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Municipalities’ irregular expenditure now at R32bn – AG report

Some of the assets municipalities failing their audits purport to have bought are nowhere to be seen: Kimi Makwetu, Auditor-General.

NOMPU SIZIBA: The Auditor-General has released the municipal audit results for the year 2018 to 2019. He has entitled his report – and I quote – “Not much to go around, yet not the right hands at the till”. Out of the 257 municipalities the AG was set to audit, his office was able to complete audits on only 229, as the other 28 municipalities had not completed the necessary work by the cut-off date of January 31, 2020. Overall, there were more financial management regressions than there were improvements. Only 18% of municipalities were able to submit financial statements that had no material misstatements. Irregular expenditure deteriorated to the tune of just over R32 billion, compared with R24.4 billion in the year prior. Of the irregular expenditure, 33% speaks to goods and services that were not even received – and that’s an amount of R11.4 billion.

Well, to discuss the latest report further I’m joined on the line by Auditor-General Kimi Makwetu. Thank you, sir, for joining us. There’s so much that you pack into this annual report, but ultimately it seems to be a continuation of largely bad or poor financial management, with only 20 out of the 257 municipalities having a clean bill of financial health.

KIMI MAKWETU: Yes, you’re right, Nompu. I think we can all agree that it is not sustainable to have negative audit outcomes because, once you allow them to become a permanent feature of your operating environment, you will quickly realise that you can easily go out of business as a municipality because you don’t take proper care off your administration – as well as gross oversight overreach. So we need to get to a point where it’s no longer about how many municipalities got how many clean audits in each part of the country. What matters most is what happens to those resources at all of those municipalities, regardless of where they are. I think we need to move the debate to that level.

NOMPU SIZIBA: This goes against a little bit of what you’ve just said now, but perhaps you can take us through the municipalities within the various provinces that continued to do well or improved, even though it’s clear that they don’t represent the majority? And perhaps take us through what it is they’ve been doing right.

KIMI MAKWETU: What I’m going to do is just to draw some broad strokes over that number, because you’ll see that quite a number of municipalities in the Western Cape have sustaining financials; it’s not something new, it’s a narrative that has been coming a number of years. Part of it came on the back of the steps that were taken by the provincial leadership, together with the local government leadership. And this would include mayors, municipal managers and chief financial officers who under subject item on their agenda on a quarterly basis would scrutinise those matters that cause regular deficiencies in the financial management. And I think that’s why they got over the hill as far as the those disciplines that concern that province. That’s why you happen to trust those numbers.

Then you see bits and pieces of it in Gauteng, but I think Gauteng’s problem has had a unique disruption from the instability that happened in a number of the municipalities, including metros, around political and the administration interface. When things fall apart at that level, then too many other things have had their effects of moving you backwards, even though you may claim to have the right accountant to put proper entries in your books.

NOMPU SIZIBA: So what were your observations of municipalities in the likes of the Free State, North West and Eastern Cape, whose audit outcomes didn’t look so rosy. What is it that these regions keep on doing wrong?

KIMI MAKWETU: Each one of the municipalities in those provinces that you mentioned has got a budget that its receives from the fiscus. Some of them collect revenue if they’ve got the opportunity to bill directly.

The common feature among many of those municipalities that failed their audits is when they have to account for the utilisation of their resources.

In some instances, the basic accounting reconciliations of records are not in place, and in certain instances the adherence to the processes of supply chain, for example, are not always observed.

And the evidence of some of the assets they purport to have bought, based on the monies that they show in their financial statements, sometimes are not anywhere to be seen.

So it’s a combination of all of those things that points to the fact that there’s no proper supervision of what those activities are about, and there is no real call for these accounts at council on a frequent basis rather than just once a year, because those are the people who ought to know what happened to what portion of the budget.

