Municipalities raked up at least R26 billion in irregular expenditure – auditor-general
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Auditor-General (A-G) Tsakani Maluleke says municipalities incurred R26 billion in irregular expenditure in the 2019/20 financial year.
Maluleke also said the councils incurred R14.4bn in unauthorised expenditure. As if that was not enough, the municipalities spent about R1bn on consultants to compile their financial statements.
Briefing the joint meeting of standing committees on public accounts and A-G as well as the portfolio committee on co-operative governance and traditional affairs on Tuesday, Maluleke said that local government finances continued to worsen.
She said that 27% of the municipalities indicated concern about financial health status.
“A key aspect to worsen in 2019/20 is revenue not collected. Creditors are not paid on time – a major indicator that the system is under significant pressure.”
Maluleke also said they found that a large number of municipalities ended the year with a deficit.
“Many incurred unauthorised expenditure in the year, R14.4bn, because of reliance on equitable share and conditional grants to fund their operations.”
She noted that with many municipalities relying on equitable share and conditional grants to pay employee salaries and councillor remuneration, this came at the cost of not being able to deliver services and conduct required maintenance on infrastructure.
Maluleke said the auditors still found financial management systems to be weak. She said they found that the vast majority of municipalities did not have critical disciplines – weekly, monthly, quarterly and bi-annual – for the preparation and presentation of quality financial statements.
“They then relied on the audit process to compile financial statements and fix misstatements.”
Maluleke said another worrying issue was reliance on using consultants to help municipalities put financial statements together.
“In this year we found R1bn was spent on consultants who helped municipalities compile financial statements for audit,” she said.
A total of 10 municipalities obtained a disclaimer of audit opinion despite hiring consultants to compile financial statements.
She also revealed that R26bn in irregular expenditure was found in 246 municipalities that submitted their financial statements.
“While the number R26bn is reported, we hasten to add that we believe the number is understated because 73 municipalities were already qualified on the completeness of disclosure of irregular expenditure.
“We can't confirm the completeness of this number and we therefore assert it is likely to be higher than 26bn,” Maluleke said.