Municipality paid financial consultants R24m, yet obtains disclaimer audit
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An Eastern Cape municipality paid its employees R66 million in salaries and R24m to consultants to compile financial statements, yet it obtained a disclaimer of audit opinion.
The Chris Hani District Municipality is one of the 22 municipalities that could not provide evidence for most amounts and disclosures in their financial statements to Auditor-General Tsakani Maluleke in 2019/20.
Briefing the three parliamentary committees on Tuesday, Maluleke said her office relied on third-party information to establish the financial information presented by the municipalities.
She said her office approached the National Treasury to check the equitable share and conditional grants allocation to the 22 municipalities. It found R6.5 billion had gone through the municipalities over the year, but only less than a billion was sitting in bank accounts at the end of the financial year.
“In between, nobody is reporting, nobody is accounting and nobody knows for sure what happened to these monies.”
Maluleke said most of the municipalities that obtained a disclaimer of audit opinion were placed under administration, some for years.
Her presentation showed that 12 municipalities had their audits completed by the April 23 deadline this year. Ten others, including those audited subsequently, finalised them on June 4.
Maluleke said Limpopo did away with disclaimers with great effort and that there were no disclaimers in Gauteng.
Although there was no disclaimer in the Free State, the audits for municipalities there could not be completed on time.
“Either they submitted late or did not. We are not able to say much in that province,” she said.
The municipalities with disclaimers:
- Chris Hani District
- Ingquza Hill
- Sundays River Valley
- Amajuba District
- Inkosi Langalibalele
- uMzinyathi District
- Govan Mbeki
- Dr Pixley Ka Isaka Seme
- Beaufort West
- Kai !Garib
- Dr Ruth Segomotsi Mompati District
- Maquassi Hills
- Lekwa Teemane
- Ramotshere Moiloa
Maluleke said the Madibeng Municipality in North West had been under administration for two years and had struggled with access to water and concerns about service delivery.
The municipality received R861m in conditional grants and equitable share but it was left with R26m at the end of year. No one could account for the R600m.
She said the Chris Hani District Municipality in the Eastern Cape received R1.43bn in equitable share and a conditional grants allocation but was left with R42m in the bank at the end of the year.
“Essentially, a billion has gone through to the municipality with little info as to what it was spent on.”
Maluleke said the municipality had employees in its finance unit who were paid R66m in salaries. It had hired consultants, at a cost of R24m, to compile financial statements.
“If we add R24m and R66m, you come to R90m for the purpose of compiling financial information, and yet this district municipality has a disclaimer of audit opinion.”
She said the Umzinyathi District Municipality in KwaZulu-Natal was allocated R6.3m from the national government but was left with R2m in the bank at the end of the financial year.
“These are some worrying signals about what is happening in these municipalities in different parts of the country,” Maluleke said.