Councils waste a billion

2013-09-02 00:00

KWAZULU-NATAL municipalities spent R1,7 billion on consultants in the 2012/13 financial year — five percent of the annual total expenditure.

This is according to a report tabled to the Legislature on Thursday by Cooperative Governance and Traditional Affairs MEC Nomusa Dube.

Dube said municipalities spent of the R173 million on consultants to prepare financial statements, perform valuations and update asset registers.

She said the larger part of this amount — R160 million — was spent by the eThekwini municipality.

She said the main reason why councils appointed consultants was because they lacked technical skills or had vacancies in their organisational structure.

She said 40 councils have also incurred irregular expenditure amounting to R1,4 billion due to contravention of tender procedures and a further R10 million was categorised as fruitless and wasteful expenditure.

She said 27 councils overspent their approved budgets in 2012/13, with the unauthorised expenditure totalling R450 million.

Dube said the amounts that have been incurred showed the poor administration of municipalities and indicated a lack of financial prudence and planning.

Cogta has now developed a framework to address unauthorised, irregular and fruitless and wasteful expenditure, to be sent to all the 61 councils,

Dube decried the regression in audit performances by 16 councils with only one council obtaining a clean audit, 44 others unqualified audits, nine qualified and seven disclaimers.

The regression was blamed on the election of many new councillors and their inability to exercise effective oversight on financial matters and management issues.

Dube added that changes in management also had an impact, since contracts of managers either left or we fired and that political instability in coalition-led councils played a role.

“Clean audits will only be achieved if the political leadership and independent oversight by the audit committee plays an active supervisory role in monitoring, municipal response plans and other support interventions in the province.”

The report showed that although the municipalities and their entities submitted their financial statements to the auditor-general on time, their financial statements left much to be desired with misstatements on property and equipment, assets, liabilities and disclosure of items.

“It is clear that municipalities were aiming to ensure compliance even though the quality of annual financial statements were being compromised given the magnitude of material adjustments that had to be made to them up until November 2012,” Dube added.

She said it was critical that councils ensured sound financial management and proper review of annual financial statements prior to submission to the auditor-general.

Dube also said the annual financial statements showed that the conditional grant had been not spent by R2,2 billion. “While the poor spending performance of majority of thee municipalities are noted, it is also very concerning that some of these municipalities could ultimately lose these funds should National Treasury decide to recall the conditional grant based on under-spending resulting from non-commitment and poor planning.”

Dube revealed that creditors have increased by 60% in KZN councils compared to 2010/11 from R1,8 billion to R7,2 billion.

“This increase in creditors may indicate that many municipalities are unable to pay their creditors within 30 days.”


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