Home South African Auditor-General report: The good, the bad and the ugly for municipalities

Auditor-General report: The good, the bad and the ugly for municipalities

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Auditor-General Tsakani Maluleke this week painted a worrying picture of municipalities whose audit outcomes remained poor. In her 2019/20 report, she said 27 municipalities obtained clean audits, 89 unqualified audits, 66 qualified audits, six adverse opinions and 12 disclaimers.

Auditor-General Tsakani Maluleke this week painted a worrying picture of municipalities whose audit outcomes remained poor. Picture: Thobile Mathonsi/African News Agency (ANA)

In her 2019/20 report, she said 27 municipalities obtained clean audits, 89 unqualified audits, 66 qualified audits, six adverse opinions and 12 disclaimers

Cape Town – Auditor-General Tsakani Maluleke this week painted a worrying picture of municipalities whose audit outcomes remained poor.

In her 2019/20 report, she said 27 municipalities obtained clean audits, 89 unqualified audits, 66 qualified audits, six adverse opinions and 12 disclaimers.

There were 57 municipalities that had outstanding audits.

Maluleke said the number of municipalities that obtained clean audits was higher than the 20 recorded.

“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.

She said they planned to raise the importance of maintaining that which was in place and improve so that we do not go backwards, to the incoming municipal leadership.

She said there were 43 new municipalities which improved from the last year while some went backwards.

“It tells that none of the auditees have got stability of systems and predictability of outcomes that guarantee gradual improvement.

“We do need to stabilise internal controls within local government.”

Most of the metros, which Maluleke said carried a significant budget, had unqualified audits except Buffalo City Metro and Nelson Mandela Bay which were qualified and City Ekurhuleni with a clean audit.

The audit of Mangaung, which previously attained a qualified audit, was not complete because they submitted financial statements late.

“You have one clean audit among the metros and the majority unqualified and two qualified ones in the Eastern Cape.”

The performance of municipalities according to the nine provinces is as follows:

Eastern Cape

Maluleke said while they improve year after year, there were still instances of the control environment being poor.

The province has some good stories to tell with Senqu municipality continued to maintain a clean audit track record.

Free State

Maluleke said they have raised financial health concerns in the Free State for many years now.

“We started to see an over-reliance on consultants in the Free State in a number of years ago.

“In this year, some of the things that we see are late or non submission of financial statements, which is worrying.”

She fingered the Maluti-a-Phofung that simply did not submit statements for audit purposes.

Gauteng

The province boasts two clean audits from Midvaal municipality and the City of Ekurhuleni.

“Midvaal sustained clean audits for a number of years,” Maluleke said, adding that the municipality had stability in leadership.

Tshwane and the City of Joburg have qualified audit opinions.

KwaZulu-Natal

The uKhahlamba municipality has maintained a clean audit record for six years.

“They invest in ensuring all systems internally support credible generation of useful and reliable info and compliance matters were kept in check,” Maluleke said.

Limpopo

The province has done away with disclaimers, something credited to the tone set by the provincial government.

The Capricorn municipality retains its clean audit while the only adverse audit was obtained by Mogalakwena municipality, which has been a site of much political and administrative instability for many years.

Maluleke said the municipality was without a CFO and persons acting in that role led to significant instability.

“While with staff of people within the finance paying them R111m a year, when the year ended they did not have records to allow preparation for information for audit purposes.

“They went to hire a consultant and paid R44m. We could not agree with information that was presented as evidence,” she said, adding that compiling the financial statements cost the municipality a total of R145m.

Mpumalanga

The province has regressed over the past four years from unqualified to adverse.

Maluleke said the auditors struggle to complete audits in Mpumalanga as auditing was incredibly difficult.

“Many municipalities run their transactions out of bank accounts and try to compile statements at the end of financial year and the ability to audit what has been cobbled at the end of year is really difficult.”

Northern Cape

The auditor general said their major concern was around financial health of municipalities in the province

“We see some changes moving in the right direction. For them to be sustainable there is a need for leadership to instil key disciplines that are required.”

North West

This province, said Maluleke, is one where they rang alarm bells for many years.

A total of 12 municipalities remained unaudited as financial statements were not submitted on time, if they were submitted at all.

Maluleke said Ditsobotla Municipality, which is facing disinvestment in Lichtenburg by dairy company Clover due to power services, has repeated disclaimers and was not able submit financial statements on time.

She also said Dr Ruth Mompati District, which obtained a disclaimer, did not do reconciliation of its bank accounts and even made double payment to some suppliers.

The municipality received a combined R697m from equitable share and conditional grants and it was left with R115m at the end of the financial year.

“In terms of accountability for the R500m, nobody is able to do that,” she said.

Western Cape

The province has retained its track record as housing the largest number of clean audits.

“That is credit to good financial accounting controls within municipalities and also the support given by the provincial government . This province delivered financial statements that are free of material misstatements for all but two municipalities,” Maluleke said.

OVERVIEW

Eastern Cape

Two municipalities received unqualified audits with no findings, 15 unqualified audit reports with findings, 14 qualified reports with findings, two adverse, four disclaimers and two outstanding

Free State

Four unqualified audit reports with findings, 11 qualified reports with findings and eight outstanding

Gauteng

Two municipalities received unqualified audits with no findings, seven unqualified audit reports with findings, one qualified report with findings and one outstanding

KwaZulu-Natal

Two municipalities received unqualified audits with no findings, two unqualified audit reports with findings, 14 qualified reports with findings, one adverse, three disclaimers and two outstanding

Limpopo

One municipalities received unqualified audits with no findings, 13 unqualified audit reports with findings, seven qualified reports with findings, one adverse, and one outstanding

Mpumalanga

Three municipalities received unqualified audits with no findings, two unqualified audit reports with findings, three qualified reports with findings, two adverse, one disclaimer and nine outstanding

Northern Cape

Three municipalities received unqualified audits with no findings, six unqualified audit reports with findings, 10 qualified reports with findings, one disclaimer and 11 outstanding

North West

One unqualified audit report with findings, six qualified reports with findings, three disclaimers and 12 outstanding

Western Cape

14 municipalities received unqualified audits with no findings, nine unqualified audit reports with findings, and seven outstanding.

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