The South African Local Government Association (Salga) wants national and provincial governments to use legislation, and other measures, to support and strengthen municipal capacity to allow them to better perform their functions.

This follows the release of the Auditor-General of South Africa’s 2022/23 Municipal Finance Management Act (MFMA) audit outcomes, which indicated that of the country’s 257 municipalities, only 34 received clean audits.

Salga noted that, overall, consolidated audit outcomes, compared with 2021/22, have stagnated, with four municipalities dropping from unqualified without material findings to unqualified with material findings, which it said was concerning.

The association called for more efforts to assist municipalities achieve unqualified audit outcomes.

Salga said municipalities should aim to achieve clean audit outcomes, steered by capable administrative and political leadership and management that pursued sound financial management, institutionalised compliance, implemented internal controls, established processes, adhered to standard operating procedures, and fostered a culture of accountability and high performance.

It urged municipalities to adopt best practices from best performers with clean audit outcomes, institutionalise controls through digital innovations and ensure stringent performance management for all officials, including those lower than senior management.

It said municipal councils and the Department of Cooperative Governance and Traditional Affairs must ensure the functionality of oversight structures and continuous capacity building of Councillors throughout their term of office.

Salga pointed out that service delivery, financial sustainability, and compliance with legislative frameworks were fundamental for municipalities, emphasising the national and provincial government's constitutional mandate to adequately support municipalities in addressing challenges and achieving their mandate of service delivery and development.

“The three spheres of government should develop fit-for-purpose programmes, coordinate and align programmes (at national and provincial levels) for municipalities to address, achieve significant improvements and impact, and extract accountability and consequence management,” Salga advised.

Meanwhile, Salga observed that the MFMA audit outcomes indicated a 45% reduction in the number of municipalities with disclaimed audit opinions, saying it was commendable and needed to be replicated to improve financial governance in municipalities that were still in the red zone.

“Municipalities such as Mopani, Madibeng, Kgathelopele and Khetlengrivier have improved and moved out of disclaimed audit outcomes, for the first time, after several years of disclaimed audit opinions,” it noted.

Salga said it appreciated Auditor-General (AG) Tsakani Maluleke’s report, which highlighted areas that needed special attention, including revenue losses, unspent grants, inadequate budget for repairs and maintenance, insufficient capacity and skills, and governance failures.

LIMITING FINANCIAL LOSSES

The report also indicated 360 material irregularities – including non-compliance and suspected fraud – with an estimated collective value of R7.34-billion in the audited financial year.

Only R924-million was protected through, for example, recovery of financial loss or in the process of being recovered, the report highlighted.

The Portfolio Committee on Cooperative Governance and Traditional Affairs pointed out that the protected amounts were far less than the material loss, calling on Maluleke to use the additional powers that had been assigned to her office to force municipalities to limit financial losses and improve audit outcomes.

The committee has asked the Department of Cooperative Governance and Traditional Affairs, led by Minister Velenkosini Hlabisa, for a plan of action to address the situation outlined by the Auditor-General.

“The plan must include measures to eliminate repeat disclaimers and repeat offenders and should also address the inappropriate use of consultants. It should also address the problem of political interference, introduce measures to assist municipalities on the use of their conditional and other grants and include consequence management measures. A report on the criminal investigations into unauthorised amounts identified in the report should also be tabled with the portfolio committee in the near future,” said committee chairperson Dr Zweli Mkhize.

He said good governance was a prerequisite for good service delivery and addressing public discontent, and said it was disappointing to observe that metros and district councils achieved similarly poor audit outcomes as the “weaker, smaller municipalities”, despite having access to better skills and other resources.

The committee also urged the department to focus on the AG’s concerns about the negative effects of growing political instability and inter- and intra-party conflict on municipalities’ performance.