Red flag about accountability, finances at local municipalities

Municipalities in SA are finding it hard to collect rates and provide quality services to residents. Non-payment for services is a major problem for some local councils. Picture: Sigmund on Unsplash

The South African Local Government Association (Salga) has expressed its deep concern at the state of municipal finances detailed in the audit outcomes for local government for the period 2019/20.

The association raised the red flag about deteriorating levels of accountability as evidenced in audit outcomes released recently by the auditor-general. Salga, in a press release, reiterated its calls made in the previous 2018/19 municipal audit outcomes, for accountability and consequences for malfeasance in the management of local government.

Where there is clear evidence of fraud and malfeasance, it’s the duty of the mayor and speaker to report this to the authorities, said Salga. Picture: John Schnobrich on Unsplash.

The association said it was its position that where there were clear actions of fraud and criminality, it was the Mayor’s and the Speaker’s fiduciary duty to refer the matters to law enforcement agencies.

An analysis of the audit results paints a worrying picture about the state of municipal finances. The number of municipalities receiving unqualified audit outcomes has declined from 147 in 2016/17, to 123 in 2017/18, 114 in 2018/19 and slightly up to 116 in 2019/2020. Although there is a slight improvement for the period 2019/20, the AG’s report, however, indicates an overall regression in comparison with the previous years, mainly due to the 57 audits which were not finalised by the cut-off date.

The severity of the problem identified by the AG called for decisive action and meant that Salga must persistently call for municipalities to implement consequence management and enforce accountability, it said.

Pockets of Excellence

Beneath the surface of the gloomy picture, Salga noted, there are pockets of excellence that should be highlighted. “It is these pockets of excellence that must be used to draw lessons that can help us turn the tide of decline.”

The AG report showed that of the 200 municipalities that had finalised audits, about half (116) received unqualified audits, of which 27 received clean audits.

Municipal consumers deserve a fair deal, creditors must be paid and the future financial viability of municipalities needs to be addressed. Picture: Cytonn Photography on Unsplash.

“These 27 municipalities are pockets of excellence whose success stories must be celebrated. These 116 municipalities account for 77% of the overall local government expenditure budget. This is a clear reflection that even though there are challenges with financial management, local government is not completely dysfunctional in financial management.”

Consumer debt throttles municipalities

One of the biggest challenges to confront local government over the past 20 years is municipal consumer debt.

“The AG’s 2019/20 report showed how the funds owed affects municipal governments’ budgets, ability to render services and accounting processes. To illustrate the pervasiveness of this across the country, on average almost 63% of the revenue shown in the books will never find its way into the bank accounts of the municipality.”

In some municipalities, consumers simply refuse to, or cannot, pay.

Forty-nine percent of municipalities have outstanding creditors that are greater than available cash at year-end.

The National Treasury has highlighted that the aggregate municipal consumer debt stood at R230bn as of December 30 2020. Salga has called for a review of the financing model for local government.

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