Sustained poor audit outcomes: The case of the Amathole District Municipality

Abstract

It is generally accepted that reliable financial statements and credible reporting on the activities of government institutions are necessary for the continued improvement of their services to the public. Within the South African context, the Auditor-General of South Africa recently reported that only a few municipalities obtained clean audit reports. In fact, the drive towards clean municipal audit outcomes initiated by the South African government in 2009 evidently failed. Subsequently, this study set out to obtain a deepened understanding of why municipalities repeatedly fail to achieve clean audit outcomes. For this purpose, the Amathole District Municipality and its constituted local municipalities were selected as a case for this study. The reviewed material consisted of a rich collection of audit reports, annual reports, regulatory documents, and a wide variety of other official documents. In addition, the findings of a survey amongst municipal officials and councillors also informed this study. As a result, enduring and deep-rooted systemic leadership deficiencies, financial and performance management restraints, and ineffective and inefficient governance structures were revealed. The evident lack of officials capable of meeting the standards set by the relevant regulatory environment and emphasised by the auditor’s reports, has shown to sustain low organisational identification and a culture of reliance on external monitoring and incentives for meeting external standards. Council members’ lack of insight into the agent’s incapability to meet the requirements of a clean audit outcome gives reason to question whether these requirements represent the values of the principal (the municipal councils) or whether it is imposed from another sphere. This study suggests that the actual principal is undoubtedly in another government sphere, resulting in the sustained low performance of leadership, financial and performance management and governance within municipalities.