The South African Local Government Association (Salga) has expressed its disappointment at what it sees as deteriorating levels of accountability in the recent audit outcomes of local government for the 2019/20 financial year.

Salga reiterates its calls, made following the previous year’s municipal audit outcomes, for accountability and consequences for any malfeasance in the management of local government finances. 

Salga calls on mayors and speakers to extract accountability and implement consequence management, as well as on the National Treasury and Department of Cooperative Governance and Traditional Affairs (Cogta) to exercise powers vested in them in terms of the Municipal Finance Management Act (MFMA).

Salga says its position is that, where there are clear instances of fraud and criminality, it is the mayor's and the speaker's fiduciary duty to refer these matters to law enforcement agencies.

The organisation highlights that it has, in the past year, succeeded in ensuring that the Municipal Structures Act as amended by Parliament gives powers to Municipal Public Accounts Committees (MPACs), similar to Parliament’s Standing Committee on Public Accounts (Scopa), to extract accountability and enforce consequence management.

Salga says this should be done by instituting investigations into fraud and any other acts of criminality.

It also welcomes the amendment and recommits itself to working closely with MPACs to extract accountability.

CALL TO ACTION

Salga emphasises that councils must employ competent people and take appropriate steps where officials fail to carry out their responsibilities.

Salga says municipalities receiving unqualified audit outcomes numbered 147 in 2016/17, 123 in 2017/18, 114 in 2018/19 and 116 in 2019/20.

“Although there is a slight improvement in the number of unqualified audits received by municipalities for the period 2019/20, the Auditor-General’s (AG’s) report, however, indicates an overall regression in comparison with the previous years, mainly due to the 57 audits which were not finalised by the cut-off date.

For audits finalised by the general report cut-off date, there is a net improvement in audit outcomes of 30 municipalities, with Limpopo (eight municipalities) and the Eastern Cape (six municipalities) being the two provinces with the greatest net improvements in municipal audit outcomes compared with the prior year.

“The magnitude and severity of the problem identified by the AG calls for decisive action and means that we, as Salga, must persistently insist on municipalities to implement consequence management and enforce accountability,” the organisation emphasises.

Salga also highlights some pockets of excellence.

The AG report shows that, of the 200 municipalities that had finalised audits, about half (116) received unqualified audits and, of those, 27 received clean audits.

These 27 municipalities are pockets of excellence whose success stories must be celebrated.  These 116 municipalities account for 77% of the overall local government expenditure budget.

“This is a clear reflection that even though there are challenges with financial management, local government is not completely dysfunctional in financial management if 77% of the local government sphere expenditure budget is under the control of municipalities who have at the very least attained financially unqualified audit opinions,” Salga acclaims.

CHALLENGES

Salga notes that one of the biggest challenges that has confronted local government over the past 20 years is that of municipal consumer debt.

It notes that the AG’s 2019/20 report continues to contextualise this problem and demonstrates how it affects municipal governments’ budgets, their ability to render services and their accounting processes.

Salga also notes a worrying and growing trend of the use of consultants in municipalities for financial reporting purposes, yet some municipalities have nothing to show for it.

The AG report has identified that “municipalities used consultants for financial reporting services at a cost of R1.02-billion” of public money. Yet, 59% (102) of financials submitted for auditing included material misstatements, Salga says.

It says it will again be writing to all municipalities implicated to conduct investigations and act against any wrong doing found.

Salga says it is intensifying its resolve to extract accountability and consequence management from affected municipalities who do not exercise accountability and consequence management and will work with stakeholders who have the legislated powers to do so.

In this regard, it has called on the National Treasury to invoke Section 216 of the Constitution against municipalities that do not exercise accountability and consequence management.

Salga urges all municipalities which received negative audit outcomes to place emphasis on improving their control environment, to implement their audit action plans with AG’s recommendations and to do so with the requisite seriousness over the coming financial year.