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An assessment of the relationship between clean audits and
service delivery - A study of the Amathole District Municipality in
the Eastern Cape province, for the 2013/2014 financial year
School of Public Administration
(SPA)
Faculty of Management and Commerce
Mini-dissertation in partial fulfilment of the programme for Masters in
Public Administration
Bongiwe Mashalaba
200508982
Supervisor: Dr. T. Jonas
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Declaration
I, Bongiwe Mashalaba, hereby declare that this dissertation entitled “An assessment of
the relationship between clean audits and service delivery - A study of Amathole District
Municipality in the Eastern Cape Province, for the 2013/2014 financial year, submitted
to the University of Fort Hare, in partial fulfilment of the requirements of the degree of
Masters in Public Administration, is a presentation of my original research work and that
it has not been submitted anywhere for any award. Wherever external contribution and
other sources were implied, every attempt was made to emphasise this clearly by
indicating references to the literature.
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Signature Date
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ACKNOWLEDGEMENTS
In my pursuit of this Master’s degree, I am entirely indebted to the invaluable
support which has been extended to me by many people in my life. First and
foremost, I wish to thank Jehovah for the wisdom, gift of good health, and
strength which He has constantly given me throughout my entire life. I owe the
deepest gratitude to my supervisors, Professor Ijeoma and Dr. Jonas. Despite
their numerous academic commitments, they took me in and ensured that I
finished my degree. Secondly, I wish to express my heartfelt gratitude to Ms
Pumza Foko, for all the support which she gave me during the conducting of my
study. To Mr. Andile Mhahlo, for his guidance and assurance, which inspired and
encouraged me: thank you for your support and experience, which enabled me
to complete this study successfully. Throughout this endeavour, I have been
fortunate to have received the invaluable support of my friends and family, who
continuously encouraged me to push on, which enabled me to come this far. I
owe all of you the deepest gratitude.
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DEDICATION
This work is dedicated to my entire family, who have been a continuous source of
support and reassurance all my life, particularly during the period of this study. It
has been a long and demanding undertaking, but you have always supported me,
from the very beginning. To my late grandparents, Christopher and Buyiswa
Mashalaba, I am sure that I have arrived at this point in my career as a result of
their influence. They loved me unconditionally, and taught me to work hard
towards whatever goals to which I may aspire and wish to achieve.
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ABSTRACT
The purpose of this study was to investigate the relationship between the concept
of clean audit reports in relation to service delivery. The study was conducted in
the Amathole District Municipality in the Eastern Cape Province and centred on
the audit outcome of the municipality for the 2013/2014 financial year. A
qualitative research design was adopted in order to conduct the study and the
data was collected through the conducting of semi-structured interviews. The
research sample comprised officers who were employed by the Amathole District
Municipality and one manager from the office of the Auditor-General.
The key findings of the study revealed that, at present, the concept of a clean
audit outcome is used by municipal officers to imply that the performance of an
organisation is to be assessed mainly on the basis of evidence which is provided
by financial indicators, to the exclusion of non-financial benchmarks. This
assumption tends to encourage municipal officers to strive towards impressing
auditors, rather than serving their communities through the providing of adequate
service delivery. In addition, the auditing of municipalities does not assess their
performance in relation to service delivery and the ways in which communities at
the local level are affected by it. At present it appears to be beyond the remit of
auditors to investigate the validity of the protests which erupt in communities in
response to poor service delivery or whether the members of communities and
other affected stakeholders are satisfied or dissatisfied with the manner in which
services are rendered by their municipalities. Consequently, those who are
tasked with the making of decisions in municipalities act upon the
recommendations which are made in their audit outcomes and formulate plans in
relation to service delivery or projects which do not necessarily accord with the
needs of the communities which they are intended to serve.
Consequently, on the basis of the findings of this study, it is proposed that
assessments of the performance of organisations should incorporate non-
financial indicators into the auditing process. Adopting this approach would
minimise incidences of municipalities receiving clean audit outcomes while the
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members of the communities which they serve take to the streets to express their
anger and frustration as a result of poor service delivery.
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ABBREVIATIONS
ADM: Amathole District Municipality AG: Auditor General DORA: Division of Revenue Act FMG: Financial Management Grant GRAP: Generally Recognised Accounting Practice GAAP: General Accepted Accounting Principles IDP: Integrated Development Plan MFMA: Municipal Finance Management Act MIG: Municipal Infrastructure Grant
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TABLE OF CONTENTS
ACKNOWLEDGEMENTS .............................................................................................. III
DEDICATION ................................................................................................................. IV
ABSTRACT .................................................................................................................... V
ABBREVIATIONS ........................................................................................................ VII
TABLE OF FIGURES .................................................................................................... VI
CHAPTER ONE: INTRODUCTION AND BACKGROUND TO THE STUDY .................. 1
1.1 INTRODUCTION ........................................................................................................ 1
1.2 BACKGROUND CONCERNING THE AUDITING OF MUNICIPALITIES ................................... 1
1.3 STATEMENT OF THE RESEARCH PROBLEM ................................................................. 3
1.4 PURPOSE AND OBJECTIVES OF THE STUDY ................................................................ 4
1.5 THE PROPOSED RESEARCH QUESTIONS .................................................................... 5
1.6 SIGNIFICANCE OF THE STUDY ................................................................................... 5
1.7 OVERVIEW OF RESEARCH METHODOLOGY ................................................................. 5
1.7.1 Clarification of terms and concepts .................................................................. 6
1.8 OUTLINE OF THE STUDY ......................................................................................... 7
1.9 CONCLUSION ........................................................................................................... 8
CHAPTER TWO: LITERATURE REVIEW ...................................................................... 9
2.1 INTRODUCTION ........................................................................................................ 9
2.2 THE EMPIRICAL SECTION .......................................................................................... 9
2.2.1 The relationship between the concept of a clean audit and service delivery .... 9
2.2.2 Operation Clean Audit 2014 .......................................................................... 10
2.2.3 The legislative framework underpinning the process of auditing .................... 11
2.2.4 Effective performance management through committees in municipalities .. 13
2.3THEORETICAL SECTION: MULTIDIMENSIONAL PERFORMANCE MEASUREMENT .............. 14
2.3.1 Primary objectives: customer and financial perspectives ............................... 16
2.3.2 Secondary objectives: internal business processes ....................................... 16
2.3.3 Learning and growth ...................................................................................... 16
2.4 CONCLUSION ......................................................................................................... 17
CHAPTER THREE: RESEARCH METHODOLOGY ..................................................... 18
3.1 INTRODUCTION ...................................................................................................... 18
3.2 RESEARCH DESIGN ................................................................................................ 18
3.3 DATA COLLECTION METHODS .................................................................................. 19
3.4 STUDY POPULATION AND SAMPLING ........................................................................ 20
3.5 DATA ANALYSIS ..................................................................................................... 21
3.6 LIMITATIONS OF THE STUDY .................................................................................... 22
3.7 ETHICAL CONSIDERATIONS ..................................................................................... 22
3.8 CONCLUSION ......................................................................................................... 23
CHAPTER FOUR: PRESENTATION OF FINDINGS AND DISCUSSION ..................... 24
4.1 INTRODUCTION ...................................................................................................... 24
4.2 JOB POSITIONS ...................................................................................................... 24
4.3 UNDERSTANDING THE TERM ‘CLEAN AUDIT’ .............................................................. 25
