In his report on the financial statements of the department for the period April 1, 2013 to March 31 this year, the auditor general says certain regional bulk infrastructure grant (RBIG) project commitments were misstated.
His findings are contained in the department’s recently tabled 2013/14 annual report.
“The department did not have adequate systems in place to maintain records of RBIG commitments where the procurement of goods and services have been approved and/or contracted, but where no delivery has taken place at year end.”
This had resulted in RBIG commitments “being misstated by R576 million for the restatement of the corresponding figure for RBIG commitments”.
The restatement had been made to rectify a prior year misstatement.
“I was unable to confirm the restatement by alternative means.”
The AG says that in addition, he was unable to obtain sufficient, appropriate audit evidence for the corresponding amounts disclosed as RBIG commitments in the financial statements.
“And I could not confirm the disclosure by alternative means.”
Consequently, “I was unable to determine whether any further adjustments to prior year RBIG commitments, stated at R5.9 billion in the financial statements, were necessary”.
In a separate note explaining the basis for his qualified opinion, the AG says there was a similar misstatement, involving an amount of R630m.
In this case, he was unable to determine “whether any further adjustments to RBIG commitments stated at R5.4bn in the financial statements were necessary”.
Further reason for the qualified opinion was that the system of controls to maintain records of RBIG goods and services received, but not yet paid for at the end of the financial year, were inadequate.
“There were no satisfactory audit procedures that I could perform to obtain reasonable assurance that all outstanding invoices for RBIG have been included in the accruals.”
As a consequence, he was unable to determine whether any further adjustments to accruals, stated at R1bn in the financial statements, were necessary.
A fourth reason for his opinion also had to do with poor record keeping and inadequate systems, this time in the department’s records of additions to buildings and other fixed structures.
“[This] resulted in additions being misstated by R204m.”
A consequence of this lack of sufficient and appropriate audit evidence meant he was unable to determine “whether any further adjustments to additions, stated at R1.5bn (2013: R358.2m) in the financial statements, were necessary”.
In a separate report within the annual report, water affairs’s own audit committee says it “notes with concern” the AG’s qualified opinion.
It concedes the department “did not have adequate systems in place” to maintain certain records.
“The committee is particularly concerned that the basis of the qualification was also raised in the previous financial year.
“While the department has presented action plans to address the issues raised… the issues were not fully cleared and were repeated as a basis for qualification,” it says.
The department had an allocated budget of R10.4bn for the 2013/14 financial year, of which it spent 98.8 percent.
The Water Trading Entity, a trading account operating as part of water affairs, also received a qualified audit opinion, after running into problems with approved water-use licences not being uploaded onto its allocation and registration management system.
This had resulted “in the non-billing of lawful water users”.
In his basis for the qualified opinion, the AG says he was unable to obtain sufficient appropriate audit evidence “that all revenue from the sale of water services had been recognised”.
Consequently, “I was unable to determine whether any adjustments to the sale of water services and related trade receivable balance stated at R7,308,824,000 and R2,420,596,000 — as disclosed [in the financial statements] — was necessary”.