Municipalities owed the Auditor-General of SA R518m in outstanding audit fees by end-March, or 38% of its total debt book of R1.34bn.
The outstanding debt reflects the financially distressed position of many municipalities, which collectively owe Eskom more than R100bn.
Collection of audit fees had been particularly difficult in the Free State, the North West, the Western Cape and the Northern Cape, deputy auditor-general Vonani Chauke told parliament’s standing committee on the auditor-general on Friday during a briefing on the office’s integrated annual report for 2024/25.
“Most of the municipalities from these provinces are in financial distress and are based in impoverished locations with low income generation,” he said.
The auditor-general has taken several initiatives to handle the outstanding debt, including a debt restructuring programme for the Northern Cape municipalities in financial distress. The debt owed by Northern Cape municipalities in 2024/25 was the highest of all provinces, amounting to R155m.
Under the programme, the current outstanding debt and future invoices would be ringfenced and settled over the next 48 months.
Also of assistance is the 1% allocation from the National Treasury, which is used to liquidate some of the long-outstanding debt.
Since the amendment of the Public Audit Act, which came into effect in April 2019, allowing certain excess audit fees to be defrayed from the National Revenue Fund, the auditor-general has received an average of R130m per year from the National Treasury to assist qualifying municipalities.
Chauke said this constituted about 2.5% of the auditor-general’s total revenue.
Also of assistance, Chauke noted, had been the warning letter sent by the Treasury to 32 municipalities in default with no payment arrangements to settle their long outstanding debt. The Treasury had threatened to withhold its grant payments unless the debt was settled.
Despite the outstanding debt, the auditor-general had a R331m surplus (not all of it cash in hand because of outstanding debt) on revenue of R5.3bn at the March year-end. It has asked the committee if it can keep the surplus for its digital transformation and IT infrastructure modernisation strategy, which is estimated to cost R1bn over the next five years. Among other factors, the bottom line was boosted by using internal resources more than external auditors.
An amount of R629m was paid during the year to 100 external audit firms: nine large firms with turnover above R50m, 17 medium-sized firms with turnover of R10m-R50m, and 74 small firms with turnover below R10m. Of this allocation, R464m went to black-owned firms and R141m to female-owned businesses.
During the year under review, the auditor-general conducted 983 regulatory audits and employed 4,240 people, including trainee auditors and those on short-term contracts.
Municipal manager billed R4.6m
On Friday, auditor-general Tsakani Maluleke announced that the municipal manager of a North West district municipality, Allan Losaba, had been charged R4.6m plus interest in his personal capacity for failing to recover financial losses despite repeated warnings.
This was the first certificate of debt issued under the material irregularity provisions of the Public Audit Act.
The losses arose from a water tanker service provider overclaiming on the kilometres and hours for services rendered.
Maluleke issued a material irregularity notice to Losaba for his failure to take steps to recover the overpayment for water tankering services rendered despite repeated advice from the auditor-general’s office .
A material irregularity is any noncompliance with or contravention of legislation, fraud, theft or a breach of a fiduciary duty identified during an audit performed under the act that resulted in or is likely to result in a material financial loss, the misuse or loss of a material public resource, or substantial harm to a public sector institution or the public.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.