More than 60% of municipalities cannot say where their money comes from and more than half cannot provide proof of how they spend it.
These are among the shocking findings of Auditor General Terence Nombembe after his countrywide roadshow, in which he presented the audited results of the 2006/07 financial year for South Africa’s 283 municipalities.
”About 60% of municipalities cannot give evidence to account for the revenue they received. And mostly these are low-capacity municipalities, which means they get their revenue from the national treasury and do not have to collect the bulk of their revenue from the citizens,” Nombembe said in an interview this week.
This means the municiÂpal managers and financial officers are unable to show how and when financial transfers from government took place, and cannot provide proof of where the amounts listed in their financial statements come from.
”More than 50% cannot account for the bulk of their expenditure, so their financial statements cannot be trusted.”
Nombembe also revealed that:
- Only a quarter of the country’s municipalities received unqualified audit opinions;
- Almost one-third of municipal funds are lost because of ”fruitless and wasteful expenditure”; and
- Ten percent of municipalities were unable to submit any financial statements to his office, despite being required to do so by the Municipal Finance Management Act
.
The worst culprits are municipalities in Limpopo, Mpumalanga, North West, Northern Cape and Free State, where up to 80% received disclaimers, which means the information in their statements cannot be verified.
Nombembe pointed to a direct link between municipal underÂperformance and political instability. In the Eastern Cape, where municipalities are crippled by political infighting, 40 of the 41 local authorities received audit disclaimers.
”If you don’t have political stability, then you won’t get proper financial accountability. It will have an impact on the financial results.”
The main problem was that councils failed to keep receipts for their expenditure.
”The one issue that cuts across all municipalities is the inability to provide source documents to support statements. The internal controls are too weak to ensure that the documents are available,” he said.
He said the lack of skilled staff at municipal level is a hurdle, but was reluctant to attribute all the financial failures of third-tier government to the skills factor.
”If we use that as an excuse we will always have something to blame, because that will never change.”
He also insisted that municipalities could not excuse poor financial management by claiming they are under-resourced. ”Each municipality gets an amount of money from government according to what it needs to do.”
Many municipalities hired consultants to help them draw up financial statements. But outsiders could do little to help in the absence of source documents, which heightened the risk of misappropriation of funds.
Nombembe said procurement is sometimes effected without the necessary council resolutions; on other occasions it is unnecessary. He gave the example of flights being booked and then not used, without the hotel or flight booking being cancelled.
The Municipal Finance Management Act provides that municipal managers, mayors and financial officers should be held liable for funds that are not properly accounted for.
Nombembe said that during his roadshow, provincial ministers and mayors had committed themselves to strengthening internal controls.
The political heads of municipalities have been instructed to draw up turnaround plans for approval by his office. These will be used to measure performance next year.