R15bn irregular municipalities expenditure shock for SA

Pretoria — Irregular as well as unauthorized expenditure in the SA’s municipalities has more than doubled since the current administrations took office five years ago, to R14.75bn, Auditor General Kimi Makwetu revealed Wednesday.

Addressing his report on local government audit outcomes for the 2014-15 financial year, Makwetu revealed that municipalities have shown an improvement in their audit results over the past five years from 2010-11 to 2014-15.

The North West, Mpumalanga, Eastern Cape and Limpopo were the main contributing provinces to the increase in irregular expenditure.

Makwetu attributed the increase to continued noncompliance with supply chain management legislation.

A total of 94 municipalities disclosed in their financial statements that they had incurred irregular expenditure, but the full amount is not known because they still had to determine whether noncompliance of a similar nature had occurred in the previous years.

This meant that the amount could have been higher in 2014-15 if the investigations had been completed by year-end, according to the report.

Makwetu said there was an improvement in municipalities’ ability to detect and disclose prior and current irregular expenditure in their financial statements.

In 2010-11, 73% was identified during the audit while in 2014-15, municipalities identified 69% of irregular expenditure. Some had to use consultants to determine the full extent.

Makwetu said there was a continued reliance on consultants.

"The management of consultants continues to be inadequate," Makwetu said, adding that this was not limited to financial reporting services.

"Weaknesses in the planning and appointment processes, performance management and monitoring, and transferring of skills were identified at 68% of the municipalities that used consultancy services." The report showed that in 2014-15, 92% of municipalities used consultants for financial reporting at a cost R892m. This was a significant increase from R267m spent in 2010-11.

On fruitless and wasteful expenditure, Makwetu said 2014-15 was more than R1bn higher than 2010-11. Since 2013-14 there had been a 96% increase from R685m to R1.34bn in 2014-15.

Municipalities in Mpumalanga, the Eastern Cape, North West, Free State and Northern Cape were the main contributors.

Unauthorised expenditure in municipalities had increase threefold from 2010-11 to R15.32bn.

Gauteng, the North West, Mpumalanga, Eastern Cape and Free State were the main contributors to the significant increase in unauthorised expenditure.

Makwetu said the main reason for unauthorised spending was because budgets were not overseen properly, which led to overspending.