Municipal Audit Outcomes: A consistent call for ethical leadership in municipalities

Opinion Piece

Although they followed very different methodologies, the Auditor-General (AG) report on Municipal Audit Outcomes comes to very similar conclusions as the Local Government Ethical Leadership Initiative (LGELI) about the root causes of municipal failures.  LGELI is a research and consultation driven project to develop a Code for Ethical Leadership in Local Government.  It was launched by The Ethics Institute, in partnership with the Department for Cooperative Governance, the South African Local Government Association (SALGA), and the Moral Regeneration Movement (MRM).

On the 31st of May 2023, the AG, Ms Tsakani Maluleke, released the Municipal Audit Outcomes for 2021/2022. The report once again paints a bleak picture of the state of local government with only 38 out of 257 municipalities receiving clean audits. This is down from 41 municipalities the year before.

Going back to the 2018-2019 report, the themes of the recent municipal audit reports have all been centred around three main issues: capacity, accountability, and leadership.  In short, the right people are not appointed to key positions. This leads to poor financial governance, but also poor overall performance and service delivery. Following these failures, there is frequently a complete lack of holding the responsible parties to account. The reports then all call on leadership to step up and address the issues.

The Local Government Ethical Leadership Initiative followed a completely different approach to assessing the local government environment. Research was conducted through focus groups and interviews, talking to hundreds of councillors, senior officials, and members of civil society in all nine provinces. One of the key questions asked was, ‘What makes ethical leadership difficult in local government?’

The number one issue identified as getting in the way of ethical leadership was the politicisation of local government, which is linked with destructive deployment practices.  This means that municipalities end up with inappropriate (and often unqualified) leadership and staff who are not focused on the organisational purpose, but on political considerations that frequently have little to do with service delivery. This is clearly linked to the lack of skills and expertise that the AG highlights in her reports.

Another challenge is the lack of education and governance skills specifically among councillors. It is an issue that has been raised in numerous forums and seems to be an inevitable outcome of the democratic system. The municipal council is however the main method of citizens giving policy direction to the administration and holding it accountable. If the people who serve on council have low levels of literacy, it gives rise to significant oversight and governance challenges.

When the AG calls on the municipal leaders to intensify their action, we need to ask if this is realistic if some very basic practices do not change. She calls on them to ensure consequence management, enable and insist on credible reports, and maintain a robust financial management culture which includes ensuring effective revenue collection, prudent spending, and prevention and speedy recovery of financial loss and wastage.  This is however all technical in nature and requires highly skilled people.

We can only call on people to do what is within their competence. Beyond that, we are trying to squeeze water from a stone.

There are however things that municipal councils can do to build high-functioning municipalities, but it means getting the basics right, and it requires immense commitment to serve the community interest.

The Code for Ethical Leadership in Local Government, which will be released as an exposure draft later in the month, has been created to give as much as possible guidance to well-intentioned councillors and officials. It sets out the spirit and principles of ethical leadership in local government and is explicit about practices that build ethical governance. 

The code consists of seven principles for ethical leadership in local government. The first principle is that ethical leaders should set the tone for an ethical culture. This goes hand in hand with principles two and three which specify that ethical leaders should ensure a community-centred approach to governance and that they should respect the boundary between the political and administrative spheres of the municipality. This means that councillors and officials should aim to ensure that community concerns trump political infighting and deployment considerations that might form part of patronage politics.

Moving from that mindset, principle four deals with the appointment of staff who have competence and integrity. It is clear that good intentions alone will not lead to a positive culture. The single largest impact that council will likely have in instilling a performance culture and building an effective municipality would be in appointing the best possible staff.  Appointing people with proven credentials raises trust levels and minimizes the required oversight.

The fifth principle specifies that appropriate levels of competence must be ensured on oversight structures. It means that people who serve on finance structures must be financially literate. If the expertise is not already within council, it must be brought in externally. This will require councillors to be honest about their limitations, but there can be no accountability without skilled oversight. This links with principle six – ethics transgressions must be dealt with fairly and decisively.  The lack of accountability for non-performance is a key concern for the AG and for citizens.

Lastly, the Code sets out that municipal leaders must engage respectfully and constructively with other municipal leaders.  We too frequently see egos and political grandstanding getting in the way of citizen needs.

Most of what is set out in the Code is within the reach of municipal leaders to attain, but it depends on individual councillors living the spirit and principles.

During the development of the Code a frequent concern was: who is going to enforce it?  The truth is that ethical leadership cannot be legislated or enforced.  It can only be guided.  From then on it requires a strong moral commitment from individual municipal leaders.

In her report the AG reflects that “Municipal leadership, councils and mayors in particular, play a critical role in setting the tone for ethical behaviour, good governance and accountability; and in creating a culture that fosters trust and confidence in local government.”

There are a sufficient number of committed leaders in local government who want to create such a culture, and the Code might just be the tool they need to give moral and practical guidance to help them achieve this.

About the Author: Kris Dobie is a Senior Manager: Organisational Ethics at The Ethics Institute.