Unaccountable: North West municipalities record R3.2bn in irregular expenditure
North West municipalities’ financial health deteriorated in the past financial year as local government leaders continued to ignore procurement legislation, leading to a ‘staggering’ level of irregular expenditure.
In the past five years, not a single municipality in North West has received a clean audit. Instead, many municipalities have received repeated disclaimer audit opinions.
Madibeng, for example, is one of the worst-performing municipalities in the country, having received disclaimer opinions for seven years in a row, according to Auditor-General Tsakani Maluleke’s 2021/22 local government audit.
Six municipalities in North West received disclaimers of opinion: Kgetlengrivier, Madibeng, Lekwa Teemane, Naledi, Ratlou and Maquassi Hills.
A disclaimer is the worst audit opinion possible, where, because of insufficient disclosures, the AG was unable to form an opinion on the credibility of an entity’s financial statements.
Improvements and regressions
Out of the 22 municipalities in North West, five – Ramotshere Moiloa, Greater Taung, Dr Kenneth Kaunda District, Matlosana and Moses Kotane – showed improvements from previous audit opinions.
Meanwhile, at least seven municipalities regressed from previous audit opinions or maintained a repeated disclaimer opinion.
Audit outcomes for Mamusa and Ditsobotla local municipalities are outstanding due to their late submission of financial reports.
Seven of North West’s 22 municipalities have been put under administration for issues such as failing to supply water to communities; administrative and political instability impacting on service delivery; failure to deal with prior audit outcomes, and non-compliance with supply chain management processes.
The seven crippled municipalities are Dr Ruth S Mompati District, Kagisano-Molopo, Kgetlengrivier, Madibeng, Naledi, Ramotshere Moiloa and Tswaing.
The Auditor-General has been encouraging the province’s political leadership and oversight structures to hold municipal managers and officials accountable for poor audit outcomes and to implement consequences promptly.
Read more in Daily Maverick: Something is rotten in North West municipalities … but nobody in power seems to care
A culture of unaccountability prevails in the province.
Maluleke said the municipalities’ financial health has continued to deteriorate since the previous local government audit report.
Fruitless and wasteful expenditure
“The already cash-strapped municipalities owe Eskom and the water boards R2.44-billion and R2.85-billion, respectively. This poor financial state is worsened by a lack of prudent spending, which can be seen from the increase in unauthorised and fruitless and wasteful expenditure,” said Maluleke.
In 2021/22, irregular expenditure in North West municipalities totalled R3.29-billion – 12% of its provincial budget of R27.42-billion.
“Municipalities continued to disregard the legislated requirements for procuring goods and services, resulting in a staggering R30.99-billion irregular expenditure closing balance at the end of 2021-22,” said Maluleke.
“We continued to enforce accountability through our expanded mandate by notifying municipal managers of material irregularities so that municipalities can implement the required changes.
“We have issued 21 material irregularities on non-compliance with legislation, resulting in financial losses of R83.74-million as well as substantial harm to the general public and municipalities.”
North West municipalities recorded R2.4-billion in unauthorised expenditure and over R300-million in fruitless and wasteful expenditure during the financial year.
The AG said there were minimal consequences for wrongdoing.
Seven municipalities disclosed their inability to continue operating in the foreseeable future, which is a further indication of the level of financial distress in the province.
“Revenue collection also remains a concern, contributing to municipalities’ worsening financial health. Overall, 79% of the municipal debt was not recoverable at 10 municipalities, and 11 municipalities will need to use next year’s budget to pay for their spending this year, resulting in serious cash-flow challenges and leaving even fewer funds available for service delivery,” said Maluleke.
Seven North West municipalities feature on the AG’s list of 70 municipalities that need urgent attention. All of these municipalities have faced significant financial challenges for at least five years. They are:
- Maquassi Hills
- Ramotshere Moiloa
Maluleke has urged North West municipal councils to create a conducive environment for turnaround strategies and recovery.
She said: “All roleplayers in the accountability ecosystem should make incremental positive changes within their area of responsibility to see a sustained improvement in audit outcomes and increased service delivery to the people of North West.”
Read more in Daily Maverick on the AG’s municipal audit outcomes:
- Gauteng municipalities lose ground amid R30bn in irregular expenditure, says AG report
- ‘Poor management’: Just two of 27 Limpopo municipalities receive clean audits, AG calls on leaders to ‘take charge’
- Auditor-General slams Northern Cape municipalities’ ‘inability to manage their resources’
- Cape Town and Prince Albert pave the way with clean audits but problems persist in Beaufort West, Laingsburg and Kannaland
- How the best-run municipality in SA gets the numbers right
An ANC report presented at the party’s elective conference in North West in August 2022 painted a frightening picture of the state of municipalities in the province, detailing how some ANC branches are led by gangsters and former convicts. DM