North West SCOPA to meet Finance and Local Government MECs to discuss worsening Municipal Audit Outcomes in 2015/16 Financial Year
The North West Provincial Legislature’s Standing Committee on Provincial Public Accounts (SCOPA) has resolved to call a meeting with the MEC for the Department of Local Government and Human Settlements, Fenny Gaolaolwe and MEC for the Department of Finance, Economy and Enterprise Development to discuss deteriorating municipal audit outcomes in the North West Province.
The auditor-general (AG), Kimi Makwetu said the audit outcomes of municipalities in the North West Province regressed in 2015/16 financial year with only four municipalities receiving unqualified audit opinions with findings. The audit of Rustenburg had not been finalised by 15 January 2017, which was the cut-off date for inclusion in this report. “The fact that not a single municipality was able to achieve a clean audit outcome again highlights the lack of accountability by municipal management and other key role players in the province responsible for monitoring and assisting local government. The slow response by the political leadership to address the underlying root causes of continued poor audit outcomes will have to be countered with decisive action to hold officials accountable and implement consequence management for poor performance.
“One of our key concerns is the poor quality of submitted financial statements. All municipalities continued to rely on consultants for financial reporting, including preparing financial statements at a cost of R126,9 million (2014-15: R130,9 million), yet all the financial statements submitted for auditing had material misstatements. Had the four unqualified municipalities not been given the opportunity to correct the misstatements identified by auditors during the audit process, none of the municipalities in the province would have obtained an unqualified opinion,” said Auditor-General Makwetu. He said key controls that enable reliable and timeous financial reporting, such as proper record keeping, daily and monthly reconciliations and regular reporting, need to be institutionalized during the year without relying on the auditors to identify misstatements after year-end.
He also said a further R2,5 billion of irregular expenditure was incurred during 2015/16, which mostly related to SCM transgressions. “This brings the total balance (excluding Rustenburg) of unresolved irregular expenditure as disclosed in the financial statements at 30 June 2016 to R7,4 billion. In addition, 15 of the 22 municipalities were qualified due to the irregular expenditure disclosed being either misstated or incomplete, while there was a further limitation of R283,8 million as contracts could not be provided for auditing.
“Unauthorized expenditure of R2 billion was incurred in 2015/16, mainly as a result of overspending the approved budgets because of a general lack of understanding of the budget process and inadequate monitoring of spending. Furthermore, expenditure being incurred when it was known that the cash flow to fund this expenditure would not be collected from consumers, contributed to our assessment of 13 of 22 municipalities (59%) being in financial distress. At the end of June 2016, approximately R6,2 billion (84%) of the consumer debt of R7,4 billion due to municipalities in the province was expected to be irrecoverable,” said Auditor-General Makwetu. He said this could then result in municipalities not being able to pay their suppliers, including R874,9 million to Eskom and R923,5 million to bulk water providers.
“Of the MIG allocation of R1,4 billion to municipalities, R146,4 million (11%) was not spent. Cash-flow constraints contributed to underspending, as in some cases the grant allocations were used to fund operational expenditure. Of the 60 key projects selected for auditing, most of the ones related to water, sanitation and road projects were behind schedule or completed late and therefore did not achieve the planned targets,” said Auditor-General Makwetu.
SCOPA Chairperson, Hon. Mahlakeng Mahlakeng said the Provincial Public Accounts Committee is disheartened by the provincial municipalities’ unfortunate trophy holders of being the worst performing in the country three (3) years in succession. “We are worried about lack of both political and administrative leadership and consequence management in our municipalities,” said Hon, Mahlakeng.
For more information contact:
Namhla Luhabe
Cell: 079 527 0628
