The outcome of the ANCs long-awaited KwaZulu-Natal conference was a win for the Thuma Mina crowd. (Delwyn Verasamy/M&G)
PARLIAMENT, June 1 (ANA) – The number of South African municipalities which received clean audits increased from 13 to 54 in the last five financial years, Auditor General Kimi Makwetu revealed Wednesday.
Releasing the 2014/15 audit outcomes, Makwetu said this number shot up to 72 if one included the 18 municipal entities with clean audits.
While 13 percent of municipalities regressed in terms of audit outcomes, 34 percent stayed stagnant, according to the report on the audit outcomes of local government.
The percentage of municipalities with adverse audit findings and disclaimers saw a notable drop from 30 percent in 2010/11 to 11 percent in 2014/15.
“Municipalities in the red…we are pleased to say that that is slowly becoming a thing of the past,” Makwetu said.
Makwetu said some of the contributors to the improved audit outcomes included the filling of key vacancies with competent people, municipal leaders who “showed courage in dealing with transgressions and poor performance” and municipal managers who followed through on plans to improve audit outcomes.
The total expenditure budget for municipalities in 2014/15 was R347 billion
“We are reporting that of the R347 billion… the ones that achieved clean audits represented a total expenditure of R134 bln which translates to 39 percent of this amount, while those with unqualified opinions represent another R143 bln which is the equivalent of 41 percent,” said Makwetu.
“The adverse [findings] and disclaimers which had receded over time, represent a mere six percent of the total budget.”
The provinces with the highest percentage of municipalities with clean audit were the Western Cape at 73 percent, Gauteng at 33 percent and KwaZulu-Natal at 30 percent. However, there were still municipalities in these provinces with poor performance, most notably the Central Karoo, West Rand and Umkhanyakude districts.
The Eastern Cape, Free State and Mpumalanga were listed as provinces that are “starting to emerge from many years of negative audit outcomes”, while the North West, Limpopo and Northern Cape were “classified as providing disappointing outcomes”.
An over-reliance on consultants was highlighted as a concern, with Makwetu saying urgent steps needed to be taken to curb the increasing spend on outside service providers to prepare financial statements.
“We cannot spend this amount of money which at the end of the 2014/15 year has amounted to R892 milion while some of those who are taking advantage of these services do not show any forward improvement in their outcomes,” he said.
The AG’s office identified some other troublesome spots for urgent attention. This included a rise in irregular, unauthorised and fruitless and wasteful expenditure.
Irregular expenditure amounted to R14.75 billion, mostly due to municipalities not following the rules governing the procurement of goods and services.
“It creates a fertile environment for irregular expenditure and as this report shows where there are number of supply chain deviations, it also comes with increasing levels of irregular expenditure,” said Makwetu.
“Through the audits we have been able to satisfy ourselves that to the extent of R10 bln of that R14.75 bln we were able to trace, even though procedures relating to supply chain management were not completely observed, but those goods and services that were bought were received…”
Most of the irregular expenditure occurred in municipalities in Limpopo, the North West, Mpumalanga and the Eastern Cape.
Fruitless and wasteful expenditure – which include municipalities paying penalty fees to service providers due to late payments or paying interest which could have been avoided if debts were paid on time – shot up by R1 bln to R1.34 bln in the past five financial years.
Makwetu’s team also assessed the financial health of municipalities and found that 92 percent of them “either concerning or required intervention”.
He said this was a high risk area as many municipalities were over the past few years spending more than they had available in their budgets, incurring net deficits.
A quarter (26 percent) of municipalities were identified as being in a “particularly poor financial position by the end of 2014/15”.
“We are also seeing signs of the current liabilities starting to exceed current assets which indicates that those assets that are suppose to be available for services are starting to disappear over time,” said Makwetu.
“We want to flag this matter to say there is a high risk of uncertainty with regard to a number of municipalities ability to continue operating in the near future because they are now starting to face a tight financial situation but that’s also compounded largely by the weaknesses in internal controls.”
– African News Agency (ANA)
Disclaimer: This story is pulled directly from the African News Agency wire, and has not been edited by Mail & Guardian staff. The M&G does not accept responsibility for errors in any statement, quote or extract that may be contained therein.