Limpopo municipalities have blown R280m on financial consultants – AG

Limpopo municipalities blew R280m on financial consultants in the past auditing year, with some hired to do basic functions like tax services and more than half found to be ineffective. 

The Auditor-General’s (AG's) report has revealed that 15 municipalities paid a total of R180m to consultants whose work was ineffective. The expenditure on consultants demonstrates massive skills shortages in local government in Limpopo, which spends the most on consultants in the country. 

Some municipalities told the AG they only had half the number of officials they need in their finance departments. 

The troubled Mogalakwena municipality in the Waterberg district forked out R44m – the highest amount paid in the province – on people to prepare its books, including doing taxes because it does not have skilled professionals to do the job, the report showed. 

The municipality, which received its third qualified audit, has been flagged by the AG as needing intervention to help establish daily and monthly controls in its administration. 

Spokesperson Malesela Selokela said one of the main causes of undesirable’s audit outcome was due to the municipality's lack of capacity in the finance department. 

He said they appointed a municipal manager towards the end of the 2023 financial period.

The CFO was appointed two months before the financial year end of 2023, he said.

“This meant during the 2023 financial year the municipality did not have a CFO for almost the entire financial period.

“In addition, the finance department had many officials including the then acting CFO - who was serving as deputy CFO - placed on suspension together with several other financial officials. This then led to the municipality having to rely on the use of consultants to compile financial statements for the 2023 period," Selokela said.

The Fetakgomo Tubatse municipality splashed R36.6m, the second-highest spend in the province, to prepare statements and help officials manage its assets. 

Fetakgomo Tubatse municipal spokesperson Mahlaku Komane said the R36m figure recorded by the AG was "incorrect". She, however, did not disclose how much the municipality paid for consultants. 

“However, what the municipality can confirm is that for the 2022/2023 financial year it received an unqualified audit opinion with a few issues highlighted by the AG, that of which are currently being addressed,” she said. 

Meanwhile, Collins Chabane municipality in the Vhembe district was billed R29m by consulting professionals for similar work. 

All the consultants hired at the three municipalities were found to have been ineffective by the AG, despite walking away with about R100m collectively. 

Collins Chabane municipal manager Risenga Shilenge said: “We are a fairly new municipality and for most of our work, we relied more on consultants since establishment. You can’t start a new municipality with adverts, where you are going to hire 200 people at a go, are you going to get quality there?

“However, we are slowly moving away from consultants. I have given the department of finance two years so that we do financials internally and we have started with that process to make sure we do that on our own.”

Regarding the AG’s findings that the consultants were not effective as there was inadequate review of work, he said the consultants  worked on the financial statements and when the AG looked at them, errors were found. 

“The fact that there is an error does not mean the financial statements are not of quality because if that was the case, how would we get an unqualified audit opinion? Errors are errors, when we correct them, the financial statements are OK.” 

The Modimolle-Mookgophong and Thabazimbi municipalities, which the AG said were in such dire financial situation that there was significant doubt they would continue to operate, collectively spent R6.1m on consultants which were also found to be ineffective. 

Speaking on Limpopo municipalities, AG Tsakani Maluleke said: “The amount that municipalities spent on consultants continued to increase, and most municipalities [21, or 78%] relied on consultants to prepare and/or review their financial statements because they did not have enough skilled resources in their finance units.

“Consultant costs for financial reporting increased by 6% to R279,87-million. Despite the high spend on financial reporting consultants, the investment has not had the desired impact as municipalities’ audit outcomes remained largely unchanged. It is also not evident whether the consultants transferred skills to municipal staff.” 

Maluleke said last year, the provincial treasury and co-operative governance departments, supported by the premier’s office, committed to help municipalities reduce their use of consultants, but this support has not yet materialised. 

Spokesperson for the provincial department of co-operative governance Tsakani Baloyi acknowledged that municipalities spent a significant amount on consultants, a matter that has been raised in the intergovernmental sessions as requiring urgent attention.

“It should however be noted that there has been a slight decrease over the years though not satisfactory in this matter. We have seen an improvement in the number of municipalities that have compiled the 2023/24 annual financial statements (AFS) in-house. 

“High vacancies in key positions, especially in finance units, contribute to insufficient capacity. This is because municipalities, like other employers, also face the risk of attracting and retaining skilled employees due to competing markets. People tend to leave smaller municipalities for others with a higher grade. Where there are critical vacancies, municipalities are advised to develop recruitment plans and fill the vacancies with qualified personnel.

“It is the commitment of the provincial government, working together with municipalities, to ensure reduction of this amounts, especially for transactions that should be handled in-house.”

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