Irregular expenditure balloons to R30 bln

This was among the findings of the 2014/2015 audit results which were released in Pretoria today.

Auditor-general Thembekile Kimi Makwetu. Picture: AGSA.

PRETORIA - Auditor General (AG) Kimi Makwetu says the value of irregular as well as unauthorised expenditure in municipalities over the last five years has ballooned to about R30 billion.

This was among the findings of the 2014/2015 audit results which were released in Pretoria today.

The results show that while the number of municipalities with clean audits has increased to 54 out of 272 the financial health of 90 percent of them requires intervention.

While Makwetu noted significant improvements in many respects irregular, unauthorised as well as fruitless and wasteful expenditure remain stubbornly high.

The AG says unauthorised expenditure has trebled over the last five years to over R15 billion.

"Unauthorised expenditure points to lack of managing budgets according to what has been appropriated for each of the functions within the municipality, more money gets committed to what has already been allocated in the budget."

He says of the R15 billion irregular expenditure, some of it can be accounted for.

"Even though procedures pertaining to supply chain management were not completely observed, those goods and services purchased were received to the extent of R10 billion we have satisfied ourselves."

Makwetu says failure to comply with supply chain management controls has led to these findings.

LISTEN: Makwetu paints picture of municipal finances over last five years.

AG CONCERNED ABOUT FINANCIAL HEALTH OF MUNICIPALITIES

While the Auditor General has noted improvements in many municipalities, he says the financial health in nine-out-of-10 councils is concerning or requires intervention.

They show that 54 out of 272 municipalities received clean audits, that's up from just 13 in 2010.

Makwetu says there is a high risk uncertainty surrounding the financial sustainability of many municipalities some even incurring net deficits.

"Meaning that the total amount of resources available for them to spend are exceeded by the amounts of money they are committed to in the form of expenditure."

He says in some cases there are signs of current liabilities exceeding current assets.

"To be a net current liability position, those assets that are supposed to be available for the continuation of the delivery of services are starting to disappear over time."

Makwetu has urged municipalities to implement stricter financial controls.

MAKWETU CITES PAYING DEBT LATE AS CONTRIBUTING FACTOR TO CASH FLOW ISSUES

The AG also says the failure to timeously collect debt has led to cash flow problems at many municipalities, which ultimately affects their ability to deliver services.

He says many municipalities simply take too long to recover debt for services they have provided.

"However, when they have to make their payments to their suppliers they are normally pushed to pay much earlier or to pay quicker."

He says this means the bulk of their cash is sitting is someone else's pocket for most of the time.

"Which is raising issues of liquidity of the municipality. Does the municipality always have sufficient cash resources to meet its obligations as and when they arise?"

Makwetu says non-compliance of supply chain management controls remains stubbornly high.