The Auditor-General’s latest report on local government paints a troubling picture of municipalities increasingly relying on outside expertise while failing to achieve meaningful improvements in financial reporting and accountability.
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South African municipalities spent R1.61 billion on financial reporting consultants in the 2024/25 financial year despite widespread financial distress, unfunded budgets and deteriorating governance, Auditor-General Tsakani Maluleke has revealed.
The Auditor-General’s latest report on local government paints a troubling picture of municipalities increasingly relying on outside expertise while failing to achieve meaningful improvements in financial reporting and accountability.
According to the report, 225 municipalities across the country hired financial reporting consultants during the year under review, collectively spending R1.61bn. The figure represents a sharp increase from a decade ago, when 179 municipalities spent R590 million on consultants.
The spending comes at a time when municipal finances remain under severe strain. Only 35% of municipalities were assessed as having good financial health, while 40% were classified as financially concerning and 25% as unfavourable.
In addition, 62 municipalities were found to be in such poor financial condition that their ability to continue operating was in doubt.
Despite the heavy expenditure on consultants, Maluleke found that the investment was not yielding the expected results.
“Despite this increased reliance and cost, 61% of municipalities using consultants submitted financial statements with material misstatements in the areas for which consultants were appointed,” Maluleke said on Thursday.
The findings suggest that municipalities are not receiving adequate value for money from the consultants they employ, even as financial pressures mount.
The report shows that consultants were primarily hired to assist with financial statement preparation, asset management and tax-related matters.
More than half of municipalities cited a lack of skills as the reason for making the appointments, while 41% pointed to a combination of skills shortages and vacancies.
A further 6% attributed the appointments solely to vacant positions. Consultant contracts were often renewed repeatedly and increasingly concentrated among a small group of service providers.
The reliance on consultants stands in stark contrast to the worsening financial condition of many municipalities.
The Auditor-General found that 116 municipalities adopted unfunded budgets during the year, committing themselves to R288.17bn in expenditure without having the resources to finance it.
Meanwhile, 123 municipalities did not have sufficient current assets to cover their liabilities, and 174 lacked enough cash to pay creditors.
Weak revenue collection and poor spending practices further undermined municipal finances.
Municipalities took an average of 129 days to collect money owed to them and wrote off R62.12bn in debt deemed unrecoverable. Water losses amounted to R14.73bn, while electricity losses reached R21.63bn.
The Auditor-General said the continued dependence on consultants reflected deeper institutional weaknesses.
In the report’s call to action, Maluleke identified “continued skills and capacity gaps, resulting in reliance on consultants and other service providers at a high cost for which value for money is not always received” as one of the major challenges confronting local government.
She also linked poor financial reporting to weak internal controls and inadequate institutional capacity.
“This discrepancy between the financial statements submitted for auditing and the information ultimately reported in the financial statements is not a technical matter, but rather reflects the absence of the daily and monthly controls necessary for credible financial reporting,” the report noted.
The findings form part of a broader assessment that the outgoing sixth local government administration failed to achieve the turnaround needed in governance and service delivery.
“Over the past four years, mayors and councils of the 6th administration have made limited progress to strengthen governance and improve service delivery, as residents and businesses continue to experience unreliable service delivery, environmental hazards and deteriorating infrastructure,” Maluleke said.
The report concludes that while there have been improvements in some areas, including a reduction in disclaimed audit opinions and better submission rates for financial statements, municipalities continue to struggle with skills shortages, weak controls, poor financial management and a persistent culture of limited accountability.
This has raised questions about whether continued spending on consultants is helping to address the root causes of local government failure.
The SA Human Rights Commission (SAHRC) said the use of financial consultants with no meaningful material change in the audit outcomes of municipalities remains a serious concern.
"The SAHRC calls for the skills and vacancy gap in municipalities to be closed. Further, where consultants are utilised, mechanisms to ensure that skills are transferred to municipal staff should be instilled," it said.
"The SAHRC is also concerned by the high levels of financial wastage in municipalities. The report records R6.36bn in fruitless and wasteful expenditure. The SAHRC reiterates that without proper financial management and the instilling of fiscal discipline and consequence management, wastage of financial resources will continue."
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