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Auditor-General speaking into the void on local government corruption

Dysfunctional control environments – and greedy hands in the till.
Accountability? A municipal manager found guilty of financial mismanagement was paid a R1m settlement when he resigned. Image: Moneyweb

The Auditor-General (AG) released the 2018/2019 Municipal Finance Management Act consolidated general report on local government audit outcomes last week. The report indicates extreme abuse of the public purse.

Many municipalities have dysfunctional control environments, high levels of corruption, and are in dire financial straits.

Read: Confirmation that municipalities are a huge burden on taxpayers

However, the AG is of the optimistic opinion that local government does have sufficient money to fulfil most of the basic needs and aspirations of its citizens, but a lot more work needs to be done.

With an apparent lack of oversight of municipalities, and no accountability or consequence management, there were 28 outstanding audits.

If the government cannot get municipalities to submit their financial statements on time, how can it stem the tide of corruption?

Audit outcomes

The audit outcomes of the municipalities (excluding municipal entities) are reflected below for comparative purposes. Because irregular expenditure (IE) reflects the extent of mismanagement and possible corruption, the IE from uncompleted audits has been included, as well as the IE from Gauteng’s municipal entities of R1.8 billion (2018: R1.3 billion).

Comparative audit outcomes
Province Number of municipalities Clean audits Outstanding audits Unqualified financial statements Irregular expenditure (Rbn)
2019 2018
Eastern Cape 39 3% 2 43% 6.700 7.400
Free State 23 0 8 20% 1.742 1.050
Gauteng 11 11% 2 100% 6.758 5.368
Kwa-Zulu Natal 54 2% 1 62% 6.517 0.151
Limpopo 27 4% 3 29% 2.094 1.143
Mpumalanga 17 11% 2 39% 1.100 0.358
Northern Cape 31 4% 4 33% 0.390 0.350
North West 25 0 5 0 5.500 4.300
Western Cape 30 45% 1 93% 2.700 1.057
33.501 21.177

The financial statements reflect a culture of unaccountability:

  • R1.26 billion was spent on consultants to assist in the preparation of financial statements;
  • 41% of municipalities had no policy or no approved policy on water maintenance;
  • 41% of municipalities had no policy or no approved policy on sanitation;
  • Many municipalities are crippled by debt and are unable to pay for water and electricity;
  • Many municipalities are not able to collect debt;
  • Unauthorised, irregular, fruitless and wasteful expenditure proliferates throughout all municipalities;
  • Some municipalities depend on grants and assistance from national government;
  • Lack of financial controls and project monitoring is common;
  • Limpopo lost R1.2 billion through the VBS debacle (various court actions are underway and the Hawks are onto it … )
  • A municipal manager (Vhembe District in Limpopo) was found guilty of financial mismanagement and was paid a R1 million settlement when he resigned!
  • Conditional grants are not always spent on intended purposes;
  • Supply chain management marked by poor record keeping, lack of supporting documents, and improper tender documents;
  • Expenditure on information technology: millions spent on systems implemented but not used, millions spent on systems with defects, millions spent on software licences not utilised; and
  • Salary figures for municipal managers and senior management were not in the report.

All in all, these are dysfunctional control environments. There are greedy hands in the till, prolonged vacancies in key positions, no consequences for poor performance and transgressions, and a complete disregard for legislation, internal controls, and financial management. Our infrastructure and institutions are crumbling around us.

Read: Municipal manager gets 48% increase during lockdown

Our legal system is inadequate to deal with all this corruption.

There should be a fast-tracked prosecutorial regime: lifestyle questionnaire, trace the assets, follow the money, claw back all settlements and pension/provident funds, take all assets, and imprison the guilty. Enough is enough.

The AG is of the view that firm steps should be taken to “restore the integrity of these institutions and place them in a position to manage their finances towards the achievement of citizens’ needs”.

And how does government view the report?

Dr Nkosazana Dlamini-Zuma, Minister of Co-operative Governance and Traditional Affairs (Cogta), tweeted that she “welcomed” the report. Perhaps the minister “welcomes” all AG reports. After all, the AG issued a disclaimer of opinion on the Cogta annual report for 2019 as he was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. The Cogta audit report details a shocking lack of internal controls, non-compliance with legislation, and hundreds of millions of rand lost – including through payments made to wrong suppliers, ghosts, and non-qualifying government employees.

Has the Minister got to grips with the corruption in Cogta?

The fish rots from the head. Until the government stands up against corruption, the AG will be speaking into the void. Nothing will get done. The municipalities will continue to plunder and loot until it is unable to provide basic services. And then the consequences will be catastrophic.

Listen to Nompu Siziba’s interview with Auditor-General Kimi Makwetu:

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And what is happening with the Munics that have been declared bankrupt etc in the Eastern Cape. How do we get proper governance and the right people in place?

You dont they have been like this for years and no action was ever taken. It will just get worse.

Can Mr Kieswetter not see that this is his shortfall.

All this while govi wants to tell us what to buy, eat, wear, when to exercise, who we can go visit..l quite laughable

What is the use if auditing for corruption and yet most municipalities go backwards in terms of the audits.

If we can’t put a stop to ANCcorruption we will never progress let alone transform.

Like lemmings streaming en masse for the cliff. Inherent death wish it seems.

What is all the fuss about?

