Auditor-General Kimi Makwetu

Pretoria - Nine percent of municipalities and municipal entities achieved clean audits in the 2012/13 audit review, Auditor General Kimi Makwetu said on Wednesday.

This was compared to five percent for the previous year.

Of the 319 audits, 22 municipalities and eight municipal entities had unqualified audits with no findings, otherwise known as clean audits.

Of the 30 clean audits, 13 had sustained this distinction from the 2011/2012 audit.

At the other end of the spectrum, 18 percent, or 59 of those audited, received disclaimed audit opinions Ä the worst finding the AG could make.

These municipalities or entities could not provide credible financial statements that could be relied on in the audit.

“Anything could have happened to the financial resources entrusted upon the auditee and the auditor had significant uncertainty about the financial statements, and thus unable to express an opinion on whether the financial statements can be relied upon,” Makwetu said.

In the category of unqualified with findings, 138 auditees or 41 percent, were found to have credible presentations of financial statements.

“With findings”, however, indicated that there were cases where the requisite processes were not followed. This cast some doubt on the transparency of the municipal activities.

A quarter of the audits were returned with qualified opinions. This meant there were elements that the municipalities or entities could not adequately account for, and elements of their financial statements were unreliable.

Two percent, or eight auditees, received adverse audit opinions, where an extreme lack of accountability was evident in financial statements.

Co-operative Governance Minister Pravin Gordhan welcomed the audit, but said it indicated areas that needed improvement.

Stronger consequences needed to be put in place to deal with problems such as fraud and corruption in municipalities and municipal entities.

“Clearly the current environment, of essentially no consequences for bad things, is not something we want to continue,” Gordhan said.

Another problem that needed to be confronted was that of a culture of non-payment.

“There are still too many South Africans who do not pay for services they can afford to pay for,” Gordhan said.

Makwetu said the audit revealed R695 million was spent on external consultants helping to prepare financial statements.

This was despite the fact that most municipalities employed people to handle financial management and reporting.

Gordhan said that in partnership with the national Treasury a centralised system to manage external financial consultants would be developed in the near future.

One of Gordhan's predecessors in the ministry, Sicelo Shiceka, launched “Operation Clean Audit 2014” in 2009, which aimed for all municipalities to achieve clean audits by this year.

“The ambition is still there, we want everyone to be compliant in all respects,” Gordhan said.

Operation Clean Audit might have been too ambitious in hoping to achieve its goal in so short a period.

“There is progress, progress in the right direction,” he said.

It was also important to contextualise the results of the audits, in that local government, as a set of democratic institutions, had only been in existence for 14 years, Gordhan said.