Municipal audits another disgrace

The Greater Tzaneen, Letaba and Giyani municipalities received qualified audit reports meaning their financial statements contained material misstatements in specific amounts, or there was insufficient evidence for the office of the Auditor General to conclude that specific amounts included in the financial statements were not materially misstated.

The Greater Tzaneen Municipality failed to improved on their 2012/2013 audit outcomes while the Greater Letaba improved a disclaimed audit opinion to qualified.

Giyani moved from adverse audit opinion to qualified audit outcomes.

Ba-Phalaborwa Municipality received a disclaimed audit opinion for the eighth year in a row. Disclaimed audit opinion means the auditor-general’s office was unable to express an audit opinion because of a lack of sufficient or appropriate audit evidence due to the municipality’s poorly prepared annual financial statements.

The Mopani District Municipality became the worst performing municipality in the district in terms of audit outcomes, after moving from a disclaimed audit opinion in 2012/2013 financial year to an adverse audit opinion recently. An adverse means the municipality produced financial statements that included so many material misstatements that the office of the Auditor General disagreed with virtually all the amounts and disclosures in the financial statements.

Although no municipality achieved a clean audit in the province, Maruleng is the only municipality in the district to get an unqualified audit report from the office of the Auditor General in the 2013/14 financial year.

The provincial audit outcomes, released last week, shows that Maruleng is one of the 12 municipalities in the province which came close to realizing its wish of achieving clean audit in the 2013/14 financial year.

Maruleng received an unqualified audit report with findings which means its financial statements send to the Auditor General contained no material misstatements but findings have been raised on compliance with key legislation.

Speaking during the release of audit outcomes in Polokwane last week, the Auditor General, Kimi Makwetu said municipalities which received poor audit results are characterised by instability at senior management level, appointment of officials lacking appropriate skills and a lack of consequence management, which have a severe impact on a sustainable turnaround strategy.

“These municipalities again failed to provide supporting documentation for a significant number of transactions and balances in their financial statements. This created an environment that did not support accountability and was susceptible to loss through fraudulent transactions,” said Makwetu.

He said of great concern is that large sums of money were also spent on consultants by the municipalities that continue to receive disclaimers.

He further said Limpopo remains subject to high levels of irregular, unauthorised as well as fruitless and wasteful expenditure, which the leadership is unable to prevent.

“The increase in unauthorised expenditure was largely due to poor budgeting. Of particular concern is the high level of supply chain management transgressions driven by uncompetitive or unfair procurement processes, conflicts of interest and internal control failures,” said Makwetu.

He expressed concern that financial sustainability remains a challenge for municipalities. “According to our analysis, most municipalities are in a poor financial position and therefore unable to meet their financial obligations with available resources. In some cases capital budgets and grants are applied for operational expenditure.

The leadership should promote sound cash management practices so that basic services are not disrupted,” he said. He added that political interference and a lack of political decisiveness in certain specifically identified municipalities continue to slow down the potential for improved audit outcomes.

He said its critical that strategies be put in place to attract and retain staff with the requisite skills and competencies, specifically at chief financial officer level. “Although the majority of municipalities have managed to submit financial statements on time over the past five years, the quality remains poor. This creates the impression that financial statements are submitted simply for the sake of meeting the legislated deadlines, without an attempt to improve the quality of financial reporting,” said Makwetu.

The Democratic Alliance leader in the province, Jacques Smalle said failure to get clean audit by all municipalities is due to lack of consequences for transgressions and lack of political leadership in the province.

He said the DA will continue to press for better financial controls, and improved financial processes, with full accounting to council and full disclosure of all public accounts.