Auditor-General Terence Nombembe has called on the government to take tough action against municipalities which fail to keep their finances in order.
Nombembe said on Monday that many municipalities were failing to implement steps suggested by his office for proper financial controls as they faced no consequences for failing to do so.
He was speaking at the release of a report on the audit outcomes of local government, which consists of SA’s 343 municipalities.
The report revealed that only 13 of the 343 municipalities in the country had received clean audits for the period 2010-2011, with none of the country’s metros receiving a clean audit.
“This slow progress towards clean audits in local government is underpinned by three prominent causes, which includes a lack of consequences for poor performance and transgressions at more than 70 percent of auditees,” said Nombembe.
Other reasons were that officials in key positions at 72 percent of municipalities were incompetent and 57 percent of municipalities had shown a slow response to the auditor-general’s messages.
Many municipalities were failing to implement proper internal audit controls despite many of them employing consultants to assist them.
The report paints a bleak picture of the state of finances at many municipalities, with massive losses in supply chain management divisions of many municipalities.
Municipalities also incurred more than R11 billion in unauthorised and irregular expenditure, with the auditor-general saying that not much was being done to prevent this.
About R6.7bn in irregular expenditures were incurred as a result of non-compliance with proper supply chain management procedures, and these were identified by Nombembe’s office after municipalities had failed to identify these by themselves.
The biggest contributors to the irregular expenditures were municipalities in Kwazulu-Natal (R2.1bn) and the Eastern Cape (R1.4bn).
“The extent of this expenditure and non-compliance by the accounting officers is indicative of an environment where incurring unauthorised and irregular expenditure is a norm and not the exception.
“Reasonable steps are not taken to prevent such expenditure, while its occurrence is also not detected by auditees and is mostly identified by AGSA’s audit process,” he said in his report.
The report also reveals huge sums of money were spent by municipalities on contracts awarded to close family members of employees and councillors in certain municipalities. These amount to R227 million, with municipalities in provinces like North West and the Eastern Cape spending about R181m and R38m on such contracts respectively.
“Although awards to close family members are not prohibited, the non-disclosure in the financial statements and failure by the officials or the suppliers to declare their interest are indicators that the relationships were being concealed,” said Nombembe.
Despite the serious need for service delivery in many provinces, 54 municipalities had underspent their budgets and conditional grants from national and provincial treasuries.
Municipalities in the Western Cape were the biggest transgressors in this regard, with more than R1.4bn under-spent by 15 municipalities there. Gauteng was also slated for under-spending more than R700m of their budget and conditional grants between 2010 and 2011.
Co-operative Governance and Traditional Affairs Minister Richard Baloyi described the under-spending as unacceptable.
“Under-spending by a municipality may translate into the depriving of certain services to the community where those services must be rendered. We welcome the report by the auditor-general and we are gravely concerned about many of the issues (raised),” said Baloyi.
He said he was also concerned about those municipalities that had failed to submit information in time for the audit to take place.
The auditor-general revealed that 13 percent of municipalities in the country had failed to submit financial statements in time for auditing.
These were municipalities in the North West, Northern Cape and the Western Cape.
Tshwane and Ekurhuleni metropolitan municipalities both received financially unqualified audit opinions, with Joburg receiving a qualified audit opinion.
Pretoria News