AG Tsakani Maluleke decries lack of accountability in municipal audits

Auditor-general Tsakani Maluleke has decried the poor state of local government, saying the lack of improvement in municipal audit outcomes is an indictment on the sector’s accountability ecosystem, which has failed to act against service delivery challenges.

Maluleke said the number of clean municipal audits improved slightly from 32 to 41 during the 2020/2021 financial year, while 64% of municipalities incurred unauthorised expenditure totalling R20.45bn.

She said of the R20.45bn, R13.25bn was for non-cash items, which means that municipalities spent money that councils had not provided for in their approved budgets, or that the spending did not meet the conditions of a particular grant.

Of the 257 municipalities in the country, 193 were responsible for fruitless and wasteful expenditure amounting to R1.96bn during the period under review.

Launching the 2020/2021 local government audit outcomes in Tshwane on Wednesday, the auditor-general said only 41 (16%) achieved unqualified audits, 100 (38%) achieved unqualified audits with findings, 78 (30%) qualified with findings, 4 (2%) adverse with findings, and 25 (10%) achieved disclaimers — the worst possible audit outcome.

Trends in the report demonstrated that the fourth administration (2016/2017), during former president Jacob Zuma’s tenure in the Union Buildings, “left municipalities in a worse financial position than when they took office”.

Kevin Allan, MD at Municipal IQ, a web-based data and intelligence service that monitors and assesses SA’s municipalities, said a lack of accountability is the “key issue in the very many problematic municipalities — no-one is held accountable”.

“Ultimately, national and provincial governments play the key role in accountability. Provincial MECs have to hold local mayors, municipal managers and CFOs accountable for problems in these municipalities,” said Allan.

“And those who are unable or unwilling to do the jobs, they were elected to do or as officials are being handsomely paid to do, they must be removed.”

Most of the country’s 257 municipalities, which are at the coalface of service delivery, have been run into the ground due to maladministration, looting and corruption, while others are struggling to pay staff salaries and employment benefits, or deliver basic services such as refuse collection, a supply of potable water and sanitation.

In 2021, SA’s largest dairy producer Clover announced it was moving its Lichtenburg cheese factory from North West to KwaZulu-Natal, citing poor service delivery by the municipality as the main reason for relocating from the province.

Astral, the country’s largest poultry producer won a court order last year over a lack of service delivery in the Lekwa local municipality in Standerton, Mpumalanga, compelling the national government and the Treasury to prepare a financial recovery plan for the municipality. Astral, the owner of consumer brands Goldi, County Fair and Festive, reported previously that deteriorating infrastructure and the municipality’s inability to provide water had cost the company millions.

The municipalities received an allocation of more than R450bn from the fiscus over the 2022 medium-term expenditure framework.

Addressing the national conference of the SA Local Government Association (Salga) in March, President Cyril Ramaphosa implored mayors, councillors and government representatives to turn local government around, saying many had lost faith in its ability to meet their needs.

Maluleke criticised municipalities for relying on consultants to prepare financial statements, while the salary cost for finance units totalled R10.41bn in 2020/2021.

“Financial reporting consultants have become permanent features in municipalities’ financial reporting processes, with the cost of these consultants amounting to R1.26bn in 2020/2021 ... When combining the money spent on finance units and consultants, it is clear that financial reporting carried a substantial price tag ... of just over R11.67bn,” Maluleke said.

Maluleke called on municipal leaders to stabilise and capacitate their municipal administration and institutionalise strong financial discipline. “They must enable and insist on regular, credible financial reports to monitor, oversee and to act. The leaders must set the right leadership tone ... around ethical conduct and consequences for wrongdoing.”

The metros of Ekurhuleni and Cape Town and Midvaal local municipality achieved clean audits, while the metros of Joburg, Tshwane, Buffalo City, Nelson Mandela Bay and Mangaung metros achieved unqualified audits with findings.

With new municipal councils formed following last year's local government elections, Maluleke said it was now time to “activate the accountability ecosystem to shift the culture  in local government towards performance, integrity, transparency and accountability”. 

“This can be achieved through courageous, ethical, accountable, capable, and citizen-centric leadership.” She said provincial leaders and the national executive had been engaged on the audit outcomes “regarding the picture that we see”.

“A clean audit should not be undermined or underestimated: it is an important foundation to achieve for a municipality to deliver much-needed services to their communities and spend scarce public resources prudently to improve their lived experiences.”

Update: June 15 2022
This article has been updated with new information

mkentanel@businesslive.co.za