NC municipalities write off R609m
MORE than half-a-billion rand in irregular expenditure was written off by municipalities in the Northern Cape during the last financial year – not a cent of which was recovered from the person responsible.
This is according to the General Report on Local Government Audit Outcomes for 2015/2016, released by the Auditor-General earlier this week.
Among the findings reflected in the report were that municipalities throughout the Province had to write off or condone irregular expenditure amounting to R609 million, but in no instance was any amount recovered from a liable person.
The Auditor-General, Kimi Makwetu, also expressed concern about the financial health of the Province, with half of the Province’s municipalities having a material uncertainty regarding their financial health.
“We favourably assessed only three municipalities (Frances Baard, Kareeberg and Sol Plaatje) on their financial health. We are concerned that 73 percent of municipalities were in a net current liability position at year-end, which meant that their total current liabilities exceeded their total current assets.”
Three municipalities were unable to meet their third-party obligations (such as to the South African Revenue Service, pension funds and medical aids).
“The year-end debtor balances of 92 percent of the municipalities included more than 10 percent of debt that should be considered irrecoverable. This is concerning considering that significant debtor balances had already been written off during the year.”
Makwetu blamed poor debt collection from consumers, which, he said, placed a strain on municipalities’ ability to pay creditors. A total of 69 percent of municipalities in the Province had a creditor-payment period of more than 120 days.
About a fifth of local municipalities also did not submit performance reports in 2015/16 – either because there were no performance management systems in place or senior management lacked the skills and competencies to implement systems.
The audit outcomes also reflect the poor state of internal controls, with only eight percent of the assessed municipalities proving to have good leadership controls, while a mere 12 percent were assessed as having good financial and performance management controls.
The report also indicated that the overall audit outcomes of the Northern Cape stagnated over the past three years, with 11 municipalities achieving unmodified audit outcomes (unqualified with no findings and unqualified with findings) in 2015/16 compared to 10 in 2013/14.
During the current year, the Joe Morolong and Ubuntu municipalities regressed from qualified audit opinions to disclaimed audit opinions.
Property, infrastructure and equipment remained the most common qualification areas with 54 percent of municipalities being qualified in this regard.
Concerns were also expressed regarding the the number of municipalities that are heavily reliant on consultants to perform functions that can be addressed by fulltime officials, with the report stating that this was an indication that skills were not being transferred due to inadequate monitoring, or an unwillingness to acquire the relevant know how.
“The cost of using consultants for financial reporting (excluding consultants paid by other institutions) amounted to R38 million, compared to R42 million in 2014/2015,” stated the report. “Of concern is that we identified material misstatements at 75 percent of the 24 municipalities where consultants assisted with financial reporting.”
The most common compliance findings related to preventing unauthorised, irregular, fruitless and wasteful expenditure.
Irregular expenditure, incurred by 85 percent of the Province’s municipalities, amounted to R287 million, of which 97 percent resulted from instances of non-compliance with supply chain management (SCM) legislation, including uncompetitive or unfair procurement processes and inadequate contract management.
It was also found that 71 percent of the Province’s municipalities have no approved policy in place to address routine maintenance of water infrastructure and have a backlog in the provision of water services.
Sixty-two percent of the municipalities have no plan, targets or time frame in place for the maintenance of water infrastructure while it was also found that the key root causes that hindered progress were inadequate consequences for poor performance and transgressions (92 percent), a slow response by the political leadership (83 percent) and a slow response by management (79 percent).
“Mayors need to accept responsibility and be prepared to hold officials accountable for failing to improve audit outcomes and bettering the lives of citizens,” the report concluded. “This can only be achieved if mayors remain focused on achieving the goals they set for their municipalities, ensuring that accountability is clear to all levels of staff, and that consequences follow if staff members do not perform as required.”