NOMPU SIZIBA: You’ve been harping on for years about local authorities needing to up their game in terms of greater internal controls and dodgy-behaviour prevention mechanisms. That would obviously better ensure that there are no or fewer leakages, at least, and better public finances. But this wisdom doesn’t appear to have really taken off. From where you sit, what are the constraints – or does this speak to wilful neglect where people just don’t care, even though they’re located in a public service?

KIMI MAKWETU: For me, I think it will take a number of constituencies to start looking at the value proposition for them as far as the judicious management of finances in local government is concerned. And I think if all the key representative constituencies do their bit, take their own steps, among others, and will be the people who vote people into councils, they’ve got a stake in the matter.

And I think those that are elected into office also have a stake in the matter. And until such time that you see them focusing on the things that were promised for delivery and were funded for projects, when they don’t appear anywhere, and the money has also been spent, they ought to be the first people to stand up and say, “We cannot sustain a situation like this, otherwise, if either we produce the records to substantiate the transactions or we find somebody who is going to do it, because ultimately they will be held to the same standard as far as transparency and accountability is concerned.

NOMPU SIZIBA: Mr Makwetu, you’ve been in the AG seat for seven years now, and you’re only able to serve one term. That’s a standard, and yours I think comes to its end in November this year. What have been the key takeaways from your tenure, and what is it you’d want to impress upon those who lead in the public service about improving the country’s fortunes?

KIMI MAKWETU: When you look at our public sector environment, Nompu, you can almost see that there are a number of areas where low-hanging fruit is evident, but the machinery is not operating in the way that can exploit the value that is attached to the assets that belong to the public system. So you don’t have people who wake up with a preoccupation to make sure that that dam that enables water to move from one area to the other is constantly looked at and appraised and maintained, so that there are no troubles with disruption of water for something that can be prevented. And I think there are many of those opportunities provided if they are to be dealt with in a manner that embraces the professional disciplines that many South Africans have, because others come into these environments and they get overtaken by the political cancer, and never get the opportunity to flourish in providing their technical capabilities to help improve the fortunes of many that are in those particular towns and provinces in the country.

So for me, I think that’s the key, because it doesn’t really get solved by one institution just because it was given additional powers. That might help along the way to scare off the few that …… start the roads don’t work. But ultimately, my task is whether we can take advantage of the assets that we own and make sure we derive value from them.

NOMPU SIZIBA: And then one last thing – legislation has given you or your office more power to bite those who are not doing their jobs or whatever. Do you see yourself using those powers somewhere in the remainder of your tenure, or are you going to leave that to the next guy or woman who’s going to take over?

KIMI MAKWETU: Well, on our part there are no constraints in terms of dealing with those issues. However, we have been investing for a bit of time on systems and procedures that will make sure that we can pass the test when it comes to the considerations of natural justice as we implement these provisions. So we thought it’s important we make the effort so that you don’t have to hassle with issues with certain provincials that you ought to have followed if you were to attach the certificate of debt in the name of the particular accounting officer. I’m sure somebody who gets taken on at that level will want to rip the case apart from all the angles.

NOMPU SIZIBA: That’s right.

KIMI MAKWETU: So that is an investment that we have been putting in, just to make sure that we are on a firm foundation as we commence the execution of using your provisions. And I guess, like any other provision, it will obviously be seen in terms of its impact over a period of time. But I think let me emphasise one point, Nompu, and that instrument that has enabled the strengthening of the mandate of the office can never operate in isolation. You can always operate and be effective in its operation if those that are charged with leadership in those institutions also are responding, and they are part of the accountability side.

NOMPU SIZIBA: Absolutely. Yeah. The stick really isn’t enough on its own. Like you say, there needs to be a culture of accountability and doing the right thing. Thank you so much for joining us, Auditor-General Kimi Makwetu. Take care, Ntate.

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Brought to you by Luthuli house. Gifts rewarding their cadres so they may stay in power.

PS – this is just the tip of the ice berg.

When people ask me for a ten bagger tip, i laugh. There is no such thing as a guarantee – ONLY one – the ZAR. Shorting today at 17.05 will surely yield you 10 times your investment AT LEAST in 5 years or less.

