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Audile-Genere of Sourh Atica Nkandla Municipality - audit report 2015-16 Report of the auditor-general to the KwaZulu-Natal Provincial Legislature and the council on Nkandla Municipality Report on the financial statements Introduction 4. [audited the financial statamants af tha Nkandla Municipality set out on pagas 10... ‘which comprise the statement of financial postion as al 30 June 2016, the statement of financial performance, statement of changes in nal assats, etalemanl of cash flows and {he stalement of comparison of budget with actual infomation forthe yaar then ended 58 well as the notes, comprising a summary of significant accounting policies and other ‘explanatory Information Accounting officer's responsibility for the flnanclal statements 2. The aecaunting offer fs cespansible tor the preparation and falr presentation af the finanial statements in accordance with the Soulh African Standards of Generally Recognised Accounting Practica (GA Standards of GRAP} andl the requirements of the Municipal Finance Management Act of Sauth Affica, 2003 (ct No. 66 of 2003) (MEMA} and the Division of Revenue Act of South Africa, 2015 (Act No. 1 of 2015) (DORA). anc {or such Internal eanlral 2s tha aecounling officer defarmines Is necessary to anabla the preparation of financial statements that are free from material misstalement, whether due to fraud or error, general's responsi 3. My responsibilly is to exprass an opinion on tha tnancial slalemants tased on my saudi. !conduated my audit in accordance with the International Standards on Austin. ‘Those standards require that | comply with ethical requirements and plen and perform the audit to obtain reaconable aesurance about whatfer the financial statarants aro free fromm matarial misstatement. 4, An suctt involves performing procedures to obtain audit svidanes about the amounts and disclosures inthe financial statements. The procaduras selected depend on tha auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether dus to fraud or arrer. In making those risk assessmants, ha audilae considers internal control relevant ta the muricisaly's preparation and fair presentation of the financial statements in order ta design audit roveduree thal are appropriaia in the circumelancea, but nol forthe purpose of fxpracsing an apiion on the effectivanass of tha municipality's internal contal, An aut also includes evaluating the eppropriateness of accounting policies used and the rassonableness of accounting estimates mede by management, as wall es evaluating the overall presentation of the financial statements. 5. telieve thal the audit evidence | have obtained is sufficient and appropriate to provide a basis for my audit opinion 8. Inmy opinion, tha financial statements present fry, in all materiel respects, the financial positon of the Nkanda Municipalty as at 30 June 2016 and ts financtal perfornance and cash flows for the year then ened, in accordance wth he SA ‘Slandards of GRAP end the requirements of the MFMA and DoRA, Emphasis of matters 7. draw attain tothe matters alow. My opinion Is nat modlMad In espact of thasa matters, Restatement of corresponding figures 3. Ae disclosed in note 36 othe ania statements, the conesponding figures for 30 dune 2015 have beed vestated as ares afan errr dlecavered during SD June 2016 inthe nancial statemerta of the Nkarndia Muricipelty at, and forthe yoer enced, 0 June 2016 Material electricity losses 9, As disclosed in note 4d tothe rancia elatemens, material elect lasses of 3, 86 milion (2018: 9,29 milion) kilowatts amounting to 4,23 milion (2018: R120 milicn) were Incurred as a result of leehnleal and nor-technicel dlstfbution losees, Addltional matters 10. | draw attention to the matters below. My opinion is aot modified in respodt af these matters. Unaudited supplementary schedules 11. The supplamentary information set aut on pages x to x dass not form part ofthe ‘nancial statements and is presented as addtional information. | have nat audited these schedules and, accordingly. Ido not express an opinion thereon, Unaudited disclosure notes 12. In terms of santion 125(2)(6) af the MFMA, the municipaliy is required to disciose Pantlevars of non-compllance with the MIFMIA. This clsclosure requirement did nat form part of the aux of the nancial slatements and, accordingly, | do nat express an opinion thereon, ments Report on other legal and regulatory req 13. In accordance with the Public Audit Act of South Africa, 2004 (Act No, 25 of 2004) {PAR} and the general notca issued in terms thareef, Ihave a responsibly ta raise findings on the reported performance information against predetermined objectives for Sloclad development priorities presented in the annual performance repos, cornplance vith legislation and Internal control. The objective of my tests was to dently reportable ndings ae described under each subheading but not to gather evidence fp axpraseé jasurancs on these matters, Accordingly, I do nol express an opinion ar conclusion on those mattrs Predetermined objectives 14, [performed procedures to obtain evidence about the usefulness and raliailily ofthe reported performance informetion for Basic service delivery and infrastructure and Local ‘seenamic development presented inthe annual performance report of the municipality Torte year ended 30 June 2016. 46. Levalusted the reported performance information against the overall criteria of usefulnese and reliabily. 16, | evalusted the useftiness of the raported performance Information to determine vwhother it was consistent wih the planned abjecives. | turther performed taste to detemine whether indicators and largets were well defined, vertable, specific, measurable, tie bound and relevart, a8 requited by the National Treasury's, Framework for managing programme perioimance information. 17. | assesaed the reliability ofthe reported performance Information ta detemine whether it ‘was val, accurate and complet. 18. lidentited na material findings on the usefulness and reliability ofthe reported performance information for tha aelacted development prlortigs: however, | draw altantion t the fllowing matters: Achievement of planned targets 49. The annual performance report on pages x o x presents information on the ‘achievement of planned targels forthe year. Adjustment of material misstatements 20, | identified material misstatements in the annual performance report submitted far ‘auditing on the reported performance infarmation forthe infrastructure davelopment and basic eervice delivery objective, As management subsequently corrected the, misstaterents, | did nol raige any material findings on the usefulness and reliabitty of tha reported peeformance infermation. Compliance with legislation 21, Iperformad praoedures to abiain evidence thet the municipality complied with applicable legislation regarding financial matters, financial management and other related matters. My material findings on compliance with spectic matters in key legisiation, as set out in the general notice Issued in terms of the PAA, ora ae fallowe: Annual financial statements 22, The financial statements submitted for euditing were not prepered, in all material respects, in accordance with the requiremens of section 122 of the MFMA. Material misstatement of revenue and disclosure of grants identified by the auditors in the submitted financiat statement were subsequently corrected, resulting Inthe fnenclal alataments racaiving an unqualflad auch opilon, Expenditure management 23, Reasonable steps were not taken to prevent iregular expenditure, as required by section 62(1)(d) of the MEMA. 24, Money owed by the municinally was not atways paid within 30 days, as required by section 85(2)(e) of the NIFMA, Infernal contre! 25, | coneiderad Internal contral relevant tn my audit of the financial statements, performance report and compliance with legislation, Leadership 28, The eocounting aficer did not exarciae adequate everelght over financial reporting and compliance 2& wall as Inarval control as material misstalements in the annual financial statements wers identfied and subsequently corrected, which resuited in the municipality receiving and unqualified audtt opinion. Financial management 27. Adequate contrels wera not In place In ensuring that recorde are properly cafeguerded ‘and monthly reconciliations and reporting were credible and reliable as material nrisstatements were identified in the annual financial statements, which were sulasequently corrected, DYadiboe- Gare ww Pietermaritzburg 30 November 2048 ro le pe enc