A-G highlights stagnation in municipal audit outcomes

Auditor-General Tsakani Maluleke has found that the trend of poor audit outcomes continued in local government, with only 41 municipalities obtaining clean audits in the 2023/24 financial year.

“While 59 municipalities have improved their audit outcomes since 2020/21 (the last year of the previous administration), 40 have regressed,” said Maluleke.

She tabled the 2023/24 general report on the local government audit outcomes in Parliament on Wednesday.

Maluleke also said the most prevalent audit outcome in 2023/24 was an unqualified audit opinion with findings on performance information and/or compliance, received by 99 municipalities.

“While the audit opinion on the financial statements of these municipalities may be unqualified (unmodified), meaning that their published financial statements are credible, the material findings on performance information mean that their performance reports are not credible, while the material findings on compliance signal continued disregard for legislation or significant lapses in control.

“These 99 municipalities could easily lose their unqualified status if they do not address the remaining challenges in their control environment.”

Of the 99 municipalities that received unqualified audit opinions, 71 failed to submit quality financial statements and relied on the audit process to correct the errors identified by the auditors.

Of the eight metros, four received unqualified audit opinions, after only three submitted quality financial statements for audit.

Maluleke said municipalities continued to spend significant financial resources on hiring consultants to assist them in preparing financial statements for audit.

“In 2023/2024, 219 municipalities spent a combined R1.47 billion on financial reporting consultants, with 130 of these municipalities still submitting financial statements that had errors in the areas where consultants did work, indicating that the spending was not effective.

“We included a similar message on the ineffective use of financial reporting consultants in our 2013/14 general report. Little has changed in the decade since then.”

Maluleke added that 25 municipalities have sustained their clean audit status every year since at least 2020/21 and encouraged those that lost their status to swiftly address the root causes of the regressions so that they can achieve a clean audit once again.

However, the report showed that 13 municipalities did not submit their financial statements for auditing by the legislated date.

Seven of the affected municipalities, of which five are in the Free State, habitually disregard the legislated requirement and submit their financial statements late every year or do not submit them at all.

The AG’s report also showed that 113 municipalities operated with unfunded budgets and 285 material irregularities with an estimated financial loss amounting to R8.7 billion were identified.

“We also identified 79 material irregularities that were causing substantial harm to local government accountability processes and financial health, and a further 80 material irregularities that were causing substantial harm to the public due to action or inaction by municipalities, most of which related to pollution of water sources (56) and mismanagement of landfill sites (20).”

She observed that the number of material irregularities increased every year.

“The material irregularities process is not having the desired impact in local government, due largely to instability in accounting officer positions; a slow response by accounting officers to our notifications, recommendations, and remedial action; prolonged investigations or delays in concluding criminal proceedings; and delays in disciplining officials.

“Where we escalate the non-responsiveness to mayors and provincial government leaders, it is rare for them to act or for their actions to have a significant impact.”

The A-G also called on local government to use its remaining year in office to provide effective and efficient governance and service delivery to improve the lives of Africans.

Maluleke noted with concern that action has been too slow and has had little impact on the lived realities of South Africans, despite the commitment made when she called them to work with urgency to overhaul the local government.

“I again implore the mayors, speakers, and council members of municipalities to use the remaining year of their term in service of their constituents and to leave a legacy of improved governance and delivery.

“I also call on the national and provincial government to work with local government to improve institutional capability,” she said.

Maluleke called on political leaders in all spheres of government and public representatives in councils, Parliament, and the provincial legislatures to do diligent oversight and take decisive action on municipal failure to turn around the culture in local government.

Cape Times