POLOKWANE – Four municipalities in Limpopo have contributed to R588 million or 75% of the R882 million unauthorised expenditure in Limpopo. The bulk of the unauthorised expenditure was due to overspending of the municipalities’ approved budgets.
The Auditor-General, Kimi Makwetu announced the provincial outcomes for the local government audits on Thursday. Individual municipalities’ outcomes would be made available after it has been tabled before councils.
Irregular expenditure in local government in the province amounted to R818 million, which is less than 2012/13’s R1 558 million. Fruitless and wasteful expenditure almost doubled to R31 million against the 2012/13 amount of R18 million, the bulk of which could be attributed to late payments of invoices and legal claims and penalties for cancelling contracts. Underspending on municipal infrastructure grants amounted to R827 million.
Polokwane Municipality received a qualified audit outcome after two years of disclaimers, while the Polokwane Housing Association received an unqualified audit with findings.
No municipality or municipal entity in Limpopo received a clean audit for the 2013/14 financial year. This means no municipality in the province had unqualified financial statements with no material findings on the quality of the annual performance report or non-compliance with key legislation.
Limpopo was classified in the category, which also includes municipalities in the Free State and North West, where financial management disciplines are very poor with significant control weaknesses in most municipalities.
“Once more, deficient controls render the system vulnerable to widespread abuse and often a loss of adequate audit trails to substantiate transactions, ” Makwetu said.
“None of the auditees in these provinces attained clean audit opinions, while the majority received qualified, adverse or disclaimed audit opinions. Overall, most of these auditees had deficient controls that rendered the system vulnerable to widespread abuse and often a loss of adequate audit trails to substantiate transactions. The quality of the financial statements submitted for auditing remained poor at 92% to 97% of the auditees in these provinces, pointing to a poor internal control environment at most municipalities. Most of the auditees used consultants at a significant cost for financial and performance reporting, but this did not improve the audit outcomes due to the poor control environment.”
He said the lack of consequences for transgressions continued to be the key driver of the non-compliance.
“The leadership has not taken any visible actions to improve this situation and address the root causes of audit findings. The legislature and provincial coordinating departments provided limited or no assurance in each of these provinces. They must improve their oversight, while the offices of the premier must strengthen intergovernmental relations, as they all have a direct bearing on municipal functions. Where there are improvements, these were also as a result of continuous material adjustments to financial statements during the audit process.”
Makwetu said Limpopo remained subject to high levels of irregular, unauthorised, as well as fruitless and wasteful expenditure, which the leadership was unable to prevent, and also experienced a significant increase in unauthorised and fruitless and wasteful expenditure during the financial year.
The increase in unauthorised expenditure was largely due to poor budgeting, he said.
“Of particular concern is the high level of supply chain management transgressions driven by uncompetitive or unfair procurement processes, conflicts of interest and internal control failures. This not only translates into high irregular expenditure but also provides very little assurance that value for money was received from the acquisition of goods and services. A further concern is the council’s failure to investigate this expenditure properly and to establish the necessary accountability, as required by legislation. Leadership at all levels should set the tone by dealing decisively with non-compliance, which in turn will create the ethical culture needed to ensure sustained compliance with legislation and the economical, effective and efficient delivery of services to the citizens of the province.”
The findings on unauthorised, irregular and fruitless and wasteful expenditure and compliance with legislation were ascribed to weak control environments.
