KZN gets 20 clean audits

2015-06-04 08:06
Nomusa Dube. (File)

Nomusa Dube. (File)

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THE MEC for the Department of ­Co-operative Governance and ­Traditional Affairs in KwaZulu-Natal, Nomusa Dube-Ncube, yesterday welcomed the Auditor General’s announcement of the 2013-14 Audit Outcomes, which saw KZN’s municipalities get a “ground-breaking” 20 clean audits.

While uMgungundlovu emerged as a shining star with a clean audit, Msunduzi was rapped over the knuckles for being one of the main contributors in the ­province to the increase in the irregular expenditure balance and received an ­unqualified audit with findings.

Dube-Ncube said in a statement the 20 clean audits was the highest amount recorded by any province, with the Western Cape getting 18 and Gauteng 11.

“The announcement by the AG is ­encouraging for us as a province, since our municipalities have been constantly showing us that they prioritise the proper management of public funds which they are entrusted with.

“The strengthening and enforcement of competency requirements for senior officials in our municipalities ensures that key positions in local government are filled by the right people that will take our institutions forward,” said ­Dube-Ncube.

Commenting on the KZN findings, the AG said there was a steady increase in the quality of the annual performance reports, but warned that uncompetitive and unfair procurement processes, ­inadequate contract management and missing tender documentation required attention, among other things.

The AG found there was an increase in unauthorised, irregular and fruitless and wasteful expenditure “most notably in the auditees with unqualified audit opinions with findings, and those with qualified audit opinions”.

Forty-one auditees (57%) received unqualified audit opinions with findings, eight (11%) received qualified opinions and three (four percent) were disclaimed.

The AG found that unauthorised ­expenditure increased from R633 million of the previous year by 68% to R1,06 billion in 2013-14.

“A total of R550 million (52%) of the total expenditure incurred was initially disclosed by the municipalities; however, a further R512 million (48%) was ­identified by the auditors.

“Of the R1,06 billion of the ­unauthorised expenditure incurred in 2013-14, R571 million (54%) arose from overspending of municipal budgets, while the other R491 million (46%) was incurred due to the auditee incurring ­expenditure on an allocation other than for its intended purpose.

“Included in the above total unauthorised expenditure is an amount of R337 million contributed by Amajuba District Municipality … due to an impairment loss in an investment company that was not budgeted for.

“The remaining balance of R725 million is spread amongst various other municipalities.”

The AG found that at five municipalities (eight percent), the unauthorised expenditure reported on in the previous year was not investigated to determine whether any officials could be held liable.

Irregular expenditure increased by 30% from R1,78 billion in the previous year to R2,31 billion in 2013-14.

“At R2,31 billion, it amounts to four percent of the budgets of the local ­government sector in the province. It is evident that systems and controls to ­detect irregular expenditure were either absent or not effective as R1,48 billion (64%) was identified during the auditing process while only R838 million (36%) was initially identified and disclosed by the auditees.”

uMkhanyakhude, Msunduzi and ­uMzinyathi municipalities were main contributors to the increase in the ­irregular expenditure balance, making up R934 million (40%).

The AG was “concerned that many municipalities still cannot submit credible and reliable financial statements for auditing, as 34 auditees (83%) would have been qualified if the financial statement errors were not corrected.

“This indicates that their leadership has not addressed the skills gap and ­significant weaknesses in internal ­controls, resulting in the extensive use of consultants without a positive impact on the audit outcomes.

“The province could, in future, experience a regression in audit outcomes should these risks remain unattended,” the AG said.

The AG also expressed concern that the financial viability of many municipalities in the province is at risk due to “poor debt-collection practices, extended supplier payment periods as well as underspending on capital budgets”.

“The underspending on capital ­budgets leads to the failure to regularly maintain core service delivery assets, which results in excessive losses from unexpected breakdowns.”

— Witness Reporter.

The municipalities that achieved clean audits are:

Dannhauser, uMgungundlovu District, Richmond, eMnambithi/Ladysmith, Uthungulu District, uMhlathuze, Zululand, uBuhlebezwe, uMzimkhulu, iLembe District, Mandeni, Ezinqoleni, uMzumbe.

Municipal entities that achieved clean audits:

Safe City Pietermaritzburg, Uthungulu Financing Partnership, Uthungulu House Development Trust, Durban Marine Theme Park (PTY) LTD, ICC, Durban (PTY) LTD, Ilembe Management Development, Enterprise Ilembe (PTY) LTD, Ugu South Coast Tourism

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