kwazulu-natal - agsa 2012-13/2012_13_mfma_kwazulu… · gener epor on the audit outcomes of...

KwaZulu-Natal

General reporton the audit outcomes of local government

MFMA 2012-13

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Our reputation promise/mission

“The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.”

KwaZulu-Natal MFMA 2012-13

The information and insights

presented in my office’s flagship

publication are aimed at

empowering oversight structures,

local government and provincial

leaders to focus on those issues

that will result in reliable financial

statements, credible reporting on

service delivery and compliance with

legislation.

This publication also captures the

commitments that leaders have made

to improve audit outcomes.

Our responsibility extends to citizens,

who trust us to make a contribution

towards a better South Africa.

Kimi Makwetu

Auditor-General

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General report on the audit outcomes of KwaZulu-Natal local government for 2012-13

Overview

1 Message from the Auditor-General Foreword Page 9

3 4% of auditees received disclaimed opinions and 17% received qualified opinions on their financial statements Page 16

5 Material non-compliance with legislation by 83% of auditees Page 18

2 Nine municipalities improve their audit outcomes; six municipalities and two entities regress Page 16

4 Reduction in auditees with findings on their annual performance reports Page 17

6 Continued high levels of unauthorised, irregular as well as fruitless and wasteful expenditure Page 19

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10 Continued reliance on consultants and ineffective management of this resource Page 24

11 Confidentiality, integrity and availability of information remain at risk Page 26

9 Vacancies in municipal manager, chief financial officer and head of supply chain management positions. Appointed officials lack minimum competencies Page 23

8 Uncompetitive and unfair procurement processes, inadequate contract management and missing tender documentation Page 21

7 58% of auditees avoid qualified opinions by correcting material misstatements in financial statements identified during audit process Page 20

13 Regression in the drivers of internal control Page 28

12 Significant risks that affect financial health of local government remain Page 27

15 Slow progress made by political and administrative leadership in addressing the root causes for the poor audit outcomes Page 30

16 Assurances provided by key role players; their initiatives and impact on audit outcomes Page 31

17 The provision of water and sanitation services and road infrastructure should receive urgent attention Page 35

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Contents

FOrewOrd 9

Our audit and repOrting prOcess 14

Overview OF audit OutcOmes and key recOmmendatiOns FOr imprOvements (Figure 1) 15

status OF the three areas that we audit and repOrt On 16

six risk areas shOuld cOntinue tO receive attentiOn 20

signiFicant deFiciencies in internal cOntrOls and rOOt causes shOuld be addressed tO imprOve audit OutcOmes 28

the level OF assurance prOvided by key rOle players needs tO be imprOved 31

the initiatives and cOmmitments OF all rOle players shOuld cOntinue tO have a pOsitive impact On Future audit OutcOmes 34

the prOvisiOn OF water and sanitatiOn services and rOad inFrastructure shOuld receive urgent attentiOn 35

audit OutcOmes OF individual municipalities 37

ethekwini municipality 41

eThekwini Municipality and its entities 44

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amajuba district 47

Amajuba District Municipality 50

Dannhauser Municipality 54

eMadlangeni Municipality 58

Newcastle Municipality 62

uThukela Water (Pty) LTD 65

harry gwala district 67

Harry Gwala District Municipality 70

Greater Kokstad Municipality 74

Ingwe Municipality 78

Kwa Sani Municipality 82

Ubuhlebezwe Municipality 86

uMzimkhulu Municipality 90

ilembe district 91

Ilembe District Municipality and its entity 94

KwaDukuza Municipality 98

Mandeni Municipality 102

Maphumulo Municipality 106

Ndwedwe Municipality 110

ugu district 111

Ugu District Municipality and its entity 114

Ezinqoleni Municipality 118

Hibiscus Coast Municipality and its entity 122

Umdoni Municipality 126

Umuziwabantu Municipality 130

Umzumbe Municipality 134

Vulamehlo Municipality 138

umgungundlOvu district 139

Umgungundlovu District Municipality 142

Impendle Municipality 146

Mkhambathini Municipality 150

Mpofana Municipality 154

Msunduzi Municipality 158

Richmond Municipality 162

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uMngeni Municipality 166

uMshwathi Municipality 170

umkhanyakhude district 171

Umkhanyakude District Municipality and its entity 174

Hlabisa Municipality 178

Jozini Municipality 182

Mtubatuba Municipality 186

The Big Five False Bay Municipality 190

uMhlabuyalingana Municipality 194

umzinyathi district 195

uMzinyathi District Municipality 198

Endumeni Municipality 202

Msinga Municipality 206

Nquthu Municipality 210

Umvoti Municipality 214

uthukela district 215

uThukela District Municipality 218

eMnambithi/Ladysmith Municipality 222

Imbabazane Municipality 226

Indaka Municipality 230

Okhahlamba Municipality 234

Umtshezi Municipality 238

uthungulu district 239

UThungulu District Municipality and its entities 242

Mfolozi Municipality 246

Mthonjaneni Municipality 250

Nkandla Municipality 254

Ntambanana Municipality 258

uMhlathuze Municipality 262

Umlalazi Municipality 266

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zululand district 267

Zululand District Municipality 270

Abaqulusi Municipality 274

eDumbe Municipality 278

Nongoma Municipality 282

Ulundi Municipality 286

uPhongolo Municipality 290

annexures 291

Annexure 1 Auditees’ audit outcomes, areas qualified, findings on predetermined objectives, non-compliance and specific focus areas 292

