Only 16% of SA’s municipalities get clean audits, Free State councils ‘should be ashamed’

A mere 16% of the 257 municipalities have received a clean audit for the 2020-21 financial year, whilst 25 municipalities or about 10%, scored disclaimed audit opinions – the worst audit opinion possible.

Only Gauteng and the Western Cape did not have any municipalities with disclaimed opinions during this period.

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Most of the municipalities that repeatedly received disclaimed opinions are in North West.

A disclaimed opinion is the worst audit opinion a municipality can receive, as it means that the municipality could not provide auditors with evidence for most of the amounts and disclosures in its financial statements.

The Auditor-General could therefore not express an opinion on the credibility of these financial statements or determine what was done with the funds the municipality received towards service delivery for the year.

Only 61 municipalities had a better audit outcome in 2020-21 than in 2016-17, with 56 now having a worse audit outcome.

There was a slight increase in the number of clean audits – 27 municipalities were able to maintain their clean audit status throughout the administration, while 14 achieved a clean audit for the first time and six lost their clean audit status.

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However, clean audit outcomes continue to represent less than a fifth of the local government budget.

Senqu – a small, rural Eastern Cape municipality – has received a clean audit for five consecutive financial years, with Western Cape municipalities such as the Cape Winelands and West Coast having also achieved this outcome for the past five years.

Financial health of metros worrying

The financial health of metros is particularly concerning, as they serve the largest segment of the population and account for more than half of the local government expenditure budget.

The City of Tshwane (Gauteng), City of Johannesburg (Gauteng), City of Ekurhuleni (Gauteng), City of Cape Town (Western Cape) and Nelson Mandela Bay (Eastern Cape) were all downgraded to below investment grade by 30 June 2021.

Four metros have consistently submitted poor performance reports since the start of the administration, namely Buffalo City, City of Johannesburg, Mangaung and Nelson Mandela Bay.

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Ten municipalities (Maluti-A-Phofung, Masilonyana, Tokologo, Govan Mbeki, !Kheis, Joe Morolong, Lekwa Teemane, Madibeng, Mamusa and Ramotshere Moiloa) had received disclaimed audit opinions for several years. The latest report shows that these municipalities have still not improved.

Free State municipalities ‘should be ashamed’

The Free State has recorded the highest number of municipalities with outstanding audits in the country and since the 2016/2017 financial year, the Free State has wasted R254 million of taxpayers’ money on consultants to improve financial outcomes.

The DA charged that the ruling party in the Free State should be ashamed that only this province has a Metro Municipality under administration, and that the Mangaung Metro has large outstanding debts amounting to R8.2 billion, with irregular expenditure debt of R190 million.

David van Vuuren, the party’s provincial spokesperson on finance, said municipalities in the Free State currently experience water losses up to R888.7 million.

The Freedom Front Plus lamented the R20,45 billion in irregular expenditure in 64% of municipalities, and the fact that 64% of municipal debt was considered unrecoverable, saying this highlighted the unacceptable levels of incompetence in municipal managements countrywide.

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