Auditor-General recovers R460 million in unpaid fees from municipalities

The Office of the Auditor-General (A-G) recovered R460 million in outstanding audit fees from municipalities in December 2024.

This was after the National Treasury wrote to the defaulting municipalities, warning that it would withhold their Equitable Share for the delivery of services if they did not pay up.

The A-G is grappling with an alarming R1 billion owed by various government entities, with municipalities and state-owned enterprises accounting for the bulk of the debt.

Briefing the Standing Committee on A-G on Friday, Accountant-General Shabeer Khan said the National Treasury wrote last November to all 257 municipalities with outstanding debt due to the A-G.

“This letter notified municipalities that if they don’t take appropriate steps, the National Treasury will invoke Section 216(2) of the Constitution, with the intention of stopping the Equitable Share.

“We have seen within a month of this message, municipalities were paying the A-G R460m in December,” Khan said.

He also said the letters were sent to 102 directors-general and 22 municipalities defaulting on third-party payments, such as A-G, SARS, and the pension funds.

Khan said many municipalities have unfunded budgets and are unable to pay creditors or deliver on services as required.

He told the MPs that the A-G has provided the National Treasury with municipalities that have not made payments or entered into payment arrangements.

“The National Treasury obtained the necessary approval from the minister to withhold the March 2025 funds from municipalities that did not respond proactively to our previous letter.

“The Local Government Equitable Share for these municipalities will be stopped and only released into the municipality’s primary bank account in instalments, with a condition that the first instalment to be released shall be strictly used to pay the respective creditors.”

This condition will only be considered fulfilled upon the municipality providing evidence in the form of proof of payment.

Khan added that despite the National Treasury’ intervention, municipalities continue to accumulate debt.

“Withholding letters must be enforced and we need to consider additional mechanisms that will enhance the collection of debt.”

He said the A-G should ensure complete and accurate reporting of the debt and collections, and track monthly.

Khan said that as of July 31, debtors' balance was R1.8 billion.

“The outstanding debt owed by the local government sphere is R437m or 24% of the total debt, whereas state-owned entities have a debt of R644m or 35% of the total debt.”

The recovery of the outstanding debt received a mixed reaction from the political parties.

ANC MP Imraan Subrathie said he was pleased by the collaboration between the National Treasury and the A-G.

MK Party MP Lucky Montana cautioned against the withholding of the Equitable Share.

 “We need to find other ways. We also need to look at the audit fees,” Montana said.

He also called for a relook into the audit fee structure and the funding model of the A-G.

“One of things not to encourage is the A-G and municipalities fighting it out in court,” Montana added.

DA MP Sbongiseni Vilakazi also cautioned against withholding the Equitable Share, while committee chairperson Wouter Wessels said withholding the funds was not good in terms of service delivery to the poorest.

But, Khan said, the National Treasury used the Equitable Share as a legal instrument to change and enforce behaviour change.

“Obviously, it was not taken lightly,” he said.

“Equitable Share is measure of the last resort. It was because of behavior and non-payments to A-G,” Khan added.

A-G Tsakani Maluleke said the National Treasury’s support to collect money due to her office was maintaining its viability and independence.

“It is evidence of the partnership between us and the National Treasury has just been enhanced because of the attention the Standing Committee on A-G paid to this matter,” Maluleke said.

mayibongwe.maqhina@inl.co.za