Millions more lost
Ndlambe Municipality receives another disastrous report from AG
TUESDAY’S open council meeting revealed yet another disappointing audit result as, for the umpteenth consecutive year, Ndlambe Municipality has failed to receive a clean or unqualified opinion from the auditor-general (AG).
The AG’s report highlighted problems in the financial statements, performance information and compliance with legislation, stating that: “[this is] evidenced by the material misstatements identified in all three areas”.
Losses in the electricity and water reticulation networks amounted to R22-million, attributable to leaks and theft.
Irregular expenditure disclosed in Ndlambe’s financial statements was understated by a massive R33.5-million. In the previous financial year it was R12.6-million.
The AG commented that due to the lack of systems it was, “impracticable for me to determine the full extent of the understatement of irregular expenditure disclosed”.
The total impairments due to irrecoverable trade debtors amounted to R60.5-million in contrast to R63.2-million for the previous year. Figures for the 2014-15 financial were reworked in the restated financial statements and included in the audit report, “as a result of errors discovered by management during 2016 in the financial statements of the municipality”.
As for unauthorised expenditure, R27.7million was incurred due to overspending of the operational and capital budgets.
The report states that inadequate measures were taken to prevent unauthorised, irregular or fruitless expenditure.
Because of the lack of adequate records the municipality was unable to determine if any person was liable for the expenditure as required by the act.
The AG stated that many of the problems resulted from inadequate or non-compliance with the Municipal Financial Management Act (MFMA) requirements, in that financial statements were not compiled in accordance with the act.
Furthermore, after adoption by the council, the oversight committee report was not made public, as required by law.
The AG cited numerous infringements of the MFMA, many of which were a result of leadership issues. According to the report, “the municipality did not have adequate systems in place to identify and disclose all irregular expenditure,” for the financial year ending June 2016.
The AG stated that municipal leadership did not adequately oversee the implementation and monitoring of internal controls, making financial and performance management noncompliant with regulation.
Further, because of the lack of adequate performance management, staff could not be held accountable and no consequential action could be taken.
With respect to procurement and contract management, the AG found quotations were accepted from providers not on the list of accredited suppliers, and that bids were not always evaluated by the bid evaluation committee. Even when the committee was sitting, it was not always composed in accordance with regulations, according to the report.
The report states: “The control environment at the municipality is inadequate with ineffective daily and monthly processing and reconciliation of transactions for performance information.”
The lack of a proper performance management system led to municipal leadership not performing reviews, reconciliations and follow- ups – playing a part in the AG’s qualified opinion.
Service delivery was also highlighted in the report, where the AG pointed out that 65% of the reported targets were inconsistent with those approved by council in the Integrated Development Plan (IDP) or service delivery and budget implementation plan.
Further, key performance indicators were not clearly defined or measurable – 50% were not well defined, 27% were not verifiable, 52% were not specified and 58% were not measurable.