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REPORT OF THE AUDITOR. GENERAL TO THE KWAZULU-NATAL PROVINCIAL LEGISLATURE AND THE ‘COUNCIL ON MAPHUMULO MUNICIPALITY REPORT ON THE FINANCIAL STATEMENTS Introduction I have audited the accompanying financial statements of the Maphumule Municipality, which ‘samprise the statement of finial positon as al 20 June 2011, and the statement of financial Performance, statament of changes in net assets and cash flaw stalement forthe year then ended, 3 summary of sign leant accounting poles and other explanatory information, asset out or pages 2410 0% ‘Accounting officer's responsibilty for the financial statements 2. The accounting officar is rasponsibie for the preparation and far presentation ofthe nancial statements in accordance withthe South Atioan Standards of Generaly Recngrised Accounting Pracice (SA Standards of GRAP} and the requirements ol the Local Gavemment: Municipal Finance Management Act of South Afica, 2003 (Act No. 53 of 2008) (MFA) andthe Divsion of Revenue Act of South Afica, 2010 (Act No.1 of 2040) (GORA}, and for sun intemal conlol aie management dtarminas necessary fo enable the preparation of financial stalements thet ere free rorn matenl -misstatornont, whothar due to aud or error, Audltor-Gonara's responsibility 3. As requited by section 188 ofthe Constiition ofthe Republic af Sauth Afica, 1896 (Act Na. 108 of 1806), section 4 of the Public Audet of South Africa, 2004 (Act Ne. 25 at 2004) (PAV) and section 426(3) of he MFMA, my responsibility isto express 2n opinion an the fnaneial statements based on sy aut 4, J oondueted my audit in accordance with Intemational Standards an Auelting and General Notion No. 1117 of 2019 issued in Governmer Gazette No. 33872 of 15 December 2010. Those staridards require that | comply ith ethical sequiramans and plan ard perform tho auaito obtain reesonabe surance abou! whether the financial statements are free fiom malarial misstatomert 5. An aust involves performing procedures to obtain audit evidenoe about the amounts an disclosures inthe nancial statements. The procedures colactod dapend on the aucitor's judgement, including the assessment ofthe risks of material misstatement of te finan Staternents, whether due to fraud or error. In making those risk assessments, fia autor cansigers Intomal contrat relevant to the municipaliy’s preparation and fair presentation of the financial statements in ordor to design ausit procedures that are appropriate in tha ertumstances, butinct for the purpose of expressing an opinion on tho effectiveness of the ensty’s intemal eartol. An audit alsa includes evaluating the approprieteness of accounting polices used and the reasonableness bf accounting estimates made by inanagemert, as well 23 evaluating the overall presentation ofthe nancial statements 66. [believe thatthe auelt evidence | have abtained is sufficient and apprepriate la prove @ basis for my auc opinion. a Opinion 1 my opinion, the financial statorents present fairy, n all matetial respects, the financial nostion ef the Mfaphurnuls: Municipality as at 39 June 2011 and its financial performance and its cash flows for the year than envied in accordance with SA Standards af CRAP snd the requirements of the MN and DORA. Emphasis of mattors 8, draw attention ta the matters below: My opinion Is nol modified 'n resect of thace matters: lrrogutar expenditure 9. As disclosed in note 06 ta the fnancial statements, iragular expenditure amounting to R171 milion ‘yas incurred. 38 a result of conacts awarded fo supaliere which contiavaned Hunicipal Supply Chain Management Regulations (GNR 868 of 30 May 2005) (Municipal SCM Regulations) Unauthorised expenditare 10.8 disclosed in note 37 tothe financial statements, the municipal ‘ncuired unauthorised ‘expenditure of 812 milion due to funds expended for purposes which are notin accardance vith the voto. Addi nal matter 11, | cra sllention to the matters below. My opinion is not most in respect of tase matters: Material nconsistencles In other Information included in the annul report 412. | have not obtained the other infermation included in the annual epait far my review and have not been able to identfy any material inconsistencies with the financial statements. Unaudited supplementary schedules 18. The supplementary