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23 Jul 2012

The audit outcomes of the Eastern Cape local government revealed minimal improvement and general slow progress towards unqualified opinions (with findings or concerns), with the province showing an overall improvement in four of the audit outcomes.

Of the 45 municipalities and 10 municipal entities audited by the Auditor-General of South Africa (AGSA) in the Eastern Cape, no municipality received the desired clean audit opinion (unqualified without findings). Thirteen municipalities (29%) received financially unqualified opinions with findings, 13 (29%) were qualified, while two (4%) received an adverse opinion and 17 (38%) disclaimers.

This situation is reinforced by the status of internal controls that require urgent intervention at roughly half of the municipalities. A third of the municipalities are in the process of improving their internal controls, while the remainder have adequately addressed internal control challenges.

The three most prominent reasons for the poor audit opinions in this province are a lack of political will at approximately 50% of the municipalities, where political leaders are not taking the AGSA's message towards ownership of key controls seriously a lack of consequences for poor performance in the majority 98% of cases, and failure to appoint adequately qualified, skilled and competent individuals at 58% of municipalities.

"We are seeing the impact of the lack of skills, the slow response of leadership to owning key controls as well as the absence of managing poor performance in the risks that municipalities continue to face. At the moment these risks are beyond tolerable levels," said Auditor-General

Terence Nombembe, who explained that the five major risks related to supply chain management, predetermined objectives (service delivery reporting), IT controls, human resources management and material errors in financial statements.

"Despite the regressions and lack of progress, I take note of the latest commitments by the province's leadership to address these challenges," concluded Nombembe, who had visited all the Eastern Cape municipalities in the past few months to discuss the state of the audit outcomes and explore ways to create momentum together with role players towards clean audits.

He said the provincial executive, the provincial treasury, the provincial department of local government and traditional affairs as well as the South African Local Government Association must build on the experiences of the door-to-door visits to enhance the coordination of their ongoing capacity-building efforts at municipalities.

Elevated cooperation between the provincial public accounts committee and the portfolio committee on local government would also improve oversight in dealing with the challenges faced by local government.

The AGSA will maintain its quarterly municipal visits, which are aimed at monitoring and evaluating the status of improvements and the sustainability of key internal controls and leadership tone that would be a catalyst for the realisation of clean administration in municipalities in the province. 

Insights gathered will continue to be shared with the provincial executive and oversight leadership each quarter, to create a platform for forward momentum towards clean audits while also working closely with internal audit units and audit committees.

Issued by: Auditor-General South Africa
23 Jul 2012

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