Auditor-General posts another miserable scorecard for municipalities

It’s beginning to sound like a broken record, with the Auditor-General of South Africa (AGSA) issuing another dismal report card for municipalities.

Only 15% of municipalities received clean audits in the 2025 fiscal year; 28% have shown improvements since 2021, and 15% have regressed over the same period.

Auditor-General findings

Seven municipalities – three of them in the Free State – continued to receive “disclaimed audit opinions” for periods ranging from three to 10 years.

This opinion is given where there is insufficient evidence for most of the information in the financial statements.

Just 39 of the country’s 257 municipalities received clean audits, down from 41 the previous year.

The most common outcome was “unqualified audit opinion with findings”.

A total of 117 municipalities were in this category, after correcting misstatements that were identified during the audit process.

These adverse findings were the result of “persistent material non-compliance, significant deficiencies in financial and performance reporting, and inadequate accountability and consequences,” according to the AGSA’s consolidated report on local government outcomes for 2024-25.

Qualified with findings

A total of 86 municipalities (33% of the total) received “qualified with findings” opinions. It was better news for the “disclaimed with findings” category: just eight municipalities fell into this category, down from 15 the previous year. Two municipal audits remain outstanding, up from zero the prior year.

While SA’s eight metros have regressed, things are worse at the non-metro municipal level.

“The absence of adequate institutional capability, compounded by persistent governance failures, increases the vulnerability of communities to the adverse effects of poor municipal management,” says AG Tsakani Maluleke.

She notes that municipalities demonstrated poor responsiveness and lack of accountability.

Certificate of debt and referrals for investigation

During the year under review, the first ever certificate of debt was issued, compelling an accounting officer at Ngaka Modiri Molema District Municipality in North West to reimburse the municipality R4.62 million for overpayment of water tinkering services.

The accounting officer has been suspended.

Certificates of debt are issued where there is a financial loss resulting from a failure to act and remedy the situation. They can be issued for material irregularities (MIs) such as breaches of law, fraud or theft resulting in financial loss.

A further 76 municipal officials were referred to public bodies for investigation, most of them in the Free State, North West and Mpumalanga.

The majority of these referrals relate to non-compliance with environmental legislation. Of the 76, 13 were referred to the Special Investigating Unit for unlawful or improper conduct.

North West based municipality

In one case, a material irregularity in the form of overpriced goods at Ngaka Modiri Molema District Municipality in North West could result in a recovery of R25 million.

In another MI case in Mohokare in the Free State, a contractor was paid for work not done. This involved the construction of a bulk raw water pipeline from the Orange River to Paisley Dam.

The report identified 23 MIs resulting in a total loss of R1.48 billion over the last year, bringing the total financial loss from MIs to R10.2 billion. Of this, nearly half is considered unrecoverable.

First line of defence against material irregularities

The first line of defence for MIs is the accounting officer in the municipality, but these often conclude that no-one can be held responsible due to “systemic weaknesses in the control environment, which include a lack of clear policies, procedures and responsibilities”, says the report.

The AG then evaluates the extent of investigation conducted by the accounting officers to see whether more work needs to be done.

The main culprits for MIs are Mpumalanga (R2.3 billion financial loss), KwaZulu-Natal (R1.8 billion), Gauteng (R1.4 billion) and North West (R1 billion).

The Free State and North West were the slowest to take action in response to MI notifications issued by the AG’s office. They were responsible for 69 (54%) of the 127 MIs where further action had to be taken.

Metros going backwards

Audit outcomes among the eight metropolitan municipalities is particularly concerning, says the AG, given that they accounted for R336 billion (54%) of the 2024-25 estimated local government expenditure budget.

These impact living conditions for the roughly 8.9 million people living in the cities.

Metro (under)performance

Metro

Planned targets achieved (%)

Example of target not achieved

Buffalo City38%Average days to process building applications < 500 square metresPlanned target: 30 daysReported achievement: 132.65 daysCape Town38%Formal housing serviced sites provided (number)Planned target: 2 400Reported achievement: 873Joburg36%Number of new households in informal settlements provided with electricityPlanned target: 2 000Reported achievement: 1 059Tshwane20%Number of new sewer connections meetingminimum standardsPlanned target: 950Reported achievement: 0Mangaung50%Number of inland water samples tested formonitoring purposesPlanned target: 2 000Reported achievement: 31Nelson Mandela Bay59%Number of new sewer connections meetingminimum standardsPlanned target: 2 000Reported achievement: 1 471

Source: AGSA’s consolidated report on local government outcomes for 2024-25

All metros except Cape Town approved major revisions to their service delivery and budget implementation plans over the past year due to insufficient funding.

This disconnect between the metro’s planned targets and actual outcomes achieved can lead to frustration and disappointment within communities, particularly when essential services or delivery on housing projects is involved, says the AGSA report.

The AG called on the new mayors, speakers and council members who will be elected in the upcoming November local government elections to assume responsibility for their communities.

“Local government requires fundamental and far-reaching reform, driven by capable, collaborative and ethical leaders that are committed to building municipalities characterised by sustained institutional performance, accountable leadership and officials, transparent systems and processes as well as strong institutional integrity,” she says.

This article was republished from Moneyweb. Read the original here.