MFMA 2019-20

SECTION 4: MUNICIPALITIES WITH A HISTORY OF DISCLAIMED AUDIT OPINIONS 75 Funds received for the year Total bank balance at year-end R202,4 m Total equitable share R284,50 m Total conditional grants R143,71 m (2018-19: R257,24 m) (2018-19: R113,3 m) (2018-19: R126,2 m) VS GOVAN MBEKI Audit outcomes Use of financial reporting consultants R1,5 m* Total salary cost of finance unit R50,02 m (2018-19: R47,52 m) Currently under provincial administration NOVEMBER 2018 TO DATE ? * 2019-20: Consultants were used for TAX SERVICES ONLY (2018-19 & 2019-20) Govan Mbeki is the smallest of seven municipalities in the Gert Sibande district, covering an area of 2 955 square kilometres. The municipality services a community of approximately 340 091 people in 108 894 households. It is mainly agricultural, with three urban areas, namely Leandra, Greater Secunda and Bethal / eMzinoni. The municipality has been on a downward trajectory for the past few years, having regressed from a financially unqualified audit opinion in 2016-17 to consecutive disclaimed opinions for the past three financial years. In 2019-20, the municipality received R428,21 million in equitable share funding and conditional grants, but only R202,4 million remained in its bank account at year-end. We could not confirm how the funds were used, as the municipality was unable to provide us with the supporting documentation or explanations we needed to formulate any conclusion. Bank and cash was one of the items for which the municipality could not provide sufficient records or explanations. The municipality struggled to prepare proper periodic reconciliations to ensure that the bank balances on the accounting system matched up with the balances held by the bank, which resulted in reconciliation items that management could not explain or support at year-end. The Municipal Standard Chart of Accounts was first implemented during 2017-18, and the municipality never fully resolved some of the significant challenges it experienced with migrating to the new system. This resulted in material misstatements that have still not been fixed, especially for bank and cash as well as revenue. The billing system is also plagued with weaknesses relating to the credibility of the revenue masterfile. For example, some consumer debtors had never been billed but were using the services provided by the municipality. These challenges undermined the credibility of the financial statements. The assistance from consultants appointed during MP 2 2018-19 2019-20 2016-17 2017-18 Disclaimed Disclaimed Disclaimed Unqualified with findings