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The Accounting Oftcor Namakwa District Municpatiy Private hag x 20 Satingbok e240 Dale: 80 Novernber 2015 Relersncs: 21961REG14-15 statements and other legal and reguiatory requirements of Namakwa District Municipality for the yoar ended 30 June 2015 1. The above-mantionsl seport f the Aucltor-Goneral fs submit! herawith in terms of section A(t} ofthe Publss Audit Act of South Affice read in canjunetion with section 188 of the Constituion af the Republic of South Africa eection 121(3} athe Municipal Finance Menagement Act of South Arica 2. We have not ya revived the other information that wil be ineluded in the annual repor with the audit financial statements and have tius nol been eble to establish whathar Kiera are ‘any inconsistencies between this information and the audited financial slatements anc the reported performanca apains! are-determined objectives. You are requested to supply this Information as scan as possible. Once tis information is received itl Bo reae and should any inconsistencies be Identified thas will hg communicated fo you and you mill be requested make the nevessary curestions, Should the carractione not be made we will amend and reissue the audit report 3. In aims af section 121(3) of the FMA you ate required to include the audit report in the ‘municipaliy’s annual report ta be tabled 4, Uni the annual repotis lad as required by section 127(2) of tha MFMA the audit report isnota publ document and should brafors ta trated! ae contdertial, 5, Porto printing or vapyéng the annual report which wil Include te aur esport you are required to.co the folowing: ‘+ Submit the final printer's proof of the annual report tothe retevart senior manages of the Audicr-Gerral of South fica for vorifcation of Ye guditrelated references In tha audit repert and for confirmation thal ne financial statements an clhar information are those {documents thal have lissn raed and audited. Special care shout he taken withthe page references in your port, since an incorrect referance could have audit implications. The signature Aueltor-Genera’in the handwiting of tho auditor authorised to sign the audit report athe end of the hate copy ofthe autil report should be scannad in whan preparing to print the tepor. This signature, as well asthe place and data of signing and the Aucitar-Gensral of South Afics's logo, should appear at the end of the report. a in tha hard aopy that is provided t0 you. The official loga will be made availabe Io you in electronic ornat. 6. Please notiy the undersignad Serior Manager well n advance of the gale on which the snrval report conlairing this suett reaort wll be ladled 7. Your cooporation to ensure that all these requirements are met would be much appreciated, Kindly acknowladgs reseip! ofthis letter. Yours sincerely ae Shai Senior Manauer NGBU: Senzosenkcsl Mthembu Encuiiss: Ndabezinhic Nkos! Telephone: (083) 838 8800 Report of the auditor-general to the Northern Cape provincial legislature and the council on Namakwa District Municipality Report on the financial statements Introduction 1. Thave audited the financial statements of the Namakwa Distiet Municipality set out on pages .. lo ., which comprise the statement af financial position as at $0 June 2016, the statement of financial performance, stalement of charges in net assets, cash fav slalement and the statement of comparison of budget anc actual amaunis for the year then ended, as well as the notes, comprising a eummary of sgnifcant accaunting Policies and other explaratory information Accounting officer's responsibility for the financial statements 2. The accounting officcr is rossonsibie forthe preparation and far presentation of these financial statements in eccordance with Soulh Alican Standards 0° Generally Recognised Acccunling Practice (SA standards af GRAP} and the requirements ofthe Nunicipal Finance Managemant Aci of South Atica, 2003 (Act No. 86 of 2003} (MFMA) and the Division of Revenve Act of South Aftca, 2014 {Act No. 10 of 2214) (DoRA}, and for such internal contol as the accounting officer dctormings is necessary to enable tho preparation of fiiancial stalemanis thal are fee ‘rors matoral misstatement, whether due to fraud or ero. Auditor-general's responsibility 3. My responsibilty is to express an opiaion an thas financial statements based on my suri. Iconducted my audi in ascordanee with Intemational Standards on Auditing, Those standards require that | comply with ethical requirements, and plan and gerform the audit to obtain reasonable assurance about whether the financ:al statements aro foe from material misstatement, 4. An audit involves geriorming proceduras ta abtain audit evidence about the amounts ‘and disclosures in he financial siatements. The provedures selected depend on tha, auditor's judgement, including the assessment ofthe risks of matarial misstatement of the financial statements, whether cue (a raud or ero. In making thas risk ‘sssessmerts, the aucitsr consigers internal contol ra‘evant tothe municipality's raparation and far presentation of he linancial statements in order to design aut Sroceduras thal are appropriate inthe ciraumstanoes, but not forthe purpose of ‘expressing an opinion on the effectiveness of the municisalily's infernal control An audit igo includes evaluating the appropriateness of accounting policlas used ard tre reasonableness vl accounting estimates made by management, as well a3 evaluating the overall presentation of the financial statements. 