AG says municipalities not heeding audit messages

Auditor-General Tsakani Maluleke. File photo: Thobile Mathonsi/African News Agency (ANA)

Auditor-General Tsakani Maluleke. File photo: Thobile Mathonsi/African News Agency (ANA)

Published Jul 1, 2021

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AUDITOR-GENERAL Tsakani Maluleke says her office has seen little evidence of their message being taken to heart by the local government.

In her 2019/20 consolidated report of local government audit outcomes, Maluleke said the improvements required to prevent accountability failures did not exist.

“We also do not see the fundamentals being strengthened to enable strong financial and performance management disciplines.

“The responsibility to turn local government around is entirely in the hands of its leadership,” she said.

Maluleke also said this year’s report was themed ethical and accountable leadership should drive the required change.

“Our conclusions and call to leadership for change are based on the overall state of financial and performance management, the material irregularities we identified, and our observation in the provinces.”

She said local government finances continued to be under severe pressure as a result of non-payment by municipal debtors, poor budgeting practices, and ineffective financial management.

“The financial position of just over a quarter of municipalities is so dire that there is significant doubt that they will be able to continue operating as a going concern in the near future. This effectively means that such a municipality does not have enough revenue to cover its expenditure and owes more money than it has.”

Maluleke also said almost half of the other municipalities were exhibiting indicators of financial strain, including low debt recovery, an inability to pay creditors, and deficits.

“The impact of municipal creditors not being paid is well-known – it severely affects Eskom and the water boards, but is even more devastating for smaller suppliers.”

She said some municipalities did not even pay over taxes such as pay-as-you-earn and value-added tax to the South African Revenue Service or transfer contributions to the pension funds of their employees.

“Local government loses billions of rand annually because of interest and penalties. In 2019-20 alone, the resulting fruitless and wasteful expenditure totalled R3,47 billion.”

Only 28% of municipalities could provide quality financial statements to audit.

“This also does not bode well for the in-year financial reporting done to manage the budget and finances of a municipality.”

Maluleke said they observed good practices at municipalities that constituted only 12% of the expenditure budget.

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