Heads must roll in municipalities following AG report says OUTA
Municipalities have repeatedly ignored the AG’s red flags and recommendations, raising the need for new interventions and civil oversight mechanisms as authorities at both provincial and national level fail to take action to stem the decline.
The Auditor-General of SA (AG) reported to Parliament this week that only 2% of the municipalities fully complied with supply chain management legislation. “The AG has raised red flags and made many recommendations to municipalities for action, however, it has become plainly obvious that municipalities have blatant disregard for the AG’s findings and recommendations, year after year,” says Julius Kleynhans, Strategy and Development Executive at OUTA. “It is high time the AG exercises his powers and holds the transgressors to account in their personal capacity. Municipalities are where most money gets stolen.”
On Wednesday, the AG’s office briefed the National Council of Provinces on his report on local government audit outcomes for 2018/19.
The AG’s report comes when municipalities are finalising their budgets for the new municipal financial year which starts on 1 July. There has been little evidence that any municipalities are trying to address financial mismanagement or the economic challenges exacerbated by Covid-19. In a time when excellent management and innovative solutions are needed, many municipalities simply expect residents to fund their misspending and maladministration by adding increases on service charges and rates.
The abuse of the supply chain process leads to uncompetitive and unfair procurement and inadequate contract management, which the AG indicated was commonly mentioned in their findings.
Collectively, R2.07 billion of municipalities’ expenditure was classified as fruitless and wasteful, R11.98 billion was unauthorised, and irregular expenditure increased from R25.2 billion to R32.06 billion – a total of R46.13 Billion under question.
“OUTA supports Minister Mboweni’s call for municipalities to adopt the zero-based budget approach. This will be a good start to local government reform, as the current model has failed dismally. The local government ship has sunk in the vast majority of our municipalities and it’s time to cut deep. Provincial oversight has also failed dismally, as these are the authorities who should identify municipal mismanagement and hold to account those who fail to do their jobs, and we believe it’s possibly time to remove provincial oversight on municipal management” says Kleynhans.
According to the AG, the year-end balance of irregular expenditure which has accumulated over many years and not been dealt with (through recovery, condonement or write-off) stood at almost R66 billion. “There is enough money in this country to improve service delivery and the lives of many citizens, but we will never succeed while those in charge are not held accountable for their failures and transgressions. Residents have suffered for too long under this broken system,” Kleynhans says.
Out of 257 municipalities, only 20 (8%) managed to achieve clean audits in 2018-2019, 33 (13%) got disclaimers with findings, while the audits of 28 municipalities’ (11%) were still outstanding, which in itself is a gross disregard for the residents of these municipalities. Over the last three years the audit outcomes of 76 municipalities (30%) regressed with those of only 31 (12%) improving.
Municipalities spent R1.26 billion on consultants for financial reporting services, of which only 7% was as a result of vacancies in municipal finance units. “This means that 93% of municipal spending on consultants for financial reporting services was probably paying external service providers to cover for employees who are not doing their work,” says Thabile Zuma, researcher in OUTA’s Public Governance Division.
Further concerns are that municipal councils continue to pass unfunded budgets. Overall, 34% of the municipalities disclosed a deficit which amounted to R6.29 billion mainly because of the inability to collect debt from municipal consumers. OUTA believes the debt problem will become even worse due to the repercussions of the Covid-19 pandemic. Of the R53.52 billion owed to creditors, payments to Eskom were in arrears of R11.31 billion and to water boards R6.24 billion in arrears.
The average creditor-payment period was 180 days. At year end, R53.52 billion was owed to municipal creditors but the cash available amounted to only R43.20 billion. This is a sign that residents are either getting fed up with service delivery, or that municipalities do not have the requisite skills and systems in place to manage customer debt and enquiries, or a combination of both.
“People are losing their jobs and good businesses are closing down because of bad and unethical business practices in municipalities,” says Zuma.
Alan Straton
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