I hereby present to the legislature and municipal councils of the KwaZulu-Natal province my 2011-12 general report on local government audit outcomes. The 2011-12 outcomes show a year-on-year regression. Although 76% of the municipalities and municipal entities received unqualified audit opinions on their financial statements, there has been a substantial increase in disclaimers, from one in 2010-11 to seven in 2011-12.

Although it is noteworthy that all the municipalities and their associated municipal entities had submitted financial statements within the legislated time frame, the quality thereof was poor. This was despite the use of consultants at a cost of R91,206 million to assist with the preparation of financial statements as well as underlying records. Consultants were also extensively used to assist in producing fixed asset registers.

A total of 85% of submitted financial statements contained material errors and/or omissions which were identified during the audit process. In total, 68% of auditees had findings on the credibility of their performance information. It is evident that the basic daily and monthly controls were not in place and that internal auditors and audit committees failed to perform in-year monitoring and analysis of reported financial and performance information. Furthermore, councils failed to confirm the credibility of information presented to them.

Overall, 96% of auditees had audit findings on non-compliance with legislation, many of which related to unauthorised, irregular or fruitless and wasteful expenditure, as well as procurement and contract management. In many instances, the leadership failed to honour their commitments and take ownership of and monitor key internal controls, especially information technology, as undertaken during quarterly engagements. This results in weak control environments and inadequate management practices that impact negatively on the financial health of the province’s municipalities and their ability to render services to the citizens in the future.

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