1 of 37 EC municipalities receives clean audit

AG finds there is still an over-reliance on the use of consultants

Small, rural and unable to attract skilled workers — and yet Senqu municipality continues to lead the pack in terms of good and clean governance in the Eastern Cape.

The Lady Grey-based municipality’s books received a clean bill of health from auditor-general Kimi Makwetu for the second consecutive year when he released the audit outcomes of municipalities for 2018/19.

Makwetu released the audit findings on Wednesday. He said Senqu was the only municipality in the province that was able to account for each and every cent that was spent during the year under review.

His report paints a dismal picture of a worsening state of local government, with irregular expenditure being R2.5bn for 2018/19 — taking it to R11bn for the past three financial years.

There was still an over-reliance on the use of consultants, with the majority of councils that received qualified and unqualified opinions spending R117m on consultants to prepare financial statements.

Thirteen municipalities regressed. Only three improved. Eight were unable to support the information reported in their financial statements, earning them disclaimers.

The Chris Hani and Amathole districts, as well as Walter Sisulu, Great Kei, Dr Beyers Naudé, Sundays River Valley, Ingquza Hill and Makana local municipalities, all slapped with disclaimers, were red-flagged as the worst performers.

Buffalo City Metro and OR Tambo district municipality received qualified audit outcomes with findings. This was the same outcome BCM received during the 2017/18 financial year.

Enoch Mgijima local municipality and Nelson Mandela Bay Metro did not even have completed audits at the time Makwetu finalised perusing the books. The Bay, whose audit was only finalised after the deadline, received a qualified audit opinion again, while the troubled Komani-based council’s books received an adverse audit opinion.

Makwetu found seven of the province’s 37 audited councils were, by the deadline, in “good financial health”, 16 were “of concern” and 14 required some serious intervention.

Audit outcomes continued to regress and irregular expenditure in SA municipalities had increased to R32bn in that financial year, up from R25.2bn in 2017/18. Wasteful expenditure was at R2bn.

He slammed the widespread failure to account for public finances and highlighted a culture of lack of accountability from councillors and officials alike.

“Instead of responsible and diligent financial management of the limited resources available, we see dysfunctional control environments, extensive disorder in accounting records, prolonged vacancies in key positions and instability in councils.

“We also see poor procurement processes, no consequences for poor performance and transgressions, unreliable reporting on municipal finances and programmes, and accumulated irregular expenditure of just over R11bn.

“The impact is evident from the financial statements of municipalities that 83% had significant cash flow constraints and could not pay their creditors on time. In total, 38% of the municipalities’ expenses exceeded their revenue at yearend,” Makwetu said.

At some municipalities, Makwetu said, the equitable share, an unconditional grant meant for core municipal functions, “was not enough to cover the salary bill”.

“The development and maintenance of infrastructure and the delivery of basic services across the province suffered from poor planning, weak project management, and the mismanagement of conditional grants.”

Makwetu said 76% of Eastern Cape municipalities continued to abuse supply chain management prescripts.

He said there was a general tolerance for transgressions and this had led to an ongoing culture of poor performance and inadequate consequence management processes.

Municipal bosses were sometimes forced into “vulnerable positions” and made decisions using unverified information because of a “constant lack of accurate financial and performance information”.

Makwetu said only 20 of the country’s 257 municipalities had been able to attain a clean audit — a regression from the 33 in the two previous financial years.

Nationally, R32bn was irregularly spent, lost to fraud and corruption.

SA Local Government Association president Thembi Nkadimeng promised they would work with the AG’s offices and municipalities in a bid to promote clean and good governance.

The report paints a dismal picture of a worsening state of local government, with irregular expenditure being R2.5bn for 2018/19 — taking it to R11bn for the past three financial years