The Free State Department of Cooperative Governance and Traditional Affairs (COGTA) said it will work hard to ensure recommendations by the Auditor General (AG) Kimi Makwetu to improve operations and financial reporting at municipalities are implemented with immediate effect.
The commitment follows the release of the country’s municipal audit results by Makwetu on Wednesday in which most of the municipalities in the province received poor audit results for the 2017/18 financial year.
None of the municipalities in the Free State got a clean audit, also known as an unqualified audit with no material findings and only two municipalities, Moqhaka Local Municipality and Xhariep District Municipality got unqualified audits with material findings.
At least 10 municipalities got qualified audit outcomes with findings while two got disclaimers because the AG could not make an informed opinion given the nature of the information at hand.
Nine municipalities had outstanding audits as their financial statements were not submitted on time.
The Free State COGTA department said in a statement issued by spokesperson Zolile Lobe that it was disappointed with the municipal audit outcomes and promised to work closely with all municipalities in order to improve service delivery and the preparation of financial statements.
“We have noted with deep concern the report on performance on municipalities in the Free State,” said Lobe.
“We have made an undertaking to improve and change the situation in the Free State,” he added in the statement.
Lobe pointed out it’s important for municipalities to deliver quality services to people and at the same time, remain accountable in order to promote transparency and win the confidence of the ratepayers.
“We remain committed to clean, transparent and accountable governance. We are going to do our best to implement the recommendations of the AG.
“We realise that municipalities also have an obligation to provide services to our people, in a sustainable manner, and COGTA is committed to hold municipalities to their constitutional mandate. We are looking forward to cooperating with our municipalities in (these) trying times,” said Lobe.
Makwetu lamented lack of accountability when he released what he called ‘declining local government audit results’.
He said the undesirable state of deteriorating audit outcomes shows that various local government role players have been slow in implementing his office’s recommendations while others even disregarded them.
As a result, accountability for financial and performance management continued to worsen in most municipalities.
“The leadership did not implement our recommendation to ensure stability and the filling of vacancies in key positions, despite their commitment to do so. This resulted in the significant deterioration
of municipal audit outcomes, service delivery and financial health.
“The financial crisis in the province is becoming a critical concern. Although some municipalities had been placed under provincial intervention in terms of Section 139(1) of the Constitution, it was not effective, as these municipalities’ financial sustainability did not improve,” explained Makwetu.
He indicated the quality of performance information remained poor, as only Xhariep District did not have material findings in its audit outcome. The AG however said the district municipality was only able to achieve this through material adjustments to the performance report.
Makwetu added the province’s audit outcomes have significantly regressed due to the continued deterioration in the accountability for financial and performance management
At least nine municipalities regressed from the previous year, while none were able to improve their audit outcomes nor to achieve a clean audit for the second consecutive year. Dihlabeng, Matjhabeng, Metsimaholo, Nala, Phumelela, Setsoto, Thabo Mofutsanyana District and Tswelopele regressed from an unqualified audit opinion with findings to a qualified audit opinion. Ngwathe regressed from a qualified audit opinion to a disclaimed opinion.
“If we had not allowed any material audit adjustments, the audit outcomes would have been worse, as no municipality would have received a financially unqualified audit opinion. Instability and vacancies in key positions as well as staff supporting them contributed to the poor audit outcomes at most municipalities,” said the AG.
He noted it was concerning that nine of the 23 municipalities’ audits had not been finalised by the cut-off date of this report of January 31, 2019, due to the late or non-submission of financial statements, delays in the audit process caused by service delivery protests at the municipality, and information systems-related issues.
Irregular spending by municipalities in the province stood at about R913 million or 10 percent of the provincial local government budget.
At least R1.8 billion or 21 percent of the provincial local government budget went into unauthorised expenditure while R310 million or three percent of the provincial local government budget went towards fruitless and wasteful expenditure.
Makwetu urged municipalities to among others, implement proper planning and budgeting to prioritise critical services; ensure fiscal discipline to promote the effective, efficient and economical use of resources; manage the performance of staff and effecting consequences for poor performance and transgressions, ensure essential oversight by assurance providers, especially municipal managers, mayors, councils, municipal public accounts committees and provincial coordinating departments and have comprehensive risk assessments and a fully functional internal audit unit, which independently evaluates management’s implementation of key controls and daily disciplines and reports directly to the audit committee.