/ 30 July 2014

Clean audits for just 9% of SA’s municipalities

Clean Audits For Just 9% Of Sa's Municipalities
The lack of accountability and consequences for deviant behaviour by government officials allowed the misuse of taxpayers’ money

Auditor general Kimi Makwetu has highlighted systemic problems with supply chain management as a recurring problem in municipalities, although the number of municipalities receiving clean audits is improving.

Makwetu released the municipal audit results for the 2012-2013 financial year in Pretoria on Tuesday.

“Out of the 319 audits completed, 22 municipalities and eight municipal entities achieved clean audits. This constitutes an overall 9% as compared to the 5% obtained in 2012. And, amongst the 30 clean audits, 13 have sustained this achievement since 2011-2012,” Makwetu said.

Makwetu commended the Western Cape and KwaZulu-Natal specifically for outperforming the other provinces in terms of the number of municipalities that received clean audits.

In 90% of cases, Makwetu said, there were instances where those audited had not complied with laws or regulations. These often related to the area of supply chain management. Irregular expenditure was reported at 265 of the auditees (83%), mainly because of the “lack of basic controls and inadequate implementation of appropriate consequences where there has been poor performance or transgressions”.

Opaque transactions
In total, 18% of municipalities received disclaimers of opinion. This is where the auditor general could find no supporting statements to justify the money they spent, and essentially could not perform an audit. And 41% of municipalities fell somewhere in the middle – receiving financially unqualified opinions with findings. This means that, although they generally accounted fairly for their transactions, the auditor general could not give them a clean audit.

These “findings” were mainly in the areas of supply chain management, that is, how municipalities buy goods and handle tenders. These transactions were not handled “transparently”, Makwetu said.

A quarter of auditees received qualified audit opinions. Makwetu said this means that they were “unable to adequately and accurately account for all the financial effects of the transactions and activities they conducted”, and the financial statements they presented were sometimes unreliable.

Again, many auditees in this category did not obey the rules for supply chain management, as well as made “inappropriate reporting on performance”.

Lack of accountability
A further 2% of auditees received an adverse opinion, which is similar to a qualified opinion, except that those with qualified opinions had findings against them only in specific categories. An adverse opinion showed that the auditee had “demonstrated extreme levels of lack of accountability for financial statements”, which would result in service delivery programmes not being achieved.

Makwetu found a total of R11.6-billion in irregular expenditure across auditees: R8-billion for goods and services received without proper procurement procedures being followed. The remaining R3.6-billion was labelled as irregular expenditure because there was no supporting documentation to demonstrate that goods and services were legitimately purchased.

But Makwetu said he was encouraged by the responses of local government politicians. This included premiers, MECs and chairpersons of portfolio committees in the provincial legislatures. “All these leaders have recognised the importance of prioritising these basic but very significant actions for municipalities,” he said.