Nombembe upbraids provinces
Former auditor-general Terence Nombembe says South Africa has nothing much to celebrate after it emerged that 19% of municipalities achieved a clean audit 22 years after democracy.
This follows the release of a report by his successor Thembekile Makwetu on Wednesday, which detailed the dismal state of financial health at South Africa’s municipalities. Some in the country have lauded the fact that 54 out of 272 municipalities have achieved a clean audit – up from 40 in the 2013/14 financial year.
Nombembe, who is the CEO of the SA Institute of Chartered Accountants, said the fact that fruitless and wasteful expenditure had increased from R685 million in 2013/14 to R1.34 billion in 2014/15 was not something to celebrate, and should instead be a serious cause for concern and should impel government to act.
“It is clear that municipalities need to stop talking about skills shortages and start doing something to grow them,” he said.
“It is unacceptable that 22 years after democracy, our local government audit results continue to reveal inadequate financial management and a complete disregard for the public’s money,” Nombembe said after reviewing this week’s local government audit results.
He said there were several other worrying factors that came out of the Auditor-General’s report that people were not paying attention to. For example, the report revealed that 92% of municipalities were using consultants to handle their financial reports at a cost of R892 million. Not only was this spending unnecessary, but last year, then cooperative governance and traditional affairs minister Pravin Gordhan expressed his suspicion that these consultants were not only colluding with municipalities to get contracts, but were actually not qualified to do the work.
“There seems to be a lot of truth in this school of thought,” said Nombembe.
He said the report also revealed a dire need for municipalities to seriously consider “growing their own timber” by participating in skills development programmes to build capacity in areas where they have been lacking for years.
“The report makes it clear that municipalities need to stop talking about the skills shortage and start building their own skills pipeline,” he said.
According to Nombembe, this was a move some provincial departments had already begun to undertake.
Earlier this year, the treasury departments in the Western Cape and KwaZulu-Natal joined the City of Johannesburg as SA Institute of Chartered Accountants-accredited training offices because they recognised the need to build their own set of skilled accountants who would be proficient in managing the financial affairs of the public sector.
Belinda Francis Scott, the MEC for finance in KwaZulu-Natal, said the KwaZulu-Natal treasury believed that it was imperative to invest in training and mentorship of future finance officers because there was “a dire shortage of public servants in the province, with adequate financial skills and capabilities”.
The report therefore showed that a lot of money was being wasted in municipalities due to lack of finance management and related leadership skills.
“Every cent wasted in government is a cent taken away from the people,” Nombembe said.
Makwetu’s report cautioned that the continued reliance on the auditors from his office to identify corrections to be made to the municipal financial statements to obtain an unqualified audit opinion was not a sustainable practice.
“Over the years, this has placed undue pressure on the audit teams to meet legislated deadlines for the completion of audits, with an accompanying increase in audit fees.
“The overreliance on consultants is a further warning sign of a lack of capacity and skills in local government to produce unqualified financial statements,” his report concluded.
The move to start training and building capacity was showing signs of success and had seen provinces in which it was implemented record the highest proportion of municipalities with clean audit opinions.
“They are certainly taking public sector financial management seriously,” Nombembe said. He warned that until everyone realised it was up to them to act by growing and acquiring these skills for the public sector’s sake, “we are going to continue to see ineffective governance at local government level”.