Regression in municipal audit outcomes

Wednesday, May 23, 2018

Auditor General Kimi Makwetu says while there are municipalities in some provinces that are burning the midnight oil to get good audit outcomes, the overall municipal audit results have deteriorated.

Makwetu said this when he released the consolidated report on the local government audit outcomes for the financial year 2016/17.

He said despite his office’s constant and insistent advice and caution to accounting officers since 2013, their counsel has fallen on deaf ears.

“When we released the 2011/12 municipal audit outcomes in August 2013, we highlighted, among others, a lack of decisive leadership to address the lack of accountability by ensuring consequences against those who flouted basic processes that hampered effective municipal governance.

“We reported weaknesses in internal control and the risks that needed attention in local government by providing root causes for audit findings and recommendations to remedy these underlying causes.

“It is now five years later, and we are still faced with the same accountability and governance challenges we had flagged throughout these years,” he said.

Five years on from 2013, the same governance and accountability issues that were flagged throughout the years still persist. “There has been no significant positive change towards credible results. Instead, we are witnessing a reversal in audit outcomes.”

Makwetu said while there are municipalities in some provinces that are diligently working hard to attain and maintain the desirable audit outcomes through an entrenched culture of accountability and decisive leadership, those outcomes and efforts are overshadowed by the many elements of regressions in the local government audit outcomes.

Municipal audit outcomes at a glance

Makwetu said his office audited 257 municipalities and 21 municipal entities.

Out of all the municipalities that were audited, the audit outcomes of 45 regressed while those of 16 improved. Only 33 municipalities, or 13%, managed to produce quality financial statements, as well as complied with all key legislation and as a result, receiving clean audits, the Auditor General said.

This is down from the 48 municipalities that obtained clean audits in the 2015/ 16 financial year.

However, 112 municipalities received unqualified audits with findings for the year under review – an increase from 108 unqualified audits with findings in the previous year.

Those with qualified audits increased to 66 during the year under review – up from 60 in 2015/16.

In terms of audit movements, while 30 municipalities retained their clean audit status, 17 regressed while three new municipalities obtained clean audits.

Briefing journalists in Cape Town, Makwetu said the credibility of financial statements and performance reports are crucial to enable accountability and transparency. He said, however, that municipalities were failing in these areas.

“Not only did the unqualified opinions on the financial statements decrease from 68% to 61%, but the financial statements provided to us for auditing were even worse than in the previous year.

“Only 22% of the municipalities could give us financial statements without material mis-statements.

“In addition, the performance reports of 62% of the municipalities that produced reports had material flaws and were not credible enough for the council for public use,” he said. –