Table Of ContentAudit Report
Elundini Municipality
REPORT OF THE AUDITOR.GENERAL TO THE EASTERN GAPE PROVINCIAL LEGISLATURE
‘AND THE COUNCIL ON ELUNDINI MUNICIPALITY
REPORT ON THE FINANCIAL STATEMENTS
Introduction
+ | have eudltes the accompanying financial statements of tho Elundini Muniipsiiy, which
‘omar the statement of fancla:pstinn as at 30 June 2011, and the atatement of tinanca
Performana sinker of change In ns! assets ang cash ‘ow statement for tho year tren
fndec, 2 summary of significant accounting ooles and other explanstery information, sd lis
ccounsig officers report, as set oun 9 pagos XX la XX,
Accounting officer's reaponelbilty for the financial statomonts
2 The ancounting ofiear is responsible for ‘ne prepaaun anc fai presentaion of these Manca!
slalenants in gecordance wth South Aihean Standards of Cenermly Recugnisad Accounting
Practice (GRAP) ane the requiemerts of the Muu'ipal Finance Management Act of Sout
Atlas, 2003 (Act No. 68 of 2003) (MERA) arc Suision of Revenue Act of South Attica, 2010
{AGL No. 1 of 2010 as amended) (DoRA), and for such inteiral corliol az manayenrent
determines necessary to enable tho propa'ulion of financs! statements that are free from
material misstatement, hella uve W fraud of eros
‘Auditor-Gonoral’s responsibility
2. Ax rauulied by section 196 of te Constitution af the Renuhie af South Afi, 1986 (Ack No. 198
fof 1965} and, section 4of tre Puslo A Act nf South Aris, 2004 (Act No, 25 of 2004) (PAA\,
iy respanmtily is lo wxpiuss an option o7 these ‘nancial stalerments hesedt on my au
4 Leorducied my auctin accordance with nle-natonal Standards on Aung und Geceral Notice
1151 of 2010 sailed in Goverment Gazette 33872 of 15 Dscwnber 2070. Those standards
fequire thet | eomply wilh alhical requrerents and olan and oerform the autit 10 obtain
feasonaule assurance about ‘whether the ‘henciel sintermons ae Gee trom material
misstatement
‘an ult Invawes performing procauues [o oblan audit evidence about the amounts and
Gisclosuies it Ihe tanto stetements, The procedures seler‘ed devurd un lie sudtore
‘vdgement, Ineleding the assessment uf Uie ‘oko of material misstatement of the finance!
Storamarts, vinethet cue (0 ‘raul Ui wife. IN making those risk assessments, the ausitor
CGansdar ntemal control relevant tothe entty’s preperation end far yresenlation of he Financial
Stetemens in order to design nul gracccluce that are approprate in the exeurrstaneas, but not
far the purpose of expressiy an gpinion an the efectieness of the entiy’s internal canta.
audit aso incldes evaluating the anpmeraleress of uecuunling policies uses and the
Teasonablensss nf counling walimates mace by management as well as evelustng he overall
presentation o ie hnancal statements,
6. | balovs tna the audit evidence
for my aualt opinion
have obtained 'ssuffsion! aid aupropriate to provide 3 basis
‘pinion
7. In my opinion, she fiscal statements present ‘ly. In all material respects, the: Financial
fusion ofthe Elurdini Munilpa ty as ai 2” June 2047, und is fnsne.al pertomance and cash
flows for the year then ended in accordanog wth GRAP and the requirements of the MTNA ens
Dare
Emphasis of matters
8, | draw attentions to the malls: Lslow. My opinion is ret modified in respect of these: matters:
‘Significant uncertainties
4. Encuires of management and the exorneys reverted thet tho muniiyally is defendant in
severe Inwsuis. The palenlil less aeiny from theee laweults is 7.00 milion as disclosed in
hte 45 fo he thane elatements, The outcome cf these lavaults cannot be deteiinen
present ard no prewsion has heen ride for any Habiily Pal may result
Restatement of corresponding figures
10. As disclosed In notes 28 and 28 to the finial staloments. the corresponding Agures which
Tals lo dw yaar ended 30 June 2910 have been restated as a result of the esrly etloplion of
‘SR4> 104 on fnenciel instruments as wel as welossifealons and error discovered during the
‘urrent nancial yea,
Unauthorised expanditure
11, Aw disclosed in nate 35.4, u
fdunng he veer endec 20 un
uthorised expenstute amounting to R118 milan was incured
O17. THis vine eve *o ousespending ol budge on certain votes,
Frultiess and wasteful expenditure
42, The municipality incurred ‘ules: and wasteful expenclture ot R11 U2t relating to imerest end
penalties 26 ciecioeed m note Jb.2 to tre fnene'a statements. Tho balance of faites svt
‘nastefu' expenditure valting fo te 2600/10 racial year hs beet condoned by Counel.
