NELSPRUIT – Mpumalanga has generally produced improved audit results for the 2009-10 financial year, Auditor-General (AG) Terence Nombembe announced today. However, the AG was quick to urge provincial leadership to increase their efforts to improve their internal control systems in the drive towards the ideal of clean audit reports.
Nombembe said although there had been a general improvement in the number of municipalities that received unqualified audit opinions, it should be noted that most of them had their financial statements materially changed during the audit in order to achieve unqualified opinions. He said it was also worth noting that more than half of the municipalities used the services of consultants to prepare their financial statements, with little or no evidence of skills being transferred. Regular monitoring of internal disciplines in financial departments should be strengthened in the light of excessive reliance on services of consultants at year-end.

Audit findings

Of the 19 municipalities reported on, five improved: Mbombela from qualified to unqualified with findings; Ehlanzeni and Steve Tshwete from unqualified with findings to a clean audit report; Lekwa from disclaimer to unqualified with findings and Victor Khanye from qualified to a clean audit report. Three municipalities regressed as follows: Emalahleni from financially unqualified with findings to qualified; Umjindi and Dr J S Moroka from qualified to a disclaimer; while the audit opinions on Gert Sibande, Nkangala, Bushbuckridge, Dipaliseng, Emakhazeni, Govan Mbeki, Msukaligwa, Nkomazi, Pixley Ka Seme, Thaba Chweu and Thembisile Hani remained unchanged.
Most remarkable is the achievement of clean audit outcomes by three municipalities in the province – Ehlanzeni district municipality, Steve Tshwete local municipality and Victor Khanye local municipality.
“The improvements are the result of leadership involvement and commitment in focusing mainly on the issues of key controls in financial management, compliance matters and predetermined objectives. These results bear testimony to what can be achieved if there is commitment, harmony and cooperation at all levels of leadership – both administrative and political.
"On the other hand, the common denominator at the municipalities that regressed or retained a disclaimer of opinion was the vacant chief financial officer (CFO) positions or the poor performance of existing CFOs, and the lack of serious action by leadership against poor performance to remedy the situation in order to improve the financial performance and management of these municipalities.”
Compliance with laws and regulations has proved to be an area of concern in municipalities, as indicated by the increased number of municipalities found to have contravened legislation. The findings revolved around supply chain management (SCM), material corrections made to the financial statements, accounting officers’ neglect of duties as well as ineffective audit committees and internal audit units. The key findings from the audits of SCM related mainly to awards made to persons in the service of the state, including councillors, inadequate controls as well as limitations of scope. This resulted in a substantial increase in the number of municipalities incurring unauthorised, irregular as well as fruitless and wasteful expenditure.
General computer control weaknesses were reported in almost all instances where information system controls were tested. Municipalities in general had not made significant progress in addressing the 2008-09 findings because they lacked information technology (IT) governance frameworks and capacity to manage their financial and performance information.

Audit of service delivery information

Most municipalities audited had findings on predetermined objectives. The main issues related to non-compliance with regulatory requirements and reported information not being useful. “It is pleasing to note that with the leadership of the Premier, all relevant role players in the province have begun consolidating and coordinating their interventions towards a common goal, that of clean administration. We will continue with our quarterly engagements with municipal and provincial leadership with a view to providing timely insights and early warnings aimed at strengthening the internal control environment, thus improving future audit results even further.”