Barely every week after Scores Afrika launched its annual research of the 100 largest municipalities within the nation, warning that the native authorities sector was on the snapping point, Auditor-Normal (AG) Tsakani Maluleke says there is no such thing as a proof of enchancment in municipal administration, as she introduced the 2020/21 Audit Outcomes on Local Government Report on Wednesday.
The deteriorating monetary well being of municipalities reveals growing indicators “of a collapse in native authorities funds and continued deterioration over the time period of the administration,” says an announcement issued by the AG.
5 years in the past there have been 33 clear audits out of 257 municipalities. By 2021, and regardless of repeated warnings and proposals, simply 41 municipalities boasted clear audits, and most of those are district municipalities. “There’s not a lot motion in the fitting course,” mentioned Maluleke at a presentation on Wednesday.
“There’s one metro (with a clear audit), only a few native municipalities, only a few municipal entities and only a few intermediate cities.”
The scenario with the metros is especially regarding. Tshwane (Gauteng), Johannesburg (Gauteng), Ekurhuleni (Gauteng), Cape City (Western Cape) and Nelson Mandela Bay (Japanese Cape) have been all downgraded to beneath funding grade by 30 June 2021.
“The downgrades put stress on among the metros to lift funding for capital expenditure, they usually had to make use of inside financial savings from operational budgets to fund shortfalls. A lot of the metros have been placed on evaluation for additional downgrades by the credit-rating businesses, which means that they might plunge deeper into sub-investment territory if financial circumstances worsen. Though a few of these metros have money reserves, additional use to make up income shortfalls will scale back the metros’ capability to fulfill future debt obligations as they fall due,” mentioned the AG.
Non-compliance and ‘no studies’ are frequent
The system of native authorities isn’t making any significant enchancment within the journey of strengthening establishments, efficiency and transparency, mentioned the AG. “The monetary well being (of municipalities) stays an actual concern. Years and years of ignoring audit findings have weakened these establishments.”
5 years in the past, 90% submitted monetary studies for audit on time. Now the determine is 82%, with the worst offenders being within the Free State, North West and Northern Cape.
The state of economic administration at provincial stage has gone backwards.
The Japanese Cape had simply 4 clear audits, each its metros (Nelson Mandela Bay and Buffalo Metropolis) acquired certified audit opinions, and the AG issued 4 disclaimers – the worst stage of audit opinion – of which three are repeats.
“The Free State continues to deteriorate within the face of inaction by the political and admin management. There’s a tradition of late and non-submission, and the metro (Mangaung) is unqualified however has main administration and governance issues, which result in service supply collapse and that metro is below administration,” she mentioned.
“Our staff laments that there is no such thing as a clear audit within the Free State and hasn’t been for a very long time.”
Some 43% of expenditure in North West resulted in irregular expenditure, “which tells you that there’s a excessive tolerance for non-compliance throughout the establishments of native authorities,” mentioned the AG.
Western Cape stays SA’s best-run native authorities
The Western Cape emerges but once more as one of the best run province within the nation, accounting for 22 of the 41 clear audits throughout the nation.
“Mpumalanga has additionally gone backwards over the past 5 years and our message to them has gone unheeded,” mentioned the AG.
The Northern Cape had various late submissions, although Maluleke says she is inspired by the variety of districts within the province that ended up with clear audits.
North West ended the 12 months and not using a clear audit.
Audit outcomes – municipalities
Gauteng had two clear audits, as did Ekurhuleni metro and Midvaal.
The AG praised Limpopo for making the best enchancment over the past 5 years, which was because of the tone set by the provincial administration.
Nevertheless, these enhancements had been on the again of pricey consultants. “Until they give attention to capacitating the establishments of native authorities, this enchancment will diminish,” she added.
AG does a deep dive on municipal misspending
In an effort to learn how cash was being misspent, the AG’s groups chosen ten municipalities with repeated disclaimers and pored by means of their checking account statements. In 4 of those municipalities, it discovered a mixed R1.7 billion paid to service suppliers, after which referred this spending to the finance accountability buildings, from the mayor to the council, the MECs for finance and treasury, and the provincial Division of Cooperative Governance and Conventional Affairs (CoGTA).
Within the remaining six municipalities, the AG says after an examination of the financial institution statements, her audit groups are none the wiser as to the place the cash went.
“Our groups went by means of the financial institution accounts and couldn’t discover the distinctive identifiers (just like the counter-foil within the outdated cheque books) to say the place the cash went. Both there was no stub, or the stub was empty. We referred this to the Monetary Intelligence Centre for them to research the place this cash went,” she mentioned.
One other new improvement was the choice to conduct on-site inspections of bodily infrastructure, similar to landfill websites and waste water administration techniques.
What the inspectors discovered was effluent working into roads and into water techniques, inflicting main well being issues.
Landfill websites are poorly managed, posing an environmental and well being hazard.
As to the state of economic administration, solely 62 municipalities (25%) gave the AG credible monetary administration practices in place, even though they’ve CFOs and groups employed particularly for this activity.
“R10.41 billion is paid to those finance models in payroll and but we don’t get credible monetary statements,” mentioned the AG. “(within the 2021 monetary 12 months) they spent R1.26 billion on consultants.”
Different highlights from the report:
- Nationwide authorities financed municipalities by means of ‘equitable share’ distributions of R80.26 billion and conditional grants of R46.21 billion. Personal income from municipalities amounted to R304.56 billion.
- 64% of municipal debt isn’t recoverable. At 80 municipalities, greater than 80% can’t be recovered. The debt assortment interval of 124 municipalities was greater than 90 days overdue.
- Salaries and wages paid to municipal workers, together with councillors, was R113.7 billion, which is 60% of recoverable income and fairness share allocation from nationwide authorities.
- Collectors have been higher than accessible money at yearend in 47% of municipalities. The common creditor fee interval is 240 days.
- 166 municipalities (64%) incurred unauthorised expenditure totalling R20.45 billion.
Many municipalities log out on unfunded budgets, and find yourself working out of cash earlier than yearend and so can not pay Eskom and bulk water payments. “They don’t plan and even funds for upkeep, as a result of they don’t have the cash for it – and that leads to a deterioration within the high quality of that infrastructure and the providers delivered,” mentioned the AG.
It’s time for a change in tradition
It’s now time to alter the tradition inside municipalities, beginning with the municipal supervisor, the mayor, and the council. They’re given a accountability in regulation to be sure that they watch over efficiency planning and administration. At provincial stage CoGTAs are speculated to evaluation the annual efficiency plan of the municipalities.
Three years in the past, the Public Audit Act was amended to furnish the AG with enhanced powers to eradicate, observe down and get better losses. The amendments launched the idea of a cloth irregularity (MIs), which is broadly outlined as non-compliance or contravention of laws, in addition to fraud, theft or breach of fiduciary obligation.
These enhanced powers to chase down MIs have been exercised at 94 municipalities in pursuit of 185 MIs, together with procurement issues, infrastructure upkeep, inappropriate billings, and money circulation administration.
When municipalities don’t reply to those MIs notices, a extra critical remedial motion is taken. Three remedial motion steps have been initiated at Ngaka Modiri Molema within the Free State.
“If that goes unattended, then we go to issuing a certificates of debt, and we now have completed so in sure situations, the place issues are referred to regulation enforcement,” mentioned the AG.
“In Tshwane we raised an MIs when infrastructure was vandalised, and was not being safeguarded.”