The Chris Hani District Municipality (CHDM) which has been receiving a qualified audit report for the past number of years, has now regressed to a disclaimer of opinion with irregular expenditure up to R25.4m for the year ending June 2019.
The audit report indicates the auditor general (AG) was unable to obtain sufficient and appropriate audit evidence to provide a basis for an audit opinion on consolidated and separate financial statements.
AG deputy business executive Tracey de Wet, who presented the report during an ordinary council meeting last week, said CHDM did not have adequate systems to account for irregular expenditure identified and disclosed as required in the municipal finance management act (MFMA).
“Differences were identified when performing a recalculation between the amounts disclosed in the consolidated and separate financial statements and supporting documentation submitted for audit. Consequently, irregular expenditure as disclosed in the consolidated and separate financial statement was overstated by R25.4m.”
CHDM accumulated fruitless and wasteful expenditure to the tune of R4m from previous years, while R10.9m was incurred for the 2018/19 financial year. On the other hand, unauthorised expenditure for previous years amounted to R616m.
De Wet said irregular, unauthorised, fruitless and wasteful expenditure had not been investigated by council.
The basis for the disclaimer of opinion was derived from various financial aspects of the district municipality, including land that was incorrectly classified as buildings, resulting in it being understated by R26.3m and buildings overstated by the same amount.
“I was unable to obtain sufficient and appropriate audit evidence for some of the items in property, plant and equipment (PPE) due to the poor state of accounting records. Moveable assets of R13.8m and ‘work in progress’ of R27.2m recorded in the consolidated separate financial statements did not agree with the movable assets and work in progress in the asset register. There were no supporting documents submitted.
“Furthermore, I was unable to obtain sufficient audit evidence for the adjustments made to the comparative figure for work in progress amounting to R371.3m, due to the poor status of accounting records,” said De Wet.
She indicated that under revenue from exchange transactions, revenue was billed using incorrect rates, incorrect consumption of units were used and some customers were not billed throughout the year under review.
CHDM mayor Wongama Gela said the municipality had been receiving an unqualified audit opinion for years, and hoped the new result was not the beginning of years to come of disclaimer of opinion.
ANC councillor Madoda Papiyana, speaking in isiXhosa, requested his fellow councilors to do the same, before expressing his disappointment in the AG’s report and recommending that a day be set aside when the report would be discussed extensively.
ANC councillor Siyabulela Zangqa said if interns ran the municipality they probably would have received a better audit outcome.
“This report is utterly disappointing and embarrassing to say the least, because we are in a dire situation that needs urgent attention. We have two choices, continue doing things they way we are and face condemnation from the public, or change our ways, do things by the book and by the prescripts of the law and get an unqualified audit outcome which is what we should strive for anyway.”
Zangqa said change would begin by taking harsh action against all transgressors and that not having a CFO was not an excuse because someone acted in the position and had full powers.
“All matters concerning irregular, fruitless and wasteful expenditure need to be investigated. The public is aware of what the government’s duty is, therefore we cannot treat them as stupid people but as rates and services payers who deserve better. As leaders we need to do some instrospection, have a conscience and do what is right with the government’s purse.”
UDM councillor Sizwe Tame said the ruling party should be ashamed of themselves and that if there was no consequence management, the municipality would receive the same outcome for the current financial year.