Treasury warns of municipal governance failures
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SERVICE delivery protests in Johannesburg with resident blocking the streets with burning tyres and debris.
THE NATIONAL Treasury has raised concern at the financial practices of the country's municipalities, warning that their information was not credible as a large number did not properly use the set systems for financial reporting to control wasteful expenditure and fraud and corruption.
The Treasury said in its local government revenue and expenditure report for the third quarter of the 2020/21 financial year this week that most municipalities were not budgeting, transacting and reporting directly in or from their core financial systems.
It said they mostly prepared budgets and reports on excel spreadsheet and then import the excel spreadsheets into the system.
“Often this manipulation of data lead to unauthorised, irregular, fruitful and wasteful expenditure and fraud and corruption as the controls that are built into the core financial systems are not triggered and transactions go through that should not," Treasury said.
The Treasury said municipalities were not locking their adopted budgets or their financial systems at month end to ensure prudent financial management.
The warning comes as business and investors confidence in municipalities faltered, with companies such as Clover folding its Ditsobola, Lichtenburg operations because of disruptions to water supply and poor state of roads which have rendered operations unprofitable.
Astral Foods also reported that it spent R3 million in just one week as Standerton's latest water interruption stretched to more than a month. Astral said power cuts had cost it R39m in the past five years.
Treasury said the performance of metros reflected a shortfall on water services for the third quarter of the 2020/21 financial year, with municipalities expereincing incongruities in their billing methods. The comparison excluded secondary costs incurred or actual revenues collected:
Billed water revenue amounted to R18.7 billion against expenditure of R20.3bn.
Credit bureau TNP chief executive Michelle Dickens said the rapidly escalating municipal charges had an impact on SA’s economic recovery.
Dickens said municipal usage charges were escalating faster than the consumer price index (CPI) while the quality of municipal services, however, showed a corresponding deterioration. She said the office of the auditor general reported that only 20 of SA’s 257 municipalities received clean audits for the 2018/2019 financial year.
"The cost of municipal water is expected to rise by more than inflation this year at between 6 and 10 percent,“Dickens said. ”The increase in the cost of refuse removal and sanitation is also expected to be above inflation this year as municipalities try to mitigate their pandemic related losses."
The Treasury said that billed water revenue rose to R9.1bn against expenditure of R7.9bn, electricity R20.9bn against expenditure of R19.1bn while billed waste water management revenue totalled R3.1bn against R2.3bn and billed waste management revenue totalled R2.7bn against expenditure of R1.9bn.
Households in metropolitan areas accounted for R84.2bn or 73.0 per cent of outstanding debt, followed by businesses at R25.6bn or 22.2 per cent and debt owed by organs of state at R5bn.
"The impact of the Covid-19 pandemic on municipalities in the 2020/21 financial year affected the performance against the conditional grants and resulted in the reduction to the baseline,“it said.
”The national lockdown from the end of March 2020 delayed most of the project implementation processes in the local government space.“
BUSINESS REPORT ONLINE