Water affairs loses track of billions, gets qualified audit

2014-10-02 16:15

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Inadequate management systems and poor record keeping involving billions of rands have earned water affairs a qualified annual audit report.

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 project commitments were misstated.

His findings are contained in the department’s recently tabled 2013-2014 annual report.

“The department did not have adequate systems in place to maintain records of regional bulk infrastructure grant 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 these infrastructure grant commitments “being misstated by R576 million for the restatement of the corresponding figure for grant commitments”.

The restatement had been made to rectify a prior year misstatement.

“I was unable to confirm the restatement by alternative means.”

The Auditor-General says that in addition, he was unable to obtain sufficient, appropriate audit evidence for the corresponding amounts disclosed as regional bulk infrastructure grant 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 regional bulk infrastructure grant commitments, stated at R5.9 billion in the financial statements, were necessary.”

In a separate note explaining the basis for his qualified opinion, the Auditor-General says there was a similar misstatement, involving an amount of R630 million.

In this case, he was unable to determine “whether any further adjustments to regional bulk infrastructure grant commitments stated at R5.4 billion in the financial statements were necessary”.

Another reason for the qualified opinion was that the system of controls to maintain records of regional bulk infrastructure grant 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 regional bulk infrastructure grant have been included in the accruals.”

As a consequence, he was unable to determine whether any more adjustments to accruals, stated at R1 billion in the financial statements, were necessary.

A fourth reason for his opinion 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 R204 million.”

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 R1.5 billion [in 2013 it was R358.2 million] 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 Auditor-General’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 R10.4 billion for the 2013-2014 financial year, of which it spent 98.8%.

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