Auditor-General (AG), Tsakani Maluleke painted a bleak picture for Polokwane when she announced the municipal audit outcomes for the 2019/20 financial year. The ANC-led municipality received a fourth consecutive qualified audit opinion, leaving opposition parties outraged. According to Maluleke, the province’s capital municipality is among 66 municipalities that received qualified opinions across the country for the year ending June 30, 2020.
In her findings, Maluleke found that financial statements were not prepared in all material respects in accordance with section 122(1) of the Municipal Financial Management Act. The report found, among others, that there was inadequate management, accounting and information systems to account for revenue in the municipality.
The report said in part: “The municipality did not adequately review the useful lives of assets at each reporting date. No adequate audit evidence could be provided for changes in estimates.”
The AG further found that the municipality did not adequately calculate the fair value of investment properties
Revenue and receivables related to service charges were incorrectly calculated as the estimated consumption used was inaccurate and incomplete. This is as the result of inadequate systems of internal controls.
In addition, creditors were not always paid within 30 days, and reasonable steps were not taken to prevent unauthorised and irregular expenditure. Awards were made to providers who were in the service of other state institutions or whose directors/principal shareholders were in the service of other state institutions. Municipal officials whose close family members were also found to have had a private or business interest in contracts awarded by the municipality failed to disclose such interest.
According to the report, there had been no investigations to determine if any person was liable for expenditure relating to unauthorised and irregular expenditure. It was also found material electricity losses of R107 million, representing a 15% loss, and water comprised a 22% loss.
Municipality spokesperson Matshidiso Mothapo said that the executive mayor, Thembi Nkadimeng has been very hands-on with the audit process which resulted in several engagements with the AG on these matters.
“She is fully aware of the technical gaps on the generally recognised accounting practice interpretations that are being articulated. The mayor has laid down processes together with administration to ensure that the municipality works hand in hand with the AG and National Treasury in this regard,” said Mothapo
“Overall, the municipality received a qualified audit report based on the difference in interpretation of the standards. It is not based on any form of institutional mismanagement in the organisation. It is on how we differed with interpretation of certain standards in about three areas. For instance, in one area there was an interpretation gap between the municipality and AG on the re-evaluation of assets. For the past five years the municipality has been using the same methodology to assess the useful life of its assets during the compilation of its financial statements. This has never been a basis of qualification for the past five years by the AG,” she added.