The Free State cooperative governance and traditional affairs (Cogta) department will intensify efforts to support municipalities in the province in order to ensure that they improve their financial management systems and work towards attaining clean audits.
The head of department for Cogta, Mokete Duma, said his department together with the provincial treasury and other strategic partners will continue to advise and support municipalities so that they can progress towards improved audit opinions.
Duma said this following the release of audit results for municipalities across the country by Auditor General (AG) Kimi Makwetu on Wednesday which indicated that none of the municipalities in the province achieved a clean audit but maintained a steady improvement for a second consecutive year on their audit outcomes for the 2012/13 financial year.
The province has one metropolitan municipality, four district municipalities, 19 local municipalities and three municipal entities.
“We will continue to support municipalities towards better performance and overall improved financial management and related aspects towards clean audits,” said Duma.
According to the AG, Nala municipality’s financial statements were received too late for inclusion in the general report; meaning only 26 municipalities s were audited.
Of the 26 auditees, 23 entities or 88 percent submitted their financial statements for the 2012/13 financial year within the prescribed timelines. The AG said the financial statements and annual performance reports submitted for audit purposes by the entities contained material misstatements, thereby compromising their chances of achieving clean audits.
Maluti-a-Phofung Water made a significant improvement on its audit outcome after it improved from a disclaimer to an unqualified opinion.
Audit findings for electricity reseller in Mangaung Metropolitan Municipality, Centlec, and the Mohokare and Kopanong municipalities improved from disclaimers to qualified opinions.
“These improvements in audit outcomes can be attributed to the mayors enhancing oversight and management responding timeously,” concluded the AG.
A qualified audit opinion is issued by auditors when the financial statements of the audited entity contain material misstatements in specific amounts, or there is insufficient evidence to conclude that specific amounts included in the financial statements are not materially misstated.
A disclaimer is issued when the financial statements of the audited entity are so materially defective or inadequate that the auditor is unable to and refuses to express an opinion on the statements.
Duma attributed the slow improvement in the audit opinions of some of the municipalities mainly to ineffective financial management seen in unresolved and recurring unauthorised, irregular, fruitless and wasteful expenditure and non-compliance with legislation and regulations, especially those relating to supply chain management.
The overall total expenditure for the Free State auditees amounted to R15.7 billion for the 2012/13 financial period compared to R17.3 billion the previous year.
The amount was made up of R3.3 billion which went into paying salaries, R10.2 billion for goods and services and R2.2 billion for capital expenditure. Mangaung metro accounted for 22 percent of the total expenditure.
“As a result of the poor control environments, the quality of financial information submitted for audit remained poor despite an investment in consultants of R114 million made by the auditees and Cogta (which contributed R36 million),” noted the AG.
Overall, there was a reduction in irregular expenditure reported to R1.060 billion compared to R1.193 billion in the prior year.
The AG also noted that there was an improvement in identifying irregular expenditure as a result of better detection processes being implemented by municipalities. He however emphasised that more effort should directed towards the prevention of irregular expenditure.
Irregular expenditure refers to expenses incurred without complying with applicable laws and regulations.
Nationally, out of the 319 audits completed, 22 municipalities and eight municipal entities achieved clean audits.