Auditor-General wants errant municipal managers charged for R32bn irregular expenditure
An irate Makwetu, who released his report in Pretoria on Wednesday, said he had already served nine municipal managers with notices to account for irregular and fruitless and wasteful expenditure amounting to R32 billion and that this would happen in accordance with the newly enhanced Public Audit Act, which came into effect in April this year.
The new act allows the auditor-general to pursue criminal charges against any officials who could be positively linked to corruption and fraud in all municipalities in the country.
Expressing his disgust, Makwetu said: “The government cannot afford to lose money because of poor decision-making, neglect or inefficiencies.”
He said the country continued to see a rise in fruitless and wasteful expenditure, with 200 municipalities having lost billions in the current year.
“Over the three-year period, R4.27bn of government expenditure was fruitless and wasteful. In total, 91% of the municipalities did not comply with legislation. The outcome is similar to the previous year and slightly higher than the 85% in 2016/17,” he said.
Makwetu added the lapse in oversight and lack of controls relating to compliance were evident in a number of areas, including supply chain management, adding that compliance with supply chain management legislation had regressed over the past few years.
“We remain concerned that only 2% of the municipalities are fully complying. This is in spite of all the reporting we have done in this area, the red flags we have raised, and the many recommendations we have made. Uncompetitive and unfair procurement processes and inadequate contract management were common.
"Irregular expenditure increased to R32.06bn from the R25.2bn we reported last year.”
Makwetu said municipalities had shown a poor track record of dealing with irregular expenditure and ensuring accountability.
North West municipalities reported irregular expenditure of R17.8bn and KwaZulu-Natal had R6.5bn, an increase of R3.5bn from last year.
EThekwini metro council alone incurred irregular expenditure of R2.3bn.
Makwetu, however, acknowledged there had been massive improvement and delivery of service in the Western Cape and Gauteng.
According to Makwetu, only 20 municipalities received clean audits, and 13 of them were in the Western Cape.
In Gauteng, it was the Midvaal local municipality.
The A-G emphasised that Gauteng and Western Cape were the only two provinces that had made tremendous progress in looking after their finances and provision of services.
He said Gauteng municipalities had again maintained good audit outcomes.
“This (Gauteng) was the only province in which all the municipalities had unqualified audit opinions, but as in prior years, only Midvaal obtained a clean audit opinion,” he said.
While other municipalities had good financial accounting, they had inadequate monitoring of the preventive controls necessary to ensure compliance with legislation and accurate reporting on service delivery achievements.
Makwetu also used the platform to highlight that municipalities in Gauteng and the Western Cape had attracted and retained staff with the right skills, and had benefited from this continuity and managed to maintain good audit outcomes.
But political infighting and lack of leadership at Joburg and Tshwane had severely affected their audit outcomes.
“Municipalities characterised by instability in political or administrative leadership, such as the City of Tshwane and City of Joburg, were unable to improve their outcomes. Irregular expenditure in this province amounted to R1.7bn for municipalities,” he said.
According to the auditor-general’s office, a further R3.3bn was reported for audits finalised subsequent to the cut-off date for the report, with the City of Tshwane accounting for R2.9bn of this amount and Emfuleni R358m.
“Municipal entities in this province incurred R1.8bn of irregular expenditure in the period of review.
"The province spent a total of R341m on consulting costs for financial reporting.
"Of this, R312m was spent by municipalities whose audits had not been finalised by the cut-off date of the report,” said Makwetu.
He said the Western Cape had the largest concentration of clean audits, and 93% of its municipalities received unqualified opinions on their financial statements.
“Eight municipalities retained their clean audit status – six of which have maintained this status for the past five years or longer. Municipalities that sustained their clean outcomes are characterised by control environments that are institutionalised, preventative in nature and reinforced by a strong tone set by leadership,” Makwetu said.
The A-G said the financial statements obtained for his report generally correlated with the socio-economic climate of the respective municipalities as well as an assessment on their ability to be financially disciplined.