The 2012/2013 audit report, in terms of the Municipal Finances Management Act no. 56 of 2003, was presented by the Auditor-General, Kimi Makwetu, on 30 July 2014.
KwaZulu-Natal has one metropolitan municipality, 10 district municipalities, 50 local municipalities and 11 municipal entities. All 72 auditees submitted their financial statements for the 2012/13 financial year within the prescribed timelines. Twenty-one per cent (21%) of the auditees submitted financial statements that were free from material misstatements. Forty-six per cent (46%) of the auditees prepared and submitted reliable and useful performance information that was adequately supported.
The overall total expenditure for the Kwazulu-Natal’s municipalities amounted to R47 billion for the 2012/13 financial year. This amount is made up of R10,8 billion for payroll costs (including councillor remuneration), R29,7 billion for goods and services and R6,5 billion in capital expenditure. The metropolitan municipality accounts for 51% of total expenditure.
Overall, KwaZulu-Natal’s MFMA 2012/13 audit outcomes improved compared to the previous year. Nineteen (26%) municipalities improved their audit opinions compared to the previous year whereas six municipalities and two municipal entities had regressed since the previous year.
Seven (10%) municipalities and four (6%) municipal entities received a financially unqualified audit opinion with no material findings on the quality of the annual performance report or compliance with legislation (also known as a “clean audit”). The seven municipalities progressed from unqualified with other findings in the previous year, while the four municipal entities retained their prior year clean audit status.
Forty municipalities (56%) were unable to improve on their prior year audit opinions, which remained unchanged. Thirty-seven (51%) municipalities were again financially unqualified with findings. Hlabisa Municipality and Newcastle Municipality retained qualified opinions and Uthukela District Municipality again received a disclaimer.
Overall, irregular expenditure increased by 14% and was reported at R1,78 million compared to R1,56 million in the previous year. The R1,78 million constitutes irregular expenditure incurred due to non-compliance with supply chain management legislation and other applicable regulations. This includes awards made to suppliers in which officials of other state institutions, employees and councillors of the auditees had an interest. While in most cases (except in respect of R103 million of irregular expenditure which we could not audit due to lack of documentation) goods and services were delivered, it was impossible to confirm whether value for money was received. Irregular expenditure reported merely indicates that provisions of the legislation, which may include provisions aimed at ensuring that procurement processes are competitive and fair, were not adhered to.
The drivers that support these positive outcomes include commitment displayed by both political and administrative leadership together with oversight role players to monitor progress on action plans to address audit findings. Additionally, key drivers that contributed included the performance of detailed reviews and reporting to council on the quality of financial and performance reports as well as the institutionalisation and continuous monitoring of the basics of daily and monthly controls. The timely implementation of commitments made in the previous year by the key role players and support and assistance from cooperative governance and traditional affairs and the provincial treasury, where vacancies and skills deficiencies were prevalent, also influenced the positive outcomes. The assurance provided by key role players, largely management and leadership, has decreased since the previous year, hence their efforts on assurance need to be amplified.
Our analysis of financial health showed that the number of municipalities experiencing going concern problems had increased, together with poor cash flow and debt management and underspending on capital budgets and conditional grants. Fiscal discipline to improve liquidity and ensure excellence in debt administration and cash flow requires a coordinated effort from financial and performance management units at municipalities.
Clean Auditees by Province:
Western Cape (12):
- Swartland – West Coast District
- Theewaters Kloof – Overberg District
- West Coast District
- Witzenberg – Cape Winelands District
- Langeberg – Cape Winelands District
- Breede Valley – Cape Winelands District
- Cape Town International Convention Centre – City of Cape Town Metro
- City of Cape Town Metro
- George – Eden District
- Knysna – Eden District
- Mossel Bay – Eden District
- Overstrand – Overberg District
KwaZulu-Natal (11):
- Durban Marine Theme Park (Pty) Ltd – eThekwini Metro
- Msinga – uMzinyathei District
- Ntambana – Uthungulu District
- Okhahlamba – uThukela District
- Ubuhlebezwe – Harry Gwala/Sisonk District
- uMhlathuze – Uthungulu District
- uMzimkhulu – Harry Gwala/Sisonk District
- Uthungulu District – Uthungulu District
- Safe City Pietermaritzburg – Umgungundlovu District
- uThungulu House Development Trust – Uthungulu District
- uThungulu Financing Partnership – Uthungulu District
Gauteng (3):
- Sedibeng District – Sedibeng
- Johannesburg Fresh Produce Market – City of Johannesburg Metro
- Johannesburg Social Housing Company – City of Johannesburg Metro
Mpumalanga (2):
- Ehlanzeni District – Ehlanzeni District
- Steve Tshwete – Nkangala District
Eastern Cape (1):
- Mandela Bay Development Agency – Nelson Mandela Bay Metro
Northern Cape (1):
- ZF Mgcawu District
eThekwini continues to develop and implement systems of clean governance