This year’s poor audit outcomes by more than 200 municipalities are a cause for concern for the South African Government Association (SALGA) which has called for municipalities with adverse audit outcomes to adopt best practices if the country is to see an improvement in sustained negative audit outcomes.
This week, Auditor General (AG), Tsakani Maluleke, briefed the Portfolio Committee on Cooperative Governance and Traditional Affairs on the consolidated general report on local government audit outcomes 2022/23.
The Local Government Audit Outcomes for 2022-23, tabled by the AG revealed that government’s poor audit outcomes has continued unabated with only 34 (13%) of the 257 of municipalities obtaining clean audits.
The report states that 110 of these achieved unqualified with findings, while 90 achieved qualified outcomes with findings. Six municipalities achieved adverse findings, 14 achieved disclaimed outcomes with findings, with only three achieving outstanding audits.
This financial year, there was a 45% reduction in the number of municipalities with disclaimed audit outcomes compared to the previous financial year, but SALGA says more needs to be done to improve the situation.
“SALGA has observed that the MFMA 2022/2023 audit outcomes indicate a notable 45% reduction in the number of municipalities with disclaimed audit opinions. This is commendable and needs to be replicated to improve financial governance in all those municipalities still in the red zone.
“Municipalities such as Mopani, Madibeng, Kgathelopele, and Kgetlengrivier have improved and moved out of disclaimed audit outcomes, for the first time, after several years of disclaimed audit opinions,” SALGA said.
According to the Auditor General, municipalities with clean audits usually display sound financial management practices.
“These municipalities generally manage projects well so that deficiencies are identified and rectified promptly and so that time-lines, budgets and quality standards are adhered to.
“The well-functioning control environment and good systems present at these municipalities form a solid foundation from which councils can prioritise further improving the performance and service delivery of their municipalities,” she said.
Maluleke said poor performance by municipalities has a direct impact on service delivery and impacted negatively on financial stability and living conditions of the people and communities who should benefit from solid financial stability.
“Wasted money and resources means reduced funding for service delivery priorities and, eventually, a greater burden on taxpayers. The lack of credible reporting on performance and finances weakens not only municipal accountability processes, but also the council’s ability to assess the municipality’s performance or to make decisions in response to underachievement.
“These continuing failures in the most critical part of municipal operations are not receiving the necessary attention from the elected leadership,” she added.
SALGA said the results show that of the 257 municipalities, 144, representing 56%, have provided credible financial statements and obtained clean and unqualified audits in the MFMA 2022/2023 financial year.
“Overall consolidated audit outcomes, as compared to 2021/2022, have stagnated with four (4) municipalities dropping from unqualified without material findings to unqualified with material findings, which is concerning. More efforts must be made to assist municipalities in achieving unqualified audit outcomes. The national and provincial governments, through legislative and other measures, must support and strengthen the capacity of municipalities to manage their affairs, exercise their powers, and perform their functions,” it said.
According to the AG, the most prevalent audit outcome (43%) was an unqualified audit opinion on the financial statements with suggested findings on performance reporting and/or compliance with key legislation affecting 43% of municipalities.
She said municipalities in this category made little to no effort to move out of this position, with 77 remaining since the last administration’s term.
Furthermore, the report suggests that compliance with legislation continues to be the biggest challenge for municipalities, with 86% receiving material compliance findings, regressing slightly from 85% in the previous year and 83% in 2020-2.
Saturday Star