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4.4 ABOUT EXECUTING SERVICE DELIVERY ................................................................... 27
4.4.1 Experiences of about service delivery: a quantitative approach .................... 27
4.4.4.1 The absence of poor service delivery in the municipality ....................... 28
4.4.4.2 The existence of poor service delivery in the municipality ..................... 29
4.4.4.3 Experiences of about service delivery: a narrative approach .................. 30
4.4.CLEAN AUDIT REPORTS VERSUS SERVICE DELIVERY IN MUNICIPALITIES ..................... 41
4.5 FULFILLING THE AUDITOR GENERAL’S ESSENTIAL REQUIREMENTS ............................ 43
4.5.1 Fulfilling the AG’s essential requirements: a quantitative approach .............. 44
4.5.2Fulfilling the AG’s essential requirements: a narrative approach ................... 45
4.6PREVENTING SUSCEPTIBILITY TO LIMITATIONS AND FLAWS WHILE CONDUCTING AUDITS 49
4.7 CONCLUSION ......................................................................................................... 52
CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS ................................... 57
5.1 INTRODUCTION ...................................................................................................... 57
5.2CONCLUDING REMARKS .......................................................................................... 57
5.2.1 The impressing of auditing officers instead of beneficiaries or stakeholders .. 57
5.2.2The effect of excluding non-financial aspects in performance measurement .. 58
5.2.3 Adherence to the country’s laws and the constitution: service delivery .......... 61
5.3 RECOMMENDATIONS .............................................................................................. 63
5.4 CONCLUSION ......................................................................................................... 63
REFERENCE LIST ....................................................................................................... 65
APPENDIX 1: INTERVIEW GUIDE ............................................................................... 68
APPENDIX 2: PERMISSION LETTER TO CONDUCT THE STUDY ............................ 70
APPENDIX 3: AUDIT REPORT 2013 FOR AMATHOLE DISTRICT MUNICIPALITY ....... 71
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LIST OF TABLES
Table 4.1: Positions held by the participants ........................................................................... 25
Table 4.2: Perceptions of the participants of whether or not the ADM was adversely
affected by poor service delivery .............................................................................................. 28
Table 4.3 Perceptions concerning the fulfilling of the essential requirements of the AG 44
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CHAPTER ONE: INTRODUCTION AND BACKGROUND TO THE
STUDY
1.1 Introduction
This chapter provides the relevant background to the study and an introduction to
its theme, namely, an assessment of the relationship between clean audit reports
and service delivery in municipalities. The chapter commences by providing the
relevant background to the auditing of municipalities, before proceeding to
provide a formal problem statement, an enumeration of the goal and objectives of
the study, an articulation of the research questions and the significance of the
study, an overview of the research methodology, a clarification of relevant terms
and concepts, and a general outline of the structure of the thesis.
1.2 Background to the auditing of municipalities
Among the responsibilities of the Auditor General of South Africa (AGSA), the
first is to carry out the auditing of the financial statements of institutions at the end
of each financial year. Secondly, the carrying out of an audit also entails reporting
performance in relation to predetermined objectives, and, thirdly, it determines
whether there has been adherence to relevant laws and regulations. In order to
obtain a clean audit, an institution which has undergone auditing needs to be
assessed positively with respect to each of these three criteria (Audit outcomes
report, 2012/2013).
In cases in which any of these criteria is not met in an audit which has been
conducted by the Auditor General or AG, the audit will not be clean, even if one
or two of the criteria are fulfilled: for an institution to achieve a clean audit, all
three criteria need to be met. Today not many organisations, including
municipalities, have been found to be capable of achieving a completely clean
audit. In those instances in which a clean audit has been achieved, it has been
the consequence of synchronised efforts on the part of administrative and
political officials in order to make a concerted and purposeful attempt to remedy
an unsatisfactory state of affairs in a particular municipality or institution.
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Those instances in which clean audit opinions in municipalities have been
achieved may be attributed to the willingness of the leadership to take a direct
and personal interest in the functioning of their institutions. The leadership in
these municipalities has demonstrated a sense of being both aware of the
functioning of their respective internal control environments, while at the same
time making a significant effort to ensure the proper monitoring of that control
environment. According to Van Vuuren (2012), citing Terence Nombembe, the
former Attorney General, the clean audit opinions which were obtained by some
municipalities resulted from a number of different factors. These include the
consistency of commitment towards taking ownership of the practices which
promote good performance in municipalities, the insistence upon employing
adequately qualified staff, and embracing effective performance management
practices.
In addition, endeavours towards achieving effective performance management in
municipalities are also effectively promoted through the overseeing roles which
are played by committees, including Municipal Account Committees (MPACs),
audit committees, and all other council committees. The roles of these
committees are defined briefly in section 2.2.4 of Chapter 2.
The distinction between an unqualified audit opinion and a clean audit outcome is
by no means always clear-cut. For this reason, the concept of a clean audit
needs to be investigated and evaluated critically, as it has been found, in most
cases, that municipalities are not likely to be able to satisfy all of the requirements
of the laws and regulations which have been introduced to guide their conduct.
The dynamics of governance are inevitably both fluid and complex, which often
makes it exceedingly difficult to discharge responsibilities effectively, while at the
same time remaining, at all times, strictly within the letter of all of the laws and
regulations pertaining to governance.
There have been instances of the very same municipalities which have been
awarded clean audit opinions being overwhelmed by protests which have been
related to poor service delivery (Muchaonyerwa, 2014). Occurrences of this sort
provide an indication that the AG does not conduct sufficiently meticulously
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detailed surveys to ensure that formally formulated plans are based upon the
realities of actual practice. The AG appears to depend on data which is received
from municipal officers, without verifying the validity of the data independently,
through its own field research.
The AGSA seems to be susceptible to a number of limitations and flaws, despite
the fact that its role of enforcing good governance is mandated by the
constitution. Some of these limitations and flaws are human in origin and
instances of favouritism, based on friendship and other similar problems, have
arisen during the conducting of audits. A strong case could be made for the need
to engage an independent body to conduct the analysing of the audit opinions
which are provided by the AGSA to the various institutions, within a specified
period. The aim of this study is to investigate the audit outcomes which have
been determined by the AGSA, through a comparative study of two municipalities
for the financial year 2013/2014. The study will focus on one municipality which
has received a clean audit opinion, and another, which was given an unqualified
audit report.
1.3 Statement of the research problem
From the outcomes of the audits of the AG, it is commonly found that some
municipalities achieve clean audits, despite the fact that they are overwhelmed by
protests which are related to service delivery. The protests indicate that the
municipalities in question are struggling to provide adequate service delivery at
the community level. This situation suggests that these municipalities are not
fulfilling one or more of the essential requirements of the three principal functions
of the AG. This possibility, in turn, could mean that their financial statements at
every financial year-end are unhealthy, that they are not performing in terms of
predetermined objectives, or that they are not always complying with the laws
and regulations governing their conduct. As a result, the simultaneous
occurrence of clean audit opinions being awarded and protests which are
attributed to service delivery makes the concept of a clean audit extremely
problematic, and it is unclear whether audit reports are a true reflection of what is
actually happening in the municipalities whose performance they purport to
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evaluate. Consequently, the aim of this study is to investigate the relationship
between the concepts of clean audits and service delivery, by making a study of
the audit outcome of the Amathole District Municipality for the financial year
2013/2014.
1.4 Purpose and objectives of the study
As the foregoing discussion suggests, the awarding of clean audit reports to
municipalities which are plagued by protests in response to poor service delivery
results in the concept of a clean audit becoming somewhat ambivalent.
Consequently, the aim of this study is to investigate the relationship between the
concept of a clean audit and service delivery in the Amathole District Municipality.
