Every South African municipality is audited each year by the Auditor-General. The outcome is one of five opinions, each precisely defined in law. It is worth understanding, because the terms are widely reported and widely misread.
| Opinion | What it means | Municipalities |
|---|---|---|
| Clean audit | Financial statements free of material misstatement, and no material findings on performance reporting or on compliance | 39 |
| Financially unqualified | The financial statements are reliable, but there are material findings on performance reporting or on compliance with legislation | 116 |
| Qualified | Material misstatements in specific areas, but not spread across the statements as a whole | 87 |
| Adverse | Misstatements are both material and pervasive: the statements as a whole cannot be relied on | 5 |
| Disclaimer | The Auditor-General could not obtain enough evidence to express any opinion at all | 8 |
The three things an audit tests
A municipal audit is broader than a company audit. It examines three things:
- The financial statements. Do the numbers fairly present what the municipality earned, spent, owns and owes?
- Performance reporting. Are the municipality’s own reports on what it delivered reliable and supported by evidence?
- Compliance with legislation. Did it follow procurement law, budget law and the rest of the framework?
A clean audit requires all three to pass without material findings. A financially unqualified opinion means the first passed but at least one of the others did not, which is why so many municipalities sit in that category.
What a clean audit does not mean
A clean audit is regularly reported as proof that a municipality is well run. It is not. It means the records are in order and the rules were followed. It says nothing about whether the money bought anything useful, whether taps run, or whether roads are repaired.
This cuts both ways. Some municipalities with clean audits deliver services modestly. Some with weaker opinions deliver reasonably well. Both sets of figures appear on every profile on this site, deliberately side by side.
Why a disclaimer is the serious one
A disclaimer is not a poor mark for performance. It means the municipality could not produce records good enough to audit at all. The Auditor-General was unable to form any view, because the evidence did not exist or could not be found. It is the clearest available signal that basic financial administration has broken down.
In the most recent year, 8 municipalities received a disclaimer: Ditsobotla, Kamiesberg, Kannaland, Makana, Masilonyana, Mohokare, Nketoana, Sundays River Valley.
Read the trend, not the year
A single year tells you less than the direction of travel. A municipality moving from disclaimer to qualified is improving substantially, even though qualified still sounds poor. One sliding from clean to unqualified is heading the wrong way. Every profile shows five consecutive years of audit outcomes for exactly this reason.
Common questions
Who appoints the auditor?
The Auditor-General of South Africa is a constitutionally independent institution and audits every municipality. Municipalities do not choose their auditor, which is a deliberate safeguard.
Does a clean audit mean there is no corruption?
No. An audit is a sample-based examination of records and controls. It can detect and report material irregularities, and often does, but a clean opinion is not a guarantee that nothing improper occurred.
What happens after a poor audit outcome?
The municipality must prepare an audit action plan and the council must consider the report. Provincial government exercises oversight, and in severe cases can intervene under section 139 of the Constitution.
How does the audit outcome affect the grade on this site?
It is the single largest component, worth 30 percent of the financial health score, alongside operating margin, current ratio, cash cover and irregular spending. The full formula is in the methodology.
Figures on this page come from National Treasury, Statistics South Africa and the Auditor-General, as set out in the sources and methodology. Read the methodology