The best-run municipalities in South Africa – with more than half in one province
South African municipalities continue to show poor audit results, but 34 received the best possible finding from the Auditor General of South Africa (AG).
In the most recent report on Local Government Audit Outcomes for 2022-23, the AG said that government’s poor audit outcomes continued, with only 34 (13%) of municipalities obtaining clean audits.
“Meaningful improvement over the term of the new administration was not evident – while 45 municipalities have improved their audit outcomes since 2020-21 (the last year of the previous administration), 36 have regressed,” said the AG.
The most prevalent audit outcome (43%) was an unqualified audit opinion on the financial statements with findings on performance reporting and/or compliance with key legislation—43% of municipalities.
Municipalities in this category made little to no effort to move out of it, with 77 remaining since the last administration’s term.
Compliance with legislation was the biggest hurdle for municipalities, with 86% receiving material compliance findings, regressing slightly from 85% in the previous year and 83% in 2020-21.
“On the positive side, there were fewer municipalities with disclaimed audit opinions,
which is the worst possible audit outcome,” said the AG.
“Over the administrative term, 18 municipalities (mainly in KwaZulu-Natal, Mpumalanga and North West) have moved out of this category. Twelve municipalities received disclaimed opinions in 2022-23.”
The AG said that the quality of financial reporting has not improved much, as municipalities rely on the audit process to identify misstatements for correction.
Municipalities lost revenue because they were not billing and collecting revenue due to water and electricity losses following infrastructure neglect.
“They were also not careful with their spending practices. The main reasons for the continuing financial losses and waste were poor payment practices, uncompetitive and uneconomical procurement practices, limited value and benefit received for money spent, and weaknesses in project management.”
“Unfunded budgets and high unauthorised expenditure clearly show the weaknesses in financial planning.”
Thus, municipalities’ financial health remains weak, and poorly managed local government finances directly affect municipalities’ ability to deliver services to their communities.
Creditors like Eskom and Water boards are also not paid within legislated timelines, leaving communities without access to essential services.
To address these issues facing municipalities, the AG has called for the following:
- Professionalising and capacitating local government
- Capable institutions with intergovernmental support
- A culture of ethics and accountability
The AG is in the process of recovering an estimated R924.1 million from its material irregularity process.
Best Performers
Of the 34 municipalities that received clean results, 20 (58%) were in the Western Cape.
The City of Cape Town was also the only metropolitan municipality to receive a clean audit outcome, keeping the rating for a second year straight.
The Eastern Cape and KwaZulu-Natal received three clean audits each, while the Northern Cape received three.
Mpumalanga received two clean audits, while South Africa’s most prosperous province, Gauteng, only received one.
The North West and Limpopo did not have a single municipality with a clean audit.
However, the AG noted that clean audits are not an indicator of good service delivery and do not correlate directly to the lived experience of all communities in the area.
“However, a clean audit positions a municipality to transparently communicate to communities
about whether and when their needs will be met through accurate records, which also enable the different roleplayers in the accountability ecosystem to make informed decisions.”
“We have seen that municipalities with institutionalised controls and systems to plan, measure, monitor and account for their finances and performance, and to stay within the rules, often have a solid foundation for service delivery to their communities.”
“These municipalities also tend to demonstrate sound project management disciplines and effective use of infrastructure grants.”
Worst-run municipalities
On the other end of the scale, a disclaimed audit opinion means that the municipality could not provide the AG with evidence for most of the information in its financial statements, meaning that it could not express an opinion on whether the financial statements were credible or what it had done with the funds.
These municipalities also tend to be unable to provide supporting documentation for the achievements
they report in their performance reports and do not abide by legislation.
Of the 12 municipalities with a disclaimed audit opinion, three were found in each of the Eastern Cape, Free State and North West.
Two were found in the Northern Cape, while one was found in Gauteng.
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