Jimmy Manyi

An explosive report into municipal financial management recommended national government intervention in more than a third of municipalities.

The aim would be to try to stop unauthorised, irregular, fruitless and wasteful expenditure amounting to billions.

The report, presented to the cabinet by Finance Minister Pravin Gordhan on March 14, paints a picture of corruption, waste and incompetence.

According to the Beeld, the report had caused discomfort among cabinet members, prompting ministers to decide not to release it but to send it back to its authors for “reworking”.

But spokesman Jimmy Manyi said the report had been compiled by the auditor-general and no instruction had been given for it to be revisited. “The assertion that the cabinet ordered the National Treasury to ‘repackage’ the report is not only untrue, but also an affront to the integrity and ethical conduct of the cabinet,” said Manyi.

The report recommended “intervention” in 35 percent of municipalities on the basis of poor financial management; in 33 percent on the basis of poor leadership; and in 35 percent due to weak governance.

It comes as a blow to the ANC, which governs most of the 237 municipalities. The report revealed that 107 municipalities and two municipal entities accounted for R5 billion in unauthorised expenditure, of which R1.1bn had since been written off.

In addition, 168 municipalities and 22 municipal entities incurred irregular expenditure of more than R4,1bn. Municipalities themselves only reported R2.7bn of the former and R440 million of the latter, with the remaining R6bn being uncovered by auditors.

The probe was to measure how well local government was doing in meeting the requirements of the Municipal Finance Management Act. Accordingly, the report noted a shocking rise in the number of municipalities guilty of unauthorised, irregular and fruitless and wasteful expenditure.

Of the 177 municipalities inspected in the 2008/09 financial year, qualifications on the basis of unauthorised, irregular and wasteful expenditure accounted for only 13 percent of all qualifications issued. In 2009/10 this figure rocketed to 63 percent, suggesting a collapse of financial controls.

In the past financial year, 77 percent of municipalities received qualifications related to their accounting for “capital assets”, 75 percent for “current assets” and 75 percent in the category “liabilities”.

Almost a quarter of all municipalities failed to submit service delivery reports and 89 percent were found not to have complied with “regulatory requirements on service delivery reporting”.

There were “material misstatements” (185), issues related to “supply chain management” (161), and “payments not made within 30 days” (93).

In terms of financial management, the Eastern Cape was the worst-run province, followed closely by the Free State and Limpopo. The best-performing provinces were the Western Cape and Gauteng.

For KZN (2009/10) it noted: Disclaimers (lack of appropriate audit evidence prevents the auditor from forming an opinion about the correctness of financial statements) 1;

Adverse: (auditor disagrees with representations in financial statements; it is not a fair reflection of the financial position) 1;

Qualified: (except for specifically listed material errors, the financial statements remain a fair reflection of the state of the books) 5;

Unqualified with findings (matters arising from the audit with “red flags”) 60; Unqualified with no findings (“clean”): 0. - Political Bureau