Municipalities regress despite paying financial consultants R1.26bn – AG

South African municipalities collectively spent R1.26 billion on consultants to help draft its financial statements, yet audit outcomes continued to regress.

The Auditor-General of South Africa (AGSA) presented a report to the National Council of Provinces about the audit outcomes for municipalities in the 2018-2019 financial year.

The report titled “Not much to go around, yet not the right hands at the till”, delivered by deputy Auditor-General Tsakani Maluleke, presented a grim picture of municipal governance in the country’s municipalities.

Of South Africa’s 257 municipalities, only 20 (8%) managed to achieve clean audits in 2018-2019, 91 (35%) achieved unqualified with findings audit reports, 83 (32%) qualified with findings and two (1%) adverse findings, 33 (13%) got disclaimed with findings, while 28 municipalities audit findings were outstanding.

“What movement there is, is mostly negative,” said Maluleke on the year-on-year comparison.

She described the report as “the story of many dysfunctional municipalities” and said it illustrated “repeated accountability failures”.

She said the good news is that there are a few municipalities with clean audits, which shows that “good governance is possible”. She said this was due to “political will and diligent attention to key controls”.

The final slide in Maluleke’s presentation read:

“In every society some people do not want to work. Unfortunately they have the upper hand in a society that lacks good leadership!”

Of the 20 clean audits, 13 were in the Western Cape.

Second best was Mpumalanga, who mustered two clean audits.

The Free State and North West municipalities didn’t have a single clean audit, while the other provinces each have one.

The Western Cape also had no disclaimed audit findings, while one municipality’s audit report was outstanding.

The North West had nine disclaimed findings, and the Eastern Cape eight.

In the Free State, eight municipalities’ audit reports were outstanding.

Maluleke provided the following comment on each province’s audit findings:

Eastern Cape: “Widespread lack of financial controls and project monitoring.”

Free State: “Deliberate lack of accountability by political and administrative leadership.”

Gauteng: “Good financial accounting with inadequate monitoring of preventative controls.”

KwaZulu-Natal: “Little change in outcomes, accountability not adequately practiced and enforced by leadership and failure of key controls.”

Limpopo: “Millions spent to improve audit outcomes yet no consequences for poor performance.”

Mpumalanga: “Deteriorating accountability and financial management coupled with weakened oversight at the centre of the significant regressions in audit outcomes.”

Northern Cape: “A prolonged state of undesirable audit outcomes.”

North West: “Systemic breakdown in the discipline of financial controls.”

Western Cape: “Improved outcomes but concerns remain.”

Collectively, R2.07bn of municipalities’ expenditure was fruitless and wasteful, while R11.98bn of expenditure was unauthorised.

Annual irregular expenditure increased from R25.2 bn to R32.06bn, while the number of municipalities incurring irregular expenditure slightly increased from 239 to 241.

The value of infrastructure assets that municipalities should maintain and safeguard was R317.68bn, but the expenditure on maintenance was only R8.5bn.

Maluleke said they are concerned about the R1.26bn municipalities spent on consultants for financial reporting services, without seeing an improvement in audit results.

She said it wasn’t necessarily wrong for municipalities to use consultants for these services.

“There certainly isn’t value to be had by taxpayers when these consultants are used,” she said, in reference to the outcomes not improving.

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