Annexure 2 Assessment of auditees’ key controls at the time of the audit 296

Annexure 3 Comparison of five-year audit outcome 299

glOssary OF terms 303

Glossary of key terminology used in this report 304

Acronyms and abbreviations 310

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municipality Msinga MunicipalityNtambanana MunicipalityOkhahlamba MunicipalityUbuhlebezwe MunicipalityuMhlatuze MunicipalityuMzimkhulu MunicipalityUthungulu District Municipality

municipal entityDurban Marine Theme Park (Pty) LtdSafe CityUthungulu Financing PartnershipUthungulu House Development Trust

KWAZULU-NATAL clean audits 2012-13

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FOREWORD

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I hereby present to the KwaZulu-Natal legislature my 2012-13 general report on local government audit outcomes. The outcomes reflect positive and steady progress by local government as 19 auditees improved their results. These included seven auditees (10%) that improved their results by obtaining clean audits and four auditees (5%) that sustained clean audits. The improved outcomes are attributed to refined processes and key internal controls, along with dedicated and disciplined efforts by the leadership and management at these auditees to achieve excellence in all financial, compliance and service delivery reporting. The audit opinions of eight auditees regressed, which resulted in a net improvement in 11 opinions.Forty-six auditees (64%) received unqualified opinions with findings on other matters, 12 (17%) had qualified opinions on their financial statements, and another three (4%) received disclaimer of audit opinions. Of the 12 auditees that had qualified audit opinions, five had improved from adverse/disclaimer of opinions in the previous year, two had repeat qualifications and another five had regressed. Audit qualifications on financial statements relate predominantly to material misstatements in non-current assets, current assets and unauthorised, irregular and fruitless and wasteful expenditure.The quality of service delivery reporting by auditees improved, with 32 auditees (46%) having no findings compared to 23 auditees (33%) in the previous year. This is indicative of focused attention and quality checks being rigorously and routinely performed by management, oversight and leadership to ensure that performance reporting is useful and reliable.Material compliance findings relate primarily to the low

FOREWORD

quality of financial statements that were submitted for auditing. Material errors were evident at 57 auditees (79%), with 42 (58%) correcting these errors during the audit. The leadership and management should institutionalise monthly and in-year monitoring practices to reduce the level of compliance findings in this area. In addition, the preparation of reliable and credible financial and performance information depends on the consistent availability of staff equipped with the required skills. Focused intervention by provincial leadership is needed to address skills development, especially through partnerships with professional accounting bodies and institutions of higher learning such as the partnership between the provincial treasury and the Thuthuka Bursary Fund.The audit results on supply chain management are stagnant, with 76% of the auditees having reported findings. Findings on competitive bidding, awards to employees in the service of the state and inadequate contract management are most dominant. Human resource management is a focus area in which the overall rate of findings has increased to 60% from 31% in the previous year. Vacancies in key positions at 29 auditees (40%), compared to 12 auditees (18%) in the previous year, is a major root cause that restricted further improvements. The vacancies are driven largely by expiring contracts not being renewed, better career prospects, political interference and poor succession planning. Information technology governance controls and security management have deteriorated as 41 auditees (57%) have not given adequate attention to these aspects. Financial health has also regressed, with findings on cash flow management, underspending on capital budgets and

Kimi MakwetuAuditor-General

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conditional grants, as well as going concern problems.The key internal control drivers of leadership and governance need to be significantly improved. This is only possible if key role players in the assurance chain intensify the extent of their involvement in this process. The impact of sound key controls on audit outcomes can be illustrated by comparing municipalities that obtained clean audit opinions such as Ubhulebezwe, where the focus was on implementing key internal controls, to those that delivered unfavourable audit opinions such as Vulamehlo, where detracting attention from key internal controls resulted in deterioration. Leadership and oversight role players who expressly stated and acted on their commitment towards attaining clean audits contributed to positive outcomes by continuously monitoring progress on action plans, performing detailed reviews and reporting to council on the quality of financial statements and performance reports. They also requested assistance from cooperative governance and traditional affairs and the provincial treasury where vacancies and skills deficiencies were prevalent. In contrast, municipalities that received disclaimer of audit opinions displayed weaknesses in their key control environments. The basics of daily and monthly controls, as well as document management practices, were not in place.Political leadership structures are required to be more persuasive in their quest for better outcomes and to take ownership and accountability as custodians of public funds. The performance management systems should be designed and managed in a manner that enables leadership to implement consequence and disciplinary actions for defective performance. Management needs to be held accountable and be equipped with the tools of its trade to perform its duties beyond reproach. The continued use of consultants to compensate for the ineptitude of officials and vacancies in positions is not a sustainable practice, and should not be

