AG Raises Concerns Over Municipalities' Poor Audit Outcomes: Only 41 Achieve Clean Audits

The Auditor-General of South Africa, Tsakani Maluleke, has expressed concern over the poor audit outcomes in municipalities, with only 41 out of 257 councils receiving a clean audit for the 2023/24 financial year.

A clean audit indicates that a municipality has credible financial statements, a reliable service delivery report, and complies with laws and regulations related to financial performance.

Maluleke noted that 25 municipalities have sustained their clean audit status every year since at least the 2020/21 financial year, demonstrating good project management and a well-functioning control environment. These municipalities serve as an example of what is possible with effective financial management and service delivery.

While 59 municipalities have improved their audit outcomes since 2020/21, 40 have regressed. Maluleke highlighted that an unqualified audit opinion does not necessarily mean a municipality is performing well, as material findings on performance information and compliance can still exist. In fact, 99 municipalities received unqualified audit opinions with findings on performance information and compliance, but this is not something to celebrate, as these municipalities can easily lose their unqualified status if they do not address challenges.

Maluleke expressed concern over the significant amount spent on financial reporting consultants, with 219 municipalities spending R1.47 billion in the 2023/24 financial year. However, many of these municipalities still submitted financial statements with errors, indicating that the spending was not effective. Maluleke noted that little has changed since her office raised similar concerns a decade ago.

The Auditor-General emphasized the need for municipalities to prioritize financial management, performance management, and compliance obligations. By addressing the significant weaknesses in these areas, municipalities can improve their audit outcomes and provide better services to citizens. Maluleke's report serves as a call to action for municipalities to take their financial management and service delivery responsibilities seriously and make meaningful improvements.