Auditor-General speaking into the void on local government corruption

The Auditor-General (AG) released the 2018/2019 Municipal Finance Management Act consolidated general report on local government audit outcomes last week. The report indicates extreme abuse of the public purse.

Many municipalities have dysfunctional control environments, high levels of corruption, and are in dire financial straits.

Read: Confirmation that municipalities are a huge burden on taxpayers

However, the AG is of the optimistic opinion that local government does have sufficient money to fulfil most of the basic needs and aspirations of its citizens, but a lot more work needs to be done.

With an apparent lack of oversight of municipalities, and no accountability or consequence management, there were 28 outstanding audits.

If the government cannot get municipalities to submit their financial statements on time, how can it stem the tide of corruption?

Audit outcomes

The audit outcomes of the municipalities (excluding municipal entities) are reflected below for comparative purposes. Because irregular expenditure (IE) reflects the extent of mismanagement and possible corruption, the IE from uncompleted audits has been included, as well as the IE from Gauteng’s municipal entities of R1.8 billion (2018: R1.3 billion).

Comparative audit outcomes
Province Number of municipalities Clean audits Outstanding audits Unqualified financial statements Irregular expenditure (Rbn)
2019 2018
Eastern Cape 39 3% 2 43% 6.700 7.400
Free State 23 0 8 20% 1.742 1.050
Gauteng 11 11% 2 100% 6.758 5.368
Kwa-Zulu Natal 54 2% 1 62% 6.517 0.151
Limpopo 27 4% 3 29% 2.094 1.143
Mpumalanga 17 11% 2 39% 1.100 0.358
Northern Cape 31 4% 4 33% 0.390 0.350
North West 25 0 5 0 5.500 4.300
Western Cape 30 45% 1 93% 2.700 1.057
33.501 21.177

The financial statements reflect a culture of unaccountability:

  • R1.26 billion was spent on consultants to assist in the preparation of financial statements;
  • 41% of municipalities had no policy or no approved policy on water maintenance;
  • 41% of municipalities had no policy or no approved policy on sanitation;
  • Many municipalities are crippled by debt and are unable to pay for water and electricity;
  • Many municipalities are not able to collect debt;
  • Unauthorised, irregular, fruitless and wasteful expenditure proliferates throughout all municipalities;
  • Some municipalities depend on grants and assistance from national government;
  • Lack of financial controls and project monitoring is common;
  • Limpopo lost R1.2 billion through the VBS debacle (various court actions are underway and the Hawks are onto it … )
  • A municipal manager (Vhembe District in Limpopo) was found guilty of financial mismanagement and was paid a R1 million settlement when he resigned!
  • Conditional grants are not always spent on intended purposes;
  • Supply chain management marked by poor record keeping, lack of supporting documents, and improper tender documents;
  • Expenditure on information technology: millions spent on systems implemented but not used, millions spent on systems with defects, millions spent on software licences not utilised; and
  • Salary figures for municipal managers and senior management were not in the report.

All in all, these are dysfunctional control environments. There are greedy hands in the till, prolonged vacancies in key positions, no consequences for poor performance and transgressions, and a complete disregard for legislation, internal controls, and financial management. Our infrastructure and institutions are crumbling around us.

Read: Municipal manager gets 48% increase during lockdown

Our legal system is inadequate to deal with all this corruption.

There should be a fast-tracked prosecutorial regime: lifestyle questionnaire, trace the assets, follow the money, claw back all settlements and pension/provident funds, take all assets, and imprison the guilty. Enough is enough.

The AG is of the view that firm steps should be taken to “restore the integrity of these institutions and place them in a position to manage their finances towards the achievement of citizens’ needs”.

And how does government view the report?

Dr Nkosazana Dlamini-Zuma, Minister of Co-operative Governance and Traditional Affairs (Cogta), tweeted that she “welcomed” the report. Perhaps the minister “welcomes” all AG reports. After all, the AG issued a disclaimer of opinion on the Cogta annual report for 2019 as he was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. The Cogta audit report details a shocking lack of internal controls, non-compliance with legislation, and hundreds of millions of rand lost – including through payments made to wrong suppliers, ghosts, and non-qualifying government employees.

Read: Cogta fails 2019 audit miserably

Has the Minister got to grips with the corruption in Cogta?

The fish rots from the head. Until the government stands up against corruption, the AG will be speaking into the void. Nothing will get done. The municipalities will continue to plunder and loot until it is unable to provide basic services. And then the consequences will be catastrophic.

Listen to Nompu Siziba’s interview with Auditor-General Kimi Makwetu: