The case of a Eastern Cape municipality which spent Covid-19 funds on a new vehicle for its mayor illustrates the financial chaos that engulfs South Africa’s municipalities.
This according to Auditor-General (AG) Tsakani Maluleke, who said local government finances were under pressure, reporting R26 billion in irregular expenditure at municipalities in the 2019-’20 financial year.
She said municipalities relied on short-term and costly solutions such as consultants to compensate for the lack of financial management and reporting skills, while supervision and monitoring were not taking place.
On Tuesday, Maluleke briefed a joint meeting of Parliament’s Standing Committee on Public Accounts and Standing Committee on the Auditor-General on the 2019-’20 municipal audit outcomes and the Covid-19 municipal expenditure.
The worsening financial situation is captured by the fact that out of the 257 municipalities across the country, only 27 received clean audits. According to Maluleke’s figures, 89 were unqualified, 66 were qualified, six were adverse and 12 disclaimed, while audits in 57 municipalities were not completed. The unqualified and qualified audits were with findings.
In the Eastern Cape, Maluleke reported that while there has been an improvement in outcomes, it might not be sustainable due to poor control environments.
“Once again, procurement was a problem,” she said, adding: “There were instances [where] relief funding was used for something other than Covid-19. An example of this is a municipality in the Eastern Cape where the funds were used to buy the mayor a car rather than this intended purpose.”
The details of the municipality in question were not revealed.
In total, 15 municipalities in the province received unqualified audit reports with findings, while 14 had qualified reports with findings.
On the Free State, Maluleke said accountability can be realised through a decisive leadership tone.
“Lack of accountability creates a perpetual disrespect for regulations, resulting in mismanagement of resources and lack of service delivery,” she said in her report.
She also used the troubled Maluti-A-Phofung municipality, which owes Eskom R5 billion, as an example.
The province has 11 municipalities with qualified audit reports with findings.
Maluleke said despite pockets of improvement, inadequate monitoring of preventative controls resulted in stagnant outcomes and increasing levels of unauthorised, irregular, fruitless and wasteful expenditure.
Seven municipalities in Gauteng were also given unqualified audit reports with findings.
She said the provincial government needed to upscale the implementation of preventative controls and drive consistent consequence management.
“Stagnation in audit outcomes – effective accountability and consequence management not consistently enforced,” she said.
In total, 32 municipalities in KwaZulu-Natal were awarded unqualified audit reports with findings, and 14 councils got qualified audit reports with findings.
Maluleke said active leadership supervision would lead to a sustainable key control environment.
“[The] improvement in audit outcomes, which is mainly consultant driven, is not supported by equivalent improvement in a sustainable key control environment,” she said.
Seven of the province’s municipalities were awarded qualified audit reports with findings, while 13 got unqualified reports with findings.
Maluleke said there was a need for leadership to act on accountability to bring about the desired change.
Nine municipalities’ audits were outstanding, while only three were awarded unqualified audit reports with no findings.
“The state of internal controls, coupled with lack of consequences for transgressions and weakened oversight, is at the centre of the deteriorating accountability in our local government,” Maluleke said.
“Sustainable change starts with leadership’s will to drive it. The benefits derived from implementing preventative controls are evident, but there is still a lot to be done to address undesirable audit outcomes,” she said.
Maluleke said to bring about accountability, leadership must be aligned and actively lead.
She said there was total neglect of internal control disciplines, resulting in financial and operational collapse, weakened governance and a lack of accountability.
The audit reports of 12 municipalities were outstanding, six were awarded qualified audit reports with findings and one got an unqualified audit report with findings.
Maluleke said the province remains consistent with its sound financial management, but she raised concerns about the inadequate preventative controls on compliance despite good financial accounting controls.