promoted. This would require a concerted effort by all role players in government to address. In most instances, the audit committees and internal audit functions provide some assurance; however, the assurance they provide is driven by the implementation of their recommendations by the leadership, which needs more attention.Recognition is given to the coordinating departments in the province, namely provincial treasury and cooperative governance and traditional affairs for their support of municipalities and the positive influence they have had on the audit outcomes for 2012-13. To elevate these results sustainably, the committees of the legislature, the coordinating departments, the legislature and the office of the premier still need to amplify their oversight roles and forge best practices and relationships with municipalities and entities. Additionally, the collaboration between the municipal public accounts committees, speaker’s forums, the portfolio committee on local government, the South African Local Government Association, the Association of Public Accounts Committees and councils needs to be intensified. If the leadership, governance and coordinating structures set the right tone and honour all commitments decisively and vigorously, further improvements in outcomes are attainable.I wish to thank the audit teams from my office and the audit firms that assisted in the province for their diligent efforts towards fulfilling our constitutional mandate and the manner in which they

auditor-general pretoria july 2014


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SUMMARY OF AUDIT OUTCOMES AND KEY RECOMMENDATIONS FOR IMPROVEMENT


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Our audit and reporting process

We audit all municipalities and their municipal entities in the province, also called auditees in this report, so that we can report on

• the quality of their financial statements • annual performance reports • their compliance with legislation.

We also assess the root cause of any error or non-compliance, based on the internal control that had failed to prevent or detect it. This year we also audited key aspects of the provision of water and sanitation services and roads infrastructure by municipalities. We include these aspects in the following three types of reports:

• We report our findings, root causes and recommendations in management reports to the senior management and accounting officers or authorities of auditees, which are also shared with the mayors and audit committees.

• Our opinion on the financial statements, material findings on the performance report and non-compliance with legislation as well as significant deficiencies in internal controls are included in an audit report, which is published with the auditee’s annual report and dealt with by the municipal council.

• Annually we report on the audit outcomes of all auditees in a provincial general report (such as this one), in which we also analyse the root causes that need to be addressed to improve audit outcomes in the province. Before the general reports are published, we share the outcomes and root causes with the provincial leadership, the provincial legislature and key role players in national and provincial government.

Over the past few years, we have intensified our efforts to assist local government to improve its audit outcomes by identifying the key controls that should be in place at auditees; assessing these on a quarterly basis; and sharing the assessment with mayors, accounting officers and audit committees.

We further identified the following six key risk areas that need to be addressed to improve audit outcomes and financial and performance management, and we specifically audit these so that we can report on the status thereof: ■ quality of submitted financial statements ■ quality of annual performance reports ■ supply chain management ■ financial health ■ information technology controls ■ human resource management.

During the audit process, we work closely with the accounting officer, senior management, audit committee and internal audit unit, as they are key role players in providing assurance on the credibility of the auditees’ financial statements, performance report and compliance with legislation.

We also continuously strengthen our relationships with mayors, the premier, the provincial treasury, the provincial department of cooperative governance and traditional affairs (CoGTA) as well as the provincial legislature, as we are convinced that their involvement and oversight have played and will continue to play a crucial role in the performance of local government in the province. We share our messages on key controls, risk areas and root causes with them and obtain and monitor their commitments to implement initiatives that can improve audit outcomes.

Figure 1 that follows gives an overview of our message on the 2012-13 audit outcomes, which is a continuation of what we had reported and recommended in our last report on the audit outcomes of local government in the province. Please note the following about the figure and when reading the rest of the report:

• If municipalities have municipal entities under their control, the audit opinion on their financial statements is that of the consolidated financial statements.

• ‘With findings’ means findings on either the quality of the annual performance reports or non-compliance with legislation, or findings on both these aspects. Clean audits are achieved when the financial statements are unqualified and there are no findings on the quality of the annual performance reports or non-compliance with legislation.

• Movement of more than 5% is regarded as an improvement or a regression. Movement is depicted as follows:

Improved Stagnant or little progress Regressed

The rest of the section summarises the audit outcomes and our key recommendations for improvement. This summary is followed by the results of our audits at district level and per municipality. The report also includes three annexures that detail the audit outcomes and findings per auditee, the status of the drivers of internal controls at the auditees, and a five-year view of the audit outcomes. The glossary of terms included after the annexures defines the terminology used in this report.


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Overview of audit outcomes and key recommendations for improvements (Figure 1)


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Status of the three areas that we audit and report on

Audit outcomes have improved

There has been an overall improvement in the audit outcomes of local government. The financial statements of all 61 municipalities and 11 municipal entities were received by the cut-off date of 31 August 2013 and all audits were completed within the legislated deadline. One new municipal entity, the Sisonke Economic Development Agency, has been analysed for 2012-13. Significant aspects of the 2012-13 audit outcomes of the 72 auditees shown in figure 1 are listed below.

Seven municipalities and four municipal entities received unqualified audit opinions with no findings (clean audit).

Forty municipalities and six municipal entities received unqualified audit opinions with findings.

Eleven municipalities and one municipal entity received a qualified audit opinion.

Three municipalities received a disclaimer of audit opinion.

