The Endumeni Local Municipality’s financial status is dire, with insufficient cash flow to sustain its operations, hindering sustainable service delivery.

The municipality briefed the KwaZulu-Natal Legislature’s Cooperative Governance and Traditional Affairs Portfolio (COGTA) Committee on the key challenges and potential implications of financial management. 

The municipality received a disclaimer audit opinion due to a lack of supporting documentation to support the financial information presented on their annual statements.  The COGTA committee held the hearing to address concerns about financial mismanagement, project delays, and lack of accountability raised by the Auditor General (AG).

Marlaine Nair, the KZN COGTA Portfolio Committee chairperson, said they held meetings with the worst-performing municipalities, which received adverse audits, disclaimer audits, and qualified audit reports from the Auditor General in the last financial year. Nair said this is an important part of their work in ensuring financial accountability, good governance, and service delivery. 

The Auditor General of South Africa (AGSA) 2023-2024 Municipal Finance Management Act (MFMA) audit outcomes for the financial year ended 30 June 2024, stated that minimal progress has been made to address prior year findings, with only four out of 26 previously reported findings successfully resolved.

The AGSA stated that the lack of appropriate oversight and monitoring by leadership over the control environment resulted in non-compliances with legislation with the municipality having repeated non-compliance findings. The AGSA also found that there were weaknesses in procurement and contract management and also lack of accountability and consequences. 

Irregular expenditure was reported at R21 million while unauthorised expenditure (UIF&W) incurred R70 million. The AGSA recommended:

• officials should be held accountable for the non-implementation of the audit action plan.
• mandating investigations into all instances of unauthorised, irregular, fruitless and wasteful (UIF&W) expenditure, and taking appropriate disciplinary or legal action based on the outcomes.
• Ensure that management implements a financial recovery plan to restore financial health, focusing on revenue enhancement, expenditure controls, and cash flow management.
• Strengthen oversight by ensuring that the budget reviewed and approved is credible and funded- supported by realistic revenue projections and cash flow forecasts.

The municipality also stated in its report to the committee that the total debt for the municipality is approximately R228 million. The highest debt is owed by households with debt amounting to R157 million. The municipality stated that commercial debt is R51 million while organs of state owe R20 million. 

The municipality stated that the highest debt is owed by Provincial Works, which COGTA has facilitated an engagement with to get this debt paid. The municipality reported that quarterly government debt engagements are held to resolve all the disputes between government departments and municipalities.

Nair described the meeting as a resounding success, adding that members of the legislature were able to fully understand what drove long-standing problems and what was being done to resolve them. 

“The legislators were also able to recommend practical solutions and clear follow-up steps for this committee and for the provincial government,” she said. 

The municipality falls within the Umzinyathi District Municipality and covers towns such as Glencoe and Dundee. 

zainul.dawood@inl.co.za

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