Auditor-general Kimi Makwetu says that irregular expenditure among South Africa’s municipalities has more than doubled over the last five years, to R14.75 billion.<\/p>\n
Releasing his report on local government audit outcomes for the 2014-15 financial year,\u00a0 Makwetu revealed that municipalities have shown an improvement in their audit results over the past five years from 2010-11 to 2014-15.<\/p>\n
He said the number of municipalities that received financially unqualified audit opinions with no findings (commonly known as \u201cclean audits\u201d) had increased from 13 to 54.<\/p>\n
However, 18 additional municipal entities also achieved clean audit status, taking the total number of clean audits to 72 in the current period.<\/p>\n
Irregular expenditure<\/strong><\/p>\n Irregular expenditure has more than doubled since 2010-11 to R14.75 billion and is incurred by an increasing number of municipalities, the report said.<\/p>\n The reason for the increase in irregular expenditure, according to Makwetu, is continued non-compliance with SCM legislation, but also an improvement in the ability of municipalities to detect and disclose current and prior year irregular expenditure in their financial statements.<\/p>\n In 2010-11, 73% of the irregular expenditure was identified during the audit, while in\u00a0 2014-15 municipalities identified 69% of the irregular expenditure \u2013 some using consultants to determine the full extent of irregular expenditure.<\/p>\n Municipalities in North West, Mpumalanga, Eastern Cape and Limpopo were the main contributors to the significant increase in irregular expenditure over the past five years, the AG said.<\/p>\n Fruitless and wasteful expenditure \u00a0<\/strong><\/p>\n Fruitless and wasteful expenditure in 2014-15 was more than R1 billion higher than in 2010-11 at R1.34 billion, and was\u00a0 again incurred by an increasing number of municipalities.<\/p>\n Municipalities in the provinces of Mpumalanga, Eastern Cape, North West, Free State and Northern Cape were the main contributors to this increase.<\/p>\n Unauthorised expenditure<\/strong><\/p>\n Unauthorised expenditure also increased threefold from 2010-11 to R15.32 billion.<\/p>\n “The main reason for\u00a0 the unauthorised expenditure remains overspending of the budget; however, more than 60% of the overspending related to non-cash items, i.e. estimates of depreciation or impairments that were not correctly budgeted for,” the report said.<\/p>\n Financial health of municipalities<\/strong><\/p>\n In 2014-15 the AGSA rated the financial health of 92% of the municipalities as either concerning or requiring intervention. The figure stood at 82% in 2012-13 when the overall assessments were introduced.<\/p>\n Makwetu said that the most concerning indicators over the past three years were municipalities spending more than the resources they had available; current liabilities exceeding current assets at year-end; debtors not paying or taking very long to pay their\u00a0 debt; and creditors not being paid on time.<\/p>\n “In total, 26% of municipalities were in a particularly poor financial position by the end of 2014-15, with material uncertainty with regard to their ability to continue operating in the\u00a0 foreseeable future – 10 more municipalities than in 2011-12,\u201d\u00a0 said Makwetu.<\/p>\n How the ANC is leading municipalities to financial ruin<\/strong><\/a><\/p>\n South Africans owe municipalities R118 billion<\/strong><\/a><\/p>\nMore on SA municipalities<\/h3>\n