Auditor-General Terence Nombembe has issued Makana Municipality with yet another adverse audit opinion as he found the council’s leave and bank records in disarray.
Auditor-General Terence Nombembe has issued Makana Municipality with yet another adverse audit opinion as he found the council’s leave and bank records in disarray.
“In my opinion, because of the significance of the matters described in the basis for adverse opinion paragraphs, the financial statements do not present fairly the financial position of the Makana Municipality
as at 30 June 2009 and its financial performance and cash flows,” concluded the AG’s report.
“The municipality’s leave accrual is calculated based on leave days that are in the system as at year end. There was, however, no adequate system of control over capturing of leave in the system on which I could rely for the purpose of my audit as employees’ leave was not captured timeously. As a result the leave accrual and employee costs are overstated by R2-million.”
The report stated that the operational bank account did not reconcile with the amount disclosed in the financial statements.
“The bank balance per the bank statement and bank confirmation was R3.7-million and balance per financial
statements was R12.3-million. This resulted in a difference of R16.1-million that could not be explained by the municipality.”
“In the bank reconciliation, the bank account balance per general ledger was stated as R22.7-million instead of R12.3-million resulting in a difference of R10.4-million and no explanation of this difference
was provided by the municipality. Furthermore, the municipality could not provide supporting documentation for the reconciling items in the bank reconciliation amounting to R26-million.”
The report said there was no adequate documentation to support the balance of R1.4-million payable to trade creditors, while journals to the value of R1.9-million were processed to the creditor’s ledger without adequate supporting documentation. Consequently, trade payables as disclosed in the statement of financial position and expenditure are each overstated by R3.3-million.
“The municipality did not claim VAT input on all expenditure incurred during the year,” said Nombembe. Consequently, taxes disclosed by the municipality and expenditure are overstated by R1.6-million.
Unauthorised expenditure to the value of R59.3-million was disclosed by the municipality and this was due to overexpenditure on the approved budget. Irregular expenditure of R2.1-million which arose from non-compliance to the Supply Chain Management Regulation was also disclosed.
For the year 2008/2009 the capital budget was R52.7-million while the operating budget was R212.6-million.
“It must be stated that the 2008/2009 financial year’s audit has proven to be quite different to the audit that has been performed in prior years,” explained Municipal Manager Ntombi Baart.
Baart added that it was a “great challenge” to provide the AG with all the documents in the required format.
On completion of the audit for a specific financial year, the AG’s office issues a statement indicating how the municipality handled its financial controls and other controls such as performance management, environmental matters and legal compliance.
The statement may indicate any of the following opinions:
• Unqualified audit report which means the municipality has no material issues that have been raised by the AG,
• Qualified audit report which means the municipality has some material issues that should to be dealt with,
• Adverse report which means the municipality performs badly in various ways or,
• Disclaimer report which means the AG cannot issue a statement on the institution’s financial statements,
maybe due to inability to access source documents, no clear guidelines or legal compliance.
