Auditor general: Only 34 of 257 municipalities achieved clean audits in 2022-23

Poor audit outcomes in local government continue unabated, with only 34 of South Africa’s 257 municipalities obtaining clean bills of health. 

Auditor general Tsakani Maluleke highlighted this stark finding when her office presented its 2022-23 consolidated general report on local government audit outcomes to parliament on Tuesday.

In her report, Maluleke called on “all roleplayers in the accountability ecosystem to work deliberately and with urgency towards a culture of performance, accountability, transparency, and institutional integrity that will ultimately result in a better life for the people of South Africa”.

The auditor general said despite commitments made by those concerned, the pace of improvement has been “slow, with little impact on the lives of ordinary South Africans”. 

The trend of poor audit outcomes had persisted, with 36 municipalities regressing since the 2020-21 audit cycle, while only 45 showed some improvement.

Maluleke said many municipalities were stuck in a cycle of unqualified audit opinions on financial statements, but with findings on performance reporting and compliance with key legislation. She expressed concern that 77 municipalities had remained in this category since the end of the previous administration’s term, showing little effort to advance to a clean audit status.

While a few municipalities have maintained clean audits over several years, exemplifying sound financial and performance management practices, the overall picture remains bleak, she said. Compliance with legislation continues to be a significant problem, with 86% of municipalities receiving material compliance findings, slightly worse than in previous years.

Maluleke said 45% of municipalities did not comply with legislation on strategic planning and performance management.

“Additionally, 48% of municipal performance reports included unreliable or unuseful information, complicating efforts to assess municipal performance and address service delivery shortfalls.” 

Maluleke urged national and provincial governments to intensify their support for municipalities, stressing the need for sustained efforts to improve their financial health and service delivery.

“Local government’s inability to comply with legislation remains a significant obstacle, with 86% of municipalities receiving material compliance findings. This marks a slight regression from previous years, with compliance findings at 85% in the last year and 83% in 2020-21,” she said.

Frequent delays, cost overruns and poor-quality work were cited as common problems, while new infrastructure was often not put into use promptly, and existing infrastructure continued to deteriorate because of inadequate maintenance.

Maluleke said poor financial management was still prevalent, with municipalities losing revenue because of inadequate billing and collection practices, and infrastructure neglect leading to water and electricity losses. Financial mismanagement directly affected service delivery, with unpaid creditors, including Eskom and water boards, threatening access to basic services for households and hindering business operations.

On a positive note, Maluleke said 18 municipalities, primarily in KwaZulu-Natal, Mpumalanga and North West, had moved out of the negative category during the current administration. 

“Fourteen municipalities received disclaimed opinions in 2022-23, including two whose audits were finalised after the 31 March 2024 cut-off date for this report,” she said, adding that the support provided by provincial governments had led to positive signs of improvement.

Municipalities with clean audits, particularly those that have maintained this status over several years, generally exhibited sound financial and performance management practices.

“These municipalities manage projects effectively, adhering to timelines, budgets and quality standards, and have well-functioning control environments that support improved performance and service delivery,” Maluleke said.

“The submission of financial statements by the legislated date has improved, with 94% of municipalities meeting the deadline in 2022-23, up from 91% in 2021-22 and 81% in 2020-21.”

The late submission or non-submission of financial statements was the primary reason for the delayed completion of 2022-23 audits for 10 municipalities, although seven of these audits have since been finalised, Malulele said.