Mayors, councils, municipalities displaying little fiscal discipline – AG

"Municipal finances are severely troubled and even though funds are constrained, mayors, councils and municipalities are displaying little fiscal discipline."

This is an observation made by Auditor-General (AG) Tsakani Maluleke on Wednesday as she released the 2023/24 consolidated general report on local government audit outcomes in parliament.

She cited widespread failures in financial management by municipal managers, mayors, and councils.

In the 2023/24 financial year, more than 100 municipalities adopted unfunded budgets, going against advice from national and provincial treasuries, Maluleke said.

The lack of consequences is most evident in the areas of poor and slow responses to investigating allegations of financial and supply chain management misconduct and fraud indicators

—  Tsakani Maluleke

This resulted in R31.79bn in unauthorised expenditure across 174 municipalities.

She said many municipalities failed to bill and collect revenue owed to them, estimating that 67.8% of the disclosed revenue in financial statements was unlikely to be recovered.

She said water and electricity loses due to neglected infrastructure contributed to a further R37.28bn in lost revenue.

"Money paid by residents and funded from the national purse is often wasted through poor financial and procurement decisions and project failures," she said.

"The limited funds that municipalities had were also not spent carefully. The main reasons for the continuing financial losses and waste were widespread poor payment practices, uncompetitive and uneconomical procurement practices, limited value and benefit received for money spent, and weaknesses in project management.

"As a result, the financial health of municipalities remains weak. Poorly managed local government finances directly affect municipalities’ ability to deliver the promised services to their communities and place further pressure on the already constrained public purse."

Creditors were also not paid within legislated timelines, Maluleke said.

She said debt owed to Eskom and the water boards remained high and continued to increase. "If these debts are not paid, communities are left without access to basic services such as electricity and water. This also makes it difficult for businesses to operate optimally, further adding to the struggling economy.

"The Eskom debt-relief programme was intended to provide some relief to municipalities that struggled to pay the electricity supplier, but 53 of the participating municipalities (84%) are not complying with the conditions of the programme," she said.

On infrastructure audits, Maluleke said after numerous site visits to inspect the progress and quality of infrastructure projects, they have identified deficiencies at 87 of the 113 projects that were visited.

"We found that, all too often, work on projects is delayed, is costing more than planned and is of poor quality. New infrastructure is also not put into use as soon as it is ready. Existing infrastructure continues to deteriorate because it is not properly maintained and safeguarded," she said.

Maluleke said the lack of consequences in local government slowed progress in service delivery and financial performance. 

"The lack of consequences is most evident in the areas of poor and slow responses to investigating allegations of financial and supply chain management misconduct and fraud indicators; not investigating and/or not properly dealing with unauthorised, irregular, and fruitless and wasteful expenditure; and material non-compliance with legislation on consequence management."

Maluleke said failure at municipal level had a direct and significant impact across our cities and towns, with residents and businesses facing regular disruptions in service delivery and having to contend with water leaks, potholes and filth on their streets. 

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