Durban - Political instability, inexperienced officials and system-related challenges at many of KwaZulu-Natal’s municipalities are crippling service delivery and costing ratepayers billions, says Auditor-General Tsakani Maluleke.
The 2020/21 Audit Outcomes on Local Government Report, presented by Maluleke last week, paints a grim picture of municipal finances, with some failing to even show what they did with the money.
Maluleke said most KZN municipalities – 89% – still struggled to implement proper controls over supply chain management processes, which contributed to high levels of irregular spending.
The irregular spending had more than doubled over the term of the previous administration, from R7.19 billion in 2016-17 to R14.45bn in 2020- 22.
She said that in 2021, the Department of Co-operative Governance reported that 64 municipalities were dysfunctional due to poor governance, weak institutional capacity, poor financial management, corruption and political instability.
By June last year, 23 municipalities were under administration or provincial intervention, a total that had increased to 33 municipalities by February this year.
In KZN, eThekwini Municipality retained its “unqualified opinion with findings” – meaning the municipality was able to produce quality financial statements, but struggled to produce quality performance reports to comply with key legislation.
Maluleke said that for eThekwini Municipality – which accounts for 53% (R47bn) of the local government budget in the province – to improve, the City should focus on strengthening its monitoring and review of procurement and consequence management.
uMkhanyakude District Municipality and Inkosi Langalibalele (Estcourt) were labelled the “worst” in the province, receiving a “disclaimer opinion” audit report – meaning the municipalities could not provide evidence for most of the amounts and disclosures in their financial statements. Inkosi Langalibalele was formed when uMtshezi and Imbabazane merged.
Maluleke said the amalgamation created significant challenges with the credibility of its financial statements, which the municipality was still grappling with, despite using consultants and having an administrator since 2016-17.
The uMkhanyakude District Municipality is made up of rural and tourism-rich municipalities in the far north of the province, including Inkosi Mtubatuba, Jozini, Hlabisa and uMhlabuyalingana.
These had been a political battleground for the IFP and ANC, which had made them unstable in terms of political leadership. Four other district municipalities – Amajuba, Ugu, uMzinyathi and Uthukela – received qualified opinions, meaning their financial statements contained material misstatements that were not corrected before the financial statements were published.
Maluleke said the consistent poor quality of financial statements remained a concern, given that some municipalities had capacity, skilled finance units, and support from consultants.
She also revealed that KZN municipalities spent R698 million on consultants, but did not get value for money.
“Although municipalities paid R698m to financial reporting consultants over this period, there was only limited improvement in control environments and audit outcomes.”
Management did not adequately implement and monitor action plans to improve the control environment.
In addition, the lack of standardised processes, poor records management and the inadequate review and reconciliation of financial reports persisted.
“Consultants should only be used in favourable control environments, with adequate support being provided and skills being transferred to ensure that the limited public funds are spent effectively and responsibly,” she said.
Maluleke said poor financial management practices, such as ineffective revenue and debt collection processes, continued to plague municipalities.
This had a negative effect on service delivery, as municipalities struggled to pay outstanding creditors on time. “The accounts of Eskom and the water boards were R1.85bn in arrears.
“Municipalities also struggled to practise sound financial management and budget monitoring, as 15% of them reported deficits for the year.”
Reacting to the state of KZN municipalities, Nathi Olifant, Spokesperson for Finance MEC said they were concerned about the prevailing negative audit outcomes, but said the province was hard at work rectifying the situation.
“Provincial Treasury continues to commit itself to supporting municipalities and promoting good financial governance in the public sector, as per the 2021 resolutions of the municipal finance roadshows conducted by National Treasury and national Cogta.
“We do not only empower CFOs, municipal managers or financial officials, but this extends to councillors by up-skilling them with financial oversight tools and instruments,” he said.
SUNDAY TRIBUNE