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Western Cape municipal entities improve their audit results while most municipalities remain static

CAPE TOWN - Auditor-General (AG) Terence Nombembe today released his 2009-10 provincial general report on local government which shows that the audit results of most Western Cape municipalities have remained static, while municipal entities have registered a significant improvement towards clean audits.
Tabling the report to the provincial legislature, Nombembe said he was satisfied with the provincial leadership’s commitment to driving further improvements in audit outcomes. “That kind of leadership drive and oversight, when implemented fully, could set and maintain the tone towards clean administration in the province.
“Although the results are still far from the ideal of totally clean administration, the commitments by the provincial leadership to work hard to improve their results would ensure an enhanced level of output. Essentially what needs to happen now is that all the commitments made should be translated into basic action plans that will ultimately result in improved audit outcomes,” said Nombembe.

Financial audit outcomes

The Western Cape local government comprises 30 municipalities and four municipal entities. The 2009-10 audits of 28 municipalities and four municipal entities were finalised by 31 January 2011. The submission of financial statements within the legislated deadline remains satisfactory, except for two municipalities, Oudtshoorn and Swellendam, whose audits have not yet been finalised. Both municipalities experienced a significant breakdown in internal control due to long standing vacancies in the finance unit, including the positions of chief financial officer and municipal manager.
The report indicates that one municipality (Prince Albert) received a disclaimer as opposed to five municipalities in 2008-09. George municipality received an adverse audit opinion, while Cederberg, Laingsburg and Saldanha Bay had qualified opinions. 21 municipalities (2008-09:23) registered unqualified opinions with other findings. The City of Cape Town remained the only municipality with a clean audit report – the same status it achieved in the previous year.
Municipal entities registered an improvement towards clean audits – two entities (2008-09: nil), Cape Town International Convention Centre and Overstrand Local Economic Development Agency, achieved clean audits, while the remaining two, the Khayelitsha Community Trust and Knysna Economic Development Agency, received unqualified audit opinions with other findings.
Some of the main factors that led to municipalities not achieving clean audit reports include leadership instability at some municipalities and failure by the leadership to up-skill finance unit staff to implement basic financial disciplines, such as, inadequate record keeping and a lack of systems to ensure regular processing of transactions and reconciliation of accounts on a monthly basis.
The other findings, which include reporting on predetermined service delivery objectives and compliance with laws and regulations, also prevented most municipalities from achieving clean audits.
Non-compliance with the supply chain management regulations by 26 municipalities (93%) and unauthorised expenditure by 17 municipalities (61%) led to a significant increase in unauthorised and irregular expenditure compared to 2008-09.
The report also highlights the fact that municipalities have made no progress in addressing the key information technology findings raised in 2008-09, resulting in a recurrence of several high-risk deficiencies in general computer controls.
“From our side, we will continue to assist executive mayors in identifying municipal-specific details of key daily, weekly and monthly controls, which are either not in place or not effective.
Monitoring of such controls should take place consistently and regularly. In addition to the quarterly visits to municipalities to assess the status of key controls, my office will also evaluate the effectiveness of monitoring carried out by the provincial executive and parliamentary leadership in the areas of leadership oversight, financial management and compliance with applicable regulations and laws,” concludes Nombembe.



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