MFMA 2019-20

SECTION 6: PROVINCIAL OVERVIEWS 127 as well as budget constraints had a negative impact on the achievement of planned performance targets in the province. Municipalities should also ensure that controls implemented around the key service delivery programmes audited are replicated across all programmes to sustain positive performance information outcomes going forward and, most importantly, ensure that citizens receive quality services. Despite efforts made, the financial health of municipalities, including the metros as the economic hubs of the country, remained concerning and fell under further strain due to covid-19. The pandemic worsened existing difficulties relating to poor revenue collection, debt write-offs and credit downgrades. The deteriorating financial position poses a risk towards municipalities achieving their planned service delivery targets. This calls for greater financial prudence over the limited funds available and the elimination of wasteful expenditure and other losses. This will ensure that municipalities are able to provide adequate services to the expanding Gauteng population. While efforts were made to stabilise municipalities, including provincial intervention at West Rand District and Emfuleni, the implementation of financial improvement strategies remains in progress and should be accelerated. Notwithstanding some improvements, the combined assurance model is still not as effective as it should be. We encourage all role players – especially accounting officers, senior management (together with internal audit units and audit committees) and executive authorities – to ensure that they contribute positively towards providing assurance regarding the control environment. These controls include regular and accurate reviews of financial and performance reports, proper procurement planning and contract management, and the use of compliance checklists. In addition, increased oversight by councils and municipal public accounts committees would be instrumental in holding municipal leaders accountable, including ensuring that investigations into unauthorised, irregular and fruitless and wasteful expenditure are done timeously. We also continue to encourage the provincial cooperative governance department, the provincial treasury and the premier to intensify the level of support provided to municipalities going forward, especially in the area of compliance with legislation and the quality of published financial statements. Gauteng’s service delivery model is fairly unique in the country, with a number of specialised municipal entities administered by municipal boards and responsible for a significant portion of the province’s municipal expenditure and service delivery programmes. The overall negative trend in municipal entity outcomes, primarily due to non-compliance with legislation, continued in the current year as the Johannesburg Development Agency regressed from a clean audit outcome, which it had sustained for three years, to an unqualified opinion with findings. This was due to material errors in the submitted financials (which were subsequently corrected), caused by inadequate reviews of the financial statements and supporting schedules. In addition, the Brakpan Bus Company remained disclaimed for the second year, due to instability in the accounting officer and financial manager positions, inadequate record- management controls, and a lack of basic financial disciplines. All other municipal entities sustained their outcomes of unqualified with material findings, including the four largest municipal entities by budget, namely City Power Johannesburg, Johannesburg Water, Pikitup Johannesburg and Johannesburg Roads Agency, which were responsible for a combined R36,13 billion of the total municipal entity budget of R42,8 billion. In the context of the municipal entity administrative model, we reiterate our previous year’s recommendation that the municipal leadership and oversight structures pay closer attention to the governance of entities under their control to reverse the negative trend in audit outcomes. We expanded our implementation of the amended Public Audit Act to four auditees, and identified nine material irregularities at two metros, namely City of Tshwane and City of Johannesburg. The material irregularities related to the current and prior years, indicating that municipalities should prioritise monitoring the implementation of stringent controls over expenditure to ensure that payments are made only when goods and services are received, and that municipal assets are adequately safeguarded. Accounting officers have been responsive towards the process and are taking corrective steps to address the irregularities identified. However, oversight and executive authorities should also continue to monitor the progress made to both address and prevent such material irregularities, thereby ensuring that public funds are only spent for their intended purpose.