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Report of the auditor-general to the Limpopo provincial legislature and the council on Thulamela Local Municipality Report on the financial statements Introduction 1. [have audited the lrancial slatements of the Thulamela Lecal Municipalty set out on ages ..ta., which comprise the statement of nancial position as at 30 June 2075, the statement of financial perfomance, statement of changes in nel assals, cash fon Statement and the statement of comparison of budge! information with actual information for he year ten ended, ae well gs the nates, comprising a summary of significant accounting pclcies and other explanatory information, Accounting officer's responsibility for the financial statements 2. The accounting officer is responsible forthe proparation arid tar presentation of these financal statements in accordance with South African Standards of Generally Recognised Accounting Practice (SA slandards of GRAP) and the requirements of the Municipal Finance Management Act of South Arca, 2003 [Act No. 56 of 2003} (MFMA} and the Division of Revenuo Act of South Alrica, 2074 (Act No. 10 of 2014) (DORA), and! for such intemal control as the accounting officer delermines 's necessary to enable the preparation of financia! statements that are fre from material misstatement, whether ‘Sua to fraud or error. Auditor-general’s responsibi 3. My responsibilty s to express an csinion on these financial statements based on my judi. | conductes my audit in accordance with International Standards an Auciting Those standards require that | comply wth ethical requirements, and plan and perform the audit io oblain reasonable ascuranes about whether the financial statements are free from material misstatement. 4. An aueit involves performing procedures to ablain aur evidence about the amounts and disclosures inthe financial slalements. The procedures selected depend on ta auditors judgement, incivding the assassment of the risks ef matoral miestatement of the financia! statements, whether due to fraud or error, In making those risk assessments, tne aucitor considers internal control relevant ta the municipality's preparation and feir presentation of tha financial statements in ordar to design audit Procedures that are appropriate in the circumstances, bul not fer the purpose of ‘Pxpressing an opinion on the effectiveness of the municipality's internal contro. An audit also includes evaluating the appropriateness of accounting policies used anc the reasonableness of accounting estimates nace ty management, 28 well as evalucting the verall presentation of the financial statements, 5. [boliove thal the eurit evidence I have obiained is sufficient and azpropriate to provide a basis for my aurit pinion. Opinion 6. In my opinion, the financial statement prasont fall, In eli malarial respects, the financial pasticn of the Thulamela Local Nunicpaliy @s at 30 June 2019 and ils ‘inancial performance and cash flaws far tha year then ended, in accardance with SA standards of GRAP ane the requirernents of the FMA and DRA, Emphasis of matter 7. draw attertion to the matters below. My opinion is no! modified in respec of these matters Significant uncertainties 8. With reference to note 32 to the financal statements, he mun eipaly is the defendant in variaus lavsuils and pending legal cases from individuals and companias. The municipality is o2pasing the claims amounting to R11 700 218, Tae ulate oLtsome of tne matter osnnot presently be delormined and na pravisin for any lity thet may rosull has bean made in the finencial staternents, Imegulor excersditure: 8. As disclosed in pola 35 Io the nancial statements the municipaliy incurred regular ‘expenditure amounting to Rt 878 957 due ie the canravention af the municipality's procurement palcy. Fruitless and waste‘ul expenditure 10. As disclosed in note 24 fo the financial statements the municipality incurred futless and ‘wasteful expenditure amaunting to RA7B 898 cue to late payment to suppliers. Restatement of corresponding figures 11. As disclosed in nore 37 to the nancial stalaments, the comesponsing figures for 30 June 2018 have been restated as a esullof an wor ciscovered duting 2015 in the {nancial salements ofthe muricipalty t and forthe year ended, SO lure 2014, Material losses 12. As disclosod in roles 2 and 5 ta the financial statements, material oases lo he: amount of R11 692.094 were incurred as a resul of aesets and inventory wrte offs Additional matters 18, | draw attention to the matlers meters, clow. My opinion is not madified in respect af these Unaudited supplementary schedules 414, The supplementary Information sat aut or pagass xx to x dows: not form part ofthe Financial atetsments and is presented as addtional information. | have not aude this scnedule and, accarcingly, | do net express an opinion thereon Unaudited disclosure notes 15. In terms of section 125(2}() of the MFMA the municipality is required lo disclose particulars of non-compliance with tre MFMIA. Ths disclosure requirement did no for part ofthe audi of the financial statements and accordingly | do no: express an opicion thereon, Report on other legal and regulatory requirements 16. Inacconance with the Public Auelt Act of South Africa, 2004 (Act Na. 26 wf 2004) (AA) and the general netics issued in terms thereof, | have & responsibilty 10 report findings Cn the reported performance information agains predetermined ohjectives for selected develogmen| prorites presented in the annual performance rapar, eampliance with fogistaton and intemal eontrol. The objentive of my tests was to identiy fenoriasie findings as descrbed under each subleading, tl not io galher evidence to express ‘assurance on these matters. Accordingly, | 0 nol express an opinion ar conclusion en these matters Predetermined objectives 17. performed procedures lo oblain evidence ahout the usefulness end relabilty of the reported performance information forthe ‘ollawiny solaciad development prontios presenied in the anual pertormange resort of the municipality Tor the year anded 30 June 2075: + Community snd pubiic eatety on pages x to x » Planning and development on pages x lox » TachnigalfRaads services on pages x to x + Housing on pages x ta x 16. | evaluated tha reporied performance usefulness ans relabilty inormation against the overall criteria of 19. levalusted the usetuiness of the reported performance information to eetermine sshelhar il was prasenler in accordance wit the National Treasury's annual reperting principles and whether the reparied perlermance was consistent with the planned development proriy. | further performed tests to determine whether indicators and targets were well defined, veritable, speciti, measurable, time bound ang ielovanl, as roquirod by the National Treasury's Fremework for managing programme periermance Information (FMPPD. 