Auditor General uncovers R5.2 billion financial losses at municipalities

Monday, February 12, 2024 – Auditor-general Tsakani Maluleke said a total of 268 material irregularities on non-compliance and suspected fraud in municipalities resulted in R5.2 billion material financial losses in 2021-22.

This comes as 61 accounting officers in municipalities did not take appropriate action when Maluleke’s office notified them of the material irregularities and she has since invoked her powers, including referring matters to public bodies for further investigations.

Briefing the standing committee on auditor-general, Maluleke said the amount found to have been lost by her office covered only a sample of transactions and was not the full state of finances in all the municipalities and their entities.

She told the MPs that the types of issues her office identified related to payments for goods and services not received; unfair and uncompetitive procurement; ineffective use of financial consultants; value for money not received; revenue not billed; interest of penalties on late or non-payments as well as asset and investment losses.

“Material irregularities could have been prevented by basic disciplines and processes. Through the material irregularities process, we highlight these internal control weaknesses and track improvements to prevent recurrence,” she said.

Maluleke also said if a municipal manager was made aware of an irregularity, the Municipal Finance Management Act and its regulations typically prescribe several steps to be taken.

These include performing a preliminary investigation to determine the cause of the transgression, who was responsible and whether financial loss was suffered.

The accounting officers are also obliged to prevent any or further loss, institute formal investigation if there were indications of fraud, corruption or other criminal conduct.

They are obliged to recover any financial losses from an external party, take steps against officials responsible and recover any financial loss from the responsible official.

Maluleke said a material irregularity was resolved when an accounting officer took all steps to recover financial losses, implemented consequences and prevented further losses.

She also said out of the 268 material irregularities, 57 were resolved and in 95 appropriate actions were taken to resolve the material irregularities.

However, no appropriate action was taken by 61 accounting officers.

In 12 cases, a response was received on notification of material irregularity and nine were recently notified.

Maluleke said in instances where accounting officers responded to her notifications, R182.72 million financial loss was recovered, R18.85m financial loss was prevented from taking place and R310.16m financial loss was in the process of being recovered.

Maluleke noted with concern that 61 municipalities and entities did not respond to her notifications of material irregularities.

Her office continued to interact with provincial legislatures and provincial executives on matters that relate to the material irregularities.

“I got a confirmation from the provincial executive I have written to and asked them to deal with a specific matter. I got confirmation they are attending to them.”

Maluleke called on all role-players in the national and provincial ecosystem to support, monitor and oversee the resolution of material irregularities.

“Councils and municipal public accounts committees and provincial legislatures should request quarterly reports from accounting officers on the status of their material irregularities and should hold them accountable for any unreasonable delays in resolving the material irregularities.

“Where there are delays in investigations, portfolio committees in Parliament responsible for public bodies should request regular reports.”