Financial Health Of SA Municipalities Calls For Prompt Intervention


The office of South Africa’s Auditor-general released a report lamenting the poor financial health of SA municipalities which has gone up to 92%  calling for a quick intervention.

Local government’s audit reporting standards have enormously increased in the past five years, but according to auditor-general’s annual report on municipalities’ performance, 72 municipalities are indicated to have received unqualified audits in the 2014-’15 financial year compared to only 13 indicated five years ago.

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This report posed a big worry considering the increase in the country’s financial management in general where irregular expenditure has more than doubled since 2010-’11 to R14.75bn while wasteful and fruitless expenditure is above R1bn higher than in 2010’-11 at R1.34bn and unauthorized expenditure more than doubled from 2010-’11 to R15.32bn.

Giving out the possible factors leading the fall in the Financial health of municipalities, the auditor-general Kimi Makwetu said:  “The main reason for the unauthorized expenditure was because of the overspending of the budget, and more than 60% of the overspending relates to non-cash items not budgeted for.”

Narrating further, Makwetu pointed out that a total of 26% of South African municipalities were in a particular poor financial position by the end of 2014-’15.

 “There is material uncertainty with regard to their ability to continue operating in the foreseeable future.” he added

To Makwetu, it was worrying that SA municipalities rely heavily on the use of consultants to prepare their financial statements. More municipalities joined the pool of extremely financially unsound local governments and

Reliance on consultants have been proved not to be justified as 68% of the SA municipalities that used consultants’ services had weaknesses in the financial reporting sphere especially as “consultancy costs for financial reporting services increased over the past five years to R892m.”

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Meanwhile, Western Cape topped the list of the was the highest concentration of clean audits at 73%, followed by Gauteng (33%) and KwaZulu-Natal (30%). On the other hand, provinces with the problem of presenting a clean audits are Limpopo, North West and the Northern Cape where the audit outcomes have been “disappointing at best”.

The report says there are yet other internal control weaknesses and a lack of administrative and financial disciplines at certain municipalities in provinces like Central Karoo, West Rand in Gauteng and Umkhanyakude districts in KZN.

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