20, | assessed the reliably ofthe reported performance information te determine whathar i ‘was vale, acourate and compete, 21. The materal fincings in rescect ofthe selected development wiiurly are ws follows: ‘Community and public safety Usefulness of reported performance information 22. Performance indicators should ba well detnes by having clear defiisens eo that dats ‘can be clected consistently and is easy lo understand and use, as requires by the FMPPI A lalal of 21% of the indicators were rot well defined. This was because management did nat achora to the requirements af the FMPPI du lo a lack of technical Indicator descriptions, Reliabilily of reported performance information 23. The FMPPI requires aucdtees to have appropriata systems to collect. collate, verity and store performance infaralicn to ensure valid, accurate anc complete reporting of actual athievemerts against planned objectives, indicators and targets, The reported performance information was not valid, accurate and complete when compared to the Source information or evidence provited. This was due ta‘ lack of frequent review of the valiiy of reported achievernents agains! source cacumentatian. Additional matters 24, I draw attention fa tne folowing matters. My conclusion is nol mocifed in respect of these matters: Achievement of planned targets 25, Reterto the annual performance report on pages x o x fr information an ‘achievement of the pianned largels ‘cr the yesr. Ths information should be considered inthe context of the matenal findings on the usefulness and reliabilty ot the reported performance infomation ler Ihe selected sevelopment priaity roparied in paragraphs 1 fo xe of this report Unaudited supplementary schedules 28. The supplementary infomation set oul on pages XX to XX does not form gartaf the ‘annual performanca report and is presented ag addiianal infermation, 'have not audited these schedules and, accerdingly, so not report thereon, Compliance with legislation 27. | performed procedures lo obtain evidenoe that the municipality had eamplied with spplvaie legislation regarding financial meters, financial management and alle related matters. My material finéings on compliance with specific msiters in key legislation, as set out in Ihe general notice issued In terms of the PAA, ara we follows; Fina ial statements, performance and annual reports. 28, ‘The financial statements submited for aucting were not prapard in all material respects in accordance with the requiramans of easton 122 of the MFMA. 29. Material misstaroments of non-current assets, iabiliies, cantingent labiltis, cconimilments, receivables and expand ure ientitied ay the auditars in the submited financial slalaments were subsequently corraciad, euting in the nancial statements receiving an unqualified audit opinion, Procurement and contract management ‘Anards were made to providers whose directors! p.incipal shareholders are in the service of ether stale institutions, in corttavention of WEWA 112{j} and SCM regulation 44, Similar awards vere idenilied in te prior yoar and ne effective steps were taken to grevent or combet the abuse of the Supply Chain Manggement (SCM) prowess in ‘accordance wih SCM regulation 38(1), 31. Awards were made fo providers who are in the sorvieo ef the municipality or whose tireclors princizal shareho'cers are in the service of the municipality in vontravention of seclion 112i of he MFMA and SCM regulalions 44, Furthermore, ce provider ‘led 10 Ueclare that ne/she was in the service ofthe muricipalily, as required by SCM regulation +3 32. Sufficient appropriate audit evidence could nal be ablained that contracts and {quotations were awarded only to bidders who submited a deciaration on whether they Fe emsioyad by the state or connected to any person amployed by the stata, as requited by SCM regulation 13(¢), Expenditure management 38, Reasonable steps were not taken ta oravont iegular expenditure and fruitless and ‘wasteful expencitute, as required by section 62{1){¢) of the MENA, Internal control 96. | considered internal control relevant to my aucitof the financial statements, annual verlormenae report and comaliance wih legislation. The matters reported beleww are limited tothe significant internal contgol deficiencies that resulted inthe findings on the ‘annual performanee report and the findings cn compliance: wilh legislation included in this repent Leadership 36. The accounting officer cid not adoquately review the report on predetermined objectives Prior to ils submission for audit as the porformance measures were not well defines and reliable Financial and performance management 36. The municipalty cid rot develop an effective systam which verified the accuracy. completeness ard rsliailty of the reporled performance coniained in te annual performance repo. 37. The financial statements were nal adecuately reviewed for accuracy and completeness by the accounling officer. Govemance 98. Those changed with governance cid nat provide siéequate oversight aver the ‘offastiveness of the inlaina’ control environment, inclicing financial and performance resorting and connslarice with laws and regulations Cie -Geneert Polokwane 30 Noventber 2015 hae