As the study entails an examination of the audit outcomes of the Amathole
District Municipality, an example of an audit report is provided in Appendix 3. The
goal of this study is articulated through the following specific objectives:
To provide an explanation of a clean audit within the context of conducting
an in-depth investigation of the concept of a clean audit as it is perceived
by the officials in the Amathole District Municipality whose work entails
concerns and activities pertaining to auditing.
To investigate the relationship between the concept of a clean audit and
service delivery in Amathole District Municipality.
To conduct a study in order to verify whether or not the concept of a clean
audit can be said to be meaningful when it is applied to municipalities by
the AG.
To conduct an investigation of the underlying factors which determine the
outcomes of audit reports in the Amathole District Municipality, namely,
those factors which contribute towards differences or similarities between
the outcomes of audits from one municipality to another.
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1.5 Research questions
The study has been conducted in order to answer the following research
questions, specifically in relation to the Amathole Municipality:
What do the officials whose work centres on municipal audits
understand by the term ‘clean audit’?
What is the nature of the relationship between clean audits and
service delivery?
Is the concept of a clean audit adhered to in municipalities in
accordance with the role which they play as government
institutions?
What are the underlying factors which contribute to either the
disparities or similarities between the outcomes of audits from one
municipality to another?
1.6 Significance of the study
This research study could contribute to the generating and consolidation of
knowledge concerning the auditing of municipalities. As not many studies have
been conducted concerning this research topic, to date, the knowledge which the
study generates could be invaluable. The results of the study and the
recommendations which are made on the basis of them could also provide
valuable guidelines to municipalities for making improvements to their auditing
systems and for broadening their understanding of the concept of a clean audit.
1.7 Overview of research methodology
The study made use of a qualitative research design. Semi-structured interviews
were conducted with municipal officials in order to generate the data. The
research sample was selected through purposive sampling.
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1.7.1 Clarification of terms and concepts
In order to clarify the terms and concepts which are used in this study, working
definitions of the concepts which are used to evaluate audit opinions and
outcomes are provided below.
Clean audit outcome: This term refers to financial statements which are free from
material misstatements. This appraisal implies an audit opinion which is
financially unqualified and in which there have been no material findings in the
reporting concerning the failure of performance objectives to be met or non-
compliance with relevant legislation. A clean audit outcome indicates that:
The financial statements and annual reports of a municipality have been
prepared in compliance with the appropriate principles, which have been
consistently applied.
The statements and annual reports comply with all of the relevant statutory
requirements and regulations.
There has been sufficient disclosure of all material matters which are
relevant to the proper presentation of the financial information, subject to
statutory requirements, in those instances in which they are applicable.
Any changes in the accounting principles or in the method of their
application and the effects which result from them have been determined
correctly and disclosed in the financial statements.
There has been compliance with all relevant laws and regulations in all
significant respects.
The reporting concerning service delivery or with respect to predetermined
objectives is accurately represented in accordance with the statutory
frameworks.
Financially unqualified audit opinion: The financial statements of an unqualified
audit opinion contain no material misstatements. If the Auditor-General does not
pronounce an audit outcome to be clean, there will be findings which indicate
either unsatisfactory reporting concerning predetermined objectives, or non-
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compliance with relevant legislation, or a failure to fulfil both of these
requirements.
Qualified audit opinion: The financial statements in a qualified audit either include
a significant number of material misstatements, or there may be insufficient
evidence to prove that specific amounts which are included in the financial
statements have not been materially misstated.
Adverse audit opinion: In an adverse audit opinion, the financial statements either
include material misstatements which are not confined to specific amounts, or a
substantial number of the financial statements are misstatements.
Disclaimer of audit opinion: This procedure is followed when the entity which is
audited has provided insufficient documented evidence for the purposes of
arriving at an audit opinion. This insufficiency is not confined to specific amounts,
and neither does it represent a substantial portion of the information which is
contained in the financial statements.
1.8 Outline of the study
Chapter 1: Introduction. This chapter serves as an introduction and is devoted to
providing the relevant background information pertaining to the study.
Chapter 2: Literature review. This chapter takes the form of a comprehensive
review of all of the relevant available literature, in order to provide an adequate
theoretical framework for the study.
Chapter 3: Research methodology. This chapter is devoted to a comprehensive
discussion of the methodology which was employed in order to conduct the
study. The research design, the methods which were used to collect and analyse
the data, the research population, the research sample, the techniques which
were used to select the research sample, and the ethical standards which are
applicable to the conducting of research in the social sciences are all covered in
detail.
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Chapter 4: Presentation and discussion of the findings. In this chapter the
findings of the study are presented, analysed, and interpreted.
Chapter 5: Conclusion and recommendations. This chapter presents the
conclusions which were drawn from the findings and makes recommendations on
the basis of the conclusions, before closing with concluding remarks.
1.9 Conclusion
The chapter has served to introduce the research topic by providing a general
background concerning the nature of the study and its objectives in the
conducting of an assessment of the relationship between clean audit reports and
service delivery in municipalities. In the next chapter, the relevant available
literature from which the theoretical framework of the study was developed is
reviewed.
1.10 Summary
This chapter has endeavoured to provide a clear elucidation of the concept of a
clean audit opinion, which, in the considered opinion of the researcher, tends to
take on an ambivalent character in certain contexts, owing to the fact that, in
some instances, clean audit opinions are awarded to municipalities in which
vociferous and even violent protests erupt in response to perceived poor service
delivery. In these instances it appears to be extremely unlikely that audit reports
provide a true reflection of the actual functioning of the municipalities whose
performance they purport to evaluate.
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CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
The literature which is reviewed in this chapter is divided into two sections. The
first is devoted to the empirical literature, in which the relevant available
information concerning the relationship between the concept of a clean audit and
service delivery (Operation Clean Audit, 2014), the legislative frameworks which
underpin the process of auditing, and effective performance management
through committees in municipalities is evaluated. The second section covers the
relevant theoretical literature, specifically in relation to multidimensional
performance measurement.
2.2 Empirical literature
2.2.1 The relationship between the concept of a clean audit and service
delivery
Research concerning the concept of a clean audit has been conducted by
researchers such as Mpehle and Qwabe (2006) and Muchaonyerwa (2014). A
clean audit outcome is desirable for any municipality or government department,
as it indicates that the organisation is functioning adequately, which, in turn
serves to boost the confidence of the public and to promote accountability. High
levels of confidence and accountability are usually indicative of a municipality or a
government department providing adequate service delivery to the members of
the community which it serves (Muchaonyerwa, 2014).
As has been noted, it is not always the case that clean audit reports are indicative
of municipalities necessarily functioning adequately, and numerous municipalities
which have received clean audits have been confronted with protests concerning
service delivery, which reveals that they are, in fact, not responding adequately
to the needs of their communities (Mpehle and Qwabe, 2006:259). In addition,
there are also cases of municipalities which are in dire financial straits, but it
appears that these municipalities do not receive disclaimer audit results
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(Muchaonyerwa, 2014). This finding suggests that the negative audits which are
given to those municipalities are, for all intents and purposes, kept concealed.
This state of affairs gives rise to concerns concerning the efficacy of audit reports
as a means of measuring the performance of municipalities (Notshikila and
Govender, 2014). The risks which are associated with audit reports include the
possibility that they may concern themselves only with technical concerns and
tend to ignore the underlying internal controls and other aspects of sound
financial management. The key internal controls include those mechanisms
which ensure the orderly and efficient carrying out of the activities and
responsibilities of municipalities and government departments, their adherence to
laid down policies, their compliance with the relevant regulations and laws, the
safety of their assets and that records are adequately maintained, in order to
ensure, in turn, that they are reliable, complete, and accurate. By contrast, sound
financial management may also refer to undertakings such as verifying whether
the resources of an organisation, be they human, financial or other relevant
resources, have been used efficiently (Mpehle and Qwabe, 2006).