Nineteen municipalities improved their audit outcomes, six municipalities and two municipal entities regressed in audit outcomes and thirty-six municipalities and eight municipal entities retained the audit outcomes received in 2011-12. The metropolitan municipality again received a financially unqualified audit opinion with findings. One of ten district municipalities received a financially unqualified audit opinion with no findings, six were financially unqualified with findings, one received a qualified audit opinion and two received disclaimer of audit opinions. The audit opinions of three district municipalities improved, one regressed and six remained unchanged.

Of note is that 71% (5 of 7) and 67% (4 of 6) of municipalities and entities in the uMkhanyakude and Harry Gwala districts respectively, improved their audit opinions. These districts as well as Amajuba, Ilembe, uMzinyathi and Uthungulu had no regressions in audit outcomes from those received in the previous year. The highest number of regressions in audit opinions, 33% (3 of 9), was found in the Ugu district.

The quality of annual performance reports has

improved

Auditees are required to measure their service delivery against the performance indicators and targets set for each of their predetermined performance objectives and to report on this in their annual performance reports. We audit the annual performance reports to determine whether the information in these reports is useful and reliable. In the audit report, we reported findings from the audits that were material enough to be brought to the attention of the users of the annual performance report, including the community.

Figure 2: Status of quality of annual performance reports

54% (38)67% (46)

55% (38)

46% (32)33% (23)

45% (31)

2012-13 2011-12 2010-11

Figure 2 shows the number of auditees in the province with material findings in this regard over the past three years, including those auditees that did not prepare an annual performance report or submitted the report too late for auditing.


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The results over the year have improved by 13% from 33% (23 auditees) to 46% (32 auditees) for auditees that did not have findings on the quality of their annual performance reports. During the current year all auditees submitted their annual performance report for audit. This is an improvement from the previous year where three auditees had not submitted these reports. These were the uThukela District Municipality, the Abaqulusi Municipality and the Hibiscus Coast Development Agency. Although all annual performance reports were submitted, three auditees, the Mpofana Municipality, the Hlabisa Municipality and the Sisonke Economic Development Agency, did not provide theirs in good time. Late submission of the annual performance reports is primarily due to vacancies in key posts that are crucial to ensuring monitoring and reviews.

When compared to the 54% overall rate of auditees with findings, six of the 10 districts displayed findings of 60% and more on the quality of their annual performance reports. The district with the lowest incidence of findings was Uthungulu (29%), followed by Ilembe (33%), Umkhanyakude (43%) and uThukela (50%).The good practices in these districts that can be replicated in the poorer performing districts are the following:

• Diligent and amplified efforts by management to implement and monitor commitments made in quarterly stakeholder interactions.

• Early identification of challenges and quick appointment of consultants to assist with performance reporting.

• Maintaining portfolios of evidence to support reported targets, which are reviewed monthly and audited by the internal auditors.

• Reporting quarterly to the audit committee on performance that is reliably supported.

• Requesting support from CoGTA and provincial treasury to assist with guidance, systems, processes and training.

• Appointing skilled and competent officials to manage the process of recording, collation, monitoring and reporting of performance.

• Monitoring spending patterns to ensure that service delivery is on target and targets not achieved are clearly explained to oversight and leadership.

We measured the usefulness of the reported information against the criteria of presentation, consistency, relevance and measurability. The number of auditees with material findings in this regard has decreased by 12% since the previous year. The most common findings on usefulness were the following:

• Performance targets are not specific.

• Indicators/measures are not well defined.

• Measures taken to improve performance not disclosed in the annual performance report.

Findings on reliability relate to whether the reported information could be traced back to the source data or documentation and whether the reported information

was accurate, complete and valid when compared to the source. The number of auditees with material findings in this regard has increased by 17% since the previous year. The most common findings on reliability were the following:

• Reported performance information was not accurate.

• Reported performance information was not complete and valid.

We also reported the following performance-related matters in the audit reports:

• Twenty-one auditees (30%) had material findings of non-compliance with the legislation that regulates strategic planning, performance management and reporting. Fifteen of these auditees had new findings while six had repeat findings.

• Twelve auditees (17%) made amendments to the annual performance report submitted for auditing to correct material misstatements identified during the audit process. Seven auditees (10%) had no material findings only because they corrected all the misstatements we had identified during the audit. The continued reliance on the auditors to identify errors in the annual performance report is not a sustainable practice.

• Of the 49 auditees (70%) with reliable annual performance reports, the predetermined objective conclusion was either unqualified or qualified, and 67% did not achieve 20% or more of the planned targets they reported on. The non-achievement of targets was only measured against those audits where reported performance was valid, accurate and complete.

Some auditees appointed consultants to assist with the preparation of performance information. More detail in this regard is included in the section on the effective use of consultants.

The level of compliance with legislation has

improved

We annually audit and report on compliance with legislation applicable to financial matters, financial management and other related matters.

We focused on the following areas in our compliance audits: ■ material misstatements in the submitted annual financial statements ■ asset and liability management ■ audit committee ■ budget management ■ expenditure management ■ unauthorised, irregular as well as fruitless and wasteful expenditure ■ consequence management ■ internal audit ■ revenue management ■ strategic planning and performance management ■ annual financial statements and annual report ■ transfer of funds and conditional grants ■ procurement and contract management (in other words, supply chain management) ■ human resource management and compensation.


