Municipalities hold their breaths as Auditor-General to release annual audit outcomes

The auditor-general is set to release the audit outcomes of municipalities today, amid deteriorating local government finances and reporting, with the worst municipalities being in North West, Free State and Mpumalanga.

Financial resources available to municipalities have fallen short of meeting service and infrastructure delivery needs over the past 20 years, impeding municipalities’ ability to deliver on their constitutional mandate.

According to the SA Local Government Association (Salga), this has been exacerbated by limited tax revenues, retracted economic growth and rising debt levels.

Of particular concern to the association is the proposed decrease in equitable share of R6.5 billion, from R84.5 billion in 2019/20 to R78 billion, as well the 0.4% reduction over the MTEF.

This is in the midst of poor households increasing due to Covid, with Salga noting that the reduction in funding allocation was detrimental to communities in a worsening economic climate, while facing unemployment and the impact of Covid.

Own revenue collection by municipalities declined during covid lockdown and the extra R20 billion for Covid relief did not match revenues collected in the previous year.

Consultants making a killing

Auditor-general Tskanani Maluleke has lamented that local government finances were under pressure but municipalities relied on short-term and costly solutions, such as consultants, to compensate for lack of financial management and reporting skills.

Whilst the number of municipalities that achieved a qualified audit with no findings increased from 20 in 2018-19 to 27 last year, poor audit outcomes remain prevalent in many municipalities. 

There are also concerns around the appointment of unqualified individuals, which meant municipalities had to incur unnecessary expenses and appoint consultants to prepare Annual Financial Statements.

Last year Maluleke highlighted the recurring use of consultants for financial reporting, as seen with 74% of municipalities, with a total, R5.594 billion spent on financial reporting.

Municipalities spent R4.567 billion on salaries of finance units, while splashing another R1.027 billion on consultants, making up 18% of the total financing reporting cost.

Lack of skills and vacancies in the finance units in municipalities were two key reasons identified for the recurring use of consultants.

It will be interesting to find out if the municipality’s has heeded The Select Committee on Appropriations and the Select Committee on Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlements’ call for municipalities to end the use of consultants.

The good

Anton Bredell, Western Cape MEC for Local Government, Environmental Affairs and Development Planning said they were pleased with the excellent audit outcomes for Western Cape municipalities for the 2020/21 financial year.

He said they received 22 unqualified audits, with no findings results, five unqualified with findings, and only three qualified audits.

“If we compare these results to the previous audit, we are seeing 24 unchanged results, 5 municipalities improved, and only one municipality has regressed in performance,” Bredell said.

Mireille Wenger, Western Cape MEC for Finance and Economic Opportunity said these were the second-best audit outcomes in the Western Cape since 2015, and shows that the Western Cape continues to lead nationally in good governance.

He said sound financial management of municipal resources was a pre-requisite for economic growth, which leads to job creation and that good audit outcomes were are an integral part of good governance.

“There is also a direct link between clean audits and service delivery. The challenge is to adopt procedures and systems that will maintain this high standard irrespective of who the individuals in charge are,” Wenger added.

siphom@citizen.co.za