Western Cape is tops
The release on Wednesday of the AuditorGeneral’s report on municipalities could be the worst timing for political parties trying to win in the local government elections. The report showed that the majority of those assuming office after the August elections would take over municipal administrations fraught with servicedelivery challenges.
On top of this would be the enormous task of rescuing these municipalities from a state of near financial collapse.
Auditor-General Kimi Makwetu’s 2014/15 audit outcomes found serious problems in several municipalities.
It rated the financial health of 92% of municipalities as “either concerning or requiring intervention”.
On the other hand, the report noted a “steady improvement” in the past five financial years from 2010/11.
Adding to the headaches of political parties contesting the elections would be the government’s daunting key target – spelt out in the medium-term strategic framework (MTSF) – of “achieving an overall municipal audit outcomes with at least 75% of municipalities receiving unqualified audits by 2019”, along with no adverse or disclaimed opinion by the same year.
The MTSF is aligned to the National Development Plan, a government programme to eliminate poverty and reduce inequality by 2030. In addition, the same strategic framework is seeking an “increase in the level of public trust and confidence in local government from 51% in 2012 to 65% by 2019” – as measured by the Ipsos (a global research organisation) survey. This adds even more pressure to the next term of local governance hopefuls.
Makwetu said 53% of municipalities had improved, 13% had regressed and 34% remained unchanged.
The Western Cape led the pack of top achievers, registering the highest proportion of municipalities with clean audits in 2014/15 at 73%. Gauteng followed at 33% and KwaZuluNatal at 30%.
The North West and Limpopo were the only two provinces that failed to register a single clean municipal audit in the past financial period.
Municipalities in the North West, Mpumalanga, the Eastern Cape and Limpopo were cited as “the main contributors to the significant increase in irregular expenditure over the past five years”.
Those in Mpumalanga, North West, Free State, the Northern Cape and the Eastern Cape were the main contributors to the increase in unauthorised expenditure.
Nelson Mandela Bay Metro leads the pack in fruitless and wasteful expenditure at R422.6 million in the past financial year followed by Matjhabeng local municipality in the Free State – albeit with a huge gap – at R151.8 million.
Political analyst Professor Tinyiko Maluleke said political parties should not show concern about municipal performances only during elections year. The same went for whether the Auditor-General’s findings mattered and why nothing had been done about the previous findings.
“Political parties will make promises to get votes in all municipalities.
“The Auditor-General’s report will be used for campaigning. But will it be used to correct things that went wrong? That we don’t know,” he said.
Giving a five-year performance assessment for the period 2010/11 to 2014/15, Makwetu emphasised that:
Clean audit opinions in the period 2010/11 to 2014/15 financial years increased from 47% to 59% while municipalities receiving disclaimed or adverse opinions eased from 33% to 11% over the same period;
Irregular expenditure has more than doubled since 2010/11 to R14.75 billion;
Fruitless and wasteful expenditure in 2014/15 was more than R1 billion higher than in 2010/11 at R1.34 billion;
Unauthorised expenditure also rose threefold from 2010/11 to R15.32 billion, mainly on the overspending of budgets; and
From the total municipal expenditure of R347 billion – just for the 2014/15 financial year – clean audits represented R134 billion, unqualified opinions R143 billion and qualified opinions R49 billion.
Outstanding audits – of six municipalities – represented R1 billion.
“One of the biggest and most disappointing areas is compliance with legislation [which] gives rise to irregular, fruitless and wasteful, as well as unauthorised, expenditures.
“The rules of the game are not observed,” said Makwetu.
He also expressed serious concern about the use of consultants to prepare audit reports for municipalities, only to produce negative outcomes and errors for some of them.
He said municipalities had in 2014/15 spent about R3.7 billion on consultants, with R892 million of this going to financial services and R615 million on IT services. The Auditor-General warned that the “overreliance on consultants” was a sign of a lack of capacity and skills in local government.
Makwetu said while consultants were “an expected and welcomed area of support” at times, the costs to the state were “disproportionate” to the service.
“We can’t spend this amount of money ... [without] improvements in the outcomes. If a municipality is able to spend R10 million a year on financial management services and still ends up with a generally lousy outcome in audit results, then the question to be asked is: What is the value of that expenditure if it does not translate into something better?”
To improve and sustain audit outcomes in municipalities in the future, Makwetu has recommended, among other things, “effective leadership [political and administrative] that is based on a culture of honesty, ethical business practices, good governance, and protecting and enhancing the interests of [individual municipalities and entities]”.
WARNING Auditor-General Kimi Makwetu says many municipalities around SA are ‘facing near financial collapse’