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In the audit report, we reported findings from the audits that were material enough to be brought to the attention of the council and the public.

Figure 3: Status of compliance with legislation

Figure 3 shows the number of auditees with material compliance findings over the past three years. We reported material findings on compliance with laws and regulations at 60 auditees (83%). There was an overall reduction in the number of auditees with material findings on compliance by 9% during the year. Four auditees (6%), Durban Marine Theme Park, Safe City, Uthungulu Financing Partnership and Uthungulu House Development Trust retained their status of no material compliance findings. Eight auditees (11%) addressed their previous year’s compliance findings, seven (10%) of which attained a clean audit in the current year. Two auditees (3%) - uMtshezi Municipality and ICC, Durban (Pty) Ltd - regressed from clean audits in 2011-12 to having findings. One new entity (1%), Sisonke Economic Development Agency, also had material findings. Fifty seven auditees (79%) are in the category of repeat findings that were not addressed since the previous year.

All of the municipalities and entities in five (50%) of the ten districts (excluding the eThekwini metro) had material compliance findings. Four districts (40%) had compliance findings at more than 60% of its auditees. The Uthungulu District was the only district that did not have material compliance findings at 56% of its auditees. Best practices that can be replicated from this district are the following:

Effective leadership oversight and governance structures at the district, who expressly stated their commitment towards attaining clean audits.

Officials adhere to policies and procedures that give effect to legislative compliance.

Leadership, both administrative and political, are sensitive to the need to ensure that rules of law are not transgressed,

Systems and programmes are in place to ensure that continuous professional training and development is in place.

There is a district and CFO forum to address challenges encountered. The internal audit and audit committees’ reports to council include

compliance with the relevant laws and regulations. Competent and dedicated personnel are responsible for compliance in

the form of a compliance or risk officer, or compliance is monitored in each department by the departmental head.

CoGTA and provincial treasury assistance is requested if vacancies are not filled in good time.

The good practices of this district can be implemented in the districts that have significant findings at all of its auditees.

Figure 4: Trends in findings on non-compliance with legislation


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Figure 4 shows the compliance areas with the most material findings and the progress made by auditees in addressing these findings. There was a lack of improvement in the non-compliance relating to material misstatements in the submitted financial statements, which was prevalent at 57 (79%) auditees. This is attributable to five auditees (7%) regressing to having material misstatements, and one new auditee, the Sisonke Economic Development Agency. Fifty-one auditees (71%) had recurring findings on material misstatements. Seven auditees (10%) improved to having no findings and eight (11%) retained a status of having no findings on material misstatements.

There was an overall lack of improvement in addressing findings on unauthorised, irregular and fruitless and wasteful expenditure. Twenty seven auditees (38%) had recurring findings in this area, together with twelve auditees (17%) that could not maintain a status of no findings in the previous year. Fourteen auditees (19%) were able to address their material findings and 19 auditees (26%) did not have material findings in this focus area.

Procurement management noted a lack of improvement as 25 auditees (35%) were not able to successfully prevent a recurrence of findings in this area, with an additional 14 auditees (19%) that were not able to maintain a status of no findings. Thirteen auditees (18%) resolved the previous year’s findings and no material findings were reported for 20 auditees (28%).

The most common findings across these compliance areas were the following:

• There were material misstatements or limitations in the financial statements submitted for auditing.

• Unauthorised, irregular, fruitless and wasteful expenditure was not prevented or adequately dealt with.

• Procurement management.

Figure 5: Trends in unauthorised, irregular as well as fruitless and wasteful expenditure

Figure 5 reflects the three-year trend in unauthorised, irregular as well as fruitless and wasteful expenditure incurred by auditees.

Unauthorised expenditure is expenditure that was not spent in accordance with the approved budget. Unauthorised expenditure increased by 14% from R541,3 million to R615,9 million. The three-year trend reflects an overall increase of 20%.

Two-thirds of the total unauthorised expenditure was incurred in two districts, Harry Gwala (R205,72 million) and uThukela (R200,30 million), mainly as a result of overspending of the approved budgets.

Of the R615,9 million in unauthorised expenditure incurred in 2012-13, most (81%) was as a result of overspending of the budget. Seventy-four per cent of the expenditure was identified by the auditees, an indication that their systems and processes are effective in identifying unauthorised expenditure incurred. However, monitoring controls should be embedded in the processes to prevent such expenditure from recurring.

Irregular expenditure is expenditure that was not incurred in the manner prescribed by legislation. Such expenditure does not necessarily mean that money had been wasted or that fraud had been committed, but is an indicator that legislation is not being adhered to, including legislation aimed at ensuring


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that procurement processes are competitive and fair. It is the role of councils to investigate all irregular expenditure to determine whether it constitutes misconduct, fraud or losses that should be recovered. Irregular expenditure increased by 14% (R224,3 million) to R1 782 million during the year.

The two districts with the largest amount of irregular expenditure are Harry Gwala (R487,18 million) and uMkhanyakude (R303,13 million). eThekwini Metro also makes up an amount of R325,5 million of the irregular expenditure.

