Eight of the 21 municipalities received an unqualified opinion (with findings or concerns), with 59% of the municipalities receiving either qualified or disclaimed opinions. Of the nine (9) municipalities that submitted financial statements late for audit, eight had their audits completed subsequent to 31 January 2012 and were all in the qualified or disclaimer categories.
Auditor-General (AG) Terence Nombembe remarked: “There is an opportunity for the few municipalities with unqualified audit opinions to set an example in the province of political leadership and municipal management that can achieve clean audit outcomes”. The poor audit outcomes in the province reflect the serious skill and internal control deficiencies at municipalities. As a result, there has generally been little or no progress in the areas of supply chain management, service delivery reporting, human resource management, information technology controls, and material errors in the financial statements.
This situation is underpinned by the status of internal controls where the necessary internal controls are not in place in about half of the municipalities, thus requiring urgent intervention at the respective municipalities. Half of the necessary controls are in the process of being improved or implemented, while no municipality has good internal controls in all areas. The AG highlighted as reasons for the status quo in audit outcomes in the province, the inadequately skilled staff in key positions at 90% of the municipalities, failure to enforce accountability for poor audit results and the late submission of financial statements at 76% of the municipalities, as well as failure by mayors and councillors of 71% of the municipalities to implement the AGSA’s recommendations and to take ownership of the key controls for clean administration.
In light of these findings, Nombembe urged local government in the Northern Cape to urgently address skills shortages at its municipalities, especially at municipal manager and chief financial officer (CFO) levels. “The province’s local government leadership will do well to fast-track the implementation of the revised Municipal Systems Act, which is aimed at addressing skills shortages,” remarked Nombembe.
The AGSA is continuously working with the provincial government to focus on three critical issues that the Northern Cape government needs to perfect, namely heightened coordination among provincial oversight structures; strengthening coordination between the provincial Department of Cooperative Governance and Traditional Affairs and the provincial treasury, using the Operation Clean Audit Forum to effectively guide and assist municipalities; and enhancing provincial financial management skills. In this regard, the initiative by the province of undertaking a CFO skills audit is commended as a significant step to addressing the financial management skills.
The provincial legislature could also enhance its oversight of municipalities, particularly the tracking of resolutions and in-year monitoring of action plans and progress made by municipalities to address long-outstanding issues.
The AGSA’s municipal door-to-door visits are continuing on a quarterly basis with a view to monitoring and evaluating the status of improvement and sustainability of the key internal controls and gauging the leadership tone. This will serve as a catalyst for realising clean administration at municipalities in the province. These insights will continue to be shared with the provincial executive and oversight leadership on a quarterly basis to create a platform for forward momentum towards clean audits. Close collaboration with the internal auditors, audit committees and municipal public accounts committees (MPACs) would also enhance the combined assurance efforts that are directed towards clean audits at the municipalities.
Ends
MEDIA NOTE: The General report on the MFMA provincial audit outcomes of the Northern Cape is available on www.agsa.co.za. ABOUT THE AGSA: The Auditor-General of South Africa (AGSA) is the country’s supreme audit institution. It is the only institution that, by law, has to audit and report on how government is spending taxpayers’ money. This has been the focus of the AGSA since its inception in 1911 – the organisation celebrated its 100-year public sector auditing legacy last year (2011).