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Auditor-General (AG) Kimi Makwetu.

Muni finances paint a bleak picture, says AG

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The report of the Auditor-General (AG) Kimi Makwetu, on the audit outcomes for local government for the 2018/19 financial year that was released last Wednesday, paints an undesirable picture of billions of Rand in funds allocated to municipalities being managed “in ways that are contrary to the prescripts and recognised accounting disciplines”.
Makwetu titled this report “not much to go around, yet not the right hands at the till” to reflect the state of financial management in municipalities, and strongly cautioned that these administrative and governance lapses make for very weak accountability, and the consequent exposure to abuse of the public purse, and added that the safe and clean hands that can be relied upon to look after the public’s finances in local government, are few and far between.
“Services are rendered and goods are delivered to consumers in all municipalities with the expectation that they will pay for them. Yet there has been a growing trend of established businesses across the chain showing signs of a diminishing ability to pay for these services, or completely refusing to pay,” Makwetu explained.
Limpopo outcomes
According to the report, six municipalities in the province improved their audit outcomes and three regressed. The improvements were mostly consultant-driven, but despite the province having spent a total of R249 million on consultants for financial reporting purposes, many municipalities continued to receive qualified opinions.
Of this, R127 million was spent by municipalities whose audits had not been finalised by the cut-off date of the report.
There was a high reliance on consultants, skills were not transferred, and some officials became complacent when consultants were appointed and did not perform the jobs they were appointed to do, raising questions about municipalities paying for officials and consultants to do the same job.
Millions were spent to improve the outcomes, but there were no consequences for poor performance, according to the AG.
Capricorn District Municipality was the only one to receive a clean audit outcome, while six municipalities obtained unqualified outcomes with findings, 16 were qualified with findings, one received a disclaimer and three audits were outstanding.
“The impact of the R1,2 billion loss following the liquidation of VBS Mutual Bank is still being felt by the municipalities concerned, where service delivery has been affected,” the AG remarked.
The province’s irregular expenditure totalled R1,5 billion for the year under review and another R594 million in irregular expenditure was reported for audits finalised after the cut-off date for the report. Polokwane was one of the municipalities of which the audits were not completed.
Comment by South African Local Government Association (Salga)
“The audit findings highlight a lack of accountability and consequence management by municipal leadership. The picture before us can only change if municipal management and leadership are held accountable to ensure that we strengthen our resolve of extracting accountability using the existing levers provided for in legislation,” Salga commented and announced that a multi-stakeholder audit steering committee consisting of Salga, National Treasury and the Department of Cooperative Governance and Traditional Affaits has been formed to monitor the implementation of municipal audit response plans, and confirmed that circulars will be released to all mayors, to ensure that the transgressions are remedied as prescribed by the legislation.
Treasury will also be encouraged to implement section 216 of the Constitution to withhold equitable shares in order to address financial misconduct in municipalities.
More information regarding the individual audits will be released once the outcomes were communicated with the municipalities and reports were tabled in council.

Story: Barry Viljoen
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