Councils fail to pay R180m in audit fees

By Time of article published Jul 23, 2012

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Donwald Pressly

The Auditor-general’s office is owed nearly R180 million by municipalities for their annual audits, which the SA Local Government Research Centre says shows an almost complete breakdown of municipal financial accountability.

With the general report on local government – scheduled to be tabled today – expected to paint a deeply gloomy picture of the state of local government audits and non-compliance with Municipal Finance Management Act regulations in the bulk of the 283 municipalities countrywide, Minister of Co-operative Governance Richard Baloyi reported on Friday that 160 municipalities needed to take urgent steps to pay their outstanding debts.

SA Local Government Research Centre director Clive Keegan said the auditor-general had indicated for some time that there was a problem of non-payment of audit fees. “It (the non-payment) impacts in a major way on the financial viability of his office… but it is not a new problem. It also speaks to the almost complete dysfunctionality of the accounting function across the board of local government.”

Local governments are also expected to report about R70 billion in outstanding debts owed to them.

Keegan said although the auditor-general’s office needed in terms of the law to recover costs of audits, it did receive Treasury funding for its work. “It is not a free service” to local governments, Keegan said.

Beverley Abrahams, a DA MP in the National Council of Provinces, asked Baloyi what money was outstanding to auditor-general Terence Nombembe for the 2009/10, 2010/11 and 2011/12 financial years, up to when the latest figures were available in April. Only Gauteng had no audit money owing, while Limpopo only reported the Fetagomo municipality as owing R378 000 for the 2010/11 financial year.

KwaZulu-Natal could provide no information on municipalities after the 2009/10 financial year, although there was no money owing in that year.

The Eastern Cape owed the most at R57m, which applied to 45 municipalities. Kouga municipality owed R6.8m. A breakdown of the last three financial years was not given.

North West owed the next highest amount at R37m for 22 municipalities. In the Northern Cape 21 municipalities owed R33m. Eight Mpumalanga municipalities owed R3.9m while 19 local authorities in the Western Cape owed about R5m.

These poor figures came after Nombembe remarked that his office was vulnerable and there was a general lack of government support for his warnings about deteriorating compliance.

Cape Town mayoral committee member for finance Ian Nielson said he believed there must be negotiations about the billing to the city amid disagreements about the audit hours charged. The city owed R732 000 up to April this year.

Taking a stern line on the defaulting municipalities, Baloyi said a municipality had a fiduciary responsibility to manage its creditors and debts “as per the provisions of the Municipal Finance Management Act (MFMA)”.

The Treasury has issued a MFMA circular to municipalities regarding “non-payment of obligations”, instructing municipalities with amounts outstanding to creditors which remain unresolved for a period of time “to act urgently”.

The problem, said Keegan, was that municipalities were aware that the auditor-general was unlikely to withdraw services. Unlike with water and electricity, where the provider could threaten to cut services to a municipality, the auditor-general had no such leverage.

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