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.
Image: Karen Sandison / Independent Media
South African municipalities continued to rely heavily on external financial consultants in the 2024/25 financial year, spending R1.61 billion even as their financial positions deteriorated and governance challenges deepened, says Auditor-General Tsakani Maluleke.
According to Business Report, the Auditor-General’s latest local government report highlights a growing dependence on outside expertise, without corresponding improvements in financial reporting or accountability outcomes across municipalities.
In total, 225 municipalities appointed consultants during the period under review, up significantly from 179 a decade earlier, when spending stood at R590 million.
The report comes against a backdrop of widespread financial instability, with only 35% of municipalities assessed as financially healthy. A further 40% were flagged as financially concerning, while 25% were deemed unfavourable.
Maluleke also found that 62 municipalities were in such poor financial condition that their ability to continue operating was in doubt.
Despite the increased reliance on consultants, the Auditor-General said the outcomes remained weak.
“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.
Consultants were primarily brought in to assist with financial statement preparation, asset management and tax-related functions, with more than half of municipalities citing a shortage of skills as the main reason for the appointments. A further 41% cited both skills shortages and vacancies, while 6% pointed solely to vacant posts.
The report notes that contracts were frequently renewed and increasingly concentrated among a small group of service providers.
At the same time, municipal finances continued to deteriorate. The AG found that 116 municipalities adopted unfunded budgets, collectively committing R288.17bn in expenditure without adequate funding in place.
A total of 123 municipalities lacked sufficient current assets to meet liabilities, while 174 did not have enough cash to pay creditors.
Revenue collection and financial discipline also remained under pressure. On average, municipalities took 129 days to collect money owed to them and wrote off R62.12bn in unrecoverable debt. Water losses totalled R14.73bn, while electricity losses reached R21.63bn.
Maluleke said the continued reliance on consultants pointed to deeper structural weaknesses in local government.
In the report’s call to action, she cited “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 a key challenge.
She added that weak internal controls and poor institutional capacity continued to undermine financial reporting.
“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 Auditor-General further observed that the sixth local government administration had made limited progress in addressing governance and service delivery challenges, with many communities still experiencing unreliable services and deteriorating infrastructure.
While there were some improvements, including fewer disclaimed audit opinions and better financial statement submissions, persistent skills shortages, weak controls and poor financial management continued to weigh on municipalities.
The SA Human Rights Commission (SAHRC) said the continued use of consultants without meaningful improvement in audit outcomes remained a 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.
It also warned that financial wastage remained high, citing R6.36bn in fruitless and wasteful expenditure, and stressed that without stronger fiscal discipline and consequence management, the problem was likely to persist.
BUSINESS REPORT