The risk to local government is that although investigations are conducted into irregular expenditure, it is a slow process and has a cost implication for the municipality. In certain instances, officials may leave the employ of the auditee before the investigations are finalised. The substantial increase in irregular expenditure since the previous year is contrary to good governance and the requirement to comply with legislation. The delays encountered during these processes, together with the cost factor, has a material effect on the auditees’ mandate to ensure that service delivery is at the required levels.

Of the R1 782 million in irregular expenditure incurred in 2012-13, 98% was related to supply chain management. Forty-one per cent of irregular expenditure was identified during the audit process. The remaining 59% was identified through the auditees internal control processes, which enabled them to identify and record irregular expenditure in good time. Although appropriate controls and processes at most auditees are effective in identifying irregular expenditure in good time, processes and controls must be designed and directed towards the prevention of irregular expenditure.

Fruitless and wasteful expenditure is expenditure that was made in vain and that would have been avoided had reasonable care been taken. There has been a decrease of 22% in this type of expenditure to R9,62 million over the three year period. Fruitless and wasteful expenditure has decreased by R7,7 million (44%) since the previous year, which is notable.

Twenty-six per cent (R2,52 million) was incurred in the Zululand district, 17% (R1,63 million) in the uThukela district and 12% (R1,15 million) in the Uthungulu district.

Of the R9,6 million in fruitless and wasteful expenditure, 88% was identified by the auditees. This is indicative of internal control processes and systems being in place to identify and disclose such expenditure. The focus should be on preventing this type of expenditure by a pro-active process of monitoring and oversight, especially as the main cause was interest payments and penalty charges on late payments.

Legislation prescribes the actions that accounting officers and councils should take to investigate and deal with unauthorised, irregular as well as fruitless and wasteful expenditure. More information on the effectiveness of these actions is included in the section on human resource management.

Six risk areas should continue

to receive attention

Our audits of the six risk areas show that our recommendations to address these risks to financial and performance management have not yet been implemented. Significant aspects of five of these risk areas are summarised below, while the quality of performance information is discussed as part of the section on audit outcomes above. A view on the effective use of consultants is given as part of the human resource management risk area included below.

Quality of submitted financial statements

The purpose of the annual audit of the financial statements is to provide users with an opinion on whether the financial statements fairly present, in all material respects, the key financial information for the reporting period in accordance with the financial framework and applicable legislation. The audit provides the users with reasonable assurance on the degree to which the financial statements are reliable and credible, on the basis that the audit procedures performed did not identify any material errors or omissions in the financial statements. We use the term material misstatement to refer to such material errors or omissions.

While all auditees submitted their financial statements for auditing on time, figure 1 shows that only fifteen auditees (21%) submitted financial statements that did not contain material misstatements. There was a lack of significant improvement from the previous year’s 18%.


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Figure 6: Quality of submitted financial statements

Figure 6 shows that fifty-seven auditees (79%) received a financially unqualified audit opinion of which forty-two (58%) were only because they corrected all the misstatements we had identified during the audit. The continued reliance on the auditors to identify corrections to be made to the financial statements to obtain an unqualified audit opinion is not a sustainable practice. Furthermore, it places undue pressure on legislated deadlines and increases the audit fees.

Even though we reported the material misstatements to management for correction, 15 auditees (2011-12: 16) could not make the necessary corrections to the financial statements, which resulted in 12 qualified and three disclaimed audit opinions. The following were the three most common financial statement qualification areas:

• Non-current assets - qualifications which were prevalent at 16 auditees in 2011-12 reduced to nine in 2012-13. Ten auditees addressed their previous year’s qualifications, while three auditees regressed to obtaining a qualification in this area.

• Irregular expenditure – a lack of improvement was noted from 2011-12 as it remained unchanged at eight auditees. However, five auditees addressed their previous year’s findings in this area, while another five auditees regressed to a qualification.

• Liabilities – A marginal improvement was noted as the number of qualifications reduced from nine in 2011-12 to eight in 2012-13. Four

auditees were able to resolve their previous year’s qualifications, and three auditees regressed to a qualification in this area.

Some auditees appointed consultants to assist with financial reporting. More information in this regard is included in the section on the effective use of consultants.

Supply chain management

As part of our audits of supply chain management, we tested 6 435 contracts (with an approximate value of R65,9 billion) and 16 639 quotations (with an approximate value of R1,5 billion), also referred to as awards in this report.

We tested whether the prescribed procurement processes had been followed, which would have ensured that all suppliers were given equal opportunity to compete and that some suppliers were not favoured above others. We also focused on contract management, as shortcomings in this area can result in delays, wastage as well as fruitless and wasteful expenditure, which in turn have a direct impact on service delivery.

We further assessed the financial interests of employees and councillors and their close family members in suppliers to the auditee as well as the interests of other state officials, as legislation prohibits awards to such suppliers. We also evaluated whether auditees had implemented adequate internal controls to prevent, detect or correct irregularities in the supply chain management processes.

We reported all the findings from the audit to management in a management report, while we reported the material non-compliance findings in the audit report.