Although a clean audit outcome should indicate that the performance of a
municipality with respect to service delivery is adequate, the fact that protests in
response to poor service delivery have erupted in municipalities which have
received clean audit outcomes provides conclusive evidence of the problematic
nature of using audit outcomes as a means of determining and ensuring
adequate service delivery to communities.
2.2.2 Operation Clean Audit 2014
Among the key achievements of the post-apartheid South African government in
the domain of audit reports has been the initiating, in 2009, of a campaign known
as Operation Clean Audit 2014 or OCA, under the auspices of the former
Department of Traditional Affairs (Muchaonyerwa, 2014). OCA was introduced as
a means of ensuring that by the end of 2011, none of the two hundred and
eighty-three (283) municipalities in South Africa would receive either a disclaimer
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or an adverse audit opinion in their audit reports, and that by 2014 all
municipalities would have clean audit reports (Steytler and Ayele, 2011).
However, over time it became apparent that these targets were unrealistically
ambitious. Despite the 2014 deadline for clean audit reports, the reports for the
2013 financial year revealed that only 9% of municipalities had achieved clean
audits (Muchaonyerwa, 2014). The inescapable conclusion was that the target
deadline of 2014 had been an ambitious but unfeasible goal.
Although the need for municipalities to achieve clean audits is irrefutable, as
doing so is indicative that a municipality functions adequately as an entity,
although a clean audit report does not necessarily always present all of the
relevant facts pertaining to the overall performance of a municipality
(Muchaonyerwa, 2014). Some municipalities tend to be hamstrung by several
problems, including inadequate or inefficient service delivery, corruption, a lack of
capacity as a result of a lack of adequately skilled and knowledgeable officials
(Notshikila and Govender, 2014: 4), unfilled essential positions, and senior
officials performing duties for which they lack the minimum levels of skills and
competency (Media Release, 13 August, 2013). Despite the fact that it
represented a commendable desire to make all municipalities fully functional, the
inevitable conclusion which needs to be drawn is that Operation Clean Audit
2014 was not a success.
2.2.3 The legislative framework which underpins the process of auditing
The auditing of municipalities and government departments is governed by
several legislative frameworks, including the Municipal Systems Act (2000), the
Municipal Finance Management Act (2003), the Public Audit Act (2004) (Act No.
25 of 2004), and the Auditor-General Act (Act No. 12 of 1995). The respective
roles which are played by each of these pieces of legislation are detailed below.
The Public Audit Act, 2004: Section 4(1) (d) of the act stipulates that the Auditor-
General has the duty to audit and report on all matters pertaining to financial
management in all of the municipalities, including their financial statements and
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accounts. Section 20 (3) stipulates that the AG is responsible for reporting
whether the resources which were procured by municipalities were procured in
an economical manner and used effectively and efficiently (Mpehle and Qwabe,
2006: 265).
The Municipal Systems Act, 2000: Section 41(c), sections (i) and (ii), require
every municipality to be responsible for monitoring, measuring, and reviewing
their performance at least once a year. In cases in which a municipality should
fail to deliver services or to meet its targets, Section 41(d) compels the
municipality concerned to institute procedures in order to improve its
performance in terms of its development priorities and objectives in those areas
in which it has failed to meet its targets for performance (Mpehle and Qwabe,
2006: 264). Section 45 of the act stipulates that it is necessary to audit the
outcomes of measuring performance, and that this procedure needs to be
carried out internally in the course of internal audits and externally by the
Auditor-General. In addition, Section 14(1) (c) requires internal auditors to audit
the performance of municipalities continuously and to submit quarterly reports to
their municipal managers and audit committees (Notshikila and Govender, 2014:
5).
The Municipal Finance Management Act, 2003: The act serves to delegate the
responsibility for “the economic, efficient and effective use of resources to the
accounting officer of a municipality” (Mpehle and Qwabe, 2006: 264).
The Auditor-General Act: Section 3(4) of the act requires that the AG should be
reasonably satisfied that acceptable processes of management have been
adhered to in order to ensure that the use of those resources which are available
is made in a manner which is economical, efficient, and effective, and that reports
to this effect should be submitted to the appropriate legislative bodies (Mpehle
and Qwabe, 2006: 264).
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2.2.4 Effective performance management through committees in
municipalities
Municipal Account Committees: An MPAC is comprised of both internal and
external stakeholders and its responsibilities include overseeing the annual
reports and annual financial statements of the municipality which it serves.
Audit committees: The role of an audit committee in a municipality is to ensure
that the council is discharging its responsibilities. Its role is to ensure that
systems of internal controls are functioning properly, and, when it is appropriate
to do so, it advises the council of instances of irregularities in the municipality
concerned. Fitzgerald and Giroux (2014: 67) concur with this assessment of the
role of audit committees, by maintaining that audit committees constitute a
significant mechanism for monitoring the performance of municipalities in large
cities, in an overall endeavour to improve the quality of reporting on matters
pertaining to municipal finances.
Municipal councils: A municipal council, which is generally referred to as the
council in many contexts, has a great number of responsibilities, among which is
ensuring that the activities of the municipalities which it serves are carried out in
accordance with the achieving of clean audits. The responsibilities of a municipal
council, in this respect, are summarised below:
To encourage the functioning of the council in a way that fosters
accountable governance.
To ensure that the standing rules of the council are in accordance with the
goals of clean and accountable governance.
To ensure that the scheduled meetings of the council coincide with the
time frames of reporting which are required by the relevant legislation,
such as convening meetings during January, in order to ensure the
presenting of annual reports in council.
To facilitate the election of committee appropriate structures to oversee
the performance of the council.
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To nurture a democratic environment which is conducive to vigorous
debate, concerning reports.
To develop the capacity of both councillors and committees to perform
their overseeing roles effectively.
2.3 Theoretical literature: Multidimensional performance
measurement
The theoretical framework of this study is provided by the theory of
multidimensional performance measurement and the concept of the balanced
scorecard. Before proceeding to define the concepts of multidimensional
performance measurement and a balanced scorecard, it would be advisable to
examine the concept of performance measurement or PM with respect to the
public sector.
Performance measurement is of particular importance in the public sector,
particularly in the context of local government, as this tier of government has
direct contact with the members of the communities to which it is mandated to
deliver services. The significance of PM is inherent in the responsibility which the
public sector has to be accountable to a “wider set of stakeholders” (Brignall and
Modell, 2000: 282), such as taxpayers, political organisations, civic society
organisations, and so on. These stakeholders have a diverse range of
expectations, which concern all levels of governance, with respect to increasing
effectiveness and efficiency in government operations. However, to date, PM
seems to have tended to confine its activities to the financial concerns of
organisations, while ignoring their non-financial concerns. Kloot and Martin (2000:
231) explain that conventional PM systems have tended to concentrate on
developing indicators which make evaluations mainly according to the criteria of
economy, in terms of inputs, and efficiency, in terms of costs. As a result they
have been criticised for not taking into account those dimensions of performance
which are not directly related to financial considerations and which are measured
according to other criteria.
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In addition, the tendency to be preoccupied with narrow criteria for measuring
performance has been considered by researchers such as Emmanuel et al.
