Irregular spend by SA municipalities up 75% to R28.4bn as audit outcomes regress

Cape Town - Audit outcomes for municipalities have continued to regress, with irregular and fruitless and wasteful expenditure each ballooning more than 70% for the 2016/17 year.

This is according to the audit results for the country’s municipalities for the 2016/17 financial year, released by Auditor-General Kimi Makwetu in Parliament on Wednesday.

Last year irregular expenditure by municipalities increased over 50% to R16bn. This year however, it increased 75% to R28.376bn.

The Auditor-General of South Africa (AGSA) audited 257 municipalities and 21 municipal entities during the period.

In his address Makwetu expressed disappointment that there has been no compliance with the AG’s constant and insistent advice regarding administrative lapses. Five years later and the patterns have not changed, the same accountability and governance challenges have persisted since 2011/12.

“When we released the 2011/12 municipal audit outcomes in August 2013, we highlighted amongst others, a lack of decisive leadership to address the lack of accountability by ensuring consequences against those who flouted basic processes that hampered effective municipal governance.

“We reported weaknesses in internal control risks that needed attention in local government by providing root causes for audit findings and recommendations to remedy underlying causes,” he said.

“There has been no significant positive change toward credible results; instead we are witnessing a reversal in audit outcomes,” Makwetu said.

Audit outcomes

Of the audited municipalities, 45 regressed and 16 improved. Only 33 municipalities (13%) received clean audits having produced quality financial statements and performance reports and complied with key legislation.

Although irregular expenditure increased, Makwetu said municipalities made efforts to identify and “transparently” report irregular expenditure from previous years. The irregular expenditure from previous years accounts for R15.03bn, in addition to the R13.4bn recorded for 2016/17.

Makwetu also spoke on the financial health of municipalities, which is at risk due to the inability to collect revenue from consumers. About 31% of municipalities disclosed a deficit, amounting to R5.6bn.

Debt owed by municipalities to their creditors led to 31% of municipalities indicating they may not be able to continue operating and are in a vulnerable financial position.

National Treasury’s state of local government and financial management report for 2016/17 released on Tuesday revealed a total of 128 municipalities are in financial distress.

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