26 July 2012
The SACP has studied the consolidated report of the Auditor General on Local Government. The details of the report in the categories of opinions on financial statements, the non-compliance with the law and regulations and on supply chain contraventions are cause for great concern.
We would like to highlight the following findings:
KwaZulu-Natal (87%), Gauteng (76%) and the Western Cape (76%) continued to have the highest number of financially unqualified audit opinions.
The Eastern Cape and Free State recorded an increase of 13% and 11% respectively in financially unqualified audit opinions. The majority of audit opinions in these provinces, however, remained financially qualified.
Limpopo and the North West recorded a reduction of 13% and 9% respectively in the number of financially unqualified audit opinions.
The prevalence of material misstatements in the financial statements submitted for audit increased from 85% to 91% of auditees.
Of the 127 (42%) auditees that received disclaimed, adverse or qualified audit opinions, 29 opinions had regressed from the previous year while 80 (63%) remained disclaimed, adverse or qualified.
Thirty-one (10%) auditees have received disclaimed or adverse audit opinions for the past six years. The Eastern Cape (seven), Free State (eight) and Northern Cape (seven) account for 71% of such auditees.
Sixty per cent of the auditees that received financially unqualified audit opinions engaged consultants to assist them with accounting-related services and/or preparation of financial statements. Eighty-five per cent of the auditees with qualified, adverse or disclaimed opinions had assistance from consultants.
Ninety-three per cent of auditees had findings on material non-compliance with laws and regulations.
Further deteriorations in terms of non-compliance occurred in KwaZulu-Natal, North West, Mpumalanga and the Northern Cape. None of the other provinces showed significant improvement.
Unauthorised, irregular or fruitless and wasteful expenditure was incurred by 86% of auditees. Eighty-four per cent of the auditees did not take reasonable steps to prevent this type of expenditure.
Procurement to the value of R3,5 billion could not be audited because the required information or documentation was not made available by auditees.
At 46% of auditees, contracts were awarded to employees, councillors or other state officials.
Unfair or uncompetitive procurement processes were followed at 65% of the auditees.
Whilst the SACP believes that outcomes of audits must be interpreted in context and with reference to service delivery we are further perturbed by the statement in the report that "Councillors, mayors and municipal managers have not demonstrated a proper understanding of their responsibility relating to service delivery planning, measuring and reporting, while reporting on performance is still viewed only as a year-end reporting requirement that must be satisfied."
In view of the SACP these findings call for much more thorough introspection about our system of governance, the role and powers of different spheres of government, the capacity and speed we are moving at to build a state with capacity to deliver. That capacity to deliver services means that we must build capacity to account for such services.
The SACP is of the view that we have also a legislative and regulatory environment that for all intents and purposes is anti-development and has fed into the tender boom. This boom has seen the rise in collusion between officials and companies doing business with the municipalities. The SACP is of the view that we need a decisive break with the current neo-liberal legislative framework which in the main has sought to privilege the creation of a private sector, which has often tended to be corrupt, at the expense of community development and the co-operative movement.
The SACP calls for the doing away of tenders and that services must be delivered through the state. This would mean that municipalities must create capacity to render services like garbage collection, infrastructure roll out, road maintenance, building of houses and so forth. This would mean that the state must be a direct employer instead of sourcing these functions to often corrupt contractors whose execution in many cases is extremely slipshod. The SACP further calls for the increased support of co-operatives to render services as a direct means to directly empower our people.
The SACP will table these issues for discussion with the alliance partners for an urgent way forward. Local Government is at the coalface of service delivery and we cannot sit back whilst it is in such a crisis. Serious leadership is required and the movement must be bold and take unpopular decisions in order to strengthen our democracy.
Issued by the SACP
SACP Spokesperson – 082 226 1802