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There’s been some improvement in the number of audit disclaimers, but overall it’s pretty much a stuck record of ongoing poor performance for metros and municipalities.
‘Widespread instability’ is one characteristic of local government as described by Auditor-General Tsakani Maluleke. Pciture: GCIS
It’s time to hold mayors, speakers and council members to account for municipal failures, said Auditor-General of SA Tsakani Maluleke during a Wednesday parliamentary briefing on local government audit outcomes.
Despite calls on municipal and metro leaders to act with urgency to overhaul local government – which is characterised by “insufficient accountability, failing service delivery, poor financial management and governance, weak institutional capability and widespread instability” – the action taken has been too slow and has had little impact on the lived realities of South Africans, said Maluleke.
“Legislation is clear on what the responsibilities of mayors, councils and executive authorities are – it is the diligent and effective implementation of these responsibilities that is lacking.”
The AG’s latest report on local government audit outcomes for the 2024 financial year shows that just 16% of 257 municipalities received clean audits, and most of these (17) were in the Western Cape. The number of clean audits (41) is unchanged from 2021.
Those with clean audits have the discipline and necessary governance to spend predictably and efficiently, said the AG.
A clean audit is not always an indicator of good service delivery and does not always reflect the lived experience of all communities in a municipal area, but it reflects honest communication with communities as to whether and when their needs will be met through accurate records.
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There was almost no change in the number of municipalities with “unqualified with findings” audits – there were 99 in 2024, compared to 100 in 2021.
Things get worse from there: 93 (35%) were given “qualified with findings” audit outcomes compared to 83 in 2021.
The number of “adverse with findings” outcomes increased to six (from four in 2021). Thirteen municipalities did not submit their financial statements on time. Of these, seven – with a combined budget of R6.85 billion – habitually disregard the legislated requirement to submit on time.
There was a notable improvement in “disclaimed with findings” audits from 28 in 2021 to 11 in 2024.
More concerning is the number of audits outstanding – 10 in 2024, up from just one in 2021.
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Outcomes ‘leave much to be desired’
“It’s great we are reversing disclaimers, but this still leaves much to be desired,” said Maluleke.
“Unqualified with findings means that institution does not have the culture to plan, execute and deploy public funds efficiently.”
It signifies weak internal controls to improve the quality of spending, as well as lax governance.
The Free State and North West appear once again as the provinces with the most problematic municipalities, with either disclaimers or non-submission of statements.
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Clean audit for Cape Town
Of the eight metros, only Cape Town received a clean audit.
Three (Ekurhuleni, Johannesburg and eThekwini) received unqualified with findings audits, and three (Buffalo City, Tshwane and Nelson Mandela Bay) earned qualified with findings audits.
“Of those with unqualified with findings [outcomes], only Ekurhuleni gave us quality financial statements.
“City of Joburg did not give us quality financial statements,” said Maluleke. “They should have the skills and resources to compile financial statements.”
The AG detailed some of the problems at Buffalo City: a vacancy for a district engineer for electricity that went unfilled for 80 months, and a vacancy for a sanitation engineer that had not been filled after 24 months.
“We must ask the question why things fall apart? Why can they not get the skills they need?” said Maluleke. “[There are] challenges of stability at council and administration levels, and institutions have become weaker over the years.”
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Infrastructure projects
The result of these deficiencies is that the financial health of local government is weakening.
This is aggravated by poor management of infrastructure projects, which are delayed, poorly planned, inadequately supervised, and often over budget.
Deficiencies were identified at 87 of the 113 projects (77%) that were visited by the AG’s office.
Overall, metros have continued to regress from 2021, despite their greater capacity and large budgets.
SA’s eight metros are responsible for delivering services to 8.9 million people, or 46% of all households in the country. The financial health of metros remains concerning as they struggle to collect revenue, despite implementing recovery and turnaround plans.
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Unfunded budgets
Some 113 municipalities adopted unfunded budgets in the 2024 financial year, contrary to the advice given by national and provincial treasuries.
Unauthorised spending of R31.8 billion incurred by 174 municipalities was the result of unreliable information and a lack of diligence and impactful decision-making by mayors and councils.
“Municipal finances are severely troubled and even though funds are constrained, mayors, councils and municipalities are displaying little fiscal discipline.
“Money paid by residents and funded from the national purse is often wasted through poor financial and procurement decisions and project failures,” said the AG.
“The limited funds that municipalities had were also not spent carefully. The main reasons for the continuing financial losses and waste were widespread poor payment practices, uncompetitive and uneconomical procurement practices, limited value and benefit received for money spent, and weaknesses in project management.”
Creditors are not paid within legislated timelines, and the debt owed to Eskom and the water boards remains high and continues to increase. If these debts are not paid, communities are left without access to basic services such as electricity and water.
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Failure of the Eskom debt relief programme
The Eskom debt relief programme was intended to provide some relief to municipalities that struggled to pay the electricity supplier, but 53 of the participating municipalities (84%) are not complying with the conditions of the programme, warns Maluleke.
Another problem is the ongoing non-compliance with procurement legislation, leading to financial losses and contractors not delivering.
Some 214 municipalities had findings on non-compliance with procurement and contract management legislation.
The lack of consequences in local government continuously slows any progress towards improved service delivery and financial performance. This is most evident in poor and slow responses to investigating allegations of financial and supply chain management misconduct and fraud indicators.
Also evident is a lack of enthusiasm for dealing with unauthorised, irregular, and fruitless and wasteful expenditure.
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Material irregularities
Some 281 material irregularities worth R8.7 billion were identified during the year, mostly for goods and services not received or of poor quality or not being in line with contracts.
Late payment of suppliers leads to interest charges, with inefficient use of resources resulting in little or no benefit for the money spent.
Revenue is lost due to incorrect or no billing, debt not recovered, and unrecorded receipts.
Another problem among poorly performing municipalities is the use of consultants, at huge cost, to little apparent avail.
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Call to action
Maluleke issued a call to action for local government turnaround:
- Build capable institutions with intergovernmental support;
- Professionalise and build capacity in local government, making it an attractive place for professionals to work; and
- Instil a culture of ethics and accountability, characterised by consequence management and where material irregularities are treated with the urgency they deserve.
This article was republished from Moneyweb. Read the original here.
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