Good money after bad

31 July 2014 - 02:03 By Thabo Mokone
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Thembekile Kimi Makwetu
Thembekile Kimi Makwetu
Image: Simon Mathebule and Nonhlanhla Msibi

Municipalities and their entities paid about R700-million to consultants to help them compile financial statements but still failed to obtain clean audits.

Auditor-General Kimi Makwetu yesterday released his report on the audit outcomes of the 319 municipalities and municipal entities for the financial year ending March 2013.

He said it was worrying that 261 audited municipalities and public entities could not produce financial statements that did not contain material misstatements, with 110 obtaining financially unqualified audit opinion only after their statements were corrected by his staff during the auditing cycle.

This was despite the fact that municipalities forked out R695-million on consultants to help them compile credible financial statements, he said.

"This expenditure is in addition to [the cost of] people in some of the municipalities who are already employed in financial management but [who do not] possess the minimum competencies to be relied upon in producing financial management outcomes.

"It is evident that improvement in audit outcomes will be attained and sustained only if local government builds the institutional capacity required to maintain adequate internal controls, systems and processes."

Minister of Cooperative Governance Pravin Gordhan said tough questions needed to be asked about the role of consultants.

"If you're spending R700-million of public money in trying to get something right, how come it always ends up wrong," he said.

Gordhan said his department and the National Treasury would centralise the procurement of services from financial consultants in a bid to stop waste.

"So that there's vetting that takes place, we have the right people with the right qualification and competence but if they don't perform, there's some recourse," he said.

Makwetu said only 22 municipalities and eight municipal public entities had received clean audits for the year under review.

Not a single municipality in the Eastern Cape, Free State, Limpopo and North West obtained a clean audit.

The City of Cape Town is the only metropolitan municipality that obtained a clean audit.

eThekwini, Tshwane, Johannesburg and Ekurhuleni got unqualified opinions with some findings.

The Eastern Cape's Buffalo City and Nelson Mandela Bay metros were slapped with qualified audit outcomes, along with the Free State's only metro of Mangaung in Bloemfontein.

Makwetu's report also showed that irregular expenditure in municipalities rose from R9.3-billion in 2012 to R11.6-billion this year. This included instances where municipalities did business with companies in which officials, employees and councillors had interests.

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