Audit slams splurge on consultants: The Herald

R695m spent as municipal staff fail to do their jobs, auditor-general says

THE majority of South Africa’s municipalities and their entities paid out almost R700-million to consultants for assisting them to compile financial statements – but still failed to obtain clean audits. This was revealed by auditor-general Kimi Makwetu when he released his report on outcomes of the country’s 319 municipalities and municipal entities for the financial year that ended in March last year.

In his first report since he was appointed to his position by parliament last year, Makwetu said it was concerning that 261 audited municipalities and public entities could not produce financial statements that did not contain material misstatements, with 110 of them obtaining only financially unqualified audit opinions after their statements were corrected by his staff during the auditing cycle.

Makwetu said this was despite the fact that municipalities forked out R695-million to pay consultants to help them compile credible financial statements.

In most cases, municipalities paid the exorbitant amount to service providers despite having staff employed to perform financial management and reporting duties. He said the staff failed to perform where it mattered most.

Meanwhile, none of 45 Eastern Cape municipalities received clean audits between July 2012 and June last year, and 13 received adverse opinions. The AG said Chris Hani, Baviaans, Camdeboo, Inkwanca and Nxuba had improved from adverse opinions to qualified, while Amahlati, Engcobo, Nyandeni and Tsolwana improved from qualified to unqualified.

The Gariep and Mhlontlo municipalities regressed from qualified to adverse and disclaimer opinions.

“At district level, Joe Gqabi, Cacadu and Amathole . . . led by example with an unqualified opinion with limited findings on compliance, while OR Tambo and Alfred Nzo districts remain a serious concern, receiving disclaimers for the sixth year,” Makwetu said.

“The province reflects a concerning picture on the drivers of the internal control environment, which is underpinned by a lack of commitment by political and administrative leadership to respond swiftly to our messages, a lack of policies, procedures and controls for document management, the absence of daily and monthly financial controls such as transactions and registers being processed, reviewed and reconciled, as well as poor monitoring of compliance with legislation.”

The AG gave the Nelson Mandela Bay metro a qualified audit opinion due to a lack of proper internal controls and a whopping R471.6-million in unauthorised, irregular and fruitless and wasteful expenditure that was incurred.

DA Eastern Cape MPL Bobby Stevenson said at the heart of the problem in municipalities was the lack of skilled staff.

Former finance minister and current Cooperative Governance Minister Pravin Gordhan said tough questions needed to be asked about whether private consultants were adding value for money.

“If you’re spending R700-million of public money in trying to get something right, how come it always ends up wrong?” he asked.

Makwetu’s report also shows that irregular expenditure at municipal level continued to rise – from R9.3-billion in 2012 to R11.6-billion last year.

This included instances in which municipalities did business with companies in which officials, employees and councillors had interests.

But Makwetu insisted that the whopping irregular expenditure bill was not money down the drain.

He said municipalities had taken delivery of the goods and services procured – the problem was that laws and regulations governing such spending had not been adhered to.