Clean audits for 9% of municipalities

UNICIPALITIES did not account for nearly R22 billion of their money in 2012/13. Although most of this was not lost or stolen, it was money without a paper trail which the auditor-general has logged as problematic.

This was nearly twice as much as was not properly accounted for two years earlier, and brings to nearly R69bn the amount that municipalities have not accounted for in the five years from 2008/9 to 2012/13.

The improperly accounted for funds in 2012/13 included: unauthorised spending of R9.2bn; irregular spending of R11.6bn; and fruitless or wasteful expenditure of R815 million. Together it is about 8 percent of the municipalities’ total spending of R268bn.

Tightening of laws is on the cards to get municipalities under control before the 2016 elections. This would make it easier to report on finances and crack down on criminality.

Auditor-General Kimi Makwetu and Minister of Co-operative Governance Pravin Gordhan yesterday released the findings for the financial year ending June 30, 2013. Of the 319 municipalities and entities audited, just 30 -– 9 percent – received clean audits. This was an improvement on the previous year, when just 5 percent got clean audits.

Among the 30 with clean audits,

M“13 have sustained this achievement since 2011/12,” said Makwetu.

He said that group had demonstrated “impeccable levels of discipline and oversight”. At the other end of the scale, 59 municipalities received audit disclaimers. This is the worst opinion from the auditor-general, and means there was not enough documentation to form an opinion.

This sector struggled to get its finances in order, despite collectively spending nearly R700m on financial consultants.

Non-compliance

KwaZulu-Natal received the highest number of clean audits with seven municipalities and four entities being given the thumbs-up; however eThekwini municipality was not among them.

eThekwini’s outcome was “unqualified with findings” with the report saying: “The lack of improvement in the audit outcome was as a result of non-compliance findings related to supply chain management and material adjustments to financial statements.”

The municipality incurred R325.27m in irregular expenditure, which was 18 percent of the total amount incurred in the province.

The irregular expenditure was as a result of contracts awarded to suppliers which contravened supply chain management legislation.

However, the irregular expenditure had decreased by 67 percent during the past three years, from R1bn in 2010-11.

The report credited monitoring by the city’s leadership and the processes in place to identify irregular expenditure in good time.

Msunduzi (Pietermaritzburg) Municipality’s audit was “qualified”, or a fair reflection of the state of the books, which was a regression.

Msinga (Tugela Ferry), Ntambanana in Zululand, Okhahlamba (Bergville), Ubuhlebezwe (Ixopo), uMhlatuze (Richards Bay), uMzimkhulu and the Uthungulu District Municipality had clean audits.

Cape Town was the only metro with a clean audit.

While the results underlined the lack of capacity in local government Makwetu and Gordhan emphasised the positive, saying municipalities were moving in the right direction.

Gordhan said not all unauthorised and wasteful expenditure was money lost, nor due to thievery, but considerable amounts related to procedural deficiencies.

He promised action on fraud and corruption. “We will start introducing a new set of values that say: don’t steal public money and control your greed.”

It also emerged that municipalities had spent R700m on consultants with no improvement in their performance and audit outcomes.

Gordhan said consultants would be vetted to prevent situations where they did not improve a municipality’s financial standing.