Council officials must explain wastage or pay up

Auditor General (AG) Kimi Makwetu’s extended powers will soon be used to hold municipal managers and chief financial officers of local councils personally liable for irregular expenditure that cannot be explained away.

Makwetu told the Mail & Guardian in an interview on the sidelines of the Public Sector Forum held in Johannesburg this week that his office plans to use the Public Audit Amendment Act to audit the financial statements of an initial 10 municipalities across the country for any instances of “material irregularities”. These are municipalities that have been identified for their history of fruitless and wasteful expenditure, he said.

The Act, which was signed into law by President Cyril Ramaphosa last year, gives the AG real teeth. Before this, auditors could report evidence of irregular expenditure but that information would often go nowhere. Now, municipal managers and accounting officers can be held responsible for theft or wasting money.  

But first they need to audit the 10 municipalities to “test how the provisions [of the Act] would work”, Makwetu said.

The last full municipal audit, for 2017-2018, showed that unauthorised, irregular, fruitless and wasteful expenditure at municipalities has reached R122-billion. Only 18 out of South Africa’s 257 municipalities received clean audits. This was down from the 33 municipalities that received clean audits in the previous financial year.

Makwetu said the statistics show a “deterioration in the general governance environment”. Under the new powers, where there is evidence that preventative controls were not put in place, or that corruption occurred, auditors can demand that those responsible recover “an appropriate portion of the financial loss”. 

“It’s also about going down to the individual levels of accountability,” Makwetu said, adding that although departments are governed by the Public Finance Management Act, there is “no one who has bothered to check what the law requires them to do”.

If there is any evidence of material irregularities, auditors from the AG’s office are required to write to the accounting officer asking them to explain the financial loss or fraudulent activity. If there is a financial loss that has been identified — and the accounting officer is not in a position to explain or recover that loss — then the auditor has to hand the evidence to an investigating agency such as the Hawks or the Special Investigating Unit.

Makwetu said a decision is then made on “who needs to be held accountable”.

Sixteen provincial and national government departments have been audited since the new Act came into effect. Makwetu said the auditors have already found about 60 instances of material irregularities. This year, the AG will audit the finances of an additional 89 provincial and national departments as well as state enterprises.

To do more, auditors also have to be trained to become forensic investigators which allows them to dig deeper.

But this is dangerous work — death threats have already been received by auditors who have discovered evidence of financial mismanagement. Makwetu said the threats usually come in the form of anonymous letters once the auditors have searched extensively “into the closet” and officials become rattled.

Local law enforcement is now being told when auditors are in the area, so they are ready to respond to any threats or problems. Auditors also hide where they are staying.

The idea of bodyguards wouldn’t work, said Makwetu: “You can’t afford auditors running around with bodyguards otherwise it will make the audit system scary.”

Thando Maeko is an Adamela Trust Business Fellow at the Mail & Guardian

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Thando Maeko
Thando Maeko is an Adamela Trust business reporter at the Mail & Guardian
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