Billions in irregular expenditure, fewer clean audits – AG report paints bleak picture of municipalities

Clean audits in municipalities have significantly dropped and have been accompanied by a drastic rise in irregular expenditure to the tune of R12.1 billion. This is according to the results of the municipal audits released by Auditor-General (AG) Kimi Makwetu in Parliament. 

Only 33 of the 257 municipalities had received clean audits – a mere seven percent of all local governments, Makwetu announced.

In total, 257 municipalities were audited, a drop from the 278 municipalities audited during the last period.

The drop was due to the amalgamation of some municipalities during 2016; 37 municipalities were closed and later integrated into 16 new municipalities.

112 municipalities received an “unqualified with findings” audit, meaning that their financial statements contained misleading information that could affect the financial decisions of those who rely on the statements when working with these local governments.

There were 66 municipalities qualified with findings, four adverse with findings audits, 24 disclaimed audits and 18 outstanding audits meaning that the majority of municipalities could not account for or had numerous discrepancies in the manner they handled public accounts.

Cooperative Governance and Traditional Affairs Deputy Minister Andries Nel congratulated the 33 municipalities which had improved in accountability and governance but said that he was deeply concerned with some of the regressions that have been highlighted by the AG’s report.

According to the Makwetu’s findings, most municipalities could not account for public finances due to the rise in undocumented municipal financial “awards” to employees, councillors, close family members and other staff officials – a trait which was most prevalent in Gauteng, North West and Mpumalanga.

Makwetu revealed that municipalities’ material non-compliance towards key legislation stood at 86%, the highest percentage of non-compliance since 2012-13.

He said the non-adherence to advice from his office by most municipalities had led to what he referred to as “lousy” findings from his audit.

The AG’s consolidated general report also revealed that irregular expenditure had increased from R16.2bn to R28.3bn. The Eastern Cape leads the pack as it incurred an astounding R13.5bn in irregular expenditure.

Among the top 10 contributors to irregular expenditure were major metros such as Tshwane, Johannesburg, Nelson Mandela Bay and Mangaung.

In his response to the AG’s report, chair for Parliament’s oversight committee of the Auditor-General, Vincent Smith, said “there were Public Audit Act amendments that were approved yesterday” which should “give AG powers to refer matters to the Hawks, SAPS and the Public Protector” and help recoup public monies.

Makwetu was however optimistic as he pointed out that some municipalities were working hard to attain and maintain the desirable audit outcomes through “a culture of accountability”. However, he said “those outcomes and efforts are overshadowed by the many elements of regressions in the local government”.