(1990), cited by Kloot and Martin (2000: 231), as being inadequate in terms of
measuring the overall performance of organisations. This conclusion suggests
that measurements of financial performance alone do not provide those who are
tasked with making decisions with the broad spectrum of information which they
require concerning the organisations in question. As an example, objectives are
usually presented in the public sector in terms which are not financial, which
makes it necessary to make use of non-financial criteria to measure performance,
as financial criteria alone would not provide a sufficiently comprehensive
assessment of the performance of an organisation (Kloot and Martin, 2000: 231).
For this reason, it is necessary to adopt a multidimensional approach to the
measurement of performance.
Multidimensional performance measurement makes use of a combination of
criteria for measuring performance, which include both financial criteria and
criteria which are not financial (Kaplan and Norton, 1996: 64). Financial criteria
include operating income, return on investment, the adding of economic value
and, so on. Among the criteria which are not based on financial considerations
are concerns such as customer satisfaction and the attitudes of employees
(Kaplan and Norton, 1996: 53, 55). Various models of multidimensional PM have
been adopted by a diverse range of organisations as a means of improving their
working performance. These include the Balanced Scorecard of Kaplan and
Norton (1992), the Results and Determinants Framework of Fitzgerald et al.
(1991), and the Performance Pyramid of Lynch and Cross (1991). This study is
concerned only with the Balanced Scorecard.
The Balanced Scorecard is a system which provides organisations with a
comprehensive framework by means of which they may facilitate the translating
of both vision and strategy into a coherent and interlinked set of criteria for
measuring performance. This model proposes that the functioning of an
organisation may be defined according to four specific perspectives, namely,
“customer, financial, internal business processes, and learning and growth”
perspectives (Kaplan and Norton 1996: 55). The customer and financial
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perspectives may be regarded as the primary objectives of an organisation, while
the internal business processes would be secondary objectives. The third
perspective is not categorised in terms of objectives. Kloot and Martin (2000:
282) maintain that primary objectives concern the measuring of results, in terms
of either services which have been delivered or deliverable services. Secondary
objectives are concerned with the determinants of results, with respect to how the
services should be delivered to the customers.
2.3.1 Primary objectives: Customer and financial perspectives
Primary objectives may be described as being externally-oriented (Kloot and
Martin, 2000: 231). They entail fulfilling the needs of stakeholders who are
outside of the organisation, such as customers and shareholders. The objectives
in relation to the customers include verifying whether an organisation is delivering
services or products which are of sufficiently high quality to its customers. In the
case of shareholders, the performance of an organisation may be determined by
whether or not its shareholders are receiving adequate returns on their
investments in the organisation.
2.3.2 Secondary objectives: Internal business processes
Secondary objectives are internally-oriented and concern how an organisation
“chooses to pursue its primary objectives” (Kloot and Martin, 2000: 231). The
question which needs to be asked concerning secondary objectives with respect
to internal processes is: “In which business processes should an organisation
excel, if it is to be to be able to fulfil the needs of its customers and
shareholders?” (Kaplan and Norton 1996: 54).
2.3.3 Learning and growth
The learning and growth perspective concerns the identification of the
infrastructure which needs to be created by an organisation in order to promote
long-term growth and improvement (Kaplan and Norton, 1996: 63). An example
could be provided by the need for organisations to make use of the most
advanced technologies which are available in terms of equipment such as
computers, in order to become and remain competitive in the market. From this
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assertion it follows that, at the same time, the staffs of organisations need to
receive training, in order to make optimal use of equipment which is continually
being upgraded, in order to keep pace with technological advances and remain
competitive.
2.4 Conclusion
This review of the relevant available literature has endeavoured to provide a
comprehensive overview of the significance of clean audit outcomes by
integrating the contributions which various researchers and writers have made to
the discourse. It has emerged that a clean audit outcome, which implies that the
service delivery of the municipality concerned had been effective, can be
problematic in instances in which the eruption of protests concerning service
delivery in municipalities which have received clean audit reports demonstrates
quite incontrovertibly that they have been not performing effectively. The chapter
also revealed that Operation Clean Audit 2014 had represented an ambitious but
unachievable goal. The various legislative frameworks which govern the auditing
of municipalities and departments of governments were covered in detail in this
chapter. The various committees which serve municipalities play a key role in
managing their performance. Finally, it was found that performance measurement
in organisations tends to be confined to financially-based considerations, to the
detriment of non-financial ones. The next chapter will be devoted to a
comprehensive description of the research methodology which was adopted and
developed in order to conduct the study.
2.5 Summary
This chapter, through the conducting of a review of the relevant available
literature, has revealed that a clean audit outcome can have a diverse range of
different implications for municipalities, although it would normally be assumed
that service delivery in a municipality which has received a clean audit outcome
should be at least adequate. As the value and validity of a clean audit outcome
appears to be questionable in certain instances, an in-depth investigation of the
relationship between clean audit outcomes and service delivery is not only
justified, but also a necessity.
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CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
This chapter provides a detailed overview of the research methods which were
employed in order to conduct the study, with the ultimate aim of arriving at
appropriate and satisfactory answers to the research questions. The chapter
begins with a discussion of the research design, followed by descriptions of the
methods which were used to collect the data, the research population, the
research sample, the techniques which were used to select the research sample,
and the procedures which were followed in order to analyse the data, before
enumerating the limitations of the study and the ethical standards for conducting
professional research in the social sciences which were adhered to at all times
during the conducting of the study.
3.2 Research design
A qualitative research design was used to conduct this study. Qualitative
research is very often conducted in surroundings which are familiar to the people
who agree to participate in particular research studies. It is an approach to
research which is well suited to studying the attitudes and behaviour of people, in
order to be able to understand them in the context of how their lives are lived
within their own environments. Qualitative research enables researchers to view
the world through the eyes of the participants in their studies, as it recognises the
need to understand the people in relation to their subjective perceptions,
opinions, beliefs, histories, and environments (www.agsa.co.za). It enables the
actions and responses of the participants to be described in great detail, by
allowing them to give their own accounts of their experiences, perceptions,
beliefs, and opinions (Babbie and Mouton, 2001: 270). In this study, qualitative
research methods were chosen in order to permit the participants to describe, in
their own words, their perceptions of what was actually taking place in their
working environments and the conditions which constituted significant factors for
the outcomes of audit reports. The nature of qualitative research also enabled
http://www.agsa.co.za/
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the researcher to obtain an in-depth understanding of the realities and dynamics
which prevail within the municipalities in which the study was conducted.
3.3 Methods employed to collect data
The data was collected from semi-structured interviews, which are sufficiently
open and flexible to allow participants to express their own perceptions, beliefs,
and opinions and to clarify their answers, should the interviewer require them to
do so. In this respect qualitative research stands in sharp contrast to the methods
which are used in quantitative research, in which respondents are obliged to
choose their answers from a series of fixed and predetermined options to an
equally fixed and predetermined set of questions (Babbie and Mouton, 2001: 289;
Mack et al., 2005: 3).
Babbie and Mouton (2001) maintain that the strength of semi-structured
interviewing lies in the fact that probing techniques can be incorporated into the
open-ended questions which can be asked in interviews of this sort. Open-ended
questions enable respondents to craft their own responses to the questions which
are put to them. Secondly, probing for information entails researchers listening
carefully to the answers which are given by the participants, who are engaged in
accordance with their individual personalities and ways of expressing
themselves. The intention behind probing questions is to encourage participants
to expand and to elaborate upon their responses by asking them questions which
begin with interrogatives such as ‘why’, ‘how’, and so on (Mack et al., 2005: 4).
