As reported earlier this year, the municipality is hard at work to change the underlying issues resulting in the disclaimer opinion received for the 2015-16 financial year.
Although the Emalahleni Local Municipality has managed to submit financial statements on time in the 2015/16 financial year the quality and availability of the records were still a concern as previously highlighted by the financial watchdog, the auditor general (AG).
Emalahleni does not have a good track record with the AG, who in February gave the municipality its fifth consecutive disclaimer. In his report he said he was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. The AG was concerned about amongst others, fruitless and wasteful expenditure, the municipality’s asset register, the valuation roll, distribution losses, and the way records are kept.
According to Mr Kingdom Mabuza, municipal spokesperson the municipality did not sit and ponder about the remarks by the AG, but instead implemented various initiatives to rectify the wrongs. These matters were contained in an Audit Remedial action plan, which are nearly fully executed. The plan deals specifically with the main concerns as reflected by the AG.
https://www.citizen.co.za/witbank-news/87754/municipality-loses-r1-6-million-due-fraud/
The AG was stern in his opinion that in terms of the property, plant and equipment, the municipality could not provide supporting documentation for the adjustment made to the assets of the municipality as per the fixed assets register. There were also no supporting documents for the land values with regards to the valuation roll.
The value of the investment property of the municipality was also adjusted without adequate supporting documentation.
“The municipality appointed an assistant manager for assets to focus directly on the issues relating to assets and monitor the work of service providers that assist the municipality with assets,” Mabuza said.
He indicated all the current year adjustments are supported by a list and the relevant documents and a prior period error adjustment has been quantified and valuation adjustments will be made to the financial statements in 2016/17.
Again there were no supporting documents for consumer receivables relating to the excess impairment.
Mabuza said the matter relates to the impairment policy and the policy was amended to reflect the methods and assumptions used in determining the impairment of debtors as disclosed on the financial statements.
The AG was concerned that no proper and supporting documents were available to show adjustments made in journals that amounted to R36-million.
“The municipality is currently in process of recovering all the documents making up the amount of R36-million. The error was caused by a power failure that resulted in the duplication in the bank processing. It is expected that the journal will be completed and supported before the annual financial statement are submitted to AG in 2017 year end,” Mabuza explained.
R31-million for receivables for exchange transactions were questioned by the AG as it too did not have any supporting documents.
This is also addressed by the municipality and Mabuza said all documents are recovered to answer the AG’s questions.
R116 492 112 are also making the AG scratch his head as there again was no supporting documents for the journals processed in this account made.
Mabuza said the list has been made available and the journal will be reversed in the 2016/17 year end.
“This matter relates to management attempts to resolve an accounting technical matter raised in the previous audit periods the issue was escalated to the accounting standards board for further consultations the matter was then accepted, and it was resolved that the municipality applied the correct accounting treatment and the above entry will then be corrected,” Mabuza explained.
These are only but to name a few problems the AG stood on when he gave the municipality a disclaimer.
“Although the municipality tried to clear all the issues as raised by the AG, there are a few issues that can only be resolved at year-end. Currently the municipality is finalising its action plan in addressing the issues and there has been an audit steering committee that was established to deal with the audit issues. Progress has been made in the implementation of measures to resolve the findings raised and the AG’s action plan is a standing agenda item in the Audit Committee meetings of the municipality.”
Mabuza highlighted that the unauthorised, irregular and fruitless and wasteful expenditures of the municipality for the past two financial years has been subjected to forensic audit and the results of the investigation will be tabled in council before the beginning of the new auditing circle by the AG.
https://www.citizen.co.za/witbank-news/62238/fourth-disclaimer-in-a-row/
The very sensitive topic of unauthorised expenditure comprise of R830-million, R6-million and R756-milliion in non-cash items (depreciation and provisions for impairments) and R14-million unspent grants that are not cash backed. It also includes the Eskom account and the interest incurred, overtime and salaries by municipal workers and non-cash items (depreciations due to increased asset base and provision for bad debts due to low collection rate).
Interest on the Eskom account, other overdue accounts, penalties on the Eskom account SARS account form part of the fruitless and wasteful expenditure.
“Many of these issues will be cleared in the new audit such as for depreciation but the Eskom debt interest will remain a thorny topic until income levels rise through improved payments by the community,” Mabuza concluded.
DA Mpumalanga Chairperson, Jane Sithole MPL, told WITBANK NEWS according to the AG’s report Emalahleni is the worst run municipality in Mpumalanga and it is getting worse.
“Emalahleni received another disclaimer audit opinion. Money disappearing and there is no paper trail to track where the money went,” Sithole said.
