Table Of Content

Auditor-General of South Afica Umainyathi District Municipality - Auait report 2014-15 Report of the auditor-general to the KwaZulu-Natal Provincial Legislature and the Council on Umzinyathl District Municipality Report on the financial statements introduction 41. have audited the nancial statements of the Limzinyathi Disticl Municipality set out on pages xx to xx which comprise the statement af fanclal positian as at 0 June 2046, ihe slalernent of financial performanoe, etaternent of changes in net assets, slatement af ‘cash flaws and the statement of comparison of budget information with actual information forthe year then ended as well as the nctes, comprising a summary of algnifleant accounting policies and other explanatory information, Accounting officer's respon: ity For the financial statements 2. The accounting officer Is responsible for the preparation and far presentation of the financial statements in accordance with the South Afcan Standard of Generally Recognised Acoouniing Practice (SA Standards of GRAP) and the requirements of tha Local Goverment: Municipal Finsnes Menagement Act of South Afioa, 2002 (Act No. {56 of 2002) {MFMA) and the Division of Revenue Act of South Africa, 2044 (Act No. 10 ‘of 2014) (DORA), and for such intemal control as the accounting officer determines it necessary fo enable the preperalon of financial stalemenis thal are tree from material misstatement, whether dua to fraud or ere. Auditor-general’s responsibility 3, My responsibilty is to express an opinion on the financial statemanis based on my ‘AUGIL Feanelucted my auc in aocordance wih international Standards an Auditing ‘Those standards require that J eamply wlth ethical requirameris, and plan and perform the audit to obtain reasonable assurance abou! whsitior tha financial statamanis are {rap from material misstatement. 4. An audit involves performing procedures lo oblein audit evidence shout the amounts ‘and disclosures inthe financial statements. The procedures salacted depend on the ‘ucitor's judgement. including the assessment of the risks of material misetatament of {he financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevent to the munlejality’s Preperation and fair presentation ofthe Rnancial statements inorder ta design aut Procedures thal are appropriate in the circumstances, but not forthe purpose of ‘expressing an opinion on the eifectivanas of the municipaliy’s intemal control, An audit also includes evaluating the appropriateness of accounting polices used and the rassonabloness of accounting estimates made by management, as well as evaluating the overall presentation of tha financlal statements, 5. [believe thatthe audit evidence I hava obtained Is sufficient and appropriate to provide ‘a besis for my audit opinion. Opinion 6. in my opinion, the financial statements present fal. in ell materiel respects, the financial position of the Limzinyathl Dletit Municipality as at 30 June 2048 and its ‘nancial performance and cash flew for the year then ended, in accordance with the SA, Standards of GRAP and the requirements of the MFMA and DORA. Emphasis of matters 7. raw attention to the matters bolow. My opinion is not madified in respect of these maters. Matertal impairmants and losees 8. As disclosed in nofe 4 to the financial statements, the municipality recogri¢ed provisian for bad dabte of R201 32 millon (2044: R147,06 rnlion) on consumer deblars as the recoverability of these amounts was doubtful 9. As dlscloeed in note 40 to tha financial statement, the municipallly heurrad water esses of 82% amounting to R7,92 milion (7,08 millon kiloltves). This was due ta burst pipes on reliculation lines, aging infrastructure and ilegal eonneetions reauting in lunaceounted for water. Report on other legal and reguiatory requirements 10. In sccordance with the Public Aucit Act of South Africa, 2004 (Act No. 26 of 2004) (PAA}and the general nolice iscued in terms thereof, I'hava a responsibility to repart findings on the reported performance information against pradetorninad objectives for selacied objectives presented in tha annual performance report, compliance wth legislation and Iniemal control. The objective af my taste wat la identify reportable findings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, Ida not express an opinion oF conclusion on these matters. Predetermined objectives 11, | perfonrned procadures to obtain evidence about the usefulness and reliably of the reported performance Information for basio service delivery and infrastructure Investment and good govemanca and nubile patisipation presented in tha annual Performance report of the municipality for the yaar ended 30 June 2018, 112, | evaluated the reported periormance information against the overall eritria of ‘usefulness and relabilly, 18. | evaluated the useftiness of the reportad performance information to determine ‘whether itwas presented in accordance with the National Treasury's arrival reporting Principles and whether the reporied perfomance was consistent withthe planned objectives. [urlher performed tests to datanmine whelherindicatars and targats wera \well defined, verfabla, apaciic, measurable, time bound end relevant, as required by the National Treasury's Framework for managing programme performance nfarmation (FMPP)), 14, assessed the rallabllly ofthe reported pertornance infomation to determine whether i 2 was valid, accurate and camplate. 15, The material findings in respect ofthe selected objectives was as follows: Basic service delivery and infrastructure investment Usefulness of reported performance information Measurability of indicators and targets Performance targets not specific and indicaters nat well defined ‘and verifiable 18. Performance tarpats should be specie in clearly identifying the nature and requlred level ‘of performernce as required by the FMPPI. A iolal of 83% of the targate were not specific. 