Worst audit finding for uMkhanyakude
UMKHANYAKUDE District Municipality received the worst result from the AuditorGeneral (AG), with a disclaimer opinion.
According to audit terminology, a disclaimer opinion is given when the auditee fails to provide sufficient evidence in the form of documentation on which to base an audit opinion.
In her 2020-21 consolidated general report on the local government audit outcomes released on Wednesday, AG Tsakani Maluleke said: ‘Political instability, inexperienced officials and system-related challenges led to poor opinions at three disclaimed municipalities, all of which were under administration.’
Maluleke said the audit outcomes in KZN ‘reflect a net regression over the term of the previous administration’.
‘This was partly due to inadequate leadership action in responding to key risk areas, political infighting and instability in key positions. The lack of enforcement of accountability and consequence management by leadership also persisted amid some improvements in audit outcomes since the previous year,’ the AG said.
Maluleke said it remains a concern that the province’s municipalities consistently produce financial statements of poor quality despite being ‘adequately capacitated’ and having ‘skilled finance units’.
‘The quality of the submitted financial statements regressed over the five-year period.
'Although municipalities paid R698-million to financial reporting consultants over this period, there was only limited improvement in control environments and audit outcomes.
'Management did not adequately implement and monitor action plans to improve the control environment.
'In addition, the lack of standardised processes, poor record management and inadequate review and reconciliation of financial reports persisted.
'Consultants should only be used in favourable control environments, with adequate support being provided and skills being transferred to ensure the limited public funds are spent effectively and responsibly.
‘Poor financial management practices, such as ineffective revenue and debt collection processes, continued to plague municipalities. This had a negative effect on service delivery, as municipalities struggled to pay outstanding creditors on time.
'The accounts of Eskom and the water boards were R1.85-billion in arrears.
'Municipalities also struggled to practise sound financial management and budget monitoring, as 15% of them reported deficits for the year.’
The AG said, although the reliability of performance reporting had improved over the past five years, in some municipalities, including uMkhanyakude, this remained a challenge.
‘Unreliable performance reporting does not provide a true reflection of service delivery and may contribute to service delivery protests.
'For example, uMkhanyakude had material findings on its annual performance report and was plagued by going concern challenges, which affected its ability to provide services. This, in turn, resulted in community protests.
'Municipalities must improve their record-keeping practices and the efficiency of their systems and processes for collating and reporting performance information to ensure the achievements they report for key service delivery infrastructure projects are credible.’
Meanwhile, Big 5 Hlabisa, Jozini and uMhlabuyalingana local municipalities under uMkhanyakude District received unqualified audit opinions with findings, while Mtubatuba Municipality received a qualified opinion with findings.