The ability of semi-structured interviews to allow participant sufficient flexibility to
reply to questions from own perspectives was of particular value for enabling the
researcher to acquire descriptive information in relation to vital concerns
pertaining to the conducting of audits in municipalities.
The interviews were arranged by making appointments with the participants,
either by telephone or through e-mail correspondence. Some of the interviews
were conducted by the researcher in the offices of the participants. These
interviews took place mainly in the Amathole District Municipality, as the
researcher works in the same complex of municipal offices as the participants
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from this municipality. The option of using telephone interviews was considered in
those cases in which gaining access to participants at work was unlikely to be
accomplished easily. The same procedures for conducting semi-structured
interviews were followed for the telephone interviews.
Although the interviews were conducted in English, the option of interviewing in
IsiXhosa was kept open, whenever the need to do so arose, in order to meet the
needs of particular participants. The interviews were scheduled to have a
duration of between 30 and 40 minutes each. Field notes were taken in English
during the course of the interviews.
3.4 Research population and sampling techniques
The research population for this study comprised all of the municipalities in the
province of the Eastern Cape. Babbie and Mouton (2001) define a research
population as a large all-inclusive collection of the people, objects, or entities
which constitute the specific field of interest of a particular researcher. As it would
usually be impractical to attempt to study an entire population with respect to a
specific phenomenon, researchers are obliged to determine the size of the
sample of the population which would be representative of the population as a
whole, for the purposes of a particular study (Babbie and Mouton, 2001).
Purposive sampling was used to select the research sample. Purposive sampling
entails the selection of participants or respondents according to specific criteria,
such as culture, age, or work experience. Unlike the methods which are often
used to select samples in quantitative research, purposive sampling is not
performed randomly (Law et al., 1998: 6). Selecting a sample purposively makes
use of the knowledge of individual researchers of the populations which they
intend to study, their constituent elements, and the nature of the aims of their
individual studies (Babbie and Mouton, 2008: 166). Purposive sampling was
preferred for the purposes of this study, because it allowed the researcher to
select a sample of participants who fulfilled specific criteria which had been
identified. The Amathole District Municipality in the Eastern Cape province was
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selected in order to obtain comprehensive data concerning a municipality which
had not received a clean audit report.
Officials who were employed by the municipality were purposively selected for
their ability to provide answers which would enable the research questions to be
answered. They were selected on the basis of the knowledge of the researcher of
the organisational structure of the municipality, which enabled her to identify
potential participants who were best qualified to provide the information which
was needed in order to answer the research questions. Officials from various
levels were selected in order to obtain a diverse range of perceptions, opinions
and attitudes. Eight (8) were selected, to yield a research sample which was
comprised of one official per position in the municipality, including one officer
from the office of the Auditor-General). The sample was made up as follows:
1 Senior manager
1 Senior manager: accounting and reporting
1 Senior manager: internal audits
1 Senior manager: revenue
1 Manager: the Auditor-General’s office
1 Senior accountant
1 Accountant
1 Councillor
3.5 Analysis of the data
The analysing of qualitative data refers to the process of breaking data down into
manageable themes, trends, patterns, constructs, and relationships (Mouton,
2006: 108). In this study, the data which had been collected was analysed by
means of coding. According to Babbie and Mouton (2008: 499), coding entails
taking the content of portions of recorded texts which have been derived from the
responses of the participants and labelling them according to categories or codes
which are meaningful to the researcher concerned.
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3.6 Limitations of the study
As the researcher was in full-time employment, restrictions were inevitably placed
upon the time which was available to her to pursue her studies and to conduct
research. This disadvantage was offset, to a very great extent, by the fact that the
study was to be conducted in the municipality in which she worked and with
which she was familiar. The potential participants were easily accessible and
arranging appointments for interviews was accomplished with a minimum of
effort, as the researcher already knew several of them personally.
3.7 Ethical considerations
Particular attention was given to the following ethical considerations during the
conducting of this study:
The researcher ensured that all of the participants agreed to participate in
the study after giving their informed consent to do so in writing.
During the initial stages of each interview session, the purpose of this
study was explained to each participant before the interview proceeded.
They were informed that their participation was completely voluntary and
that they had the right to withdraw from participating at any time during the
course of the interview session if they felt the need to do so, without
needing to fear negative consequences of any sort whatsoever, should
they elect to withdraw their participation.
Trust between the researcher and the respondents was established by
means of creating rapport with them during the initial stages of the
interviews.
Care was taken not to disrupt the daily duties of the interviewees and most
of them were interviewed in their offices.
The confidentiality of the information which was provided by participants
was maintained at all times. The information was not revealed to anyone
who did not participate in the study. The names of the participants would
not be disclosed in the research report which would be produced at the
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end of the study. The researcher concerned herself with only the ideas,
perceptions, opinions, and beliefs of the participants, and not the identities
of the participants, and it would not be possible to associate any ideas or
thoughts which were expressed with any particular individual participant.
3.8 Conclusion
This chapter has provided a comprehensive overview of the research
methodology which was adopted and developed in order to obtain qualitative
data, through the conducting of the semi-structured interviews with officers who
were employed by the two municipalities which were selected to participate in the
study. In the following chapter, the findings of the study will be presented,
analysed, and discussed in detail.
3.9 Summary
The purpose of this chapter was to provide an adequate account of the
systematic procedures which were followed in order to arrive at credible and valid
answers to the research questions, in order to establish that the aims and
objectives of the study had been achieved. It also provided a detailed summary of
the ethical standards which are applicable to the conducting of research in the
social sciences, which were scrupulously adhered to at all times during the
conducting of the study.
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CHAPTER FOUR: PRESENTATION AND DISCUSSION OF THE
FINDINGS
4.1 Introduction
This chapter is devoted to a presentation, an analysis, and a discussion of the
findings of the study, in relation to both the aims and objectives of the study and
the research questions. The chapter begins with a discussion of the positions
which were held by the participants at the time at which the study was conducted,
followed by a discussion of the implications of the term ‘clean audit’, the problems
which are encountered by municipalities with respect to providing adequate
service delivery to the communities which they serve, the anomalies which have
emerged in relation to clean audit reports and service delivery in municipalities,
and the fulfilling of the essential requirements of the Auditor-General.
4.2 Professional positions held by the participants
Of the 8 officers who participated in the study, 7 were ADM officers and the
remaining participant worked in the office of the Auditor General. Those who
were employed by the ADM comprised a senior manager, a senior manager for
accounting and reporting, a senior manager for internal audits, a senior manager
for revenue, a senior accountant, an accountant, and a councillor. The participant
who worked in the office of the Auditor-General held the position of a manager.
These positions are shown in Table 4.1 below.
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Table 4.1: Positions held by the participants
Position Institution No. of responses
Senior manager ADM 1
Senior manager: Accounting & reporting
ADM 1
Senior manager: Internal audits ADM 1
Senior manager: Revenue ADM 1
Manager The office of the Auditor-General
1
Senior accountant ADM 1
Accountant ADM 1
Councillor ADM 1
Total 8
4.3 Perceptions of the term ‘clean audit’
This section surveys the appraisals of the term ‘clean audit’ which were provided
by the officers of the Amathole District Municipality who participated in the study,
which are presented below:
The concept of a ‘clean audit’ means that the financial statements which
are submitted by the officers of a municipality during the auditing process
present a fair and accurate picture of the municipality and they (financial
statements) need to comply with generally accepted accounting principles.
