Irregular expenditure almost doubles at municipalities – Auditor General

Irregular expenditure by South Africa‘s municipalities almost doubled in the past financial year, with only a tenth of local governments producing credible financial statements, the auditor general said on Wednesday. Irregular spending includes payments made on contracts awarded unlawfully, outside of budget procedures or without necessary approvals.

The continent’s most industrialised economy has barely grown in the past decade with fiscal missteps and government corruption contributing to weak business and consumer confidence. Poverty has climbed and unemployment reached record levels.

The Auditor General, which audits all public entities and departments and enforces financial management rules, said municipal irregular expenditure had increased to R28.4 billion ($2.25 billion) in the 2016-17 financial year from R16.2 billion in the year before, mainly due to “glaring governance, leadership and oversight lapses”.

Irregular expenditure was at its highest since 2012, while only 33 out of over 200 municipalities in the country’s nine provinces managed to produce quality financial statements and performance reports that complied with all key legislation, the Auditor General said.

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

The prospect of municipalities suffering a financial meltdown has put pressure on national government and triggered violent protests by communities angered by a deterioration in services.

Recent protests in the North West province lasted for weeks and saw President Cyril Ramaphosa cut short a trip to London to deal with the fallout.

Finance Minister Nhlanhla Nene told Parliament last week 112 municipalities did not have money to carry out service delivery plans for the current financial year.

The Treasury has said the sharp increase in transfers from national to provincial government was unsustainable and conflicted with Pretoria’s fiscal consolidation plan.

“The situation is pretty scary,” said Paul Berkowitz, governance expert and director at EDGIS-SA.

“This will definitely put pressure on Treasury. And you might just see Treasury stepping in more and more to take over powers from municipalities. It’s not something they’d want to do but things are looking pretty desperate.”