Auditor-General of South Africa, Kimi Makwetu, has called on the leadership in municipalities to be accountable and respect the law in the running of municipalities.
Releasing the 2015-16 Local Government Audit Outcomes Report on Wednesday in Pretoria, Makwetu said accountability in the management of municipal affairs is important, and it starts with appropriate planning focused on the needs of citizens, instituting appropriate internal control and supervision that will ensure proper financial and performance management.
He encouraged municipal leaders to monitor budgets and ensure that performance targets are achieved, and that there are consequences for mismanagement and non-performance.
“If basic principles of accountability built around a central theme of strong internal control and good governance are in place, municipalities should be well geared to live up to the expectations of the communities that they serve,” said Makwetu.
He said the limited improvement in audit outcomes over the past year shows that accountability for these important functions was not as strong as it should be.
The report shows that there was limited improvement in the audit outcomes of municipalities with about 15% of municipalities improving, about 13% regressing and 67% remaining unchanged.
The audit outcomes of 263 municipalities and a summary of the key audit outcomes of 51 municipal entities are included in the latest general report.
“In total, about 40 municipalities (82%) with clean audit opinions in the previous financial year (2014-15) obtained this outcome again in the year under review (2015-16).”
He said this is an encouraging sign, that improvements at these municipalities are sustainable.
Clean audit opinions
The AG’s report shows that the provinces with the highest proportion of municipalities with clean audit opinions in 2015-16 were the Western Cape with 80% of its municipalities, followed by KwaZulu-Natal with 18% of its municipalities, and Eastern Cape with 16%.
“The Western Cape continued setting the pace by increasing their clean audit opinions from 73% to 80% of their municipalities.”
Right momentum in audit outcomes
Makwetu said audit outcomes of municipalities in the Eastern Cape, Limpopo and Mpumalanga showed momentum in the right direction, with the Eastern Cape showing the greatest improvement.
He said improvements in Limpopo were as a result of increased focus to resolve audit findings in response to a strong stance taken by the Premier that steps will be taken against municipal managers if audit outcomes are poor.
In Mpumalanga, Makwetu said strong leadership, accountability and good human resource management at an increased number of municipalities had the desired effect.
“We commend the leadership in these provinces for decisively acting on and implementing our previous years’ audit recommendations. We urge them to maintain this promising momentum.”
Municipalities loose clean audit status
Makwetu said it was unfortunate that about 14 municipalities lost their clean audit status, while only nine moved into this category resulting in an overall decrease in municipalities with clean audit opinions.
“Metros and district municipalities should be leading by example in the local government spheres, yet only one metro — the City of Cape Town — and 14 district municipalities (32% of all district municipalities) received clean audit opinions.”
The report shows that although Gauteng continued to perform well and was the only province where 100% of its municipalities received unqualified audit opinions on their financial statements, only the Midvaal municipality could hold on to its clean audit status.
The report further revealed that not paying sufficient attention to supply chain management and performance reporting led to three municipalities losing their clean audit status of the previous year.
Total local government expenditure budget in 2015-16
The expenditure budget for the municipal sphere in 2015-16 was R378 billion. Makwetu said municipalities with clean audit opinions represent R70.9 billion, which is about 19% of the total amount.
He said municipalities with unqualified opinions with findings represent R218 billion, which made up to 57% of the total budget, while municipalities with qualified audit opinions represent R53.4 billion, which made up 14% of the total budget.
He said those with adverse and disclaimed opinions represented R15.2 billion, which made up about 5% of the total budget, and municipalities with outstanding audits constitute R20.5 billion, which made up 5% of the total expenditure budget.
The Deputy Minister for Cooperative Governance and Traditional Affairs, Andries Nel, also attended the briefing in which the report was released.
The Deputy Minister welcomed the report, saying the department was thankful of the partnership that it has with the office of the AG and that it will follow up on the findings and recommendations in all municipalities.
Deputy Minister Nel also said he welcomes the overall trend that emerges from the current and previous reports by the AG.
“If you look at the report released by the AG in 2009 and where we were a year ago, I think that it is clear that there is an overall improvement in terms of the financial accountability of our municipalities.
“Today we are at a stage were 62.6% of our municipalities are getting clean or unqualified audits. We are within reach of two-thirds of our municipalities getting qualified audits. If one bears in mind that in 2008-09 we were still dealing with a situation that about 104 of our municipalities were getting disclaimers – the worst possible outcomes.
“Today through combined efforts and partnerships with our stakeholders, the number has decreased to about 25,” said the Deputy Minister.
He also spoke to the fact that in 2009, only one municipality received a clean audit, but in the last financial year that number has gone up to 48 municipalities.
“I think it indicates an overall positive trend,” said Deputy Minister Nel.