Withhold funds from dysfunctional municipalities: Salga

The South African Local Government Association (Salga) has called on the National Treasury to withhold funding from municipalities that consistently fail to properly account for public funds.

The call came as auditor-general Kimi Makwetu decried the poor financial management of SA's municipalities. He said most were crippled by debt and unable to pay for water and electricity, were haunted by inaccurate and lacklustre revenue collection, saw expenditure that is unauthorised, irregular, fruitless and wasteful, and had a high dependence on grants and assistance from the national government.

Makwetu was publishing the audit outcomes for local government for the 2018/19 financial year. This was his last batch of outcomes before he leaves office in November.

This year's bleak audit outcomes have forced Salga, a local government advocacy organisation, to call for bold action against municipalities that fail to account for what they are supposed to do.

“We are saying withhold the money and hold us accountable until we are able to deliver what the money is purported to do. It is the first time that we make that call,” said Salga president Thembi Nkadimeng on Wednesday.

She said it was the need to make tangible resolutions that has seen Salga for the first time ask the government to enforce a provision of the constitution which allows the Treasury to withhold funds from an organ of state that commits a serious or persistent breach of Treasury control measures.

“We are saying: can you enforce us under section 216. The regression clearly indicates there is poor leadership, there is poor management and there is poor consequence management,” she said.

Nkadimeng said during the period under review, Salga trained municipal public account committees in 109 of the country's 257 municipalities. She said they will be going back to those municipalities to see if there was any value to that training.

“It's also got to do with: are you training somebody who is trainable, someone who understands what he or she has got to do? Do you understand, do you have the capacity and capability to understand and be able to do what you are intended to do at council?” she said.

Makwetu's report, titled “Not Much To Go Around, Yet Not the Right Hands at the Till” found there was a regression in the audit outcomes under the current local government administration, now in its third year. Over the three-year period, the audit outcomes of 76 municipalities regressed, with only 31 improving.

“The financial statements show increasing indicators of a collapse in local government finances,” said Makwetu.

The auditor-general assessed 79% of the municipalities as having a financial health status that was either concerning nor requiring urgent intervention. Just under a third of municipalities were in a particularly vulnerable financial position, according to the report.

The audit office also found a rise in fruitless and wasteful expenditure, with 200 municipalities losing R2.07bn in the year under review. Over the three-year period, R4.27bn of government expenditure was fruitless and wasteful.

Makwetu found that billions of rand in funds allocated to municipalities were being managed “in ways that are contrary to the prescripts and recognised accounting disciplines”. He said these administrative and governance lapses make for very weak accountability and the consequent exposure to abuse of the public purse.

Compliance with supply chain management legislation has also regressed since 2016-17, the AG found, adding that only 2% of the municipalities are fully complying.

“This is in spite of all the reporting we have done in this area, the red flags we have raised, and the many recommendations we have made. Uncompetitive and unfair procurement processes and inadequate contract management were common,” he said.