Figure 1 shows that there has been little improvement in the number of auditees that had audit findings on supply chain management since the previous year. Overall, 24% of auditees did not have findings on supply chain management compared to 25% in 2011-12. Material findings and management report findings show little/no movement at 54% and 22% respectively in 2012-13 compared to 54% and 21% in 2011-12. The lack of overall improvement in this key risk area is of concern, which is a setback in the plans to achieve or sustain improved audit outcomes.

Financially unqualified Financially qualified


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Figure 7: Findings on supply chain management

Figure 7 indicates the extent of findings in the areas we report on and the movement since the previous year. The following were the most common findings:

• It is of great concern that this year we again experienced limitations in auditing supply chain management. We could not audit awards with a value of R273,7 million at 12 auditees, as they could not provide us with evidence that awards had been made in accordance with the requirements of supply chain management legislation. We could also not perform any alternative audit procedures to obtain assurance that the expenditure incurred in this regard was not irregular. The main reason for the limitations was an inadequate record management system, resulting in mislaid tender documents and contracts. Consequently, assurance could not be obtained as to whether further irregularities were present.

• There were 46 instances of awards with an overall value of R5 million to suppliers in which employees and councillors of the auditees had an interest. In 22% of these instances, the supplier did not declare the interest, while the employee or councillor did not declare the interest in

78% (36 of 46) of these instances. The persons involved included senior management and other employees.

• There were 77 instances of awards with an overall value of R90,5 million to suppliers in which close family members of employees and councillors of the auditees had an interest. In 30% of these instances, the auditee did not report the interest in the financial statements initially submitted for audit, as required by the Municipal Financial Management Act (MFMA). In 8% of these instances, the supplier did not declare the interest, while the employee or councillor did not declare the interest in 62% of the cases. The persons involved included senior management and other employees.

• There were 952 instances of awards with an overall value of R160,3 million to suppliers in which other state officials had an interest. In 27% of these instances (R38,2 million), the supplier did not declare the interest.

The most common findings on uncompetitive and unfair procurement processes were:

• Three written quotations were not invited – deviations were not approved at 24% of auditees

• Procurement from suppliers without SARS tax clearance at 21% of auditees

• Three written quotations were not invited - approved deviation was not reasonable/ justified at 19% of auditees.

The most common findings on internal control deficiencies were:

• Inadequate controls to ensure interests are declared at 38% of auditees

• No plan for addressing audit findings on supply chain management or adherence to the plan was not monitored regularly at 26% of auditees

• No actions taken to identify supply chain management risks identified at 7% of auditees

Human resource management

Human resource management is effective if adequate and sufficiently skilled staff are in place and if their performance and productivity are properly managed.

Our audits included an assessment of human resource management that focused on the following areas: ■ human resource planning and organisation ■ management of vacancies ■ appointment processes ■ performance management ■ acting positions ■ management of leave, overtime and suspensions.

With findings With material findings


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Our audits furthermore specifically looked at the management of vacancies and stability in key positions, competencies of key officials, performance management and consequences for transgressions.

We reported all the findings from the audit to management in a management report, while we reported the material findings of non-compliance in the audit report.

Figure 1 shows that there has been an increase in the percentage of auditees with findings from 22 auditees (31%) to 43 auditees (60%) on human resource management since the previous year. Included in this are material findings that have increased from two in 2011-12 to 11 in 2012-13.

Figure 8: Vacancies in key positions

Figure 9: Stability in key positions (average number of months in position)

Figure 8 shows the number of auditees where the positions of accounting officer, chief financial officer and head of the supply chain management unit were vacant at year-end, and also indicates the period that the positions had been vacant. Figure 9 shows the average number of months key officials had been in their positions.

The highest vacancy rate is in the position of chief financial officer, with 16 vacancies at year end. This is an increase of 10 vacancies since the previous year. The reasons for the continuing vacancies include the lack of succession planning and a slow response by political leadership in approving appointments. This resulted in senior positions being vacant for long periods of time. Furthermore, due to the perceived glamour of the private sector, local government finds it difficult to attract and retain adequately skilled staff at top management levels. The impact of these vacancies is that staff acting in top management positions are incompetent or inadequate. Financial reporting is poor due to their lack of understanding of financial reporting frameworks and other critical laws and regulations that have to be applied. The highest vacancy rates were in the Umkhanyakude (24%), uMgungundlovu (22%), and uThukela (22%) districts. These were for the positions of accounting officer, chief financial officer and head of the supply chain management. The audit outcomes in the uMgungundlovu district regressed by 22% from the previous year. Umkhanyakude district had 25% of the qualified audit opinions in the province, yet had a 71% improvement in audit outcomes due to the involvement of both provincial treasury and CoGTA. The Umkhanyakude district also had the highest number of human resource audit findings, particularly in the areas of management of vacancies, performance management and management of leave, overtime and suspensions. uThukela district had a net improvement of 15% (33% improved and 17% regressed) with one disclaimer of audit opinion

7% (5)

13% (9) 10% (7)

4% (3)

10% (7)

1% (1)

Municipal managers andchief executive officers

Chief financial officers Heads of SCM units

Vacant for less than 6 months

Vacant for 6 months or more

30 34

20

Accounting officers andchief executive officers



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and one qualified audit opinion. Audit findings were particularly in the area of management of vacancies.

