Kimi Makwetu: SA municipalities' overall audit outcomes have regressed

Recommendations made by the AG's office to improve audit outcomes have also largely been ignored, he says.

Auditor-General Kimi Makwetu, when releasing the audit outcomes for the 2016-17 financial year earlier today, said that the overall audit outcomes of the country’s 257 municipalities have regressed.

According to Makwetu, of the 257 municipalities audited‚ only 16 improved while 45 regressed. Some 33 municipalities, meanwhile, produced high-quality financial statements and performance reports and complied with all key legislation‚ thus receiving a clean audit.

Makwetu said:

"Not only did the unqualified opinions on the financial statements decrease from 68 percent to 61 percent‚ but the financial statements provided to us for auditing were even worse than in the previous year… Only 22 percent of the municipalities could give us financial statements without material misstatements. In addition‚ the performance reports of 62 percent of the municipalities that produced reports had material flaws and were not credible enough for the council or the public to use.”

Makwetu further said that recommendations made last year by his office to improve accountability and audit outcomes went largely unimplemented. This was evidenced by the findings from the audits that included attention not being paid to audit action plans‚ poor performance planning and budgeting‚ resulting in unauthorised expenditure of R12.6 billion and regression of varying degree in the status of internal control, he said.

One of the exemplary municipalities is eThekwini Metro, the CFO of which, Krish Kumar, recently won the Publc Sector CFO of the Year Award at the annual CFO Awards. With a R36.7 billion budget, eThekwini Metro had no material findings on its performance report. Of the total irregular expenditure of R513 million incurred by eThekwini Metro, R386 million was due to the awarding of a contract for the construction of housing units that was not adjudicated by the bid adjudication committee.

Makwetu’s report comes just weeks after Finance Minister Nhlanhla Nene told Parliament that as many as 112 municipalities lacked the finances to carry out service delivery plans for the current financial year.