infermatian set out on pages xx to»: do nal form part ofthe fnancal statements 1nd is presented as adeliional information. | hava not auted these schedules and eccordingly, do not express an opinion thereon, REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS 14, In accordance with tha PAA and in terns of General notice No. 1141 af 2070, issued in Government Gazette No. 39872 of 16 December 2010. include below my findings onthe annul perormane report as sat out an pages xx to xx and material nan-camplanos wh I and ragulatons applicable te the muniipalty Predetermined objectives 16. There were no material findings on the annual performance report. EG i ‘hands tante ‘Compliance with laws and regulations ‘Annual financial statements and performance report 16 The faancial statomonts submitted for auciting were not arepared in all material respects in ‘ovordance with the requitamenis of secton 122(1i(3} of he MFMA, Material misstatements in fospoct of racavables and disclosure notes were ienliied by the auditors and subsequently corrected resulting in dhe financial stalemants receiving an unqualifed osinien, ‘Audit committee 17. The performance aust committee or snother commites ftnetoning as the ve-formence audt committee sid not perforn the following as required by Municipal Planning and Performance Management Regulation 14 + review the quarterly reaorts ofthe internal aucitors on their audits ofthe perfarmance oasuraments ofthe municipality, + revieer the munisipalty’s performance management system and make recommerdations in this regard to the coun ofthe municipality + submit an auultors report to the council regarsing the performance management system at least twice during the financtal yea, Procurement and contract management 18, Sufficiont appropriate audi evidence could not be obtained that awards were made to suppliers based on preference points thal were allocated and calculated in accordance with the requirements ha Preterenlial Pracureraent Policy Framewerk Act. 2000 (Act No. 6 of 2000} and ts eguiations 19. Sufficient appropriate aust evidence could not he obtained that goods and eervices afa transaction valve above R200 000 were procured by means of invting compelve bids as per te requirements ‘ofthe Municipal SCM Regulations 19(a) and 3601) 20, Awaids were made to suppers who dil nat submits desteration on thelr employment by the state forthel relationship fo a person employed by the state 3 por the raguirerents of the Municipal SCM Regulation 1346}. 21. Final awards were nat always made by an adjudicerion commitias vuhich was constituted of atleast fur senior managers of Pre municipalty as per the requirernents otha Muncipal SCM Regulation 2902} Expenditure management 22. The accountng officer did nat take reasonable steps ta prevent unautharised expenditure and Ireagular exper lira, 28 required By sertion 62(1}() ofthe MEM, | aes pve le e's dé Ee: a i g INTERNAL CONTROL 23. In accordance with the PAA andin lems of General antice No. 1111 of 2010 iesuau in Gavaroment Gazette No. 33872 of 15 December 2010 | cansidared internal contol relevant to my audi. but Not forthe purpose of expressing an opinion onthe effectivencss of interial etal, The matters reported below are limited to the signiftcant defcieneies that resuted in the ndings on ea mpanae vats fs ard regulations, Leadership 24, The accounling officer did nat exercise oversight responsiblity ever monthly financial reporting, compiance with laws and regulaliuns and monitor the adherence tothe Municipal SCM Regulations Financial and performance management 26. Tha chief nancial officer did not implement effective controls ta ensure thatthe fancial statements subrrilod to audit were thee af material misstatements, Governance 2. The audit cammittee did aot promote accountability and service delvary through evaluating ‘and monitoring responses to eks and providing oversight aver the effectiveness ofthe interoal ‘contel envicenman, inluding financial and performance reparling and compliance wit law ard rogulatins. OTHER REPORTS. Investigations 27. Two forensic investigations have boon inated based on the allegtions of possible regulary in {lation lo nsi-auherence te Munisipal SCM Regulations. Those iwvatigations were stl ongoing at the reporting date Pietermaritzburg 30 Nevember 201 EE : dina