R87 billion of South African taxpayer money down the drain
South African municipalities incurred a combined irregular expenditure of R87.03 billion over the three financial years ending in 2023/24.
This is according to the Auditor-General of South Africa’s (AGSA) consolidated report of its assessment of the country’s 257 municipalities during the 2023/24 financial year.
The AGSA defines irregular expenditure as any expenditure incurred that contravenes the applicable legislation.
For instance, if a municipality spends R25 million on procuring generators for a school, but the bidding process for the contract was not competitive and it could have done so for R19 million, the irregular expenditure is R6 million.
This differs from material irregularities, which refer to any form of non-compliance, as well as fraud, theft, or breach of fiduciary duty.
The most significant portion of this was incurred during the 2021/22 financial year, when R30.47 billion was recorded.
This then dipped to R27.62 billion the following year, but increased again in 2023/24 to R28.94 billion.
According to the AGSA, these figures could be significantly higher, as 40% of municipalities were either qualified for the completeness of irregular expenditure or claimed to still be investigating it.
South Africa’s eight metropolitan municipalities accounted for R33.29 billion (38%) of all irregular expenditure.
The City of Cape Town was the only metro in the country to receive a clean audit opinion.
The cities of Johannesburg, Ekurhuleni, and eThekwini all received unqualified audit opinions, while Buffalo City, Tshwane, Mangaung, and Nelson Mandela Bay received qualified outcomes.
Most of the overall expenditure was attributed to non-compliance with procurement processes, amounting to R55.35 billion.
Procurement without competitive bidding or quotation processes accounted for R18.48 billion, while non-compliance with legislation contributed another R13.61 billion.
A further R590 million was attributed to “other types of irregular expenditure”.
During the 2023/24 period alone, R27.39 billion of the irregular expenditure reported was due to breaches in the five pillars of procurement.
“Procurement that was not fair, transparent, competitive and cost-effective accounted for R26.13 billion of this amount,” the AGSA said.
“The remaining R1.26 billion related to procurement that was not equitable, such as where municipalities did not apply the preference point system correctly.”
The AGSA said that it assessed whether the municipalities that incurred irregular expenditure received value for the money spent.
A total of R75.06 million was paid over the course of the year for goods and services above market value, to overpaid employees, or for goods and services that were paid for but not received.
The impact on municipalities
In addition to resulting in irregular expenditure, the AGSA states that procurement and contract management can also create several other challenges for municipalities.
These include severe financial losses if procurement practices are uncompetitive or uneconomical, as suppliers may not deliver.
Unfair procurement practices can also expose municipalities to litigation due to breaches of procurement processes and regulations.
They also, in turn, affect suppliers and the government’s socio-economic objectives of empowering previously disadvantaged individuals.
ActionSA MP Alan Beesley said that unless stricter oversight, enhanced auditing, and tangible consequences for non-compliance are implemented, public trust and government efficiency will continue to suffer.
“It is clear that there is no accountability and consequence for public officials. Until incompetent and corrupt officials are either fired or jailed, nothing will change,” Beesley told Newsday.
“Everything rises and falls on leadership, and sadly competent and honest leadership is missing with most state departments and entities.”
The Auditor-General’s overall report
There are five types of audit outcomes given by the AGSA. The best result is a clean one, which means that no misstatements can be found in an entity’s financial reporting. Forty one received this opinion.
This is followed by a financially unqualified outcome, which contains no material misstatements; however, issues have been raised regarding an entity’s reporting.
Ninety-nine municipalities received this type of audit outcome.
If a municipality receives a qualified audit outcome, it means the AG has determined that its financial reporting contains material misstatements in specific amounts. This was found to be true for 90 municipalities.
An adverse audit outcome means material misstatements have been found which are not confined to specific amounts, as was the case for six municipalities.
The final outcome is a disclaimer of audit opinion, meaning that the entity provided insufficient documentation to make an audit decision. Eleven municipalities received disclaimed audit opinions.
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Well we’ve said it long ago as the African Democratic Party (ADP) THAT SINCE VIRTUALLY EVERY STATE ORGAN is either disfunctinal or imbued by maladministration, scoundering of the state tax payers money, corruption…etc. It is of paramount importance to have these municipalities and government paramount institutions overhauled and the new Government RULERSHIP structures be completely changed. A new dispensation be installed that will be competant, effective and productive in it’s work. Working with and installing competant, disciplined, professional workers who are responsible and working in merit. With no intentions to scounder, steal and mismanage tax payers and the state Treasury money. A Government Committed, Responsible and Accountable to every cent they spend daily. With Preventive Systems installed in place to prevent completely such acts! ADP PRES VUSI SIMPHIWE MKHIZE DBN SA.