The 2022-2023 Local Government Audit Outcomes noted that there has been little change when it comes to the improvement in the government of South Africa’s municipalities.
According to Auditor General (AG) Tsakani Maluleke, the trend of poor audit outcomes in local government continued, with only 34 (13%) of municipalities obtaining clean audits.
“Meaningful improvement over the term of the new administration was not evident, while 45 municipalities have improved their audit outcomes since 2020-21, 36 have regressed,” Maluleke explained.
“The most prevalent audit outcome was an unqualified audit opinion on the financial statements with findings on performance reporting and/or compliance with key legislation at 43% of municipalities. These municipalities had made little effort to move out of this category, with 77 remaining there since the end of the previous administration’s term,” she added.
Maluleke said that one of the main issues was compliance with legislation with 86% of SA’s municipalities receiving material compliance findings, slightly regressing from 85% in the previous year and 83% in 2020-21.
The AG said that poor financial management remained prevalent.
“Municipalities lost revenue because they were not billing and collecting revenue, and due to water and electricity losses as a result of infrastructure neglect,” she said.
Some municipalities were also not careful with their spending practices.
“The main reasons for the continuing financial losses and waste were poor payment practices, uncompetitive and uneconomical procurement practices, limited value and benefit received for money spent, and weaknesses in project management,” Maluleke noted.
She said that her department is in the process of recovering an estimated R900 million from its material irregularity process.
“The material irregularity process continues to make an impact with financial losses of an estimated R924.1 million having been recovered, are in the process of being recovered or have been prevented because of this process,” the AG said.
The audit looked at 247 municipalities with audits that had been completed by March 31, 2024, which was the cut-off date for inclusion in this report.
The best and the worst municipalities
The AG said that the City of Ekurhuleni Metro in Gauteng regressed from a clean audit to an unqualified audit opinion due to lapsed procurement and contract management controls.
Buffalo City Metro in the Eastern Cape regressed from an unqualified audit opinion with findings to a qualified audit opinion due to internal control deficiencies, the report noted.
“Mangaung Metro in the Free State again received a qualified audit opinion due to audit action plans that were not effectively implemented to address prior-year qualifications and poor record keeping,” according to the report.
“Both eThekwini in KwaZulu-Natal and the City of Johannesburg metros retained last year’s outcome of an unqualified audit opinion with findings.”
The City of Cape Town Metro in the Western Cape has sustained a clean audit status over the administrative term, the AG has noted.
The report also said that the Nelson Mandela Bay Metro in the Eastern Cape improved its audit outcome from a qualified audit opinion in 2021-22 to an unqualified opinion with findings, by addressing the multiple material misstatements in its financial statements.
Lastly, the City of Tshwane Metro improved its outcome from an adverse audit opinion to a qualified opinion by taking steps to implement prior-year audit recommendations.
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