5. noleve that the audit evidence | have abtained is sufficient and aapropriate to provide 2 basis for my audi opinion, Opinion 6. In my opinion, the tinercial statements pracant fay. in all material respects, the finencia! postion of the Nammakiwa Distict Municioalty as at 30 June 2018 and its financial performance and casi flows forthe year then ended, in accordance with the SA, standards of GRAP and the requirements of tha MIFMA and DORA Emphasis of matters 7. | draw attention lo the matters below. My opinion ‘s nat modified in respect of these mates, Material underspending of a vote 8. As disclosed in note 41 to the financial statemenis, le municipality has materially tunderspent the budgel an Economic Development: Planning and evelopment sub program, Administration: Corporate Services su program and Tachnieal Services: Rood Transpon sub prearam io the amoun's of R&S 5B 804, Rt 249 612 and RAGE O12 respectively. As a consequence, le municipality has not achiaved ls objectives of Lpgrading the harbour project as intially planed Financial sustainability 9. The stalament of financia! perfornanca Indicates Inal the Namiakwa Distt Municipality incurred a net loss af RS 278 193 curing the year erdad 39 June 2015, These ‘onditions, along with other maitars as set forth in note 43, ndicala the existence ot a material uncertainty tha; may cast significant doubt on the municipaity’s abi to ‘operate as a going concern. lregular expenditure 410. As disclosed in role 33.8 tothe fnencial statements, the munieipelly incurred iregular ‘expaniture of R820 325 during the year under review mainly due to non-camplance: with supply chain menegement requirements. In addin, the full extert of regular ‘expenciure is sillin tho proses of being eetermines, Additional matters 11, | draw altention tothe matters below. My opinion is nat mosiied in respect of these maners, Unaudited supplementary schedules 2. The supplemaniary information set out on cages XX ta XX daes not form part of the financial statements and is pleseniad as adsitional informaton. | have nol audited these schedules and, accordingly, | <0 nat expross an cpinion thereon. Unaudited disclosure notes 13, Intemms of section 12612Ke} of the MFMA the municipality is recuired to disclose particulars of non-compliance wilh the MEMA. This dselosure requirement did not form part af the aucit of the financial statements and accordingly we do nct exprase an pinion thereon, Report on other legal and regulatory requirements 14, In accordanes with the Public Audit Act of South Africa, 2004 (Act No. 26 of 2004) (PAM and the general rotice Issued in feanss thereof, | heve a responsibilty fo repor findings ‘on the reported perfomance information agains predetermined objectives for selected objectives prosente: in the annual perfomance report, compliance with log slation and intemal control. The objective of my tests was lo idly reper findings as described under each subheading, but not to gather avidence lo express assurance on these matlers. Accordingly. I do not express ain opinion or conclusion an these mailers, Predetermined objectives 15. | performed procedures to oblain avidence shout he usefulness ane reliabiliy af the rapiorlac performance informetion forthe following sclccied objective presented in fe annual performance rezort of tne munisipaity for the year ended 20 June 20°6: + Objesive: Depariment: Economic Dovalopment, Tourism and Projects on pages xo 16, | evaluated the reported porformance information against the overall citeria af usefulness and relia iy 17. | evaluated tho usefulness of the reported performance information to dalormina whether twas presented in accordance withthe National Treasury's annual reporting prineiplas and whether the reported performance was consistent wih tha planned objectives. | further performed less lo determine whether indicators anc targets ware well dalined, verihable, specific, measurable, lime bound and relevant, a8 requirec by the National ‘Treasury's Framework for managing programme porformance information (FMPPI}, 18, | assessed the reiabilly ofthe reported performance infomation ta determine ssheiher it 1was valid, accurate and complete. 19. Tha material findings in respect of the selected objectives are as falows: Department: Economic Development, Tourism and Projects Uselulness of reported performance information 20, Sention 41{c! cf the Municipal Systems Act (MSA) requires the integreted development plan to form the basis for the anrual repor. there"ore requiking consistency of abjectives, Insigators and targets aetwoen planning and reporting documents. A total of 700% of the reparled objectives were not consistent with those in the approvad budgel implementation plan. This was due In an insufficient review af the anual performance report. Ad ional matter 21. I draw altention te the folowing matter: Achievement of planned targets 22, Refer to bie annual pertormance report on pages x to x and x to x forinformation on the Echievement of the oanned Largets lor the yest. This information should o@ canidered in the context ofthe matevial findings on the usefulness of the reported performance, infemalion forthe ss'ecied objective reported in paragraph x la xx ef his repart Compliance with legislation 28. | performed procedures to abtain evidence that the municipality had complied with applicable legislation regarding financial mallars, Snencial management and ather ralated »sters, My material findings an camliance with specific matters in key legislation, as set out inthe ganeral notice iseued in terms of tho PAA, are as follows: Strate; planning and performance management 24. The municipality die not conduct its affairs in @ manner which wes consisicn with its inlegrated development alan. as requiros by section 36 al he MSA, section 21;2i(a) of the MFRIA and Municipal planring and performance management reguiaion 6. 