INSTEAD of improving, Ugu District Municipality’s finances are deteriorating each year and the municipality is facing serious financial problems.
This was revealed at the tabling of the audit report at Ugu’s first council meeting of the year held at the Hibiscus Coast Municipality chambers last Thursday.
A representative from the Auditor General’s office, Adele Howard, told council that the municipality had obtained a disclaimer audit opinion.
“The financial statements submitted for auditing were not prepared in all material respects in accordance with the requirements of section 122 of the MFMA,” she said.
She added that material misstatements of unspent grants, retention and trade creditors identified by the auditors in the submitted financial statements were subsequently corrected, but the uncorrected material misstatements and supporting records that could not be provided resulted in the financial statements receiving a disclaimer audit opinion.
The AG listed the following as some of the reasons which led to a disclaimer opinion:
He was…
– unable to determine whether any adjustment to property plant and equipment stated at R2.6 billion in the financial statement was necessary.
– unable to determine whether any adjustment to the provision for leave pay stated at R15.27 million was necessary.
– unable to obtain evidence that management had properly accrued and accounted for all VAT output and VAT input, due to poor internal controls in the revenue and creditors system. The AG was also unable to confirm the service VAT receivable by alternative means, which meant the AG could not determine whether any adjustment to VAT received stated at R21.36 million in the financial statements was necessary.
Further, …
– there was no evidence to prove that management has accounted for all corrections to the prior period errors relating to incorrect entries passed to conditional grants due to lack of supporting documentation and justification for amounts processed. The AG was not able to confirm the prior period error adjustment by alternative means.
– no evidence determined whether any adjustment to irregular expenditure stated at R43.93 million was necessary.
– the AG was unable to obtain sufficient appropriate audit evidence for the amounts disclosed as part for nett cash flow from operating activities due to the inconsistencies in amounts when compared to the statement of financial position and performance. This meant that the AG was unable to determine whether any adjustments to the nett cash flow from operating activities stated at R224.56 million on the cash flow statements were necessary.
“Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, the AG has not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, I do not express an opinion on these financial statements,” said the Ms Howard.
The matters of emphasis were as follows:
– The municipality is the defendant in 13 lawsuits relating to non payments of contracts and breach of agreements amounting to R21,79 million.
– Material losses amounting to R21.48 million and 11.91million kilolitres were incurred as a result of water losses.
– Unauthorised expenditure of R8.13 million was incurred as a result of expenditure exceeding approved budget for operating expenditure.
– Fruitless and wasteful expenditure of R809 680 was incurred as a result of interest charges on late payment.
The AG’s report also revealed that awards were made to providers who are in the service of the municipality, furthermore the provider failed to declare that he/she was in the service of the municipality as required.
– Persons in service of the municipality whose close family members had a private or business interest in contracts awarded by the municipality and did not disclose such interest, as required.
– Bid adjudication was not always done by committees which were composed in accordance with regulations.
– Sufficient appropriate audit evidence could not be obtained that invitations for competitive bidding were advertised for a required minimum period of days, as required.
– Sufficient appropriate audit evidence could not be obtained that contracts and quotations were awarded to suppliers based on preferences points that were allocated and calculated in accordance with the requirements of the Preferential Procurement Policy Framework Act and its regulation.
