Local Government's Audit Crisis: Five Years of Broken Promises Exposed

WHEN THE BOOKS CANNOT BALANCE: LOCAL GOVERNMENT’S AUDIT CRISIS AND THE PROMISES NOBODY COULD KEEP

On 24 June, Auditor-General Tsakani Maluleke tabled the consolidated report on local government audit outcomes for 2024-25, covering the final audited year of councils elected in 2021. The report is free, online, and represents the most complete account available of what the past five years delivered to the places where South Africans actually live. It received a day of coverage and then the news moved on.

The language of audit reports can obscure their meaning, but the underlying story is straightforward. Every municipality submits annual financial statements to independent auditors who assess whether the accounts are accurate, whether rules were followed, and whether the municipality reported honestly on its own performance. A clean audit signals all three conditions were met. An unqualified opinion with findings means the numbers are right but procedures were broken. A qualified opinion indicates material gaps in the evidence. An adverse opinion means the statements are fundamentally wrong. A disclaimed opinion, the worst outcome, means auditors could not obtain enough evidence to form any judgment at all.

The results paint a picture of systemic dysfunction. Fifteen percent of municipalities achieved clean audits, yet those municipalities account for only eight percent of total expenditure. Three-quarters of all municipalities submitted financial statements containing material misstatements, figures that were wrong on arrival and corrected only because auditors discovered the errors. The sector spent R1.61-billion on consultants to help produce those statements, and many still could not generate credible ones. Meanwhile, neglected infrastructure lost R14.73-billion worth of water and R21.63-billion worth of electricity, purchased and paid for but leaked into the ground in a country where people still queue at taps with containers.

There is improvement to acknowledge. Sixty-one percent of municipalities received unqualified opinions, a proportion last reached a decade ago. Disclaimed opinions fell from 29 in 2020-21 to eight. KwaZulu-Natal, Limpopo and Mpumalanga eliminated theirs entirely. Finance officials in those municipalities performed difficult, often thankless work that should not be erased from the record. But better paperwork is not the same as better water.

The deeper failure lies in a figure that demands sustained attention: forty-five percent of municipalities adopted unfunded budgets, committing R288.17-billion they do not have. This is not an accident, a spreadsheet error, or a failure of national economic conditions. An unfunded budget is a document that states, in numbers, that incoming revenue will not cover outgoing expenditure. A council sits with that document before it. Officials have reviewed it. Treasury has often warned about it. And the council adopts it anyway, on revenue targets nobody in the room believes will be met.

When the year runs and the money does not arrive, the consequences are concrete. The clinic road is not graded, so someone is carried down it. The pump station is not rebuilt, so the tap runs for two hours on a Thursday and the rest is queueing. The contractor is not paid, so a man who hired six people lays off six people. By June, there is a shortfall to explain to an auditor.

Capacity constraints are real. Small municipalities compete for finance skills against banks and audit firms and lose. The R1.61-billion spent on consultants is, among other things, an admission by hundreds of councils that they cannot do this work themselves. Incompetence explains a great deal. But incompetence does not explain an unfunded budget. Nobody accidentally votes for a promise they have been told cannot be kept. That is a different category of failure.

The cruelty of unfunded promises operates at a human level. When someone waits for something promised by someone who was never going to arrive, the damage is not the first disappointment. It is what the waiting does afterwards. The person who waits does not stop believing the promise; they revise themselves instead. They decide they asked for too much, or asked at the wrong time, or were never quite worth the trip. A town does the same. It stops expecting the road, then stops asking about the road, then begins explaining to itself why a place like this was never going to get one. That is how a budget nobody could fund becomes, five years later, a settled belief about who deserves what. It is worse than a father who does not come, because this promise was made by resolution, in public, with a quorum, and minuted.

The audit outcomes reveal something that should trouble anyone who has settled the question of local government by settling the question of party. Not one of the eight metros achieved a clean audit. Cape Town, Johannesburg, Tshwane, eThekwini, Ekurhuleni, Nelson Mandela Bay, Mangaung, and Buffalo City all failed. Between them, these metros manage 54 percent of the local government budget and serve 46 percent of South African households. They are governed by different parties and very different coalitions. Whatever produces an unfunded budget or an uncollectable debtors book is not confined to one party’s culture, and it will not be cured by a change of colours alone.

Before 4 November, when voters will decide whether to return or replace these councils, three questions matter. What audit opinion did your municipality receive, and for how many years running? Was its budget funded? And how much of the money owed to it has been written off as irrecoverable? In KwaZulu-Natal, roughly half of all municipalities have written off more than 80 percent of their debtors. When a candidate arrives at your door, the useful question is not which party they represent. The useful question is what the audit finding was and what specifically they will do about it. Watch whether they know the answer.