Gauteng’s MFMA 2012-13 audit outcome highlights

Gauteng has three metropolitan municipalities, two district municipalities, seven local municipalities and 25 municipal entities. All 37 auditees submitted their financial statements for the 2012-13 financial year for audit within the prescribed timelines. Sixty-eight per cent (68%) of auditees prepared and submitted reliable and useful financial performance information that was supported by an adequate audit trail.

The overall total expenditure of the Gauteng municipalities amounted to R83,8 billion for the 2012-13 financial period. This amount is made up of R20 billion for payroll costs (including councillors), R52,2 billion for goods and services and R11,6 billion in capital expenditure. The three Gauteng metros accounted for 88% of the total.

Overall, Gauteng’s MFMA 2012-13 audit outcomes improved significantly compared to the previous year.

Considerable attention and effort dedicated to prior year qualifications resulted in a significant reduction in auditees with qualified audit opinions.

Only Randfontein and Westonaria remain qualified with findings on compliance.

Sedibeng District Municipality was exemplary to other municipalities as they progressed to a financially unqualified audit opinion with no material findings on the quality of the annual performance report or compliance with legislation (also known as a "clean audit").

The Johannesburg Social Housing Company and Johannesburg Fresh Produce Market maintained their financially unqualified audit opinion with no material findings on the quality of the annual performance report or compliance with legislation ("clean audit").

Overall, there was a significant reduction in irregular expenditure reported to R466 million compared to R1,8 billion in the prior year. The R466 million constitutes irregular expenditure incurred due to non-compliance with supply chain management legislation and other applicable regulations. This includes awards made to suppliers in which officials of other state institutions, employees and councillors of the auditees had an interest. While in most cases goods and services were delivered, it was impossible to confirm whether value for money was received. Irregular expenditure reported merely indicates that provisions of the legislation, which may include provisions aimed at ensuring that procurement processes are competitive and fair, were not adhered to.

The drivers that support these positive outcomes include commitment displayed by both political and administrative leadership to deal with audit findings and action plans; institutionalisation of good governance practices, including the role played by internal audit and audit committees; strong drivers

2 of internal controls, with the focus on entrenching administrative basics and standard disciplines and processes which were continuously monitored; and implementation of commitments made in the previous year by the role players as this provides the essential assurance.

While the municipalities and their respective entities are not in a financial health crisis, our analysis of financial health showed that some municipalities experienced financial difficulties which necessitate a viable intervention strategy to stabilise liquidity concerns and prevent the municipalities from getting into the red zone.

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