R40.3m owing for audit fees: Eastern Cape municipalities indebted to AG

Eastern Cape provincial municipalities owed the Auditor-General (AG) more than R40-million in unpaid audit fees by the end of the 2015-16 financial year third quarter in December, the provincial treasury revealed.

A report on the debt was presented to the Bhisho legislature’s finance portfolio committee by treasury head Daluhlanga Majeke.

The provincial municipalities and their entities are indebted to the AG to the tune of R40.3-million, a slight increase from the R40.1-million the municipalities owed the AG at the end of the same period in the previous financial year.

The report, which scrutinised the financial position of 45 provincial municipalities, revealed about R4.9million of the debt was less than 30 days old, while R4.8-million was between 30 and 60 days old.

More than R3.9-million was owed for a period of between 60 and 90 days, while the bulk of the debt, R26.6-million, was outstanding for a period of over three months.

According to the report, this was in contravention of the Municipal Finances Management Act, which requires government institutions to settle debt within 30 days.

The AG’s national spokeswoman, Khutsafalo Mnisi, failed to respond to questions at the time of writing yesterday.

The report stated that the R40million formed part of a broader R1.4-billion debt provincial councils owed to various suppliers by the end of December.

In November, the figure stood at R830-million, the report said.

Although the report did not give a breakdown of how much each municipality owed, it revealed that:

● R277.5-million was owed to Eskom for bulk electricity supply;

● R91.5-million was owed to the department of water affairs for bulk water supply;

● R44.6-million was owed for municipal employees’ pay-as-you-earn deductions;

● R35.2-million was owed for retirement pensions;

● R26.9-million was owed for loan repayments;

● R649.6-million was owed for trade creditors; and ● R268-million was “other” debt. Provincial treasury spokeswoman Nosisa Sogayise said yesterday payments had been made by the municipalities since December “but due to time-frames this has not been consolidated as yet”.

Sogayise said to facilitate payment, provincial treasury together with the cooperative governance and traditional affairs department held bi-monthly meetings and encouraged municipalities to make sufficient provision in their budgets to meet their financial obligations.

“Municipalities are therefore advised to budget adequately for audit fees, and are reminded on a monthly basis to verify amounts owed and pay undisputed amounts to the AG and to others they owe.

“This is a work in progress and the systems are in place to deal with the repayments. Visits to individual affected municipalities are also undertaken to discuss financial management,” Sogayise said.

Standing committee on public accounts committee chair and UDM MPL Max Mhlathi said the debt “was as a result of those municipalities’ own making”.

He said it was caused by them “diverting” funds meant to settle their debts “towards other programmes such as staff payments”.

“In order to adequately deal with this, the provincial government must strengthen financial management in these councils,” he said.

Committee member and DA MPL Bobby Stevenson said it was unacceptable that the figure could increase from R830-million to R1.4billion in the space of a month.

“Municipalities are retaliating unlawfully, punishing creditors by not paying them within the prescribed 30-day period,” he said.

“This state of affairs is particularly unfair to small businesses that cannot be expected to bankroll municipalities’ cash-flow problems. This failure to pay . . . causes businesses to fail.”