Daily Maverick has been unpacking the AG’s report. Find some of the articles here:

• Financial gauge: Auditor-General puts spotlight on state of South Africa’s eight metros
• Only 41 municipalities register clean audits, with Western Cape leading the pack  – and Free State at the bottom
• More than a quarter of SA’s municipalities are on brink of financial collapse, warns AG
• The good, the bad and the shocking: A visual gauge of the financial state of South Africa’s municipalities 
• Levels of financial stress – The best and worst municipal performers in KwaZulu-Natal DM

Gauteng:

In the first two years of the previous administration’s term, municipalities in Gauteng produced good-quality financial statements. It was the only province without negative financial outcomes.

However, that changed in the 2020/2021 audit outcomes.

These cover the period of the previous political administrations whose terms came to an end in November 2021, when local government elections were held across the country.

According to the Auditor-General’s acting business unit leader for Gauteng, Dorothy Rampopo, the latest report for the province is characterised by a decline in the quality of audit outcomes.

“Of the 11 statements submitted by municipalities, six needed to be corrected through an audit process, with an additional two municipalities having received qualified and adverse opinions respectively.

“If the audit process did not provide this opportunity, the province would have only been able to produce three unmodified opinions.”

Best-performing municipalities

The City of Ekurhuleni Metropolitan Municipality and Midvaal are the only two in the province that have maintained clean audits for the past two and eight consecutive years respectively.

Clean audits mean the financial statements are free from material misstatements and there are no problems identified by the Auditor-General on reporting on performance and compliance with objectives.

Worst-performing municipalities

Municipalities including the City of Johannesburg, the City of Tshwane, Sedibeng, West Rand district, Emfuleni, Lesedi and Mogale City received unqualified audit opinions, but with findings. This means the auditors found that financial statements were fairly and appropriately presented, but there were still areas that needed to be attended to before the municipality could get a clean audit.

Rand West City and Merafong City have consecutively received qualified and adverse opinions. This means the financial statements are misrepresented, misstated and do not accurately reflect financial performance and health.

Besides the City of Ekurhuleni and Midvaal, other Gauteng municipalities have shown a regression in audit reports which have negatively affected both municipalities and residents to properly assess services promised to them by the administration.

Rampopo has attributed the regression to political instability, little to no consequence management, poor financial controls and noncompliance.

Gauteng municipalities’ state of financial health

Rampopo said the financial health of all municipalities in Gauteng was concerning, as revenue collection remained poor despite the implementation of post-Covid recovery measures.

She said the province’s failure to rein in irregular expenditure was a cause of financial distress. Gauteng municipalities had spent R919.11-million on consultants for certain elements of financial reporting since 2016/2017.

The Auditor-General’s report flagged the City of Tshwane as the worst-performing metro in Gauteng, with high levels of irregular expenditure and reliance on consultants. The irregularities amount to R2.7-billion.

The City of Tshwane’s irregular expenditure was followed by the City of Johannesburg, at R1.1-billion.

At R226-million, Ekurhuleni’s irregular expenditure was relatively lower by comparison.

In total, Gauteng’s municipalities and their entities accumulated R6.6-billion in irregular expenditure for the financial year.

Irregular expenditure among Gauteng’s municipalities had increased the risk of funds meant for service delivery being misused.

For example, in Hammanskraal in the City of Tshwane, the water has routinely been contaminated by sewage. The problem in Hammanskraal is similar to that experienced in Emfuleni Local Municipality, with the pollution of the Vaal River by sewage.

While the poor financial position of Gauteng’s municipalities has been mostly pinned on overspending, Rampopo has attributed some of the causes to low levels of spending on the maintenance of infrastructure assets (below the norm of 8%) by other municipalities that did not spend their full grant allocations, despite having only limited funds at their disposal.

Rampopo urged Gauteng’s municipalities and leadership to embed preventative controls and timeous consequence management to improve audit outcomes. DM