It has been like this since 1994, people riot, burn tyres, burn municipal offices the list is endless and what happens? NOTHING. It just goes on, so let me start again,

WHAT IS ALL THE FUSS ABOUT? This how it is from PE to Cairo. Note not CT to Cairo from PE to Cairo.

A municipality is simply a tool in the hands of the local community. Depending on their level of sophistication, that community can use that tool to build infrastructure and services or to destroy it. When the thought processes and mindset of the community have not evolved to adapt to modern-day amenities like sewage works, schools, swimming pools and libraries, they will use the municipality as a tool to destroy those sophisticated amenities and revert to the pit latrine or the bush toilet. The municipality brings equilibrium between the infrastructure and mindset of voters.

This public display of the mindset of the average voter is visible all across the country in all districts and wards. In some places, new sewage plants are being built while elsewhere the plants are being destroyed. In some places, people respect the libraries and schools while elsewhere they burn it down. In some places, they erect new statues while elsewhere they take down the old statues. The people are changing their surroundings to reflect their thought processes. This is the power of democracy. Ultimately, this is the only difference between Switzerland and Zimbabwe.

This public manifestation of the mindset cannot be changed by the government because those who are moving away from sewage works, towards pit latrines, are the ones who elected that government. The mindset of the leaders represents the mindset of the voters. That is why the sewage is running down the streets in 80% of townships. This a way for the people to express themselves. This is how a democratic system empowers people to reveal their thought processes.

“The mindset of the leaders represents the mindset of the voters.”

That sums up our once great country, spot on!!

Well said as usual Sensei but the “people” often have the idea that the bloated entities created by the ANC for their own self enrichment will somehow have the peoples’ needs at heart. They won’t; these VBS type municipalities are that in name only like N Korea is democratic.

A real municipality is from the people and uses ratepayers’ money to do what the ratepayers’ want. Pretty much the opposite of many, usually ANC, municipalities in SA. ANC run – into the ground.

A one time payment from the national government to municipalities to furnish their needs and fulfill their fiscal duty for the year is the wrong approach. These so called officials clearly cannot cope with seeing 250bn in the provincial purse in the beginning of a fiscal year, and yet they are still employed!!!
Certainly, municipalities cannot even be faithful with much, we must send them back to the basics and let them learn to be faithful with the least. Funds from national government should be paid in a a series of four or more payments PER QUARTER and the release of the next payment should be contingent upon the proper use of the prior payment tranche. In light of corruption, no subsequent payment will be made until officials are fired and/or imprisoned.

It is often said they steal from the poor but this is also theft from tax payers. Thomas Jefferson aptly puts it; “The government should derive its power from the governed.” Yet, the governed are the ones being robbed blind. Sick state!

Per quarter is too little. There needs to be a rolling budget, month to month. Each process in budget management can be done on a monthly basis.

Ag man, just another “Proudly South African” achievement, wouldn’t you say?

Democracy was supposed to lead to a better economy with chances for all to build a better future.

Our democracy has been turned into a scam that empowers the looters and incompetents at the expense of the broader population. No high profile people went to jail to try and stem this tidal wave of corruption. We are paying high salaries so that people can occupy positions that add no value to our country.

One day it will be the ANC that will be held accountable for crimes against humanity.

The solution to Municipal governance is simple and cost effective:

Make the councilor positions honorary again, as it was pre 94. No payment.

That way you attract a better class of councilor, one with more life, professional and business experience and a mindset to put the interests of the community first.

Also, municipalities save on all those executive salaries, especially the smaller ones, where the money can be used for service delivery.

Mindboggling to think that the interests of 10 councilors are more important than the interests of thousands of residents.

What makes a person decide to become an auditor?
When they realise that they do not have the charisma to succeed as an undertaker.

The voters are not capable of understanding the Auditor’s reports and at the same time they will continue to suffer “unknowing why”.

It a not the voters money so why should they care? This is the plight of socialism and tribalism, it is emotive not logical and for any human with eyes let alone a single brain cells it will never make sense to vote based on facts.

Unfortunately even the most intelligent single cell organisms will face reality at some stage regardless of how much emotion they feel.

This is where our Institutions need to have more power and to Ban any party from governing the next 5 years unless certain basic conditions are met.
Because there is no disincentive for poor governance, that is why they are above the law.

The solution is really simple and straight forward, and impossible to implement. The right to vote should be determined in the same way as at a company. Shareholders, who have skin in the game, are incentivised to appoint the best people with the best skills to win market share in a competitive environment. The customer gets the best products at the best possible price, and employees receive the best wage possible as part of this process. All parties are winners, even those who do not have voting rights benefit from the system. Anybody is free to purchase shares if they want to vote. This is the sustainable form of democracy. The profit objective enforces accountability and leads to responsible behaviour patterns among voters, managers and employees.

The right to vote should be a function of a formula that consists of the following criteria: the amount of income tax paid + the value of property owned inside the country + the amount paid in salaries and wages + 10 times the charitable donations to welfare organisations. This formula sustainably incentivises social beneficiation. The current formula that is used in South Africa is a recipe for disaster.

You are spot on Sensei ,however you need people in govt to administer such a formula: As u can see from municipalities this ANC lot would be utterly incapable of completing the calculation :

I see Ace Magashule left his indelible mark on the Free State, his personal fiefdom.

No wonder the ANC has run out of money!

End of comments.





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