The latest Auditor-General report on municipalities shows pockets of improvement, but the number of clean audits is declining. From Moneyweb.
Just 34 of the 257 municipalities in SA achieved clean audits for the 2023 financial year, and 20 of those were in the Western Cape.
There were no clean audits in the Free State of North West and four in Kwazulu-Natal and Eastern Cape. Northern Cape achieved three clean audits, Mpumalanga two and Gauteng one.
These are key findings of the Auditor-General’s (AG) 2022-23 consolidated general report on the local government audit outcomes.
With just 13% of municipalities achieving clean audits, there is little to celebrate.
“We are going backwards in terms of the number of clean audits that are being delivered in the local government system. We are further behind than where we began with this particular administration,” said AG Tsakani Maluleke, speaking on Tuesday at the launch of the latest audit outcomes report.
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Those with clean audits produced credible financial statements, useful and reliable service delivery reports and demonstrated compliance with key legislation.
“These 30 [municipalities with clean audits] have established the key disciplines, the key preventative controls to prevent problems, to detect them quickly and to act swiftly,” added Maluleke. “This doesn’t mean that things are perfect in those environments, but it does mean that the basics are in place, and they are well positioned to deliver on their mandates. They can show where and how they have deployed public resources.”
‘Unqualified with findings’ is a step down from a clean audit, and there was some improvement here: 110 achieved this outcome in 2023 versus 100 in 2021.
These municipalities could produce credible financial statements, though most struggle to compile useful service delivery reports or demonstrate compliance in procurement, supply change management and contract management.
A total of 90 municipalities achieved ‘qualified with findings’ outcomes, an increase from 83 in 2021. These institutions struggled to account for revenues, mostly because of incorrect billing, poor management of their debtors books, weaknesses in accounting for expenditure and especially irregular spending, and municipal infrastructure. “That’s quite important. If they don’t know where their assets are and their state, they are unlikely to have a credible maintenance plan and that accounts for asset degradation. They also fail to account for what assets they are invested in,” said Maluleke.
Six municipalities received an ‘adverse with findings’ rating due to unreliable financial statements, while 14 were issued disclaimers – the lowest audit opinion. On a more positive note, 18 municipalities, mainly in KwaZulu-Natal, Mpumalanga and the North West, have moved out of this category over the last year. There was also an improvement in the number of municipalities submitting financial statements on time – up to 94% in 2023 from 81% in 2021.
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Three audit opinions were outstanding for the 2023 financial year.
Overall, there has been little change in audit outcomes in recent years, despite commitments from public sector role players to improve accountability. “Action has been too slow and has had little impact on the lived realities of ordinary South Africans,” said the AG.
Political instability weakens metros
Of the eight metros, only Cape Town received a clean audit.
Ekurhuleni, which had a clean audit in 2022, slipped down a notch to ‘unqualified with findings’, mainly because of problems with procurement. This placed it alongside Johannesburg, eThekwini, and Nelson Mandela Bay.
The AG noted that despite their large budgets, the big metros are not performing any better than smaller municipalities. They should be able to hire and retain skills, yet this does not appear to be happening to the extent it should.
Mangaung, Buffalo City and Tshwane achieved qualified audits, while most metros struggled to provide reliable service delivery reports.
Political instability, with many metros governed by coalitions between different parties, had weakened metros, said Maluleke.
Deficiencies in infrastructure projects
The AG reported that auditors identified deficiencies in 72% of the 75 infrastructure projects that were visited.
“We found that, all too often, work on projects is delayed, is costing more than planned and is of poor quality, and that new infrastructure is not put [to] use as soon as it is ready. Existing infrastructure continues to deteriorate because it is not properly maintained and safeguarded,” she added.
Material irregularities
One of the tools used to prevent losses is the enhanced power to demand action from accounting officers over material irregularities. A total of R924 million had been or is in the process of being recovered, or losses prevented, due to this process.
The overall poor performance of municipalities has a direct bearing on the lives of South Africans, and change was needed across the power spectrum, from councils to mayors, legislatures, and provincial leaders, to instil a culture of performance.
“Service delivery improvements and the responsible use of the limited funds available will only be enabled when municipalities are capable, cooperative, accountable and responsive, and when they deliver on their mandates,” said the AG.
