Only nine new municipalities out of 263 achieved clean audits - AG report | Fin24
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Only nine new municipalities out of 263 achieved clean audits - AG report

Jun 21 2017 11:12
Lameez Omarjee

Pretoria – There was little improvement in the local government audit outcomes report for the year 2015/16, with fewer municipalities achieving clean audit opinions.

This auditor general local government report was released on Wednesday. The report shows the audit outcomes of 263 municipalities and 51 municipal entities. Auditor General Kimi Makwetu spoke on the findings at a press briefing in Pretoria.

The report showed that 14 municipalities lost their clean audit opinions and only nine joined the category of clean audits. A total of 49 municipalities achieved clean audits.

The provinces with the highest proportion of municipalities with clean audit opinions were the Western Cape (80%), KwaZulu-Natal (18%) and the Eastern Cape (16%).

The Western Cape increased its clean audit opinions from 73% in the previous year to 80%.

Gauteng was the only province to receive unqualified audit opinions on its financial statements. The Midvaal municipality was the only one to keep its clean audit status.

The Eastern Cape, Limpopo and Mpumalanga showed improvements while North West, Northern Cape and Free State delivered the poorest audit results.

Irregular expenditure on the up

Weak systems of internal control impacted the financial health of municipalities. The auditor general considers 65% of municipalities’ financial health as concerning or requiring intervention. This is higher compared to the 60% recorded for 2014/15.

Irregular expenditure increased by over 50% to R16.81bn, the highest since the auditor general started keeping a track record. This could be higher, as a third of municipalities indicated that the full amount was unknown and 24% were qualified as the disclosed amount was incomplete, explained Makwetu.

"Irregular expenditure does not necessarily represent wastage or mean that fraud has been committed,” he said. “This needs to be confirmed through investigations.”

Fruitless and wasteful expenditure was 21% lower than the previous year. Despite the drop, a number of municipalities incurred this expenditure, said Makwetu. Fruitless and wasteful expenditure incurred by the Eastern Cape, Limpopo and North West decreased. 

Unauthorised expenditure remained at almost the same level as the previous year, at R12.77bn. The report indicated over 55% of the overspending is related to non-cash items. These are estimates of depreciation and impairment which were not correctly budgeted.

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