Why you might ask, read this article, read a dozen others (look through the swamp of the ZONDO commission etc) and the especially intriguing one that over a period of 11-12 years, there has been well in excess of R800B – R1T that has simply vanished/ been misappropriated.

I would love to know from inception in 1994 – what has actually been pulled out, from the first Arms deal to the tens of thousands of tenders since then. Now adjust that amount for ZAR depreciation largely caused by the same theft, for inflation and massive opportunity cost directed away from real business and infrastructure expansion. How do you put a value on the destruction of the future of a country like RSA, with one of the largest mineral bases on earth.

Heaven help us.

The word ‘ municipality ” means nothing in South Africa. These municipalities appear to be generally staffed by people who have no idea of what the job is and how to do it. The requirement of having the right qualifications to do the job does not appear to exist. And as long as they have a salary, housing subsidy and company cellphone they are happy to sit at a desk.Why have a staff meeting at the office when you can have it at a luxurious hotel? When they see one person getting away with corrupt activities they don’t report it but join in so they don’t miss out. And why not? Who gets prosecuted for corruption?
What is surprising is that the residents of these municipalities vote the same people into office time and again and then complain when there are no services.Putting the same political party back in power time and time again expecting a different result is, in the words of Einstein. an act of insanity.

You hit it on the head.

FACT/: This is an actual account of what happened in my municipality, a small rural town in the eastern cape.

When municipal elections come around the more influential people in the townships, like school teachers and health workers and taxi bosses start to promise people what they will do when elected. The gullible then vote them in. With luck there may just be one opposition party councilor.

At the first council meeting they chose a mayor, who then gets his fellow councilors to appoint his pal as MM. A friend is then appointed as the financial manager. As the rate payers chairman I went to congratulate the new mayor and found him and his friend the newly appointed MM having a good laugh in his office. They proceeded to tell me all about local politics. I said to them that is all over now you have a R30 million rand business to run. Shocked silence, totally unaware of what they had to do.

The next step is for some sleazy IT firm to bribe the financial manager into replacing the accounting system with a new one. The new one does not talk to the old one so the data base is lost, hence the annual fight for us to try and prove that rates have been paid for the last 10 years but they have no record of it. The balances owed are huge, 10 years arrears plus interest. On the strength of this cars are bought and salaries increased, hence the mess they have today.

School teachers, health workers and taxi bosses etc are incapable of running a business, but are very good at promising wonderful lies for the voters.

at

We hear this every year, yet nothing happens.

So what else is new?

They are still discussing on how to fight corruption. Maybe there is a 10 year plan?

same old story,and the tax payers will be punished.it will never stop.im praying for the second coming.

Is there any will power from our government to arrest this problem! In 2008,I remember the head of Salga or the other party who assured people on radio that they are going to train and empower people to do their job right. He said they can’t get rid of them because the problem was going to be resolved by training. People we crying and voicing their displeasure that no one was taken to task for all the maladministration that was proven and causing serious issues with service delivery.

How long does it take to train and then hold people accountable?

Municipalities then have an audacity to raise rates in this financial environment!
They have an audacity with the unions to demand and also give salary increases and bonus, really!

I am not affiliated with DA but why are they doing WAY better than municipalities by other parties, audit wise?

What would be interesting is the ratio of ANC to DA controlled municipalities and irregular expenditure. It might just tell us who governs best?

And then ABSOLUTELY NOTHING HAPPENED so the cadres continued looting.

Please use your new powers and prosecute these cANCer looters!

A simple solution to fix the municipalities: Make the councilor positions honorary again, as it was pre 94. So, no payment.

You attract a better class of councilor, with more life, professional and business experience and an approach of putting the community first.

Especially the smaller municipalities will save millions of Rands if they do not have to pay the exorbitant salaries of the councilors, money that can be spent on service delivery.

End of comments.

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