AS IT HAPPENED: Our auditors faced threats & intimidation in most provinces, pressure to change negative findings - Auditor-General

2019-06-26 11:21

Auditor General Kimi Makwetu will deliver the local government audit results for the 2017-2018 financial year.

Auditor General Kimi Makwetu

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Last Updated at 14:27
26 Jun 13:02
On that note, that's a wrap from the AG's briefing. News24 will continue to bring you more on the 2017/2018 municipal audit report.

26 Jun 12:37

Very difficult to disagree with this message.

26 Jun 12:33

On the Free State, the AG notes serious concerns:

"The Free State local government environment displayed a total breakdown in internal controls as the province’s political and administrative leadership, yet again, exhibited no response to improve its accountability for financial and performance management."

The leadership did not implement our recommendation to ensure stability and the filling of vacancies in key positions, despite their commitment to do so. This resulted in the significant deterioration of municipal audit outcomes, service delivery and financial health. The required level of oversight by all assurance providers in the province wasnon-existent at most municipalities and we doubt if there is political will to do the right thing for the right reason, mainly due to political interference to the detriment of good governance."

Makwetu says the financial crisis in the province is becoming a critical concern.

"Although some municipalities had been placed under provincial intervention, this was not effective, as these municipalities’ financial sustainability did not improve. Several municipalities in the province qualified for mandatory intervention by the provincial executive, which is applicable when a municipality is in a serious financial crisis and is an inmaterial breach of its obligations to provide basic services or to meet its financial commitments; however, no decisive action was taken by the provincial leadership to implement the constitutional prescripts. Consequently, municipalities’ financial health continued to deteriorate from a net current liability position (where current liabilities exceed current assets) of R4,8 billion in the prior year to R6,1 billion in the current year."

26 Jun 12:30

On Gauteng:

The Gauteng local government sustained its audit outcomes in 2017-18 with one municipality obtaining a clean audit. The analysis of audit outcomes excludes Emfuleni, of which the audit outcome had not been finalised by the legislated date due to safety concerns in the municipal area, which resulted in a temporary suspension of the audit process. The AG commended Midvaal for sustaining a clean audit outcome for the last five years.

"As highlighted in previous years, this was as a result of the municipality institutionalising a number of best practices, such as timeously monitoring the implementation of action plans to ensure that internal control deficiencies are addressed and effectively applying consequences. Should such practices be replicated across the province, audit results are likely to improve even further."

Makwetu also commended the province’s municipalities for obtaining a 100%financially unqualified opinion for the past three years. Gauteng also remains the only province without any qualified or disclaimed opinions. However, the quality of financial statements as initially submitted for auditing regressed, as only 30% of the municipalities(2016-17: 40%) submitted financial statements without material misstatements.

26 Jun 12:25

On the North West, the AG says:

"Despite the commitments made by the leadership to address root causes and control deficiencies, they did not respond with the required urgency to our messages about addressing risks and improving internal controls. The political instability in the province and the tone of those charged with governances have created an environment that is not conducive accountability, good governance and the effecting of consequences.”

26 Jun 12:22

The AG's comment on the Western Cape:

While the province still has the largest concentration of municipalities with clean audits at 40%, its latest results reflect a significant regression compared to 2016-17 (70%). We have observed that the lapses in controls in certain municipalities in this province were largely non-adherence to statutory submission dates of financial statements for audit,non-adherence to supply chain requirements in confined areas already identified and actioned by management only after the audit. For these reasons we do not believe that these lapses or control deviations are indicative of a systematic breakdown in the systems of internal control, however, the report had to reflect the occurrences to prevent management complacency.

26 Jun 12:07

Makwetu wraps up his prepared address by making a comment on the importance of leadership.

26 Jun 12:02

The AG, once again, notes that the "audit environment" is becoming more "hostile" towards auditors.

"The audit environment became more hostile with increased contestation of audit findings and pushbacks whereby our audit processes and the motives of our audit teams were questioned."

26 Jun 11:59

26 Jun 11:58
Makwetu: In Limpopo we have observed that there are a number of municipalities which do not have the necessary skills at CFO level, and thus they bring in the services of consultants. Limpopo municipalities spent a total of R177 million on consultants in the past financial year.

26 Jun 11:56

26 Jun 11:55

Only six provinces have one or more entities which were given clean audits:

- Western Cape (12)

- Eastern Cape (2)

- Northern Cape (1)

- Gauteng (1)

- KwaZulu-Natal (1)

- Mpumalanga (1)

26 Jun 11:46

26 Jun 11:43

26 Jun 11:35

Here are two big numbers:

Irregular expenditure is down from R29.7 billion in 2016/2017 to R25.2 bn in 2017/2018.

Clean audits is down from 14% in 2016/2017 to 8% in 2017/2018.

26 Jun 11:32
It's important to note that the Public Audit Amendement Act does not affect the figures and results being released today.

The AG's office says it will only affect audit reports for financial years which ended "on or after 31 March 2019". 

26 Jun 11:30
The AG laments the fact that "local government role players have been slow in implementing, and in many instances even disregarded, the audit office's recommendations".

26 Jun 11:26

26 Jun 11:26
Makwetu says, overall, the 2017/2018 audit results show a decline in audit results.

26 Jun 11:25
Makwetu says it's concerning that a growing number of municipalities and individuals are ignoring the Auditor-General's findings and recommendations over the last 15 to 20 years.

26 Jun 11:25
This is Makwetu's first major results announcement since the Public Audit Act was amended and came into effect in April this year.

26 Jun 11:25

Auditor-General Kimi Makwetu is announcing the 2017/2018 municipal audit results.

26 Jun 11:24

The Mahikeng municipality has provided portable toilets to be used at the taxi rank on July 04, 2018 in Mahikeng.

Mahikeng municipal manager Thabo Mokoena is accused of corruption after he allegedly paid a total of R672 000 in seven months for a mobile toilet at a taxi rank which officials said it was non-existent and without a service-level agreement. (Tiro Ramatlhatse, Gallo Images, Sowetan)

26 Jun 11:24

Auditor General Kimi Makwetu releases the 2015/2016 municipal audit report in Pretoria, South Africa.

Makwetu revealed that the number of South African municipalities which received clean audits increased from 13 to 54 in the last five financial years. (Lisa Hnatowicz, Gallo Images, Beeld)

26 Jun 11:24

26 Jun 11:24

17 district municipalities in 'financial distress' - Treasury

Seventeen district municipalities were identified as being in financial distress, National Treasury’s state of local government and financial management report for 2016/17 revealed.

26 Jun 11:24

AG given more teeth to refer audits for law enforcement

The Standing Committee on the Auditor-General has approved amendments to the Public Audit Act, giving the Auditor-General of South Africa more power to effect consequence management.

26 Jun 11:24

26 Jun 11:24

Auditor-General Kimi Makwetu: Why it's getting worse

The man responsible for auditing government books blames the "state capture years" under former president Jacob Zuma for municipal coffers being looted with impunity.

26 Jun 11:21

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