No clean audit for Polokwane Municpality

POLOKWANE – After progressing from qualified audit outcomes for three financial years (2018 to 2021), Polokwane Municipality has received an unqualified opinion with findings for the 2022/23 financial year, the same as the previous year, but still could not get it right to obtain a clean audit opinion.

In the report that was released by Auditor-General (AG) Tsakani Maluleke last week, it was pointed out that the root cause of the outcome was slow responses by the management of the municipality as well as insufficient consequences for transgressions.

A financially unqualified opinion with no findings (clean audit) means the auditee produced quality financial statements free of material misstatements, in other words, errors or omissions that are so significant that they affect the credibility and reliability of the financial statements, produced quality performance reports that measure and report on performance in a manner that is useful and reliable and finally complied with key legislation relating to financial and performance management.

A financially unqualified opinion with findings means the auditee was able to produce good-quality financial statements that had no material misstatements, but struggled to produce good-quality performance reports and to comply with all relevant key legislation.

The findings on supply chain management included non-competitive and unfair procurement, awards to close family members and inadequate contract management.

It was also found that the municipality takes an average of 108 days to pay creditors (should be less than 30 days), 49% of municipal debt cannot be recovered and it takes an average of 100 days to collect debt owed to it.

The municipality spent R326.8m more than it made for the year (deficit) and more than 10% of the next year’s budget was already spent in previous years. A matter of concern is that the local authority disclosed R87.4m in water losses, an equivalent to 36% of all water flowing through municipal pipelines. The National Treasury norm is 15–30%.

The municipality spent R26.1m on consultants for financial reporting and cited the reasons for using consultants as lack of skills, the nature of the services consultants provided, the necessity to prepare or review financial statements, maintain proper asset management and provide tax services.

The municipality owned more than it owed at year-end (no total liability position) and had money in the bank at year-end with no overdraft.

In general, the AG remarked that the trend of poor audit outcomes in local government continued, with only 34 (13%) of municipalities obtaining clean audits.

Meaningful improvement over the term of the new administration was not evident – while 45 municipalities have improved their audit outcomes since 2020-21 (the last year of the previous administration), 36 have regressed.

“The most prevalent audit outcome was an unqualified audit opinion on the financial statements with findings on performance reporting and/or compliance with key legislation – at 43% of municipalities. These municipalities had made little effort to move out of this category, with 77 remaining there since the end of the previous administration’s term,” according to the AG.

In summary, the 2022-23 audit outcomes for Limpopo are characterised by inadequate oversight and slow implementation of corrective action.

“The status of audit outcomes and service delivery remained largely unchanged from last year, although two municipalities that previously received clean audits – Capricorn and Waterberg district municipalities – regressed, leaving the province without a single clean audit,” the AG concluded.

Polokwane Muni will comment on the report as soon as it has been perused and a report is tabled in council.