17. Performance indicators should be well-defined by having clear definitions co that dats can be csltected consistenty and is easy to understand and use, a8 required by the FMPPI. A total of 33% of the Indleatore were nat wal-defined, 18. The processes and systems that produced the Indicator shauld be vertiable, a8 required by the FMPPI, A tolal of 80% ef the indicators were not verifiable. ‘This was due to Inadequate review ofthe gervioe delivery budget implementation plan {SDBIP) by the accounting officer and the aul committee and the lack of oversight by the maniepal counci on tha preparation ef the annual performanica report Reliability of reported performance information 19, The FMPPI requires municipality’ to have appropriate systems to collet, collate. verify fond store performance information to ensure valid, accurate and complete reporting of ‘actual achlevements against planned objectives, Indicators and targets. The reported performance information was not vali, aecurate and complete when compared to the ‘source information of evidences provided, This wae due to a ack af standard operating procedures for the accurate racording of actual achiaverents and maintaining sSupperting documentation for reported Information, Good governance and public participation Usefulness of reported performance information Measurabilty of indicators Performance indicators not verifiable 20. Tha processes and systame that produced the Indicator should be verifiable, as required by the FMPPI. A total of 26% of the indicators worg not verfiahle. This wae due to a lack of proper systems and processes thal produce the infomation on actual performance. Reliability of reported performance information 21, The FMPPI requires municipality's a have appropriate system lo allec, colata, verfy and store perfarmance information to ansure valid, acourate and campiaie reporting of ‘sctual achievements against planned objectives, Indicators and targets. Adaquate and ‘eliable corroboraling evidence could nat be provided for significantly important targets {in assess the relabilty ofthe reported performancs Information. The municipality's records did not permit the appltcation of alternative aud procedures, This was du6 lo @ lack of standard operating procedures for the ancurate renerding of selusl achievernents ‘and meinisining supporting documentation fx reported information, Addlitionat matter 22. | draw ationtion to the following matter; Achievement of planned targets 23, Refer fa tha annual perfomance report on pages x to x and x to» for information on the ‘achievement ofthe planned targets for the year. Ths information shauld be considered inthe context of the material findings on the usefuiness and reliability ofthe reported performance Information for the selected objectives reporied in paragraphs 16 10 21 of this report Compfiance with leaislation 24, | performed procedures to obiain evidence thel the municipality had camplied with applicabte legisition regarding financial matters, financial management and other related matters. My material findings op compliance with specific matters n key, legislation, 2s set aut in the general notice Issued in terms of the PAA, ato as Fallows: Annual financial statements 25. The finanelsl statements submited for auditing were not prepared in all material respects in accordance with the requirements of section 122 of the MFMA. Material misstatements of capital comnmilments, grants and subse, infrastructure assets and budget stalemant identified by the auditors in the submitted financial staternents ware ‘subssquentty corrected and the supporting records were provided subsequently, resulting in the financial statements receiving an unqualified auelt opinion Procurement and contract management 28. Goods and services with a transaction value of below R200 000 were procured without Dbiaining the required price quotations as required by supply chain management (SEM) regulation 17(a) end (¢) 227. Goods and services of a transaction valve above R200 000 were procured without inviing compettive bids, as required by SCM regutation 19(a) 28. Councilors of the municipalty attended meetings of committees evaluating or approving tenders and quotations, in contravention of section 117 of the MFMA, 29, Contracts and quotations ware awarded ta bidders who did not submit a dacteraton on ‘whether they are employed by the state or connected fo any person employed by the stata, ae required by SCM regulation 13(c), 80. Awards wara made to providers who are in the service of ether etate institutions, in ‘contravention of section 112() of the MFMA and SCM regulation 44, Similar avards \were identified In the prior year and no effective stops ware taken to pravent ar combat the sbuse of tha SCM process in accordance with SCM regulation 28(1), Strategic planning and performances management 31. The performanos management system and related conirols were inadequate as It dl not describe and represent the processes of performances review and reporting and hovitis ‘conducted, organised and managed, as required by saction 38 ofthe Local Government: Munlelpal Sysiems Act, 2000 (Act No. 32 of 2000) (MSA) and ragulalion 7 ofthe Municipal planning and performance management regulations. Expenditure management 32, Reasonable steps were not taken to provent inegular axpenditure, as required by section 182(1) (d) of tha MEMA, Consequence management 32. Ireguiar expenditure incurred by tha municfpaly was net Investigated to determing If ‘any person is liabie for the expenditure, as required by section 32(2}{a) (i) of the NEMA, Internal control 34. | considered intemal control relevant to my audit of the financial statoments, annual erformance taport and complianca with legislation. Tha matters reported below are Fimited to the signficant intsral control deficiencies that resulted In the findings on the <annuel performance report and the findings an compliance with legsfaion included in this repon. Leadership 438. The accountng ofiser and municipal coun did not exercise oversight responsibity ‘ver the preparation ofthe annwal francial statements, annual performance report and compllanca wih Key leglaton Financial and performance management 36. The socounling officer and management did nat implement a proper record management system for the rapoeting of performanes Information, 37, There was inadequate morthly monitoring and reconciling of transactions and balances on Infrastructure assets, commilments, SCM and reporting on predetermined objectives. Governance 38. The ausit commitiee did not perform adequate reviews of reparing of predetermined ‘Objectives and financial statements and di not adequately monitor the implementation of racommendstions made by the internal aueiters on the rellailly of quarterly performance reporis, Pletermaritzburg 27 Novernber 2015 ro bus wube