Municipalities just don’t listen – Auditor-General

Amendments to the Public Audit Act that are aimed at giving the Auditor-General (AG) more teeth, will be presented to parliament within days, chairman of the Standing Committee on the Auditor-General Vincent Smith told journalists on Wednesday.

Smith was speaking at the release of the consolidated audit outcomes for municipalities for 2016/17 by Auditor-General Kimi Makwetu.

At the event, Makwetu expressed his frustration with the majority of municipalities that fail to heed the “constant and insistent advice and caution” of his office and as a result showed a deterioration in audit outcomes.

The number of municipalities with clean audits dropped from 48 in 2015/16 to 33. A total of 112 received unqualified audit reports with findings, up from 108 in the previous financial year. Qualified audit outcomes increased from 60 to 66 and as in the previous financial year four municipalities each got an adverse report with findings. The number of disclaimers increased from 21 to 24 and the results of 18 municipalities were outstanding against none in the previous financial year.

Irregular expenditure (unlawful) increased by 75% from R16.2 billion to R28.3 billion. Of this, R15 billion relates to irregular expenditure incurred in previous periods, but only detected in 2016/17. This, Makwetu said, shows an improvement in the detection of irregularities. The balance of R13.3 billion relates to expenses paid in 2016/17.

Fruitless and wasteful expenditure (no value to the municipality) increased to R1.5 billion and unauthorised expenditure (not budgeted for) dropped by 9% to R12.6 billion.

Makwetu said he pointed to a lack of decisive leadership to address accountability by ensuring consequences for those who flouted processes in 2011/12. He also highlighted weaknesses in internal control and provided the root causes for poor audit outcomes and made recommendations to rectify it.

“It is now five years later, and we are still faced with the same accountability and governance challenges we had flagged throughout these years. There has been no significant positive change towards credible results; instead, we are witnessing a reversal in audit outcomes,” he said

Smith said the standing committee finalised its work on amendments to the Public Audit Act on Tuesday and hoped to present it to Parliament within days. He said Parliament should adopt the amendment before it rises at the end of the current term (end June), which means it will be in force as soon thereafter as the president signs it.

The amendments will grant the AG powers to refer material irregularities to independent agencies like the South African Police Service, the Hawks, and the Public Protector.

On the basis of findings by such agencies, the AG will have the power to issue a certificate of debt to the municipality or entity that will oblige it to collect any money lost due to such irregularities. The person owing will become a debtor in the books of the municipality and the municipality has to report annually on these collections.

Asked whether the certificates would be limited to employees still working for the municipality, Smith said: “As long as you are not dead, they must find you!”

He said history has taught us that officials resign when they are under the spotlight for irregularities, and soon pop up elsewhere. “This musical chairs of the past 24 years must come to an end,” he said.

The amendment will provide identified debtors with an appeal process. Smith said they will have to bring evidence to convince the AG that the conclusion of the investigating agency is incorrect and the AG will have the final say.

If the debtor wants to further challenge the certificate of debt, he will have to take it on review in the High Court.

Top contributor to irregular expenditure was the Nelson Mandel Bay Metro with R8.1 billion, most of which relates to non-compliance with procurement processes in previous years. The OR Tambo district incurred the second highest irregular expenditure, namely R3 billion of which the majority was also incurred before the reporting year. The City of Tshwane was third with R1.8 billion irregular expenditure relating to its smart metering, WiFi and fleet management contracts.

Makwetu said the irregular expenditure in metros increased significantly, mostly due to uncovering sins from the past. He said the financial health of half of the eight metros was stable, but he has concerns about Johannesburg, Tshwane and Nelson Mandela Bay, while Mangaung is “in a particularly vulnerable financial position”.

– Author: Antoinette Slabbert

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