VERNON MCHUNU
Durban: The writing off of an unaccounted for R4.5 billion, a R109.8 million unjustifiable payment to consultants and financial losses amounting to R248.3m are among the ills that continue to bedevil the KwaZulu-Natal municipal space.
This is according to the latest municipal audit performance review issued by Auditor-General Tsakani Maluleke this week.
While the City of uMhlathuze was hailed for being the only municipality in the province to receive a clean audit opinion, Amajuba, Inkosi Langalibalele, uMzinyathi districts received disclaimer audit opinions while no findings could be made regarding Nquthu because it had not submitted documents by the cut-off date.
Although there had been some improvements in the year under review, the overall stagnation in KZN’s municipalities proved complacency on the part of management and leadership in relation to municipal finance management, Maluleke said.
The South African Local Government Association (Salga), the employer representative body, said the ongoing financial irregularities were a concern that needed serious action, adding that the declining trend in national municipal performance was disappointing.
In a stern warning, Maluleke said that municipal managers were being given a last opportunity to take corrective action against offenders.
Failing which, she added, the A-G would begin to exercise her newly expanded role and report the accounting officers to law enforcement agencies, among other oversight bodies, in keeping with the amendments to the Public Audit Act that became effective in April 2019.
“In 2018-2019, we urged leadership to respond to our constant calls for the effective implementation and monitoring of preventive controls and recommendations to positively influence accountability and basic control disciplines. The stagnation in audit outcomes demonstrates complacency from management and leadership when it comes to effectively and decisively addressing key matters of concern,” said Maluleke.
She said this was an effort to strengthen the accountability mechanisms.
Non-compliance with key legislation remained a challenge due to inadequate consequences for transgressions and a failure to implement supervisory checks and controls.
“Non-compliance with supply chain management prescripts contributed to more than 90% of the total irregular expenditure incurred of R4.86bn,” the A-G reported.
Of the total irregular expenditure, R4.55bn was written off as no officials were found to be liable for these transgressions, Maluleke said.
“Municipal councils did not always ensure that investigations were adequately performed to determine if a person was liable before approving the write-off of irregular expenditure,” the A-G said.
“Many municipalities also continued to rely on consultants even though officials were appointed to perform these functions. Despite the excessive amounts spent on consultants for financial reporting, only seven of the 33 municipalities (that used consultants) reflected improved audit outcomes, while we identified material misstatements in the consultants’ area of responsibilities at 17 municipalities.
“The poor quality of the underlying data, coupled with poor project management and monitoring of the consultants’ work, limited their impact and effectiveness on quality financial reporting. Others paid consultants even though their finance units are well capacitated,” said Maluleke.
There were 18 material irregularities, which included a financial loss of R248.3m involving five municipalities, R64.5m worth of assets that were lost due to poor safeguarding measures, and lost revenue to the tune of R161.2m as a result of failure to effect billing.
Salga criticised municipalities’ spending on private firms for financial work that yielded no discernible results.
“Public money used must show return on investment, and every cent must count. There is a worrying and growing trend of the use of consultants in municipalities for financial reporting purposes, and yet some of the municipalities have nothing to show for it,” the employer body said.
Salga said it was a worrying concern that despite the use of consultants, 59% of financials submitted for auditing included material misstatements, adding that the picture meant that even with the presence of consultants, municipalities could still not finalise financial statements.
“This practice of using consultants for financial reporting must be stopped, as it yields no results. Municipalities must name and shame those companies that are found to have robbed municipalities, report them to professional bodies like the SA Institute of Chartered Accountants, blacklist them and demand refunds.”
The Mercury