A clean audit report is a term which is used by the Auditor-General as a
means of confirming that a particular institution is in full compliance with
the General Accepted Accounting Principles (GAAP), and its financial
affairs are maintained in a manner which is effective and efficient.
A clean audit report implies that the financial statements of an institution
are free from material misstatements; in other words, a financially
unqualified audit opinion, and that there are no material findings in the
reporting concerning failure to meet performance objectives or non-
compliance with the legislation.
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It is an audit opinion without any emphasis on matters pertaining to
non-compliance with rules and regulations, which means that all of
the controls, finances, and service delivery obligations are in order.
It also means that an institution has fulfilled all of the requirements
of the Auditor-General.
The Auditor-General forms an opinion concerning whether all
material aspects of the financial statements have been prepared in
accordance with the applicable financial reporting framework, and,
in this instance the Auditor-General concludes that, except for
specifically listed insubstantial misstatements, the financial
statements remain a fair reflection.
The office of the Auditor-General scrutinises the annual financial statements of
municipalities, in order to ascertain whether they fulfil all of the legal prerequisites
for financial management as they are enshrined in the Municipal Financial
Management Act (MFMA) No. 53 of 2003. The aim is to modernise budget and
financial management practices by placing local government finances on a
sustainable footing, in order to maximise the capacity of municipalities to deliver
services to all of their constituencies. As audits are conducted in accordance with
prevailing auditing standards and audit reports are not in any way a substitute for
good financial management, there is a high risk that the scope of audit reports
may be confined to technical concerns pertaining to accounting only, rather than
encompassing underlying internal controls and other elements of good financial
management. Consequently, more consideration needs to be given to the nature
of the concerns and criteria which have informed audit opinions to date (PDG and
Akhil, 2010:58).
In addition, March and Sutton (1997: 698) warn that inferences concerning the
factors which contribute to performance cannot be made only from the data which
is available internally in an organisation. External audits have a vital role to play,
as they provide an independent means of examining information in order to
express an opinion concerning whether the performance of an organisation
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meets set standards or not. External audits, particularly by the office of the
Auditor-General, perform a key function in organisations, as they provide
independent assessments of their affairs, which is of particular importance to
external stakeholders who have vested interests in a particular organisation.
Consequently, reports which assess the performance of organisations need to be
based not only on data which is available internally. It is also necessary for the
performance of organisations to be assessed through conducting investigations
of their external affairs.
4.4 Factors which militate against effective service delivery
This section is devoted to an investigation of the factors which served to preclude
the ADM from providing effective service delivery during the 2013/2014 financial
year, particularly with respect to service delivery which has resulted in
expressions of intense dissatisfaction on the part of the members of communities
towards the municipality as an agent of local government. In this context the
participants were asked to indicate whether or not they believed that the
municipality had experienced difficulty in providing effective service delivery to all
of the communities which it serves. The participants were asked to begin with a
simple “yes” or “no” response and then to elaborate. This section is divided into 2
subsections, namely, an investigation of instances of failure to provide effective
service delivery in order to generate quantitative findings, and a narrative account
of the difficulties which have been experienced with respect to providing effective
service delivery.
4.4.1 Failures with respect to service delivery: A quantitative appraisal
The responses of the participants in relation to their perceptions of the failure of
the municipality to provide effective service delivery are shown in Figure 4.2
below. Of the 8 respondents, 5 gave a “no” response, which indicated that they
believed that the Amathole District Municipality was not adversely affected by
unsatisfactory service delivery. However, the remaining 3 participants gave a
“yes” response, which provided evidence of a diametrically opposed perception.
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Table 4.2: Perceptions of the participants of whether or not the ADM was adversely affected by poor service delivery
4.4.4.1 The absence of poor service delivery in the municipality
The 5 officials who indicated that they believed that the ADM was not adversely
affected by poor service delivery based their responses on the fact that all of the
budget which had been allocated for specific projects had been used as it had
been intended to be used. According to laid down procedures, municipalities are
required to have formalised plans and strategies for providing particular services
to residents in their jurisdictional areas. However, in numerous instances these
plans, and the promises which accompany them, evolve into nightmares as
municipalities throughout the country struggle to work in a manner which enables
targets which have been set to be met. In the case of the Amathole District
Municipality during the 2013/2014 financial year, all of the targets for service
delivery were met and the allocated budget was spent. This process was
monitored by means of a performance management system tool which is known
as the SDBIP (Service Delivery and Budget Implementation Plan).
In addition, the communities which were the beneficiaries of these projects did
not express any dissatisfaction in the form of protests or related activities
concerning service delivery. When communities are frustrated with the slow pace
of service delivery, they are required to engage with their municipalities before
engaging with other spheres of government. According to chapter two of the Bill
of Rights of the Constitution of the Republic of South Africa (Act 108 of 1996), it is
the responsibility of the government to ensure that the services which are
provided by municipalities are received by all communities, within the limits of
available resources. In the Bill of Rights, citizens have the right to take action
against municipalities if they believe that their constitutional rights have been
Response No. of responses
No 5
Yes 3
Total 8
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infringed upon. Consequently, receiving adequate services is not a privilege, but
a legitimate right. It may be concluded that the Amathole District Municipality has
fulfilled its responsibility to ensure that services are received by all communities
in the Amathole region during the 2013/2014 financial year.
4.4.4.2 The prevalence of poor service delivery in the municipality
Evidence of poor service delivery was provided by the perceptions of 3 of the
participants. Poor service delivery is inevitably a reflection of the adoption of poor
governance practices, which include, inter alia, poor administration. Poorly
functioning administrations result in poor levels of service delivery to the public
and are often characterised by instances of large-scale fraud, with large portions
of funds, which had been allocated to service delivery, going missing without
being accounted for (Nevondwe and Matotoka, 2013). Consequently, instances
of poor service delivery are symptoms of either poor governance practices or
inadequate administration. Unfortunately, these symptoms are frequently
associated with multifaceted problems for municipalities, such as protests in
response to poor service delivery, which often result in the destruction of
government property and much-needed facilities in communities, such as schools
and clinics.
In addition, the failure to adopt and adhere to principles of good governance,
such as ethical leadership and compliance with accepted laws, codes, rules, and
standards, results in problems pertaining to service delivery, which can be
directly attributed to corruption and fraud. According to Nevondwe and Matotoka
(2014: 15-16), as the local level of government is characterised by poor financial
controls, fraudulent activities are rife. Consequently, there is an urgent need for
the adoption of and the adherence to the principles and practices of good
governance as mechanisms for promoting and improving the delivery of public
services at the local level of government in South Africa.
The two variables which are represented by poor service delivery and poor
governance practices should be regarded as being both interdependent and
mutually inclusive. Although a clean audit outcome ostensibly shows that the
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performance of a municipality with respect to service delivery is effective,
receiving a clean audit report does not always imply that a municipality is
performing effectively, which makes the concept clean audit outcome
problematic in certain instances. This finding suggests that the Auditor-General
should balance the need for achieving clean audit outcomes with ensuring
effective service delivery to the communities which need it most.
4.4.4.3 Evaluations of service delivery: A narrative appraisal
a) Problems which result from poor service delivery
A significant number of participants revealed that the municipality had been
plagued by poor service delivery during the financial year with which this study is
concerned. The nature of the problems which resulted in instances of poor
service delivery is analysed in the sections which follow
The mandate of the municipality is to provide basic services such as water
and sanitation to communities. However, the endeavour to fulfil this
mandate is undermined by several different factors. The insufficient supply
of potable water is aggravated by dilapidated infrastructure, such as
machinery for water treatment, water reticulation systems, and ageing
pipes, which require large sums of money to be repaired, in order to be
able to transmit sufficient water to communities. In some instances,
connection problems prevent water from reaching certain parts of
communities, which is further aggravated by the steadily rising demand for
the water and sanitation services which municipalities are mandated to
provide to the communities which they serve. In addition, ageing and
obsolete infrastructure, such as the underground pipes which transmit
water to taps, often causes great losses of precious water resources,
owing to leakages, which further strains the abilities of municipalities to
deliver water to communities.
