MUNICIPALITIES in the Eastern Cape are battling to manage their money, with half showing no political will to ensure clean governance and many unable to appoint enough skilled staff to ensure delivery.

These were the findings of auditor-general Terence Nombembe, who delivered his national audit report yesterday, painting a bleak picture of the state of local government in the province for the 2010/11 financial year.

Nombembe pointed out that often there were no consequences for irregular expenditure or flouting of rules when spending money, and this created an environment of fraud and corruption.

He said internal controls at about half of the municipalities in the province needed urgent intervention.

Of the 45 municipalities in the Eastern Cape, only 13 received unqualified audits and even those had matters of concern raised by Nombembe.

Irregular expenditure increased by 64% – equating to R565-million – compared to the 2009/10 financial year.

Nombembe said flouting of supply chain management policies accounted for 97% of the irregular expenditure.

“This is the result of weak to non-existent internal controls over SCM [supply chain management] processes and the blatant non-adherence to the requirements of SCM legislation.

“Weak controls, together with a lack of consequences for SCM breaches, create an environment that is conducive to fraud and corrupt practices,” he said.

For the 2010/11 financial year, the Nelson Mandela Bay metro – the biggest metro in the province – received an unqualified audit, but the city was criticised for irregular, fruitless and wasteful expenditure of R63.4-million.

It was also lambasted for awarding lucrative tenders to companies with undeclared close family links to the city, in contravention of supply chain management policies.

Former acting municipal manager Elias Ntoba was the accounting officer at the time.

The Buffalo City metro received an adverse audit opinion, which is worse than a disclaimed opinion as it means the AG believes the financial statements of the municipality contained false information or that some facts were left out.

“We are seeing the impact of the lack of skills, the slow response of leadership to owning key controls, and the absence of managing poor performance in the risks that municipalities continue to face. At the moment these risks are beyond tolerable levels,” Nombembe said.

His comments come on the back of Local Government MEC Mlibo Qoboshiyane’s admission in February that the province was battling to attract and retain skilled professionals with the know-how and experience to turn local government around and fast-track service delivery.

“For the year under review, very little effort was made to establish basic internal controls and management disciplines.

“Without a positive and committed reaction from mayors and councillors, opportunities to build a sustainable culture of accountability at municipal level remain limited.

“Mayors and councillors need to take full ownership of the internal control environment and insist on daily disciplines that ensure excellence in financial management, service delivery execution and compliance with laws and regulations, thus setting a tone for the credibility of all reports of the municipality,” Nombembe said.

He said the leadership in municipalities had “not adequately set the correct tone through strong decisive direction as related to monitoring and oversight”.

This was especially apparent in the supply chain management departments, human resources and IT controls, which had shown little or no improvement since the previous financial year.

“Despite the regressions and lack of progress, I take note of the latest commitments by the province’s leadership to address the challenges [in these departments],” Nombembe said.

“Sound leadership principles, financial and performance management, and governance are the building blocks on which clean administration is built.

“It is evident that, despite the sporadic improvements, the provincial sphere needs to intensify and accelerate initiatives to institutionalise these building blocks if they are to achieve clean administration in the foreseeable future.”

Political parties have lambasted the findings of the report, saying government needs to take drastic action in order to meet its goal of a clean audit by 2014.

The UDM parliamentary leader in the provincial legislature, Max Mahlathi, said: “I’m not surprised by this outcome because as long as government does not employ people with the necessary skills in departments, we will have this problem.”

DA MPL Dacre Haddon, who is the party’s spokesman for local government, said the report showed that 42% of the municipalities had “dire financial problems”.

“Qoboshiyane needs to make hard choices regarding this poor state of affairs. There needs to be strong action taken against nonperforming accounting officials in municipalities,” Haddon said.

Qoboshiyane’s spokesman, Mvusiwekhaya Sicwetsha, refused to comment on the AG’s report yesterday, saying a press conference would be held today.