The Office of the Auditor-General presented the local government audit outcomes of the 2021/22 financial year to the Standing Committee on Auditor-General, revealing a mixed bag of outcomes that included some improvements but also stagnation and regression.
According to the Auditor-General, Ms Tsakani Maluleke, financial management in municipalities deteriorated in the main. Out of the 257 municipalities, 38 received a clean audit, 104 submitted credible financial statements, 78 received a qualified audit, six received adverse findings, 15 received disclaimers and 16 have outstanding audit outcomes due to late submission of their financial statements.
These poor results reflect the lack of the type of attention needed to turn the tide. Ms Maluleke also emphasised that the Office’s reports include analyses, recommendations and insights that could be used as a resource to improve municipalities’ financial management systems and internal controls, but local government does not make use of the information.
The Auditor-General urged premiers, provincial governments, municipal public account committees, accounting officers and chief financial officers of respective municipalities need to play an active role to institutionalise key control instruments consistently over time. If this does not happen, service delivery and infrastructure will continue to decline and a trust deficient between citizens and government will grow ever wider.
“Poor implementation of the delivery mandate of local government is related to financial management and planning.” At worst, this absence often leads to an unfunded budget and unauthorised expenditure.
Ms Maluleke also spoke about the skills deficit at local government level, which contributes to poor financial management and hence unsatisfactory audit outcomes. Regrettably, the lack of skills has led 220 municipalities to commission consultants to fulfill their financial management responsibilities and this cost over R1.6 billion in this financial year, an increase from R1.3 billion last year. This practice of commissioning consultants continues even though the nature of the work is not complex, but rather involves rudimentary line functions for which the municipalities are charged millions of rands.
Ms Maluleke also flagged the problem of salaries that consume entire budgets, crowding out service delivery in many municipalities.
She also warned that good financial audit outcomes do not often translate into good performance outcomes, and it is a deception to conflate the two. “The fact that a municipality has a clean audit does not mean it has also achieved its performance targets. Often, that is not the case.” She is also of the view that “there’s a need to move away from our obsession only with financial outcomes to the detriment of performance outcomes.” An ideal situation is to marry the two and see how they complement each other in bringing about critical service delivery. She cited the current cholera outbreak in Hammanskraal as indicative of the lack of proper monitoring and assessment of municipalities’ performance outcomes.
Meanwhile, the Auditor-General has reported material irregularities to relevant law enforcement agencies for investigation.
Members of the committee criticised the R30 billion in irregular expenditures incurred by local government in this financial year but praised the Auditor-General for the clarity of her report. The Chairperson of the Standing Committee on the Office of Auditor General, Mr Sakhumzi Somyo, declared: “Your report has gone deeper on issues affecting local government financial and performance management. Our legacy is to plough its outcomes and drive collaborations with Treasury and the Department of Cooperative Governance and Traditional Affairs to create a synergy that will improve the local government audit outcomes and ensure there is value for money in this sphere of governance.
Source: Parliament of South Africa