounts disclosed were incomplete.

“The year-end balance of irregular expenditure that had accumulated over many years and had not been dealt with (through recovery, condonement or writing off) was R41.7 billion,” according to the report.

In contrast, fruitless and wasteful expenditure was down by 21 percent and stood at R901 million for the 2015/16 financial year.

“The general nature of the fruitless and wasteful expenditure related to interest and penalties on overdue accounts and late payments (at R814 million), litigation and claims (R23 million) and other matters…”

Unauthorised expenditure stood at R12.7 billion – remaining at almost the same levels as the 2014/15 financial year. Most (99 percent) of this unauthorised expenditure related to municipalities that overspent on their budgets.

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