R100m to R1.6bn yearly bill: AG implores municipalities to stop paying consultants millions for ‘basic’ work

Over the past 10 years, the bill for municipalities for consultants who do “basic” accounting work of compiling financial reports during the auditor-general office’s review season has grown from R100m to R1.6bn and continues to take more from the cash-strapped entities yearly.

This is according to auditor-general Tsakani Maluleke who was speaking at the Kgalema Motlanthe Foundation annual inclusive growth forum in the Drakensberg at the weekend.

Maluleke implored municipalities to do better and stop spending millions yearly on outsourced accountants while they have accountants on their payroll to do the work.

“Ten years ago, when we started understanding this was happening more and more, we decided to look at it in terms of how much municipalities across the country are spending just on this basic thing of putting financial information together. The amount 10 years ago was about R100m across the country. Just last year, 10 years later, the number was R1.6bn across the country. It has been growing exponentially over time,” she said. 

Maluleke said the dependence on consultants showed municipalities employed people without the necessary skills to do “basic” accounting work and possibly did the same in other spheres of their governance.

“Even when you have skilled people employed, they are not attending to the basics. Municipalities do not invest in their own capabilities but rather employ consultants to also do the very basics such as compile financial information.

“The question you must ask is, where else is this prevalent in the municipality? If this is happening in the finance function it is most likely happening in other functions as well and over time, it diminishes the capacities of the municipality and of course accountability doesn’t happen.”

The 2021/22 AG report found 220 municipalities used consultants for their financial reports.

“Because these municipalities cannot master credible financial reporting, they appoint consultants year after year without ensuring that skills are transferred to municipal staff, and what was intended to be a short-term solution continues indefinitely.

“In total, 81% of municipalities reappointed the consultants used in the previous year, slightly more than the 78% that did so in 2020-21,” the report read.

KwaZulu-Natal municipalities spent the highest amount of money on consultants — a total of R309m. Despite the amount spent on consultants, about 62% of municipalities still fell short of having their books in good standing. 

Maluleke raised concern about consultants taking advantage of municipalities. 

“What I am concerned about is the tendency of those consultants to come and do the basics knowing full well they add no value but then extract significant resources from the municipality.” 

In contrast to the majority, the Matjhabeng municipality in the Free State poached staff from the AG's office and National Treasury to prepare financial statements in-house without using consultants. According to the AG report, this saved the municipality R8.74m in consultancy costs.