The latest set of audit outcomes of KZN’s municipalities show a slight improvement but they are certainly no cause for celebration. According to the report for the 2018/2019 financial year released by the Auditor-General’s office last week, our municipalities have maintained one clean audit opinion while 32 municipalities received an unqualified audit opinion, 18 municipalities received a qualified audit opinion, one municipality received an adverse opinion and two municipalities received a disclaimer of opinions.
Overall, there have been eight improvements against seven regressions in KZN with all other municipalities maintaining the status quo. These results are by no means satisfactory and the situation demands an urgent response. In the next few days, we will be meeting with all poorly performing municipalities to determine what measures are now in place to address all outstanding audit matters and what level of assistance is needed. Municipal accounting officers will also be expected to indicate the level of readiness for the upcoming submission of financial statements.
As Cogta – a provincial department which exercises general oversight over KZN’s local government institutions – we are determined to ensure that we lay solid foundations for radically improved audit outcomes in all of our municipalities. More specifically, we need to reverse the trend of poorly performing municipalities continuously incurring unauthorised, irregular, fruitless and wasteful expenditure. In this regard, we also need to determine the level of consequence management in all municipalities where such expenditure is leading to poor audit outcomes.
Other root causes reported by the Auditor-General as contributing factors to the negative audit outcomes in our municipalities include slow response to improving key internal controls by senior municipal management and the political leadership, inadequate consequences for poor performance and instability and prolonged vacancies in key management positions in municipalities. Considering how much time and effort we as Cogta have put over time into municipal audit outcomes by way of supporting municipalities, these results are simply unacceptable
The latest municipal audit outcomes must therefore be a wake-up call for all senior municipal officials whose poor performance has caused this as well as all mayors and councillors whose poor oversight has failed to prevent it. Our mayors have a critical role to play in financial management and providing leadership over the fiscal and financial matters of their municipality. Similarly, municipal managers run the administration and must take guidance from the mayors but ultimately, the accountability rests with these officials to ensure clean audits.
And last but not least, chief financial officers are technical experts in preparation and submission of annual financial statements of municipalities and dealing with their financial matters. Material adjustments to financial statements are an indictment on these officials because this reflects ill-discipline in maintaining the financial records of the municipality and reporting in compliance with the relevant legislation. We cannot rely on the Auditor-General to come and tell us at the end of the year what is wrong with our accounting and record-keeping!
It is obvious that poor audit outcomes must be prevented. If these occur, then it reflects poorly on leadership, and indicates a breakdown in the management of the institution and its systems of internal control which is the responsibility of the municipal manager and management team. If this happens, there must be corrective action and consequence management. The law is specific in relation to consequence management and any person responsible for, say, unauthorised, irregular, fruitless and wasteful expenditure, must be held to account.
This department has provided guidance to all concerned. We have also trained municipal officials and councillors, including mayors and members of Municipal Public Accounts Committees on dealing with unauthorised, irregular, fruitless and wasteful expenditure and consequence management. As Cogta, we maintain that ignorance is no excuse for contravening the law. We must do everything necessary to achieve clean audits and there can be no excuses for spending public funds and not accounting properly for them or for not following the law.
The new powers that have been given to the AG in terms of the Public Audit Amendment Act, allow the Auditor-General to refer material audit irregularities for further investigation if necessary and in certain cases, to demand the recovery of money lost from accounting officers. This will ensure that harsh consequences are meted out for non-performance.
Each stakeholder must play their part as defined in the law and this requires collective action with the administration implementing the processes and systems necessary, the mayor and council providing political leadership, monitoring effectively and performing rigorous oversight. As political heads of municipalities, mayors must ensure that the right people are in the right positions and that political interference in operational management is minimised. And unless municipal officials do their jobs properly and unless their work is overseen adequately by councillors, our municipalities will not achieve the audit outcomes their residents deserve.
The choice before our municipalities is clear: either they are prepared to take the hard decisions and discharge their duties in accordance with their mandate, or they face the consequences for poor performance. As Cogta, we have already demonstrated that we are not afraid to intervene in or even dissolve dysfunctional municipalities.
OPINION PIECE BY SIPHO HLOMUKA
KZN MEC FOR COGTA
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