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Audit exposes deepening rot at Free State municipalities

Auditor-General (AG) Tsakani Maluleke has blamed inaction by political and administrative leadership at Free State municipalities as a key contributor to the poor financial performance at most councils in the province.

She said this when she released the 2020-21 audit outcomes on local government on Wednesday.

Maluleke said the audit outcomes for the province regressed during the period under review and no municipality in the Free State achieved a clean audit during the five-year period of the previous administration.

“Inaction by political and administrative leadership continued to be a deliberate obstruction to municipalities’ effective functioning,” said Maluleke, adding provincial leadership should be very concerned about this state of affairs.
She said only 52 percent of municipalities submitted their financial statements on time, compared to 80 percent in 2016-17.

“By the date of this report, the audits of seven municipalities had not been completed as a result of the late or non-submission of financial statements,” the AG pointed out.

“We escalated the non-submission to the relevant councils and the provincial leadership, but their response was ineffective.”

A total of six municipalities achieved unqualified audit outcomes with findings while 10 had qualified audits with findings and seven are still outstanding due to late submission.

Unqualified audit outcomes with findings were recorded at Kopanong, Letsemeng, Masilonyana, Metsimaholo, Mohokare and Moqhaka local municipalities.

Qualified audits with findings: Dihlabeng, Mafube, Maluti-A-Phofung, Mantsopa and Matjhabeng local municipalities as well as Mangaung Metro and Fezile Dabi and Lejweleputswa district municipalities.

Maluleke expressed concern at the continued hiring of consultants at most municipalities in the province saying the move did not really help the situation because the initial financial statements prepared by the municipalities were poorly prepared.

“They continued outsourcing their responsibility by appointing consultants after year-end to prepare the financial statements and to construct and correct the underlying information,” she said.

“A total of R254 million had been spent on consultants since 2016-17.

“The reliance on the audit process to identify errors in the poor-quality financial statements submitted for auditing also continued.

“All auditees needed to make significant adjustments to correct material errors in the figures presented.

“If this had not been allowed, another seven auditees (41 percent) would have received qualified audit opinions.”

The AG’s office also performed additional audit work on the infrastructure and payment profiles of Masilonyana, Maluti-A-Phofung and Tokologo.

“We determined that only Masilonyana had a plan and budget for the routine maintenance of infrastructure assets, while Maluti-A-Phofung and Tokologo had no plan to ensure that their infrastructure assets were properly maintained,” said Maluleke.

“The municipalities were not fulfilling their service delivery mandates.

For example, all seven wastewater treatment works at Maluti-A-Phofung collapsed and the plants were not operational due to a combination of poor management, theft and vandalism.

“This resulted in raw sewage being discharged into the environment.

“We issued notifications of material irregularities for four of these plants due to the likely substantial harm to the public.”

She also found that municipalities had gone backwards in meeting project deadlines for infrastructure projects.

In 2016-17, for example, only 10 percent did not meet project deadlines, but this had increased to 60 percent in 2020-21.

The AG cited Metsimaholo where a project to instal 4 000 sewer connections was delayed by almost two years due to poor planning.

During the course of the project, additional houses needing sewer connections were also identified and additional time was needed for repairs.

“Most municipalities struggled to perform preventative maintenance and safeguard their infrastructure assets, because they spent only one percent of their infrastructure value on repairs and maintenance, compared to the norm of eight percent. Repairs were only done after assets had broken down,” said Maluleke.

According to the AG, a wastewater treatment plant that was earmarked to be decommissioned in Moqhaka continued to be used because the new plant had design challenges which took long to be fixed.

The old plant could not function effectively due to lack of maintenance over the years resulting in sewage spillage that contaminated the Vals River.

Financial health at all municipalities in the province continued to deteriorate.

Eleven auditees or 73 percent indicated they were uncertain whether they would be able to meet their financial obligations when they became due.

The debt of these municipalities, according to the AG, exceeded what they can convert to cash by R8.69-billion.

The amounts they owed to Eskom and the water boards continued to increase, reaching R12.45-billion.

Unmetered consumption, theft and a lack of maintenance resulted in average water losses of 49 percent and electricity distribution losses of 20 percent.

Unauthorised expenditure for the year amounted to R2.9-billion with fruitless and wasteful expenditure at R208.5-million.

Irregular expenditure was R7.2-billion.

“Urgent action to strengthen controls is required to achieve the desired outcome,” said Maluleke.

“All role players should be dedicated to rebuilding strong and credible municipalities with high levels of transparency, integrity and accountability.

“The provincial treasury, the MEC for local government and the provincial cooperative governance and traditional affairs department should intensify interventions to support and strengthen the capacity of municipalities.

“The incoming councils should set the correct tone at the top.

“They have the opportunity to deal with years of impunity and lack of consequences and to champion improved audit outcomes.

“They should ensure that there is stability in that administrative leadership vacancies are filled, and officials are capacitated to perform their duties.

“This will ensure service delivery and earn the trust of their communities.” – Staff Reporter

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