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Auditor-General of Souta Africa: uMfolozi Municipatity - Audit report 2014-15 Report of the auditor-general to the KwaZulu-Natal Provincial Legislature and the Council on uMfolezi Municipality Report on the financial statements Introduction 1. Thave auudted the tinanctal slatamants of tha uMfolozi Municipality eet out on pages XK to XX, which comprise, the statement of financial positon as at 90 June 2015, the statement of financial performance, siatement of chariges in nel aeaets, cash flow slatamant and the statement of comparison of budgel information with actual information for the year then ended as well as Sie notes, comprising a summary af signfleant ‘accounting policies and other explanatory information, inl statements Accounting officer's responsibility for the finan: 2. The accounting officals raspansibo for he preperation and fa presentation ofthe financial statements in accordance with he South Aican Standards of Generally Recognised Accaunting Pracica (SA Starcards of GRAP) and the requirements ofthe Local Government Municipal Finance Managemant Act of South Altea, 2003 (Act No. £50 of 2005} {MFMA) and the Divsin of Revenue Act of South Aca, 2014 (Act No, 10 ‘of 2014) (DeRA), and for such Intamel control es the eecounting officer determines is necessary to erie the preparation of financial statements tna ara fre from mater misstatement whethor due to fraud or error. Auditor-general's responsibility 3. My responsbillyI¢ to express an opinion on the nancial statements based on my audit | conducted my audit in accordance wih Intemational Standards oni Auditing, ‘Those standards raquise that | comply with ethical requirements, and pian and perform the audit fo obiain reasonable assurance about whether ihe financial statements are frac from material misstatement 4. An audit involves pertarming procedures to obtain auait evidence about the amounts and disclosures in tha financial satemants. The procedures eelecied dapand on the suditors judgement, including the assessment of the risks of material misstatement of the financial statements, shether dus to frais or error. In making those riak assessments, the auditor considers intemal cantral ralavant tothe rmunlelpalty’s preparation and fai presentalion ofthe financial statements in orcer fo design auctt proceduras that are appropriate in the crcumataneas, but not forthe purpose of ‘Sxpressing an opinion on the effectiveneas af the municipalll's Internal cantral. An audlt also Indludas evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, 86 well as evaluating the ovsrall presentation of the financial salemnents, 5. I bolisva that the audit avidence | have obteined is eufficiont and appropriate to provide ‘a basis for my audt opinion. Opinion @. In my opinion, the financial statements present fait, in all material respects, the financial postion of the uMfoloa! Municipal a6 at 30 June 2018 and ils financial performance and cash flows for the year than ended, In accordance with the SA ‘Standards of GRAP end the requirements of the MFMA and DoRA. Additional matter 7. I draw attention fa the matter below. My opinion is not modified in respect of this matter. Unaudited disclosure notes 8. Interms of section 125(2Ke) of the MFMA the municipality is required to disclose parioulars of nan-complance with the MEMA. This dlaclasura requirement dld not-for par of the aucit of the franctal statements and accordingly I de not express an opinion thereon, Report on other legal and regulatory requirements 8. Im accordance with the Pubic Audit Act of South Aftica, 2008 (Act No. 25 of 2004} (PAA) and the general notice issued in terms thereof, Ihave a responsibly fa report ‘ndings on the reported performance information against predetermined abjectives for ‘selacied development priors presentad In the annuel performance report, compliance with legislation and internal conzol. The objective of my tests was to Idantlfy reportable findings as described under each subheading but not to gather evidence bo express assurance on these maltors. Accordingly, | do not express an opinion or conlusion on these matire Predetermined abjective 19. | performed procedures to obtin evidence about the usefulness and rellabilly of the reperted performance information for basic service delivery development objective breeanted In the annual performanos repert of the municipality for the year ended 30 June 2018, 41. | evaluated the reported performance Information against the overall erlleria of Usefulness and ralleblity | evaluated the usefulness of tha reported performance informetion to determine whether it ‘Was presented in accordance with tha National