Auditor-General Discloses R5.2 Billion Lost in SA Municipalities Due to Material Irregularities

The financial integrity of South African municipalities has come under severe scrutiny after a report by Auditor-General Tsakani Maluleke disclosed financial losses amounting to R5.2 billion due to material irregularities like non-compliance and suspected fraud during the 2021-22 fiscal year. This alarming figure was revealed during a briefing to the standing committee on auditor-general and underscores the persistent challenges facing municipal finance management in the country.

The identification of these transgressions is more distressing given that they were only discovered in a sample of transactions, implicating that the actual financial state may show even more severe losses. The irregularities ranged from payments for undelivered goods and services to unfair procurement practices and the ineffective use of financial consultants. These errors highlight systemic weaknesses that, according to Maluleke, could have been mitigated through basic fiscal discipline and more robust internal controls.

Notably, when Maluleke's office notified 61 accounting officers of such irregularities, there was a stark absence of appropriate response. Despite a clear guideline of steps outlined in the Municipal Finance Management Act, these individuals failed to initiate preliminary investigations, prevent further loss, or take action against those responsible. This failure to respond is now leading to the implementation of Maluleke’s powers, which include referring matters to public bodies for further investigation.

Out of the 268 material irregularities recorded, Maluleke reported that only 57 had been resolved and 95 were in the process of being addressed, while no action was taken in 61 cases. This lack of accountability and follow-through from the municipal managers represents a critical vulnerability in the system.

However, on a positive note, the instances wherein officers did respond, Maluleke's office was able to recover a substantial R182.72 million, and efforts are in motion to recoup an additional R310.16 million. It goes to show that with due diligence, financial losses can be mitigated.

The Auditor-General noted the alarming fact that 61 municipalities and entities failed to respond to notifications regarding these irregularities. This has prompted her office to maintain interactions with provincial legislatures and executives to address these issues. Encouragingly, some have confirmed they are attending to the matters highlighted.

In her call to action, Maluleke stresses the importance of support from all role players within the national and provincial ecosystem. She urges councils, municipal public accounts committees, and provincial legislatures to demand quarterly reports from accounting officers on the status of material irregularities. Parliamentary portfolio committees should also request reports on the progress of investigations regularly.

The lack of urgency in resolving these material irregularities, combined with sporadic follow-up and recovery efforts, paints a worrying picture of financial management within South Africa’s municipalities. It is clear that a collaborative push from various governmental tiers is essential to overcome the current deficiencies and restore public trust in municipal financial administration.