Auditor-General warns against R5.2 billion lost in municipalities

Auditor-General Tsakani Maluleke has warned against billions lost in municipalities. . Picture: Thobile Mathonsi/Independent Newspapers

Auditor-General Tsakani Maluleke has warned against billions lost in municipalities. . Picture: Thobile Mathonsi/Independent Newspapers

Published Feb 11, 2024


The Auditor-General has raised concern about material irregularities in municipalities, which amounted to R5.2 billion, saying there were no proper controls.

The auditor-general, Tsakani Maluleke, said R5.2bn does not cover all municipalities in the country, but this was a sample of municipalities they audited for material irregularities.

The Public Audit Act, which came into effect in 2019, gives the auditor-general powers to act where officials are not addressing financial losses.

Financial losses in municipalities are due to issues relating to payments of goods and services that have not been delivered and unfair, uncompetitive and ineffective use of consultants.

Maluleke said in some municipalities they use consultants to do the same job that officials are doing.

However, Maluleke said since they started with the process of material irregularities in 2019 they started with four municipalities. But now they were auditing more than 170 municipalities for material irregularities.

The Auditor-General was briefing the standing committee on the auditor-general on Friday on her report on material irregularities in local government.

The number of municipalities to be audited for material irregularities will be increased this year, she said.

“So far in the local government space we have identified 268 material irregularities. We have identified that of those 194 relate to transactions where there are instances of material financial loss and we have consolidated that number to come at R5.2bn of loss that we have calculated associated with the material irregularities we have identified.

“As you know when we audit, we only cover a sample that is scientifically determined. We don’t cover the full population of transactions. It does not mean the R5.2bn is all that is lost through non-compliance, fraud, theft or breaches of fiduciary duties. It just tells you the type of items we have identified through the application of these powers,” said Maluleke.

She said financial losses in municipalities are identified during their normal course of auditing processes.

This issue has to be addressed by officials to prevent more losses in local government.

Local government has over the last few years been identified by state agencies, including the Auditor-General, the Special Investigating Unit, the Hawks and the National Prosecuting Authority to be a problem where procurement processes were not followed.

The Standing Committee on Public Accounts has also raised the issue of non-compliance with procurement processes at local level.

The law enforcement agencies have submitted various reports on the state of local government.

The government has been urged to intervene in some of the municipalities that are on the verge of collapse.

The Auditor-General said financial losses remains a serious concern .

“The type of issues that are leading to financial loss relate to matters that we identify over the course of our normal audits even before the material irregularity process came into being. where we are seeing that there are payments of goods and services that have not been received, unfair and uncompetitive, ineffective use of consultants,” said Maluleke.

The auditor-general also said the use of consultants must be monitored as municipalities tend to rely on consultants.

Municipalities were paying consultants to do the same job their officials were doing.

Last year municipalities paid R1.6bn to consultants.

In her report in 2021, the auditor-general said municipalities paid consultants R1bn for their services when they had staff in their finance divisions, The wage bill for staff members in finance was R4.5bn.

At the time the AG said local government spent a combined R5.5bn to pay people who were doing the same job and yet there was nothing to show for it.

Maluleke told the standing committee that local government must stop relying on consultants.

“As you know we have been reporting on the over-reliance on consultants even though people are employed in the finance divisions of municipalities. Here we are talking about the ineffective use of consultants who come in to do the basics that have simply been neglected by those who are appointed to run public affairs during the course of the year.”

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