Poor leadership, lack of skills are to blame
SOUTH Africa’s municipalities continue to bleed billions of rand in taxpayers’ money on irregular and wasteful expenditure, despite local governments battling to deliver services.
And the problems are the same: unskilled municipal officials and mayors; failure to ensure that the basics – including budgeting, cost-management and adhering to the prescribed tender processes – are done correctly; as well as a lack of accountability.
These were among the findings by Auditor-General Kimi Makwetu yesterday when he released his report for the 2015/2016 financial year, which paints a bleak picture of most municipalities regressing in their financial control systems.
Out of the 263 municipalities in the country, only 49 received clean audits. In total, R16.1 billion has been lost to irregular expenditure – translating to an increase of 50% – in what has been described as a deep-seated crisis in local government.
More disconcerting is that even the big metros have not fared well in their financial management, with the City of Cape Town the only one that received a clean audit. None of the metros in Gauteng – Joburg, Tshwane and Ekurhuleni – have received a clean bill of health on finances.
Of the 263 municipalities across the country, those in the Western Cape came out tops, with 80% of their local governments obtaining clean audits, followed by KwaZuluNatal and the Eastern Cape, at a low 18% and 16%, respectively.
A clean audit, according to the AG’s website, is when financial statements have have incorrect or omitted information. This means a municipality should fully account for how they used money allocated.
In Gauteng, only Midvaal received a clean audit, with the likes of Sedibeng and Mogale City failing their financial tests again, having received qualified audit opinions on their statements.
The Auditor-General named North West, Northern Cape and the Free State as the provinces with the poorest results.
“There was little improvement in these provinces from the previous year’s outlook. Focused political will and a considerable investment in ensuring that the basics are done right are required to create a baseline from which accountability can be restored in these provinces,” Makwetu said.
He blamed the lack of proper leadership and talent retention in key positions in the municipalities. He said more had to be done to hold municipal leaders accountable, and his office had been consulting with Parliament on the matter.
“If you look at the architecture of the managerial roles, a chief financial officer is responsible for managing the finance department, while the municipal manager is in charge of the entire system.
“If we have made audit recommendations to the institutions, we look at the manager and the finance department to implement them. The longer they are in that institution, the better the achievement of the solutions.”
He also lamented that his office could not recommend action against municipalities that did not perform.
Karen Heese of Municipal IQ, a body that monitors the performance of municipalities, said some of the reasons why the financial management at municipalities has regressed might have been the preparation for last August’s elections.
“There might not have been leadership from politicians in ensuring that there’s political control. They might have been concern about the elections, instead of focusing on municipal management. It’s conceivable to think the elections might have undermined focus on governance.”
But she said that wasn’t a good excuse, because service delivery should also top their agenda.
“It’s not acceptable that they might have had their eye off the ball.
“Irregular does not necessarily mean that it’s money that was not spent well, just that it was money that was not accounted for.
“It does point to a deep-seated crisis in local government,” Heese said.
The new municipal councils formed after last year’s elections don’t form part of this report.
Co-operative Governance Deputy Minister Andries Nel said: “Our system of local government is comparatively young. Local government as it’s prescribed in the final constitution is really effective from the year 2000. We are dealing with a system that is about 17 years old.”
The SA Local Government Association’s Mpho Khunou said they were concerned about areas of regression, especially around irregular expenditure.
“Municipalities must be a lot more stringent in implementing cost management.”
TWO of the City of Joburg’s entities have failed to maintain clean audit reports due to non-compliance with legislation, according to the latest report by Auditor-General Kimi Makwetu.
Pikitup and the Johannesburg Roads Agency were found to have been non-compliant in “inadequate contract management”.
Pikitup was at the time of the audit period, embroiled in controversy with its former head Amanda Nair, who was implicated in multimillion-rand corruption. She was dismissed in October after investigations and months of protests by the SA Municipal Workers’ Union.
The AG report for the 2015/16 financial year indicated that City of Joburg was one of the three in the province that did not approve water infrastructure management policies. This, the report warned, might have an adverse impact on the municipalities’ ability to deliver services.
Joburg mayor Herman Mashaba blamed the poor performance on the previous ANC-led administration.
“The audit outcomes illustrate poor attention to financial management practices under the previous government.
“This was also manifested in the failure to adequately investigate cases of unauthorised irregular and fruitless expenditure over years,” the mayor said.
Overall, Gauteng’s municipalities regressed with only one municipality – the DA-run Midvaal – obtaining a clean audit.
Three municipalities: Ekurhuleni, Sedibeng and Mogale City – regressed in the 2015/16 financial year from a clean audit to a qualified opinion with findings.
“The regression at Ekurhuleni and Mogale City was due to compliance with supply-chain management prescripts not being monitored adequately,” the report stated.
Regarding Midvaal, the DA’s spokesperson for co-operative governance Kevin Mileham said the latest audit results proved that where the DA governs, money is spent on service delivery and is “not lost on irregular, unauthorised, fruitless and wasteful expenditure”.
The report also indicates that Gauteng municipalities’ financial health was still constrained and they still face huge challenges in collecting revenue from residents.
Makwetu recommended they pay attention to their debt-collection processes and proper financial spending to allow them to improve service delivery.
Other areas highlighted were City of Joburg projects that included Fleurhof mixed-housing where 11 000 mixed-development units were constructed.
“Overall the units built were of basic quality with an improvement in the standard of workmanship noted from the previous year,” the report stated.
HIGHLIGHTED SHORTCOMINGS: Auditor-General Kimi Makwetu released the audit results of the country’s municipalities for the 2015/16 financial year in Pretoria yesterday.