(Material losse
13. The municipality suferee sigriicanl elechilly losees of 6 430 721 Kh with a value of 3.7
milion Juiny the yoar under feview as disclosed in note 254 to the fancinl statements. The
mmuriepally alsa suferes weter oasis of 214 888 meya ites vitn a valve of R24 millon as
Aisclosid in nuie 964 lo the Fnancial statements
terial impairments
14 The murispally Isted outstanding debtors totaling [60.02 milion at A unc: 2011, for whic
the recoverabilty s considered to he doubt. This i decked in nolws 14 ane 19 to the
finenelal statements
Meter! undersponding of the budgst
45, The municpalty has matenaly undersoent on is ceptal budget, As disclosed in note 34.3 to te
financia! statements R26.43 millon othe capital buigelrarisined unspent at 30 June 2011,
Aditlonal matter
18. | diay attention tothe rater below, My opinion la nat modified in roepect of is malta
Unaudited supplementary schedules
17. The supplementary information set out on pagns XX la XX does rel form part of the tnancia
statemants ane fs racented ge addi! inlurmaton. We have not audted these schecil
tind, aosardingly, We do not express an opinion thereon
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
“2m accordance wih the PAA ard a lcs of General notice 111" of 2070, lssued in Government
Gazette 39072 of 19 Decemer 2010, | Include betow my findings on liz annual perfonnsnes
reporfnd materiel nuncomplance will awe and regulations apelicabie tothe Municipality.
Predetermined objectives
Presentation of information
48, The following erteria ara relovant fo tha ings below
= Performance egalnst predetermined abjelives is rsputed using te National Treasury
uel,
20. Audit ining
+ Tha annual performance report did not contain measures to improve performance
Ine anaual perfomance report clé aot contain mesnures taken [a inpwore perfernanos
hese objectives were not me, as required by regulation 13(2) ows Mumeipal Planing and
Perormanon Mariage! Regulations
Usefulnass of information
21, The falloing itera are relevant to the findings below:
+ Consistenay: Objectives indicators and targets are consistent between planring and renoring
documents
22, Ausit findings:
+ Performance objectives aro not consistent
ity olgnt peroent of tne snecse epetud porlomarice objectives are not consistent with the
‘Service Delvery and Budget implementation Pian (SCIP) ené Intagrate Dexelepment Plan
{10>}, a8 reouired by section 26j)) of tho Municipal Systems Act {MSA}, wad together wth
Deragraph 4, nage ? 1 he NERA Cau 13,
+ Changes to the objectives of the approved annual performance plan were not
siaclowadd and explained
Changes to the objectives of the approved ennunl norformance plan for the yer wus
review, were net dleslocod anc explnined ae reyured in terms of the relevant Natfonal
‘Treaminry prejaration yuide, OF the 12 objectives Inckiced in the original IDP, only igh of
these were in the bance soorecerd. In addition the bussnceu scuiucard incluces. an
dition 42 objectives that were nat vty raudd i the IDP.
