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Report of the auditor-general to the Western Cape Provincial Parllament and the council on the Stellenbosch Municipality Report on the financial statements Infroduction 11. have audited the financlal etatsments ofthe Stellenbosch Municipalty sel out on pages 5 to 12, which comprise the elatement of financial position as at 30 Juna 2016, ths stalomsnt of financial performance, statement of changes In nal aesets, cash flaw statement and statament of comparison of budget and actual amounts for he year then. ‘ended, as well as the notes, comprising @ summary of significant accounting polices and other explanatory information Accounting officer's responsibility for the financial stalements 2. The accounting officers responsibi forthe preparation and fale presentation of these financial statemants in acoardanca with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Municipal Finance Management Act of South Africa, 2003 (Act No, 58 of 2003) (MFMA) and the Dkision of Revenue Act of South Africa, 2016 (Act No. 1 of 2018) (DORA), and for such internal control as tha accounling officer determines is necessary to enable tha ‘praperation of financial statements that ate free fiom material missistement, whether due to fraud or error. Auditor-general’s responsibility 3. My responsibilty is lo express an opinion on these financial statements based on my audit | conducted my audi in accordance with Intemational Standards on Auditing. ‘Those etandards require that | comply with ethical roquirements, and plan and pefarm the audit obtaln reasonsble assurance about whether the financial statements ats free from material misstatement 4, An audit involves performing pracedures to abtain audit avidemcs about he amounts and disclosures inthe financial siatements, The pracedures selected depend on the auditors judgement, including the aeseesmment ofthe riske of material misstatement of the financial statements, whether dua ta fraud or arer. In making those risk assessments, the auditor considers intemal control relevant tothe municipality's preparation and fair presertefion ofthe financial statements in order lo deslgn audit procedures that are appropriaia in the circumstances. but not for tha purpote of ‘expressing an opinion on the effectiveness of the municipality's internal contol, An aut also includas evaiuating ths eppropriateness of accounting policies used and the reasonebleness of accounting ssiimates made by management, a6 well as evaluating the overall presentation of the financial stalements. 5. [believe that the audit evidence | have obtained is sufficient and appropriate to provide 1 basis for my aut opinion. Opinion 6. In my opinion, the financial statements prasent faty, in all materiel respects, the financial position of the Stellenbosch Municipality 28 at 30 June 2018 and its fnancial performance and cash flows for the year then envied, in accordance with SA Standards of GRAP and the requirements of the MFMA and DoRA, Emphasis of matters 7. draw altention to the matters below. My opinion ls not maslifad in respect of these matters, Significant uncertainties 8. With reference lo nots 81 to the financial statsrents, the muricipally Is at ik regarding the payment of claims relating to contractual clgputas from third parties. The amaunts in this regard were unceriain at year-end and no provision for any lability that may result has bean made In the fhancial statements, Changes in accounting policy 8. As disclosed in note $9 ta the financial statements, the municipality changed its ‘accounting policy with respect to the treatment of land and buildings and investment property by applying Directive 11, Changes in measurement bases following the intial adoption of Standards of GRAP es iseuad by the Accounting Standards Board. Land ‘and buildings and investment properties were inflaly mesauted on the revaluation ‘modal and fai value model, reapectvely. The cost model was applled retrospectively on these assets during the 2015-18 financial year. Restatement of corresponding figures 1D. As disclosed in note 60 ta the financial statemenls, the corresponding figures far 30 June 2045 have been restated asa result ol errs discovered during the 2015-16 financial year Inthe financial statements of the municipality at, and forthe year ended, 30 June 2016. Material mpaiments 11. As disclosed in notes 4 and 740 the fnancie statements, respectively, the municipality has provdedor the impairment of receivables fom exchange traneactions amounting (a. R51,8 milion (2014-16; R62,9 milion) and the impairment of recalvablas fram non-exchange transactions amounting to R94,4 million (201418: R72,9 mlon). Addifional matter 12, {draw attention to the mattar below. My opinion i not motified in respect ofthis matt, Unaudited disclosure notes 18, In terms of section 125(2)@) of the MFMA, tha municipalty is required to disclose particulars of non-compliance with the MFMA. This dleclosure requirement dd not form part of the aucit of the financial siatsmenis and, accordingly, ldo not express an opinion thereon, 14, In accordance with tha Public Audit Act of South Africa, 2004 (Act No. 26 of 2004) (PAA) ‘and the gensral notice Issued In teers there, Ihave & responsibilty to report ndings ‘on the reported perfonnance information agalnst predeterminad objectives for selected objectives presented In the annual porformenca report, complance with legisiation and intemal control. The objactive of my tests was to Kentty reportable findings a <esribad under each subheading, but nat to gather evidence lo express asurange on thase matters. Accordingly | do not express an opinion or conclusion en thase mattors. edetermined oblectives 15. | performed procedures o oblain avidence about the usefulness and reliability af the ‘reported performance information forthe folawing selacted objective presented in the anrwel performance report of the municipality for the year endad 30 June 2076: = Objective 4: cigniied living, an pages 190 to 197 16. | evaluated the usefuiness of the reported performance information lo determine ‘whether Il was consistant wih the planned objective. | further pertarmed tests 0 determine whether indicators and laryats were well defined, verifiable, specific, ‘meaaurable, time baund and relevant, as required by the National Treasurys Framework for Managing Programme Performance Information. 17. | assessed the rellallity ofthe reported performance information to determina whather It wae valid, accurate and complete, 18. I did not Idantily any materia findings on the usefulness and reiahilty of te reported Performance information for tha selected objective, Addifional matters 1 Atthough | identifed no moterlet ndings on the uselulnoss and reliability of the repartad performance information for tha selactad objective, | draw attentln tothe fllowing rmatlens Achievement of planned targets 20, Refer la the annual performance report on page 190 for information on the achievement of the planned targets forthe your. Adjustment of material misstatements 21. Lidentitied material misstatements in the annual pertormance repert submitted far auditing. These material misetalernents were an the reporlad performance information of objective 4: dignified lving. As management subsequently cortected tha misstatements, did not Identify materal finalnge on the usefulness and reliability of the reported performance information. Compliance with lealslation 22. | performed procedurss to obtain evidence that tha municipatily hed complied with applicable lagislation regarding financial matters, nancial management and other related matters. | did not identity any instances of material non-complanca with specie matters in key legislation, a8 set out in lhe general netics iesued in terme of the PAA. Infernal control 228. | considered internal contra ralevant to my aut ofthe financial statements, annual Performance report and compliance with legisiaton. I didnot idenify any significant <efciencies in internal contro, Other reports 24, | draw attention ta the folewing engayamanis thal could potentially have an impact on the municipality's financial, performance and compliance related matters. My opinion is not maaified in respect ofthese engagements, Investigations 25, Various investigations n egpect of alegatans relating fo procurement repute, the misconduct of employaes and fraudulent activites wors conducted by the municipal At the date of the aucit report, these matters were sin progress. Qadir Cape Town 30 November 2016 Auch bold pbc conience