Concern about continuing decline of municipalities – AG report

With only 34 out of 257 municipalities in South Africa receiving a clean audit from the Auditor General in 2022/23, there is concern that local government in the country continues to decline due to municipalities continuing to ignore the law, mismanage projects, mess up the paperwork, spend money badly and pass budgets that they cannot afford to implement.

The Organisation Undoing Tax Abuse (Outa) expressed its grave concern over the latest report of the Auditor General (AG) which reveals a continuing decline in financial management, accountability and service delivery across municipalities.

“The decline in clean audits is a clear indication of systemic failures in our municipalities, weak political oversight and a lack of consequence management. This not only compromises service delivery but also erodes the trust that communities place in their local governments.

“It is unacceptable that so many municipalities continue to fail in their fundamental duty to manage public resources responsibly and provide basic services to the people,” Julius Kleynhans, executive manager for local government at Outa, says.

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Distressing picture of inability to manage public funds in AG report

The AG’s report paints a distressing picture of local government’s (in)ability to manage public funds effectively, with only 13% of municipalities (34) receiving clean audits (unqualified with no findings), a significant decrease from previous years.

Kleynhans says this troubling trend highlights the urgent need for reform, increased oversight and improved financial controls to restore public trust in local governance.

According to the AG’s report, 43% (110) received unqualified audits with findings, 33% (85) qualified with findings, 2% (6) adverse with findings, and 5% (12) disclaimed findings.

Key findings in the report include weak performance planning and reporting processes, poor project and contract management, inadequate internal controls, persistent issues with unauthorised and wasteful expenditure and a deterioration in service delivery.

The performance plans of 19% of municipalities, including five metros, also excluded indicators that measure performance on their core mandated functions.

In addition, in auditing a sample of municipal projects, the AG’s office identified deficiencies in 54 cases (72%) of the 75 projects visited, due to delays, cost escalation, poor quality of work and new infrastructure projects not being used. The AG also found that existing infrastructure continues to deteriorate because it is “not properly maintained and safeguarded”.

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Other poor practices in AG report

Other key poor practices the AG identified include poor payment practices, uncompetitive and uneconomical procurement practices, limited value and benefit received for money spent weaknesses in project management and underspending on grants.

The AG noted that the basic disciplines of sound financial management were not integrated in the culture of many municipalities with obvious material misstatements only being corrected once the audit commenced.

“The high non-compliance with legislation and the requirements of sound financial management, supply chain management, cost controls and standard project management is deeply concerning. While the AG identified green shoots in the municipal ecosystem, much more must be done to correct the path of this key sphere of government.

“Decisive leadership is needed. Failure to transform local government soon will be catastrophic for South Africa,” Kleynhans says. He adds that Outa supports the AG’s call for the professionalisation of municipalities.

“Intergovernmental support and the culture of ethics and accountability must be cultivated in local government. Local government reform and consequence management is crucial if we want to see real change.”

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AG’s hard work encouraging – Outa

Kleynhans says Outa is encouraged by the AG’s hard work as well as the transparency and good reporting and believes it sets an example of how other government institutions are supposed to function and perform. Outa also urges communities to hold their local governments accountable and demand transparency and accountability in the management of public funds.

“Local government is the closest sphere of government to the people and it is essential that it functions effectively. We cannot allow the continued mismanagement of public funds to go unchecked. Outa will continue to advocate for improved governance and accountability at the local level, ensuring that our municipalities serve the best interests of their communities,” he says.

Outa is also concerned that more than 42% of municipalities had budgets that were unfunded. “Passing an unfunded budget violates the Municipal Finance Management Act (MFMA) and can lead to significant consequences, including intervention by the provincial treasury under Section 139 of the Constitution, disciplinary action against municipal officials and the withholding of funds by the National Treasury.

“The municipality may be required to revise its budget to ensure it is fully funded, failing which it risks further intervention, such as the dissolution of the council or the appointment of an administrator,” Kleynhans says.