We welcome the Consolidated Report on Audit Outcomes of Local Government for 2013/14 released by the Auditor-General today.
The report shows consistent improvement in almost all aspects of municipal audit outcomes. It points to a steady trend towards good governance and sound financial management. This reinforces more efficient and accountable basic service delivery in line with the Back to Basics approach.
Of the 335 municipalities and municipal entities audited: 102 improved, 194 remained constant, 27 regressed, 2 were new and 10 were still outstanding.
We welcome the fact that 198 (58%) of all 335 municipalities and municipal entities received unqualified audit opinions for their financial statements. This is up from 165 (49%) last year. For municipalities, 148 (53%) now have unqualified audits - up from 120 (43%) last year. Auditees with financially unqualified opinions now account for 76% of the total local government expenditure budget of R315 billion. This means that almost eight out of every ten rands spent by local government is spent by entities with financially unqualified statements.
The report recognises that a concerted effort was made to address irregular expenditure. Auditees with qualification on irregular expenditure decreased from 100 to 74. However, the quantum of irregular expenditure of R11, 4 billion remains unacceptably high.
An overwhelming 96% of auditees (municipalities and municipal entities) submitted their financial statements on time. This is an improvement over 93% in 2012-13 and a massive improvement from 78% in 2007-08. Auditees qualified on the basis of inadequate information on property, infrastructure and equipment are down to 95 (from 118 last year.) This item has been responsible for most qualifications over the past few years. Those receiving a financially unqualified opinion with no findings on predetermined objectives and legislative compliance (a so-called “clean audit”) deserve special congratulations. This number increased to 58 – consisting of 40 municipalities (14%) and 18 municipal entities (32%). This is an improvement on last year’s result of 30 (9%).
We congratulate all provinces on the improvement in their audit outcomes. The biggest contributors to the number of unqualified opinions with no findings on predetermined objectives and legislative compliance are Gauteng (13, or 39% of their auditees), KwaZulu-Natal (20, or 28% of their auditees) and the Western Cape (18, or 55% of their auditees).
Limpopo deserves a special mention. For 2012/13 only one of its 32 auditees received an unqualified audit. The others received qualified (19), adverse (3) and disclaimed (9) audits. This has improved dramatically to 15 unqualified audits for 2013/4. These results were achieved through hard work, dedication, leadership and consistent hands-on engagement by, with and in municipalities.
Back to Basics is a drive for discipline, commitment and performance; in this regard benchmarks have been set for municipalities to perform their basic responsibilities. Joint national-provincial Back to Basics Task Teams have been established in all provinces. These teams have developed support plans which are integrated into municipal IDPs. Municipalities are submitting monthly reports to a CoGTA National Monitoring Centre on the implementation of Back to Basics performance indicators. MECs report regularly on Back to Basics implementation in provinces.
As part of Back to Basics we are giving special attention to the 50 municipalities that received disclaimed audit opinions and particularly the 25 that had disclaimed opinions for the past five years.
The main reason for disclaimed opinions was inadequate or missing supporting documentation. This is caused by failure to strengthen internal controls and the lack of skilled officials. Over-reliance on consultants also remains a concern. This is unacceptable; we are asking the MEC’s to oversee that councils institute disciplinary action against negligent and underperforming officials.
If need be we will refer some municipalities to the relevant political parties to consider a change in the leadership of these municipalities if there is no immediate improvement.
Furthermore; as part of Back to Basics we will redouble our efforts to address these challenges by working with provinces and municipalities to:
- Implement audit response plans addressing issues raised by the Auditor General;
- Ensure risk management and effective internal audit units and audit committees;
- Capacitate Municipal Public Account Committees through training and support to provide effective oversight.
- Ensure appointment of competent senior management; we are making progress in enforcing compliance in this regard:
- 56% of municipal managers have completed all four minimum competencies. The remaining 25% are progressing towards completing these competencies. 19% of MM positions are vacant.
- 61% of chief financial officers have already completed all four minimum competencies. The remaining 20% are progressing towards completing these competencies. 19% of CFO positions are vacant.
Candidates who do not meet minimum competency requirements are not endorsed by MEC’s.
Thus far MECs have launched five court applications for orders nullify the appointments of the municipal managers without the necessary qualifications.
Collaboration between national, provincial and local government has supported this work. We value our partnerships with the Auditor General, National Treasury, SALGA, provincial government and the private sector.
We encourage the AG to strengthen their audit focus on fraud and corruption risk within supply chain management. We must deal firmly with those few individuals with insatiable greed, who steal at the expense of the people.
Enquiries:
Dumisa Jele
Cell: 082 908 4798
E-mail: dumisaj@gmail.com