The inadequate delivery of basic services to communities is in direct
conflict with the provisions of the constitution, which assigns to
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municipalities the responsibility of ensuring that all citizens are provided
with services to meet their basic needs. The most important of the services
which municipalities provide to communities are water, sewage and refuse
disposal, and health services. The availability of these services has a
direct and immediate influence on the quality of the lives of the people in
particular communities. For example, if the water which is provided is of
poor quality or refuse is not collected regularly, unhealthy and unsafe living
environments will be among the inevitable consequences. As poor
municipal services can also make it difficult to attract businesses or
industries to areas which have been targeted for economic development,
opportunities for employment continue to be limited for the residents of the
communities concerned. The Amathole District Municipality is responsible
for providing services in the form of water, sewage disposal, refuse
collection, and health services to the communities which it serves.
The efficient and effective use of financial resources by municipalities is of
crucial importance for ensuring optimal service delivery. In order to prevent
the expressions of anger which have characterised demands for improved
service delivery in many communities, municipalities need to learn to
adhere to the laws of the country, beginning with the constitution, as it
guarantees the basic rights of all people, the key pieces of legislation
which govern and regulate municipal workers, and laws such the MFMA
(Municipal Finance Management Act) and the MSA (Municipal Systems
Act). Strict adherence to the laws of the country by municipalities would
make a significant contribution to ensuring improved service delivery. In
the case of the ADM, it was found that the relevant laws and regulations
had been adhered to, in that adequate plans for the allocation of financial
resources had been made and spent accordingly, which, in turn, saw the
institution fulfilling its mandate to deliver services through the projects
which had been planned for the 2013/2014 financial year. Accordingly, the
ADM office has played a significant role with respect to service delivery, by
delivering water and sanitation services to its communities.
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One of the most significant factors which undermines the capacity of the
municipality is its heavy reliance upon grants, in the form of funding from
the national government, owing to a small revenue base and a severely
restricted ability to collect revenue for the services which it delivers. At
present the municipality is unable to collect monies which are owed by its
debtors, as it is a rural district municipality. As most of the debtors of the
municipality are indigent and dependent upon government grants, they are
unable to pay for the services which they receive, which, in turn,
perpetuates a cycle of dependence, as the municipality is obliged to be
dependent, to a very large extent, upon grants from the government.
According to Craythorne (2003:150), the Constitution of the Republic of
South Africa (1996) requires municipalities to practise integrated
development planning, to structure and manage their administration,
budgeting, and planning processes, to give priority to the basic needs of
the communities which they serve, and to promote the social and
economic development of the community. Section 215 of the constitution
requires municipalities to have budgets which have processes for
promoting transparency, accountability, and the effective financial
management of the economy, debt, and the public sector (Craythorne,
2006:254). The councils of municipalities are required to approve an
annual municipal budget before the start of each financial year. The mayor
of each municipality is required to table the annual budget at a council
meeting at least 90 days before the start of the budget year, which is July
1 of each year. An annual budget is usually divided into a capital budget
and an operating budget, in accordance with international best practice. It
is required to articulate realistic anticipated revenues for the budget year
from each source of revenue (Craythorne, 2006:254).
In order to fund the fulfilling of responsibilities which entail constitutionally
mandated expenditures, the Amathole District Municipality is intended to
rely on its own revenue, which is generated by charges for municipal
services which are rendered, and intergovernmental fiscal transfers, in the
form of grants. However, owing to economic inequalities within the area
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which falls under its jurisdiction, the revenue which the ADM is able to
generate falls far short of the requirements of the area. Consequently, it is
obliged to rely heavily upon the intergovernmental transfers which ensure
that all municipalities are sufficiently well funded to fulfil their service
delivery mandates. Municipal consumer debt refers to the non-payment of
property rates and fees and charges for services which are provided by
municipalities such as water, sanitation, electricity, and refuse removal.
The principal sources of non-payment include households, businesses,
and government departments. Consequently, it may be concluded that the
inability of the municipality to collect a significant portion of the debt which
is owed to it by consumers serves to restrict its ability to generate its own
revenue and obliges it to rely upon funding in the form of grants from the
government.
Owing to high rates of unemployment and poverty, there are significant
numbers of indigent households and citizens who are unable to pay for
basic services. According to the Free Basic Service (FBS) Strategy of
South Africa (2001), people who are classified as indigent on account of
their falling below a certain threshold are exempt from being required to
pay for basic services. The ADM funds this segment of the population from
its own revenue, which places further strain on its budget. As a result, the
plight of indigent people, which results in their not being required to pay for
basic services, effectively reduces the amount of its own revenue which is
at the disposal of the municipality, which, in turn, restricts its ability to
extend to services access and to deliver FBS to the poorest of the poor.
Although the indigent register is used to keep track of indigent households,
as it is difficult to update the relevant information regularly, people who
have been classified as being indigent may be included among those who
have been listed as illegal defaulters, thereby inflating the apparent extent
of consumer debt. Those who are indigent are often reluctant to come
forward to register, or to update their information, should their status
change. Consequently, it becomes imperative that the regular updating
and maintenance of information pertaining to indigent people should be
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recognised as an integral component of revenue management and be
included in Section 64 of the MFMA. Particular attention needs to be given
to ensuring the quality and accuracy of data and information pertaining to
indigent people, as the information would contribute towards the meeting
of a number of social development objectives, from improving the services
which are provided to the poorest of the poor to enabling consumer debt to
be accurately quantified.
The vision of the Municipal Infrastructure Grant (MIG) programme is to
provide all South Africans with at least a basic level of services, through
the providing of finance in the form of grants, which are intended to cover
the capital cost of basic infrastructure for the poor. The MIG is a
conditional grant which is provided if municipalities do not perform well, in
terms of providing services to their communities, as a result of deficiencies
with respect to revenue which they are able to generate. As the ADM
receives a share of the MIG in order to fund its service delivery
programme each financial year, it is considered to be dependent upon
receiving external funding through grants from the government.
Although the municipality received an unqualified audit opinion, it has
suffered several setbacks in the domain of delivering adequate services to
the communities which it serves. Not every project which had been
embarked upon with respect to service delivery was implemented to a
sufficiently high standard, and the standard of work which had been
performed was often disproportionate, in terms of the money which had
been spent by the municipality on particular projects. Contracted service
providers were found not always to have rendered satisfactory services,
and often the municipality was the loser, in terms of receiving value for
money. This state of affairs frequently resulted in significant setbacks for
service delivery, which, in turn, resulted in intense anger and distress and
a loss of confidence and trust by communities which were ostensibly
served by the municipality.
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These findings concur with concerns which have been expressed by
various different researchers and writers in relation to poor service delivery
by municipalities in South Africa. Monkam (2011:12) maintains that most
of the problems which are encountered by municipalities in South Africa
were rooted in poor service delivery. The failures of some municipalities
stem from huge backlogs, inadequate collecting of revenue, corruption and
fraud, poor financial management systems, and a lack of highly skilled
personnel.
b) The municipality was not adversely affected by poor service
delivery
The perceptions of the participants who asserted that the municipality had not
been adv