25. The service delivery and bueget implementation alan tor implementing the municipality's delivery cf municipal services and annual dic not indicate projastians ‘or each month af the revenue to be coleciad, by source and the oneravonel ane capital sxpendilure, by vote. as required by section 1 of the MEMA ‘Tha gerformance management system and relatod controle were inadequate as it did not cescrise and represent the processes of performance planning, raviaw,rejerting and how itis conducted, organised and managed, inluding determining the rales of the difforont ole-pleyers, as required by sections 38 of bie MSA and regulation 7 of the Municipa’ planning ard performanos management regulations. Finoncial statements, performance and annual reports 27. The annus ropor for the year under review did net include a compariven ofthe performance wih the previous financial and measures laken la imarove performance as required by section 46(13(b) & {6} af the MSA, Audit committees 28. The audit commttas did nel mee! al least four tes a year, as roquired by section 186(4)(b} ofthe MFMA, Procurement and contract management 29. Goods and services with « transaction value of below R20 000 were procured without obiaiing the required arice quotations as requited by supaly chain management (SCM) regulation 17[3} and (c), 30. Quolations were accepted from prospoctve providers wha are rel rapisteres on the list, of accredited prospective providers and do not meet the listing requiremanls prescribed by the SCM poloyin contravention af SCM raguiaion 16(D) and 17(0}. 51. The preferonce point system was net apples in all pracurament of goods and serv above R30 000 as raguited by section 2{a} of the Preferential Procurement Policy Framework Act and SCR regulation 281) Expenditure management 32, Reasonable siegs were not takon lo prevent unauthorised and irregular expenditure, 28 Fequired by section B2(1){d) of the MRA, Consequence management 33, Unauthorised and iragular expenditure incurred by the municipality was not investigated to determine if any person is lisble for Ihe expenciture, as required by section 3212 Ki) of the MEMA, 34, Council ceriliad inagular excenditure as irecoverable without having conducted an investigation fo determing the recoverabilty of the expenciture, in contravention af section $2{2)ai) of tha MEMA. Internal control 35. | consideres intemal control relevant to my audit ofthe financial stateinents, annual performance report and compliance with lozistation. The matlars reported below are Frrited tothe signfigunt intemal control deficiencies that resulted in ihe bas's Ine fingings on the annual performance reporl and the findings on compliance with legislation included inthis rancor Leadership 56. The oversight functions dd not ideally and prevent non-complance inetancas curing the 27. Human resauros management was nol alfactive in enswring thal competent anc sulficiantly skilled oficiels ware appointed to ensure thal performance is monitored. 38. The action plan procaes was not effective lo imecusly address financial and pertormanas reporting matters and non-compliance tat occurred during the trencisl yea Financial and perfermance management 39, Dung the financial year under review, management also did not ensure that all transactions and racords were internally checked to detect and carrect errors in the financial records, 49. During the year uncer review, management did not regularly review and monitor management's compliance with all laws and regulations and intemally designed policies and procedures. As a result. significant non-compliance issues were hoted that couls have been prevented. There were deficiencies in tha dasign and implementation of internal contr in raspeet af compliance silh applicable iawe and ragulations and performance information ans these were nol addressed 41. Management did rot review te financial stalements, to ensure the achievement of fair presentation: this resulled in material amendments t2 regular expenditure disclosure in the financial sialemerts 42. The weaknesses within tha security management, usse access mangement, program change management ang IT service continuity were net aedressed ae provicusly feported due io falure of IT Mlanagernent to Linoly fliow-up an acton slans spectied turing the past review and correct previousty identified internal control deficiencies. (T Findings end improvement of the IT contals within the municpalty were not prioritised by management. Governance snagement did not review oF monitor risks idantiied, In addition no risk assessment 5 performed relating to the IT environment. 45. The accounting officer did not encure that a F8k unit was established. The munisinaliy td net idontiy risks relating to the achiovement of facial and performance reporing Sbjectives. Consequenty. contrals were not developed to prevent and detect various internel control weaknesses it financial and performance reporting rot being detected timoously, These weaknesses ais hampered the functioning cf the audit commitess ‘whieh also did not execute ts prescribed mandate Grant pytoe imberley 30 Noverner 2015