Reliability of information
23, The following cilia are relevant tote tndings below
+ Validity: Anus! repoiled perfomance has occurred ane pertains to te ently
+ Acauray- Amauns, numbers, and other data relating ‘0 reporee ectual performanen have
been recordes and reported apprepristely
2A, Audit tndings
+ Non-submission of source documentation to very the actual achievernonts
The non-submission of saures decumerttion ta vary hw actual achievements disclosed in
the ennui pe-formsinca rau Has resulied ina lintaton of scope and aa such, Impaced aur
‘lily to determine ihe repented performance statstes aro complet, atizuale and valid.
the selected objactives. 4% could note varied ior validly, accuracy and completeness.
= Non-compliance not affecting the fair presentation of the repart on pradatarminad
objectives
“The tnuvicigaly did not folow the prescribed process in terms of sections 2/, 28, 29, 30.31,
32 ard 24(0) ofthe MOA, 98 well 98 fegulation 3 of tha Lose! Govermmont Munelpal Planning
and Porformenos Managerant Regulations rainy lu the implementation of a new balanced
‘seoracard. A counel resoltion passed on “/ September 2010 resolved that a nex, improved
balanced scorecard would supersede tho Instutlonal lancet srorecad in the IDP, sh
was aap 18 Jur 2010,
“+ No allosation of burget amounts
‘The municpally did rol slacala budget amounts for each strategic objectveipronty as
required by Section © af the Locel Government, Municipal Plenning and Porformanco
sfanagement Regulations
‘Compliance with Iawe and regulstions
Budgetary reporting
28, The muricipaly nau expenditure that wae net oudgotes for, in contravention of section 15 cf
the MEM,
Procurement and contract manegement
26, Suffclent appronriace audi avons could ‘ol be ublained that bid spectcatione were deat by
ibd epecineation committees which were composed of one of more aiielals ofthe municipal as
required by Susply Chala Management (SCM) repulsion 27{3),
27, Bids vere not aways evaluated ny bid exaiuation eunmilleze which were composed of at least
tote SOM praciioner ofthe municpaily as per the requirements of SCM regulation 28/2),
Metarial undorspending ofthe budget
28. ha municipality has materially underspent on is capa budget As discnsed in mole 24.3 Wo the
‘nanclal statements F236 43 rion othe capital wulgel retained unepent at $0 June 2011
Expenditure management
25. The acomunting officer it nol lake ceasonaole steps to prevent tutless ane) wasteful
expenditure, a required by section $9(0) of the MFA
INTERNAL CONTROL,
40, In accordance wity the PAK and in rms of General ntine 111 af 20/0, issued in Gavennment
Gazette 3067? of 15 Mrcember 2070, | wns darad internal control relevant to my aueit. but not
for the purpose of expressing an goinion oF the eectiveness of infernal contol. The meters
Feported Below are limted ta the significant deficarcers Hal resulted ia the findnge on the
fannie performance por and the ndings on compisnce win aws ard reauitions include in
ig separ
Leadorehip
31) Inthe veer under review, the leadership strnture has becn stable snd tae wurked (0 inpleeni
fection alans to adaross prior yene mut findings. hi as has. a postive impact on the number of
Sandi lings raised. However a lack of foal controls over the IT systems wns nated resin
in hndings relating to a2cirny, anress canifol, program chsnge manage! and disaster
recovery.
32, The finds inked to norco are as & result of 2 sklls shortage within the surrounding
areas of the un clpalty, creating challenges felting ta hie reerumen! und reieian of sulle
skllod wruployees
Financial and performance management
‘88, ineonsistencies were noted oetween the ID, SOSIP and performance report thr our aut
fof perfornence ohieetives due Inseee: Information belng submited for suc purposes. The
lace of formal ennirais. in the I slams ak rabulled 19 thy realabiiy, availabilty and protection
of infomaion potentially being compromised.
Govamance
34, Insufficient acion vee taken by the govemence structures win the munis tp ensure tr
Ties relating tothe rarilring anid veporlig of prTarnance objectives and coryplance with laves
‘ard regulations vers addressed 1s resulting in -epeat suc finings inthis arze.
Nuditer— Genero!
East London
‘WO November 2071
rap
acai ulate corflaence
