Pretoria – Cooperative Governance and Traditional Affairs (Cogta) Minister Des van Rooyen has welcomed the release of the Auditor-General’s audit outcomes of the country’s municipalities, saying that government interventions are starting to bear fruit.
“On behalf of Cogta, we welcome the AG’s report on the audit of municipal finances for the financial year 2014/15. The AG’s report shows that the department, as well as other sector departments and role players like Salga’s interventions over the past few years [that] range from Operation Clean Audit to the current intervention… [the] Back to Basics programme, are starting to bear fruit and show a positive result,” he said.
The Minister was speaking at a media briefing on the release of the audit outcomes by Auditor-General (AG) Kimi Makwetu, in Pretoria.
According to Minister Van Rooyen, the report is encouraging in that there has been a considerable improvement in audit outcomes in the past five financial years.
Makwetu announced that municipalities have shown an encouraging improvement in their audit results from 2010/11 to 2015.
According to the AG, the number of municipalities that received financially unqualified audit opinions with no findings (clean audits) increased from 13 to 54.
“It’s our take as Cogta that we are not yet there, but we have to acknowledge that we are not where we were before. It is our undertaking that a lot needs to be done to take this commitment forward,” said Minister Van Rooyen.
The AG said the country’s 272 municipalities had a total expenditure budget of R347 billion.
“Municipalities with clean audit opinions represented R134 billion of this amount, while those with unqualified opinions with findings represent R143 billion,” said the AG, adding that municipalities with qualified audit opinions made up R49 billion of the total budget.
According to the report, the Western Cape (73%), Gauteng (33%) and KwaZulu-Natal (30%) were the provinces that had the highest proportion of municipalities with clean audit opinions in 2014/15.
In addition, audit outcomes of municipalities in the Eastern Cape, Free State and Mpumalanga were starting to emerge from years of negative audit outcomes.
Use of consultants in municipalities
When coming to the use of consultants, the Auditor-General said that consultancy costs for financial reporting services continued to increase over the past five years to the current R892 million in 2014/15.
The AG lamented this, saying municipalities continue to rely on consultants to prepare financial statements.
In responding to the Auditor’s General’s comments, Minister Van Rooyen said government acknowledges the use of consultants. He said South Africa comes from a history where for decades systems in place were not meant to service the country’s majority.
“One of the biggest challenges that we acknowledge that we are faced with is institutional capacity. That’s why we’ve included this in our Back to Basics programme. There is a problem of developing the necessary capacity in some of our municipalities,” said the Minister, noting that a focused approach to address this is in place.
South Africa’s local government system is working, he said.
Improvement in local government transparency
The report also noted that there has been a significant improvement in the submission of financial statements by the legislated date, as well as the preparation of annual performance reports.
This, according to Makwetu, is largely attributed to increased accountability and transparency in local government.
The financial statement submission rate improved from 78% to 94%, while the number of municipalities that failed to prepare annual performance reports decreased from 14% to 4%.
The report also picked up that irregular expenditure has more than doubled since 2010/11 to R14.75 billion, a total — according to Makwetu — that was reached due to non-compliance with Supply Chain Management legislation.
In addition, fruitless and wasteful expenditure in 2014/15 was more than R1 billion higher than in 2010/11 at R1.34 billion, which was incurred by an increasing number of municipalities. The provinces of Mpumalanga and the Free State, among others, were the main contributors to the increase.
Unauthorised expenditure according to the report increased threefold from 2010-11 to R15.32 billion with the main reasons for unauthorised expenditure continuing to be overspending of budgets and non-cash items.
In response to a question, Minister Van Rooyen said the department has started working closely with Makwetu’s office in order to address this.
“We have started a process of working more closely with the AG to mitigate areas of mismanagement, especially irregular, fruitless as well as unauthorised expenditure,” he said.
Minister Van Rooyen said the department is “preoccupied” with ensuring that there are consequences for wrongdoing.
“It’s important to note that we are approaching this report as part of the work that is continuing. We are not approaching it as an isolated activity… We can’t allow a system where people don’t pay the price. [With our] Back to Basics campaign, there are no less than 2 665 disciplinary matters that are being attended to. These cases include dismissal cases,” said Minister Van Rooyen.