Municipalities incur staggering R26bn in irregular expenditure

Auditor-general (AG) Tsakani Maluleke has reported a staggering R26bn in irregular expenditure at municipalities in the 2019/20 financial year.

Irregular expenditure was incurred in 246 of the 278 municipalities across SA.

Although it shows an improvement of R5bn from the reported R32bn last year, it was still a significant number.

Maluleke said they believed this number could be higher as some financial statements were not completed for different reasons, including non-submission and late submission.

“While the number R26bn is reported, we hasten to add we believe the number is understated because 73 municipalities were already qualified on the completeness of their disclosure of irregular expenditure,” Maluleke said.

“We can’t confirm completeness of this number and we therefore can assert it is likely to be higher than R26bn.”

In general, audit outcomes remained poor in municipalities, with only 27 receiving clean audits, 89 unqualified, 66 qualified, six adverse and 12 disclaimed, while audits in 57 were not completed.

“Twenty-seven is higher than last year’s 20, which is notable and is good progress. Our concern is that this administration inherited 33 clean audits when they began in 2015/16, so the system has gone backwards instead of making the progress that is required,” Maluleke said.

The grim state of municipal financial health was worrying as a high number spent millions on consultants but still fell short.

The biggest culprits were municipalities in the Eastern Cape, the Free State, the North West and KwaZulu-Natal, while Gauteng, the Western Cape, Mpumalanga and Limpopo made some improvements.

In the Free State, Maluleke made mention of Maluti-a-Phofung municipality as one of those that did not submit financial statements.

“We’ve raised financial health concerns around the Free State local government sphere for many years, and we started to see over-reliance on consultants in the Free State a number of years ago.

“This year, some of the things we’re seeing are late or non-submission of financial statements, which is worrying. For example, Maluti-a-Phofung is one of those audits where financial statements are simply not being submitted at all.

“Matjhabeng municipality, which was in the news in the past few weeks because of service delivery protests, is a municipality with a history of financial health challenges, and a history of supply chain management findings that go undealt with in terms of the requisite consequence management.

“This year the municipality clocked debt to Eskom of R3.3bn. At the end of the year they owed Eskom R3.3bn but did not have cash to pay. They owed the Sedibeng water board R3.6bn. They have poor infrastructure for water services because they have not been maintaining that infrastructure, and as a consequence this year they reported water losses of R462m.”

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