Auditor-general Kimi Makwetu. Picture: BUSINESS DAY
Auditor-general Kimi Makwetu. Picture: BUSINESS DAY

Only 18 municipalities managed to obtain clean audits for the previous financial year, according to auditor-general Kimi Makwetu.

While the majority of the municipalities that obtained clean audits were in the DA-run Western Cape, the province did regress from the 70% clean audit figure it obtained in 2016/2017, to 40% in 2017/2018. 

Makwetu said on Wednesday at the release of the municipal audit results that the outcomes of 63 municipalities of those audited for the 2017/2018 financial year had regressed, while only 22 improved. 

Only 18 municipalities managed to produce good-quality financial statements and performance reports, as well as comply with key legislation, thereby receiving a clean audit.

This is a regression from the 33 municipalities that received clean audits in the previous year, Makwetu said. 

He said credible financial statements and performance reports were crucial to enable accountability and transparency in the government, but that most municipalities continued to fail in such areas. 

The quality of the financial statements provided for auditing was worse than in 2018, and only 19% of municipalities provided financial statements without material misstatements, he said. 

Makwetu said 65% of those municipalities that did provide performance reports, or had reports which had material flaws which were not credible enough for council or the public to use. 

He said there was material noncompliance with key legislation at 92% of municipalities, which was an increase on 85% in the previous financial year. While irregular expenditure remained high, it was down to R25.9bn in 2017/2018, in comparison to the R29.7bn in 2016/2017. 

The auditor-general added that the reported total included R4bn in irregular expenditure by those municipalities whose audits were not completed by the cut-off date of his report. He said the amount could be could be even higher, as 46% of the municipalities were either qualified on the incomplete disclosure of irregular expenditure, or disclosed in financial statements that they did not know the full extent of the irregular expenditure. 

He said R17.3bn of the irregular expenditure related to expenses incurred in 2017/2018, which amounted to 5% of the total local government expenditure budget. 

Despite the Municipal Finance Management Act prescribing to municipalities that they should submit annual reports to the respective councils, Makwetu said that by May 31, only Gauteng, KwaZulu-Natal, Mpumalanga and the Northern Cape had fully complied with this. 

Makwetu said there was a lack of consequences for transgressions and irregularities, which included a failure to investigate findings made, as well as take action on those findings. 

He raised his concern about the increasingly hostile environment the auditor-general's auditing teams faced and emphasised that that the accountability failures in local government had had a negative effect on the lives of citizens. 

“When there is no accountability, municipalities struggle or fail to meet their objectives. This, in turn, adversely affects the citizens who rely on municipalities for their service delivery,” Makwetu said.