Gauteng municipalities lose ground amid R30bn in irregular expenditure, says AG report

The financial health of municipalities in Gauteng remains of great concern to Auditor-General Tsakani Maluleke, with an increasing number of regressions in audit outcomes in the province’s municipalities.

According to the AG’s local government audit outcomes of 2021/22, Gauteng municipalities lack financial discipline, consequence management and effective oversight, which has resulted in inadequate service delivery.

In addition to the lack of financial discipline, Gauteng metros have experienced political instabilities due to mayorships changing hands multiple times since the 2021 local government elections.

“Although the tone set by provincial leadership in restoring Gauteng to clean governance has been positive, it is not yet yielding the desired results,” according to Maluleke.

 

Only two out of 11 municipalities in Gauteng received clean audits, and one municipality has improved, according to the AG’s report.

Ekurhuleni and Midvaal have consecutively received clean audits for three and nine years respectively. Rand West City Local Municipality improved from a qualified opinion with findings to unqualified opinions with findings.

Meanwhile, four municipalities have regressed in audit reports while other municipalities have maintained the same audit opinions, which has negatively affected both municipalities and residents to properly assess services promised to them by the administration.

Municipalities that have regressed include the City of Tshwane, Emfuleni, Mogale City and Merafong. This is despite Merafong and West Rand municipalities having been placed under provincial administration.

 

Poor state of financial health

Maluleke said the financial health of all municipalities in the province in 2021/22 continued to deteriorate as revenue collection remained poor and metros continued to rely on loans to fund their operations and capital infrastructure projects, while district and local municipalities relied on grants.

She said non-compliance with legislation by municipalities remained a concern.

The AG found that six of Gauteng’s municipalities had been in worrying financial positions for consecutive years: Tshwane, Emfuleni, Merafong, Rand West, Sedibeng and West Rand.

 

“We did not see an improvement from the previous year. There were fewer instances of non-compliance relating to supply chain management legislation, with a slight decrease in the irregular expenditure incurred, from R6.59-billion to R6.46-billion,” read the report.

However, the closing balance of irregular expenditure remains high, at R29.41-billion.

Municipal public accounts committees did not investigate identified instances of non-compliance as a matter of urgency to ensure that the irregular expenditure closing balance was dealt with in line with legislation.

“Since 2018/19, we have issued 21 material irregularities linked to various instances of noncompliance, with an estimated financial loss of R575.10-million.

“The material irregularity process continues to gain traction as most accounting officers are busy taking corrective steps, including improving internal controls, upgrading and maintaining infrastructure, instituting disciplinary processes and recovering funds,” said Maluleke.

Read more in Daily Maverick on the AG’s municipal audit outcomes:

• Auditor-General slams Northern Cape municipalities’ ‘inability to manage their resources’


• Cape Town and Prince Albert pave the way with clean audits but problems persist in Beaufort West, Laingsburg and Kannaland


• How the best-run municipality in SA gets the numbers right

The AG urged governance structures and councils to closely monitor the progress of municipal managers in implementing the actions they have committed to take so that these material irregularities can be quickly resolved.

This includes the remedial action issued for three material irregularities at the City of Tshwane for the municipal manager’s failure to implement the recommendations issued following the city’s adverse audit outcomes in 2022.

Maluke said instability at the council level in Gauteng metros also hampered council approval and decision-making on important strategic and operational matters, resulting in delayed consequence management processes.

The City of Johannesburg is no exception to council ructions.

Instability at the council and mayoral level resulted in the late tabling of investigation reports because of delayed council sittings, in turn delaying the accountability processes.

The Johannesburg mayor’s State of the City address, which is meant to provide direction and reveal budget priorities, is set for 6 June – halfway through the year. DM