Not a single metropolitan municipality in South Africa achieved a clean audit for the 2024/25 financial year, according to the latest Auditor-General (AG) reports, with the Organisation Undoing Tax Abuse (Outa) warning that this failure points to an entrenched crisis in local government.

Metros represent 54% of total local government expenditure and serve millions of citizens, therefore, Outa says their financial regression directly threatens both community service delivery and the national economy.

While 61% of municipalities achieved unqualified audits, severe underlying issues persist. Outa highlights a “toxic combination” of over-reliance on external consultants, poor budget execution, and a systemic lack of consequence management.

The AG’s report reveals a severe lack of financial and performance discipline across the country. Only 39 out of 257 municipalities achieved a clean audit status, 17 municipalities received unqualified opinions with findings, leading to complacency rather than improvement and 225 municipalities spent a combined R1.61-billion on financial reporting consultants.

The report also highlighted major flaws in compliance and performance reporting.

Outa executive Julius Kleynhans notes that the AG report exposes problems far deeper than poor financial administration. The steady erosion of institutional capability explains why service delivery deteriorates despite rising municipal budgets, he says.

Municipalities routinely bypass internal capacity in favour of expensive private contractors. Spending R1.61-billion on financial consultants highlights a failure to build internal skills. This practice creates a cycle of dependency without fixing underlying accounting errors, Kleynhans says.

He points to a weakening culture of transparency and institutional integrity that plagues local leadership and allows compliance failures to go unpunished. He adds that without automatic consequence management for officials who ignore laws or lose public money, financial drift remains the norm.

Further, many local governments fail to implement credible, funded, and service-delivery-based budgets and traditional budgeting structures allow bloated historical costs and wasteful contracts to be rolled over annually without review, Kleynhans notes.

SOLUTIONS

To make clean audits the standard rather than the exception, Outa advocates for immediate review of all expenditure categories and existing contracts from scratch to eliminate waste.

Outa wants to mandate immediate legal and disciplinary action against officials and contractors who abuse procurement systems, and to fill critical vacancies with qualified professionals to eliminate dependency on external financial consultants.

The organisation wants the urgent deployment of sustained provincial and national intervention teams to monitor metropolitan expenditure.

Without rebuilding basic institutional capability and enforcing strict discipline, any future audit improvements will remain entirely superficial, it warns.