More needs to be done despite better financial audit outcome – mayor
Brink said the city's next goal is to obtain at least an unqualified audit in the current financial year, which ends in June.
More work needs to be done, despite Tshwane’s now improved financial audit outcome, says mayor Cilliers Brink.
According to Brink, the metro has made a significant improvement in its audit outcome, moving from an adverse finding in 2022 to a qualified finding in 2023.
The qualified opinion means that this auditee’s financial statements contained material misstatements that were not corrected before the financial statements were published.
It further means that the auditee also had challenges with the quality of performance reports and/or compliance with key legislation.
In February the metro faced the possibility of forfeiting over R629-million of its grant funding to The Treasury due to underperformance of the grant allocations.
STATEMENT: Improved audit outcome shows City of Tshwane is making progress, but more work must be done. @CityTshwane pic.twitter.com/UI0uNprahL
— Cilliers Brink (@CilliersB) March 13, 2024
The grants on the line include:
– Programme and project preparation support grant,
– Urban settlement development grant,
– Public transport network grant,
– Informal settlements upgrading partnership grant and,
– Neighbourhood development partnership grant.
The metro has also intensified its effort to shame the biggest debtors and recoup outstanding bills on electricity and water through disconnections.
“Though a qualified finding is still not the ideal outcome, it is a positive sign of progress in the city’s efforts to improve governance and accountability,” Brink said.
He said in short the aggressive credit control measures are working.
Brink said their next goal was to obtain at least an unqualified audit in the current financial year, which ends this June.
“At the outset, we knew that an unqualified or clean audit would not be possible straight after the 2022 adverse finding.
As I made clear in the State of the City Address in 2023, the adverse findings were simply too extensive to turn around in a single auditing cycle,” Brink said.
“I explained that while we could redress the findings related to cash flow and creditors, assets would take longer. This is exactly what we have achieved.”
Brink said it was clear that the measures put in place to respond to the Auditor-General’s (AG) findings were working.
“This includes far more rigorous oversight by the mayoral committee on rebuilding systems and controls to improve financial performance and to deliver value for taxpayers’ money.”
Brink commended the city manager for the right call on the advice of the Audit and Performance Committee, to seek permission to submit the city’s financial statements somewhat late.
“This enabled the necessary quality control to be done. In future, we will ensure that any such decisions are also clearly and timeously communicated to the Johannesburg Stock Exchange.”
He also expressed his gratitude to the city’s new CFO, Gareth Mnisi, for the improvement in responsiveness to the AG.
“It is clear that without his work, an improved audit outcome would not have been possible. His task is to ensure that the city from now on does not need additional time to submit credible financial statements to the Auditor-General,” he said.
To be clear, the different audit outcomes mean the following, listed from good to bad:
– Clean or unqualified opinion with no findings. This is the gold standard in the long term. It requires the production of quality financial statements that are free of material misstatements, quality performance reports that are useful and reliable, and compliance with legislation.
– An unqualified opinion with findings is indicative of quality financial statements, but there is a struggle to produce quality performance reports and proper compliance with key legislation. This is the metro’s next most immediate goal.
– A qualified opinion means the financial statements contained material misstatements that were not correct before the financial statements were published. There were also challenges related to the quality of performance reporting and compliance with legislation. This is what the city has now achieved.
– An adverse opinion with findings indicates that the financial statements included so many material misstatements that there was significant disagreement with the AG on the amounts and disclosures in the financial statements. This is what the city received in the last audit cycle.
– A disclaimer of opinion with findings means that the AG cannot express an opinion on the credibility of the financial statements. Effectively, there was not enough evidence to support the amounts and disclosures.
According to Brink, an improvement in the form of a qualified opinion is a hopeful start to fully restoring the financial controls that “we need in our administration”.
“However, more will and must be done, as we remain committed to building a capital city that works for all its people,” he continued.
He said the full audit report will be made public as part of the city’s annual report that will be discussed in council in due course.
The audit report is presented to the council formally by the AG for councillors to engage with.
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