Only 39 municipalities receive clean audits – AG report

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JIMMY MOYAHA: The Auditor-General’s Office of South Africa today, 24^th of June 2026, released its audit findings for local municipalities. Only 39 [15%] of SA’s local municipalities were able to receive a clean audit, according to the AG’s report.

More concerning is that the state of metros over the last five or so years has deteriorated in terms of the quality of their audit findings. We’re going to look at this in more detail with the head of audit at the Auditor-General’s Office of South Africa, Sharrone Adams. She joins me on the line now to see what we make of this.

Sharrone, lovely having you on the show. Thanks so much for taking the time. Let’s start with an overview of the findings from the AG’s office across the municipalities. Any standout performers there?

SHARRONE ADAMS: Good evening, Jimmy, and good evening to the listeners. We’ve seen for the current year that we have very limited progress over this administration. However, we’ve seen some green shoots in some improvements.

The first one that we would like to mention is the timely submission of the financial statements, where we’ve seen an improvement from 82% to 98% in the current year.

Furthermore, the second improvement is a reduction in disclaimed municipalities. When we started the administration, there were about 29 disclaimed municipalities, and those have reduced to eight municipalities. These involve undesirable audit outcomes that we would not like to see. Of these eight, there are seven repeat disclaimers that have been in the disclaimer zone for three to 10 years.

Where we have seen these improvements in terms of the submission of the financial statements and those of the disclaimed audit opinions, is all the intervention from both national and provincial perspective – the roles that the premiers, the Cogtas [departments of Cooperative Governance and Traditional Affairs], the Treasury and legislatures and parliament have to play in terms of the accountability ecosystem.

Furthermore, one of the other green shoots that we’ve seen is that we have about 61% of our municipalities in the ‘unqualified’ zone with findings. That is quite a significant improvement.

However, of concern, Jimmy, to us and the listeners are the areas of regression that we’ve seen. So we’ve seen a regression in the [numbers] of a clean audit from 41 to 39 clean audits – representing only 15%.

Further regressions that we have seen have been specifically in the space of the metros, where we find that there is no metro municipality with clean audit outcomes.

And we have three basically in the ‘unqualified’ zone– the City of Cape Town, eThekwini, and the City of Joburg. These municipalities, these metros, serve about 46% of households and are responsible for 54% of the budget.

I think furthermore, if we look at these metro municipalities, they take responsibility for about R73 billion of their regular expenditure over the administration – and in the current year, R23 billion of irregular expenditure.

So what we have clearly seen in the space of a metro is a clear demonstration where institutionalisation of controls is not implemented, there is no regard for compliance to the law, officials are not behaving ethically, there is conflict of interest, and they don’t always act in the best interest of the institution.

We’ve seen the amount of unauthorised and irregular expenditure and fruitless and wasteful expenditure growing on a consistent basis, with no proper accountability and consequence management that takes place in in this regard.

The other interesting matter, in terms of the movement in the audit outcomes, is that overall we see 72 municipalities improve and 38% regress. However, when we look at the budgets of these municipalities, the regressions are more in the 38%, which basically deals with R149 billion of the budget, compared to the improvement of R82 billion of the budget – which basically indicates that the municipalities that regress actually hold a portion of the biggest budget, compared to those that have improved.

JIMMY MOYAHA: Now, Sharrone, part of those regressing municipalities are, of course, metros. They have been performing worse than they did at the start of this particular reporting term. Over the last five years we’ve seen a significant deterioration in their performance.

Can we look at that in a bit more detail and look at why it is so concerning? The metros are surely supposed to be those that have more resources, and perhaps even those that are able to set an example for the smaller municipalities.

SHARRONE ADAMS: Jimmy, 100% right. So when we look at the audit outcomes for the metros, as I’ve indicated, there are three basically which received an unqualified audit opinion.

So what we have seen in the current year is a regression, specifically with the City of Cape Town, which had findings on procurement and contract management that they’re addressing and dealing with.

When we specifically look at the eThekwini metro, this has been a metro that has been in the unqualified zone for a number of years.

So throughout these metros, we see consistent findings in the area of non-compliance with laws and regulations – with specific emphasis on procurement and contract management where procurement prescripts are not appropriately followed in these cases.

For example, in the case of the City of Joburg we see they have an unqualified audit. But this was mainly due to the entities across their sphere that basically received these ‘unqualified’ audits.

But as a standalone audit, the City of Joburg would have obtained a ‘qualified’ audit opinion.

Similarly, when we look at the other metros in the ‘qualified’ zone – which is the rest of them – there again we don’t see any culture of clear performance, of knowing that you perform your work in terms of your mandate. There’s no clear accountability that we find.

So when we basically engage with these metros, we often issue repeat findings.

And then furthermore, from a transparency perspective, when you even look at their performance report, there are only two metros that basically received a clean bill of health when it comes to service delivery – which is the performance information report.

Furthermore, when we look specifically at the metros in terms of their rate of responsiveness to our findings – even in some of the instances where we’ve issued [findings of] material irregularities – the rate of responsiveness is very, very slow.

So those are some of the key challenges that we find in the metros, and they are the ones, as you correctly say, that basically have the biggest budgets, and which, from a skillset capability perspective should have better skills and capability based on where they are centred. But still they are ones we find quite a bit of challenges with.

JIMMY MOYAHA: Sharrone, if we are looking at what needs to be done going forward, we have seen some signs of improvement in some areas, but we’ve also seen an increase in the use of consultants significantly impacting how much is spent on consultants to prepare financial statements and to do things that municipalities employ other individuals to do.

How do we improve this? How do we improve the audit quality simultaneously with the financial management of municipalities such that we’re able to achieve better audit outcomes?

SHARRONE ADAMS: Jimmy, when we specifically look at the spend on consultants, once again we see an increase since the start of the administration to now. For this year, about R1.6 billion has been spent on the cost of consultants.

What we further see when these consultants are basically utilised, is that in 68% of the instances we see recurring appointments of consultants in the municipalities.

In the majority of cases, the reason for the appointment of consultants is because of … not having appropriate skills, or having vacancies in place. That was one of the key reasons why these consultants were appointed.

When you dig a bit deeper to get an understanding, you can ask what these consultants are appointed to actually do.

A lot of the work that the consultants then do is often looking at underlying basic information that was supposed to be done on a daily, monthly and quarterly basis – like asset management, accounting services, preparation of financial statements. In some instances there are even tax services that we see that they do.

And in this case, when we actually assess from our perspective, looking at when these consultants were utilised, we still find in the majority of cases that the audit outcomes are not improving, and that the findings remain the same.

So in many of the cases we find that the work of the consultant is not adequately reviewed by the respective municipalities when they appoint consultants.

Sometimes when they appoint these consultants, they don’t even do a proper needs assessment to ask why we need consultants.

And in other cases they actually appoint consultants, knowing they don’t have the documents available. So in many cases, we’ve started issuing [findings of] material irregularities – about 33 of them – where we’ve actually indicated that ‘you are not using consultants effectively, and there should be a process in place when you’re appointing these consultants’.

These are instances where we’ve seen proper processes were not followed, and proper accountability wasn’t driven when it came to the appointment of consultants.

JIMMY MOYAHA: Greater accountability and audit improvements are required from municipalities and are required urgently.

We’ll have to leave the conversation on that note. The head of audit at the Auditor-General’s Office of South Africa, Sharrone Adams, joined us to look at the conclusion of local municipality audits and the outcomes thereof.