OUTA is deeply concerned about the Auditor-General's 2022/23 local government audit, which shows a continued decline in financial management, accountability, and service delivery. Municipalities continue to ignore the law, mismanage projects, mishandle paperwork, overspend, and pass unfunded budgets. What can be done about this? 

Only 34 (or 13%) of the country’s municipalities received clean audits (unqualified with no findings) – a significant decrease from previous years. This troubling trend highlights the urgent need for reform, increased oversight, and improved financial controls to restore public trust in local governance.  

Julius Kleynhans, OUTA’s Executive Manager for Local Government, calls the decline in clean audits a clear indication of systemic failures within our municipalities, weak political oversight and a lack of consequence management. “It is unacceptable that municipalities continue to fail in their fundamental duty to manage public resources responsibly and provide basic services to the people. It not only compromises service delivery, but also erodes communities’ trust in their local governments.”  

The AG’s report shows that 

• 43% (110) received unqualified audits with findings, 

• 33% (85) received qualified with findings, 

• 2% (6) adverse with findings, and 

• 5% (12) disclaimed findings

The AG also reported that 19% of municipalities, including five metros, did not include indicators to measure their core functions in their performance plans.

Key findings by the AG include:

• Weak performance planning and reporting processes: 45% of all municipalities, and 91% of those with disclaimed audits, did not follow laws on strategic planning and performance management. 

• Poor project and contract management: Money lost due to poor contract management, delays in project delivery, budget overruns, and limited maintenance.

• Inadequate internal controls: The majority of municipalities lack effective internal controls, resulting in poor record-keeping, insufficient financial oversight, and a lack of accountability for public funds.

• Persistent issues with unauthorised and wasteful expenditure: Unauthorised expenditure (R21.12bn) and fruitless and wasteful expenditure (R7.41bn) remain alarmingly high, with little to no consequence management in place to address these issues.

• Deterioration in service delivery: The mismanagement of funds has a direct impact on service delivery, with many municipalities struggling to provide basic services such as water, sanitation, and waste management.

Other key poor practices identified by the AG included poor payment practices, uncompetitive and uneconomical procurement practices, limited value and benefit received for money spent, weaknesses in project management and underspending on grants. 

The AG also noted that many municipalities lacked basic financial management practices, with major errors only fixed after the audit began.

OUTA’s main concerns:  

Unfunded budgets: 42% of municipalities had unfunded budgets, violating the Municipal Finance Management Act (MFMA). This could lead to provincial intervention, disciplinary actions, withholding of funds, or even dissolving the council if the budget isn't corrected.  

Widespread non-compliance: Not only with laws and financial management practices, but also with supply chain management, cost controls and standard project management. 

Lack of leadership and consequence management:  Kleynhans says strong leadership is needed to reform local government. Failure to change this could be disastrous for South Africa.

Absence of a culture of ethics and accountability, as well as intergovernmental support: This must be cultivated within local government, and we support the AG’s call for the professionalisation of municipalities.

OUTA urges communities to hold local governments accountable. “Demand transparency in how public funds are spent – the mismanagement must stop. OUTA will keep pushing for better governance and accountability in municipalities to serve their communities effectively.”

Kleynhans congratulated the AG and her team as well on their transparency and good reporting, and believes it sets an example on how other government institutions are supposed to function and perform.

The Auditor-General's report on the municipalities can be read here.

Below: Extract from the Auditor-General's report on local government audit outcomes for 2022/23.