Treasury's annual raporlng principles and «thother the reported porfarmence was consistent with the planned davelapment abjeciWe. | further netformed tests to determine whatherIndloatore and tangata were well defined, verifiable, specific, measurable, time bound and relevant, as required by the National ‘Treasury's Framework far managing programme performance information (FMP), 12, | assessed the ralablty ofthe reported performance infomation lo determine whether It vas valid, accurate and complete, 18, | dd not idenify any mala hdlngs on the usefulness and rlabty of tha reparted performance infermetton forthe basic service delvery development bjacive Addi 414, Although | identited na material indinge on tha usefulnase and rallabily ofthe reported fperformance information for the selected development cbjectiva, | draw attention to the folowing mater: nal matters. Achievement of planned targets 18. Refer to the annual performance report on pages XK ta KX for nfarmation on the achievement ofthe planned targets forthe year. Adjustment of material misstatements 18, | identified material misstatements in the annuel performance report submitted for audiing on the reported performance information far basie service delivery development abjective. As management subsequently corrected the misslaterents Idk! not identify ‘|any meteral findings on the usefulness and relsbily ofthe reported netformanca Information Compliance with legislation 17. | performed procedures to obtain evidence that the municipality had compliod with plicable legiclation regarding financial maltars, nancial management and other related matiers. My material ndings on compliance with specif matters in key legialation, e@ eet out in the general not Kseued In terms of the PAA, are a6 follows: Strategle planning and performance management 18, Revisions to the service delivery and budget implementation plan were nol npproved by the council after the eppmval of tha adusimants budgel, as raquirad by seellon 84(1)(c) af the MFA, 18, The KPIs set by the municipality did rot include indicators an percentage of hayssholds wlth ocars to bale laval of sald waste removal as raquirad by eaction 43(2) of the Local Govemiment: Municipal Systema Act, 2000 {Act No. 32 of 2000) and the Municipal planning and performance management regulation 10f@). Annual financial statements 20. The financial atalements submitted for auelt were not prepared, i all material respecte In acoordance wth the requirements of epelon 122 of the MMA. Material misstatement cfratentions, property plant and equipment and revenue, identified by the auditors in the submitted financial statements were subsequently corrected and the supporting records wera provided subsequently, resuting inthe financial statements receiving an. Uunqualtfied audi opinion, Procurement and contract management 21, Goods and services witha transaction valus of below R200 000 ware procured without binning the required price quotations as required by supply chaln management regulation 17 (3) and (¢). Expenditure management 22, Reasonable steps wars not taken to prevent unauthorised and ireguiar expenditure, as required by section 62(1)(¢} ofthe MFMA, Internal control 28. | considered Internal contol ralevant fo my aust of the financial statements, annual performance report and compliance with legislation. The matters eported below are limited to the significant intemal control deficiencies that resulted inthe findings on the ‘anrwal performance report and the findings on compliance wih tegslation Included in this report Leadership 24. The municipal managar aid not exarcise adequate and effective oversight responsibilty ‘over compliance with polices, procedures and internal conisols. Furthermors, management did not tke effeciive measurea tu address previous findings on iregular ‘expenditure and complance with laglelatlon dus tp key offciese lacking appropriate ‘competencies. Financlel and performance management 25. Management did not prepare financial and performance reports that are supported and evidenced by reliable information due to Inadaquate reviews. ofthe ennuel financll statements and performance reports being submitted for audit which resuliad in material maisstaiamant. Other reports investigations 28. An independent consulting fm performed an investigation atthe request ofthe muriepaliy, which covered the perad 1 ly 2013 o 30 June 2014. The fveetigation ‘a8 inliated based on an aleyaton of supply chaln management ieguares. The investigation wae concluded on 30 June 2018 and resulled in the resignation ofthe effected cenployes por m any alecipinary procesdngs, Bodtur Gaenl Pietermaritzburg 27 Nowambee 2015 ~ wae Aen a il pic sais