R815m spent in vain, consultants rake in R695m – Kimi Makwetu

2014-07-30 20:01

Local government audit results have revealed R815 million in fruitless and wasteful expenditure, substantially up from the previous financial year.

Wasteful and fruitless expenditure grew by 31% for the 2012/2013 year, compared to the previous year, according to Auditor General Kimi Makwetu’s report on audit outcomes of local government released in Pretoria today.

This is defined as funds spent in vain, that could have been avoided if the municipality or municipal entity had taken reasonable care.

According to the report, most of the institutions audited had inadequate measures in place to detect and quantify wasteful spending.

Makwetu told reporters that irregular expenditure, or funds spent not in accordance with relevant legislation, reached R11.6 billion.

A total of R8bn of this amount represented goods and services received because normal processes governing procurement were not followed.

The R8bn was included in the category of irregular expenditure because approved supply chain management processes had not been followed, meaning municipalities may have paid more than they should have.

This distinction had not been made in the previous year’s report, he said.

For the remaining R3.6bn of the R11.6bn supporting documents were not provided, and so the audits could not confirm whether the goods or services were received.

Irregular spending grew by 24% from the previous year, and was observed in the audits of 83% of district municipalities. It was a problem common to all provinces. Of the 319 audits, 22 municipalities and eight municipal entities (9%) had unqualified audits with no findings, otherwise known as clean audits. One of these, and the only metropolitan to receive a clean audit, was the City of Cape Town. In the Eastern Cape, however, no municipalities or municipal entities received clean audits, the audit results showed. Nine auditees showed improvement from the previous year, while three regressed. No clean audits were achieved in the Free State, but the province appeared to be steadily improving its audit outcomes.

The audits of Limpopo’s municipalities and municipal entities reflected a regression for the third consecutive year, with no clean audits received.

The problems leading to this included vacancies in key positions. A total of 88% of municipalities employed key officials lacking minimum skills and competencies.

The outcomes for the Northern Cape improved slightly, despite 13 municipalities receiving disclaimed audit opinions – all but one maintaining this dubious distinction from the previous year.

North West local government audit outcomes remained static compared to the previous year, with no clean audits received. Six auditees in the province, or 22%, received unqualified audit opinions, with findings.

In Mpumalanga, the Ehlanzeni district municipality and Steve Tshwete local municipality maintained clean audits for the last four years. Overall, however, auditees in the province regressed.

Nineteen KwaZulu-Natal municipalities improved their performance, while six municipalities and two municipal entities regressed. An overall improvement in audit outcomes was recorded. Seven municipalities in the province and four municipal entities achieved clean audits.

Gauteng’s overall audit outcomes showed a significant improvement from the previous year, with the Sebideng district municipality achieving a clean audit.

Municipal entities the Johannesburg Fresh Produce Market and the Johannesburg Social Housing Company also got clean audits.

Co-operative Governance Minister Pravin Gordhan welcomed the audit, but said it indicated areas that needed improvement.

There had to be harsher consequences to deal with problems such as fraud and corruption in municipalities and municipal entities.

“Clearly the current environment, of essentially no consequences for bad things, is not something we want to continue,” said Gordhan.

The culture of non-payment needed to be confronted.

“There are still too many South Africans who do not pay for services they can afford to pay for.”

Makwetu said the audit revealed that R695 million was spent on external consultants in helping prepare financial statements.

This was despite the fact that most municipalities employed people to handle financial management and reporting.

Gordhan said that in partnership with Treasury a centralised system to manage external financial consultants would be developed in the near future.

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