AG berates municipality leaders
Irregular expenditure ballooned by billions of rands as municipal leaders looked elsewhere
Municipal leaders in councils across the country were so preoccupied with the run-up to last year’s local government elections that they neglected critical issues relating to serving their municipalities.
This had a negative effect on the audit outcome of several municipalities, auditor general Kimi Makwetu found.
The disheartening state of affairs is highlighted in his General Report on the State of Local Government Audit Outcomes for the 2015-2016 financial year released this week.
In his executive summary, Makwetu says: “The focus of many municipal leaders was on the local government elections.” As a result, “many important interventions to address vacancies and instability as well as poor control environments were postponed”.
Many municipal leaders were of the view that highlighted issues would receive attention from the new administration, he said. Another view was that the redemarcation of municipal boundaries would address these matters.
This attitude was bound to have negative consequences on the 20162017 audit outcomes “if the new administration ‘disowns’ the audit outcomes of previous years and does not follow through on the commitments made by their predecessors to improve audit outcomes”.
Irregular expenditure for the period ballooned by 50% to R16.81billion, the highest since the office started tracking the values. This was despite audit opinions on financial statements slightly improving from 60% to 62% unqualified opinions.
He has urged newly elected officials to ensure that there is accountability and that attention is paid from the onset.
In the year under review, most of the country’s 263 municipality’s regressed. The municipalities shared a R378-billion expenditure. Of this R70-billion (19%) was for municipalities that obtained clean audits. Unqualified audits accounted for R215-billion (57%) and councils with qualified audit opinions received R53-billion (14%). An unqualified audit opinion is where the financial statements contain no material misstatements.
Releasing the report, the auditor general emphasised the importance of accountability in the management of municipal affairs. The Western Cape, one of three bestperforming municipalities, had the highest number of clean audits at 80%. KwaZulu-Natal was the second best at 18% and the Eastern Cape was last with 16% of its council receiving clean audits.
The South African Local Government Association (Salga), welcomed the report.
“It is vital that the new councils leading municipalities in this current term build from the base that they have and in this regard Salga will be having an intensive focus on empowering councillors to perform their oversight role effectively and thereby enhance accountability and consequence management,” it said in a statement.
It also decried the high levels of unauthorised, irregular, fruitless and wasteful expenditure reported by the auditor general.
“[It] is a cause for concern and something that the new councils need to monitor and address in terms of compliance with the relevant laws and regulations as well as improved internal controls in municipalities,” the statement read.
Two of three Gauteng metros were among the top contributors to irregular expenditure. Tshwane, a metro that the Democratic Alliance snatched from the ANC in last year’s local government elections, topped the charts with R1.9-billion in unauthorised expenditure. Johannesburg, which also suffered the same fate as Tshwane, was fourth, with R693-million in wasteful expenditure. Westonaria and Emfuleni, also from Gauteng, were among the top 10 with a combined total of R730-million.
Frustrated by the lack of decisive action on his previous audit outcomes, Makwetu has asked Parliament to empower his office. When suspected irregular expenditure is identified, the findings should be handed over to either, or a combination of, the Hawks, the National Prosecuting Authority, the Special Investigating Unit and other agencies. Reports would be returned to be finalised to “close the gap” of opportunity for reports to be buried.
“Municipalities are not [taking heed to audit outcomes], if they were, then we wouldn’t go to Parliament for extra powers. We went to Parliament and said: ‘Give the power to deal with these issues and hand it over to the investigating agencies’,” said Makwetu.
“In the past we used to report [to municipalities] but the reports go nowhere. But now we want to take the report to the next person so that it can be investigated, findings made and then the appropriate consequences attached.”
Another of the auditor general’s findings relates to government employees and their close families who, in the year under review, made false declarations to secure R1.9billion in state contracts. This was prohibited by supply chain management regulations.