Bad and getting worse: AG laments state of country's public finances

Auditor-general Kimi Makwetu has lamented that the management of public funds at local government level is getting worse - including in the DA-governed Western Cape, where municipalities fared better than in the rest of the country.

Makwetu was tabling his report on the financial performance of municipalities in the 2017/18 financial year in Pretoria on Wednesday.

As the plundering of public funds at local government continues to worsen, hostility against the AG's office personnel continues to heighten. This included intimidation and death threats in places such as the embattled eThekwini metro in Durban.

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Citing an example of how bad the country's municipalities are at accounting for spending public funds, Makwetu said the Metsimaholo municipality in the Free State spent R21.7m for the construction of a sports complex but had little to nothing to show for it.

Makwetu said it shocked him that upon visiting the site where the sports complex was meant to be built, only a fence could be spotted with not a single brick nor foundation laid. This despite the exorbitant amounts spent by the municipality.

On clean audits, the picture was going from bad to worse. Only 18 of the country's 257 audited municipalities scored a clean audit opinion.

Although the Western Cape continues to lead the pack with 12 of these 18, the province regressed with a 30 percentage point decline from the previous year.

Free State, Limpopo and North West were the three provinces with not a single municipality with a clean audit.

Countrywide, the deterioration is getting worse, with clean audits continuing to decline since the 2015/16 financial year. Then, there were 48 municipalities to get clean audits. This dropped to to 33 in the following years, and with the current 18 there seems little sign of improvement.

Makwetu said that at the heart of the problem was lack of accountability and leadership, slow implementation of - and downright disregard of - the AG's office recommendations.

Worse still, he went on, the AG's office was finding it more difficult to do its work without fear owing to rising hostility by transgressing municipalities.

"The audit environment became more hostile with increased contestation of audit findings and pushbacks whereby our audit processes and the motives of our audit teams were questioned," said Makwetu.

"Moreover, pressure was placed on audit teams to change conclusions purely to avoid negative audit outcomes or the disclosure of irregular expenditure, without sufficient grounds." 

He said "threats to and intimidation of our auditors were also experienced in most of the provinces".

The AG also revealed that although irregular expenditure had dropped across the board from the previous year, the numbers were still unacceptably high.

Irregular expenditure by municipalities had dropped from R29.7bn to just more than R25bn, with Makwetu noting that "the amount could be even higher as 46% of the municipalities were qualified on the incomplete disclosure of irregular expenditure".

In this regard, the underdeveloped Eastern Cape was the leading transgressor, recording R7.3bn of irregular expenditure - about a quarter of the national share.

Nelson Mandela Bay, which is governed through a coalition government, said Makwetu, was the champion of irregular expenditure in the financial year under review, followed by Mthatha's OR Tambo district municipality.

Makwethu believes only leadership at the top of local government can turn the situation around.

And if they refuse to repent, he warned, mayors as well as municipal managers would be hit hard in their personal pockets when the amendments to the Public Audit Act - giving the AG office teeth to bite with binding remedial action - is effected.

"The leadership sets the tone at the top of any organisation. If an organisation's leaders are unethical; have a disregard for governance, compliance and control; and are not committed to transparency and accountability, it will filter through to the lowest levels of the organisation," he lamented.

Following the binding remedial action of the office that became law in April this year, Makwetu said in future the AG "will consider initiating a process that would trigger a certificate of debt in the name on an accounting officer or the accounting authority associated with such material irregularity".