MAVERICK CITIZEN

MUNICIPAL AUDIT

Local government failures: Another

year, another inspection, another bad
outcome — with a few exceptions

Illustrative image | Sources: Auditor-General of South Africa Tsakani Maluleke. (Photo: Phill
Magakoe) / Residents from the settlement Gatvol in Heidedal protest during a shutdown on 18 May
2021 in Bloemfontein. (Photo: Gallo Images / Volksblad / Mlungisi Louw) | Houses of Parliament.
(Photo: Leila Dogan ) | Adobe Stock

By Marianne Merten
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22 Jun 2021 22
Just 27 of South Africa’s 257 municipalities have a clean bill of financial health,
according to the local government 2019/20 audit. That’s 10 less than in 2017
when the present crop of municipal politicians came into office. Some R5.5bn
was spent — without anyone able to say what for.

BeyondWords
Four months before the 2021 local government elections scheduled for 27
October, the state of municipalities is dire. According to Tuesday’s local
government audit outcomes briefing to MPs, just more than a quarter of
South Africa’s municipalities, or 27%, themselves say they don’t know if
they can continue — and almost one in four councils, or 57, failed to deliver
any kind of financial statement by the statutory audit deadline.
The good news is that there are 27 municipalities with clean audits,
including one of the eight metros, Ekurhuleni.

Whether it’s Okhahlamba in KwaZulu-Natal, Nkangala in Mpumalanga,

Witzenberg in the Western Cape or Senqu in the Eastern Cape, these
municipalities’ clean audit — unqualified with no findings in auditor-speak
— have the administrative and political leadership that is interested in
ensuring financial controls are in place, procurement regulations are
followed and consequences for contraventions are imposed.
At Witzenberg, “it’s about the leadership tone set” from the municipal
manager, responsiveness to audits and how the council does its oversight,
Auditor-General Tsakani Maluleke told the Standing Committee on the
Auditor-General and Standing Committee on Public Accounts (Scopa).
At Okhahlamba in the Drakensberg, the municipal leadership invested in
systems for credible financial statements and compliance. “The leadership
there has embraced the notion that a clean audit will help them attract
investment… (for tourism).”
The ugly news is the 22 councils countrywide with disclaimed audit
outcomes — the worst possible — that went through almost R5.5-billion
without being able to say where the money went.
Put differently: of the R6.45-billion taxpayers contributed via the national
purse to those municipalities through equitable share and conditional grant
allocations, only R980-million remained by municipal financial year-end.
Or as Maluleke put it, “Nobody is reporting. Nobody is accounting. Nobody
is sure where the money went.”
For example, the Chris Hani District Municipality in the Eastern Cape
could not account for how it had spent R1-billion of the R1.043-billion it
had received in equitable share and grant allocations.
Similarly, the Dr Ruth Segomotsi Mompati District Municipality in North
West, which received a disclaimer, was unable to account for how it spent
R582-million of the R697-million in its bank accounts. MPs were told bank
accounts were not reconciled, but double payments were made to
suppliers.
This district council is one of three in North West that were disclaimed. No
municipalities in North West received a clean audit for the 2019/20
financial year, according to the Auditor-General’s briefing presentation to
MPs. Of the province’s 22 councils, aside from the three disclaimers, six
received qualified audit reports with findings and 12 failed to submit any
financial statements whatsoever.
“Local government in the North West has collapsed,”
acknowledged President Cyril Ramaphosa in Monday’s virtual address to
the ANC Norman Mashabane regional conference in Limpopo, where he
called on party members to nominate “capable” councillor candidates for
the upcoming 27 October local government elections.
The president talked up municipalities, saying they needed credible leaders,
and investment was crucial, according to TimesLive. “We must market our
towns and local government areas to would-be investors with a view to
create employment. We must become advocates of investment.”
Not so at Lichtenburg in North West which is losing its biggest employer,
Clover, over council failures to keep water and electricity going and
ensuring proper road maintenance. In early June 2021, the dairy product
manufacturer announced it was moving its cheese factory from Lichtenburg
to eThekwini, KwaZulu-Natal.
Nor at any of the municipalities where protests over service delivery
failures erupt regularly, most recently at Harrismith, part of the troubled
Maluti-a-Phofung municipality in the Free State.
Coincidentally, as in the North West, no Free State municipality had a clean
audit. Eight of the province’s 23 councils did not submit any financial
statements. Its metro, Mangaung, wracked by protests over service delivery
failures, also failed to submit financial statements.
The bad news is somewhere in between.
It ranges from contravening procurement rules such as competitive bids,
keeping financial controls or the spending of R1-billion on consultants,
often for the most basic financial statements and often without impact,
given 10 of the 22 disclaimed councils had spent R105-million on
consultants.
“In 68% of cases, the problem is not that there are vacancies in the finance
department, but rather that the people employed in those finance
departments did not have the skills required,” said Maluleke.
It is indeed lamentable that the trajectory of municipal performance is
rather unimpressive. Much of the progress made has unfortunately been
eclipsed by the widespread ‘failure’ of many municipalities. Rather than
moving communities forward, many municipalities have themselves
regressed.
Municipal audit outcomes have worsened. The recorded R26-billion
irregular expenditure — this includes the overpayment for goods and not
adhering to procurement rules — is probably not the final tally because of
inadequate municipal statements.
But municipalities also fail to recover all of what’s owed to them from rates,
electricity tariffs and other levies; on average 63% is recovered. This means
councils owe suppliers such as Eskom and water boards more money than
is in the kitty, and helps explain the 209-day payment delays.
The bottom line? Revenue not collected, creditors not paid, councils in
deficit.
This means 46% of equitable shares, grants and other monies meant for
maintenance and service delivery are instead diverted to pay the salaries of
admin staff and councillors. Maintenance and service delivery does not
happen.
All this is known. Finance Minister Tito Mboweni said as recently as May
2021 in his Budget Vote debate that 163 municipalities were in financial
distress and 40 in financial and service delivery crises — and 102
municipalities adopted budgets they could not fund.
“It is indeed lamentable that the trajectory of municipal performance is
rather unimpressive. Much of the progress made has unfortunately been
eclipsed by the widespread ‘failure’ of many municipalities. Rather than
moving communities forward, many municipalities have themselves
regressed,” said Mboweni, adding later, “Poor political leadership
demonstrated by political infighting in councils and political interference in
administrative matters have served as a stumbling block to a viable
municipal sector.”
Tuesday’s Auditor-General briefing to MPs was a heads-up, if you will,
before the official release of the local government 2019/20 audit. Similar
briefings have been given to the ministers of finance and cooperative
governance, and others.
Maluleke spoke frankly, telling lawmakers it was all about stability and
leadership.
“It is the type of leadership we deploy and appoint to specific roles that
defines how an institution runs… Without dealing with the quality of
leadership that’s in charge of institutions, we are not going to get this
right.”
What needs to happen is clear. Whether politicians in the middle of
councillor candidate selection and the municipal campaign trail will pay
any heed, remains to be seen. DM