State debt of millions of rands threatens auditor-general's office

Auditor-general Kimi Makwetu says debt collection is compounded by the current economic climate . / Kevin Sutherland.
Auditor-general Kimi Makwetu says debt collection is compounded by the current economic climate . / Kevin Sutherland.

Auditor-general Kimi Makwetu has warned that almost a billion rands owed by government institutions are threatening the financial wellbeing of his office.

At the end of March this year, debt owed by all three spheres of government and other state-owned entities audited by Makwetu stood at R806-million, with municipalities accounting for R391-million of the debt.

Provincial government departments owed R150-million while unlisted public and municipal entities and utility agencies were R132-million in arrears.

National departments accounted for R90-million of the debt and statutory entities (chapter nine institutions, water boards, funds and tourism authorities) owed R43-million.

"The main threat to our financial viability remains the increasing debt by local government auditees," reads the 2016/17 AG annual report.

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In total, in the past financial year the AG had 337 debtors across the country.

The R806-million debt increased by 19% from last year's overall figure of R679-million.

Chairman of parliament's standing committee on the auditor-general Vincent Smith said he shared the same concerns as Makwetu that the debt threatened his office's sustainability.

"If we're serious about sustaining our democracy we have to sustain the auditor-general," he said.

Smith said the debt crisis was creating a dual problem as there were serious delinquents in some municipalities who claim there is no money to pay the AG to prevent his office auditing their books.

"We can't live without the auditor-general. We might have to fund the auditor-general from the fiscus," he said.

The AG depends on audit fees and has no budget allocation, Smith said.

Makwetu noted that persistent increases in outstanding debt, which pose a major liquidity risk, remain a stumbling block.

Issuing of monthly letters of demand and summons helped Makwetu collect R354-million but this method of collection is not sustainable, the report stated.

Successful collection of outstanding audit fees through litigation and structured (ring-fenced) payments allowed the auditor-general to remain viable in 2016/17.

Municipalities and their agencies in the Eastern Cape, Northern Cape, Free State and North West owe R309-million or 81% of the local government debt.

But the auditor-general is happy that the Eastern Cape and Northern Cape decreased this by R10-million and R24-million respectively.

The AG said debt collection was compounded by the current economic climate. Among the reasons for the rising debt, he said, were financially distressed auditees with no capacity to generate revenue.

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