The most common findings on the management of vacancies and acting positions were that at seven municipalities, senior management positions were vacant for more than 12 months and at six municipalities senior managers acted in positions for more than three months. When a person acts in a position, they tend not to take on the full responsibilities of the post and have a lower commitment to the deliverables of the post as a result of the temporary nature of the position. Persons holding acting posts often do not have signed performance contracts and therefore cannot be held accountable for poor performance.

The Municipal regulations on minimum competency levels issued by the National Treasury on 15 June 2007 defines the minimum competency levels of accounting officers, chief financial officers, senior managers, supply chain management officials and other financial officials, taking into account the size and scope of municipalities.

However, municipalities were granted an opportunity by the National Treasury to apply by September 2012 for an 18-month extension (until 1 July 2014) for enforcing the regulations as a “special merit case” based on the particular circumstances faced by the municipality. Thirty-nine municipalities have applied for extensions in respect of various applicable levels, but mainly for the chief financial officer positions. Figure 10: Key officials that did not have the minimum competencies

28% (18)30% (17)

24% (14)

Accounting officers andchief executive officers


Figure 10 shows the percentage and number of auditees where key officials did not meet the competency levels defined in the regulations at year-end.

The most common findings on the competencies of key officials were in the areas of financial reporting (five auditees) and performance reporting (three auditees), where the competencies of key personnel were found to be inadequate.

To improve the performance and productivity of staff, the leadership should set the correct tone by implementing sound performance management processes, evaluating and monitoring performance, and consistently demonstrating that poor performance has consequences.

Findings on performance management revealed that four accounting officers and seven senior managers did not sign performance agreements for the current performance period. Further, at two municipalities there were no performance management systems in place for employees other than senior managers.

Legislation prescribes how financial misconduct, improper conduct in the supply chain management processes as well as unauthorised, irregular or fruitless and wasteful expenditure should be dealt with through an investigative and disciplinary process, with possible sanctions and criminal proceedings. The following indicates that there continues to be a lack of consequences at some auditees:

At 19 auditees, appropriate consequence management was not in place to ensure that unauthorised, irregular and fruitless and wasteful expenditure was investigated and/or condoned in terms of legislation.

Effective use of consultants

As in previous financial years, auditees continued to engage consultants to assist them with financial reporting as well as the preparation of performance information.

Auditees indicated the following as reasons for the continued use of consultants:

Reason Financial management

Performance information

Municipal officials lacked the required skills (56%) (69%)

Positions were vacant (5%) (13%)

Combination of lack of skills and vacancies (25%) (13%)

The cost of consultants assisting with financial reporting was R129,31 million (2011-12: R111,73 million). This excludes amounts, as far as could be determined from available information, spent by the provincial departments of


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treasury and CoGTA on consultants assigned to assist municipalities, of R1,88 million and R2,41 million, respectively. The cost of consultants assisting with performance information was R4,06 million (2011-12: R1,46 million).

Figure 11: Audit outcomes of auditees assisted by consultants

Figure 11 shows the audit outcomes of 55 auditees (76%) that had been assisted by consultants and the occurrence of findings on performance information at those auditees. The reasons that consultants did not have a positive impact on the audit outcomes of some auditees are shown below.

Figure 12: Reasons for uncorrected material misstatements – financial reporting

Figure 13: Reasons for material findings – performance information

Two municipalities, Newcastle and Vulamehlo, had material misstatements on their financial statements. Another six municipalities - eDumbe; Kwadukuza; Nongoma; Kwa Sani; Hlabisa and uPhongolo - had material findings on their performance information. This was as a result of a lack of records and documents being made available to consultants. The lack of valid, accurate, complete and credible supporting documents limited the consultants’ ability to effectively carry out their mandate.

At three municipalities, Abaqulusi; Mtubatuba and uPhongolo, consultants were appointed too late to have any effect on audit outcomes. With proper planning, the municipality would have realised earlier that assistance was required due to vacancies and a lack of skills at the municipality.

At two municipalities, uThukela District and eDumbe, the leadership did not effectively monitor consultants to ensure that deliverables were met as per the consultants’ mandates. The consultants’ mandates emanated from contracts and memorandums of understanding signed between the municipality and the consultants. This led to delays in rendering the final product as a result of errors that could have been avoided through proper monitoring. We are concerned about the following based on our review of the contracts and arrangements between auditees and consultants:

• No policy /strategy in place on use of consultants - 22 auditees

• Consultants appointed without conducting needs assessment - 21 auditees

Unqualified with no findings

Unqualified with findings

Qualified with findingsAdverse or disclaimer

with findings

No finding on performance information

With findings on performance information


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• No evidence of skills transfer - 20 auditees

• Conditions or clauses relating to transfer of skills not included in contract - 15 auditees.

Information technology controls

Information technology (IT) controls ensure the confidentiality, integrity and availability of state information, enables service delivery and promotes national security. It is thus essential to have good IT governance, effective IT management and a secure IT infrastructure.

Our audit included an assessment of the IT controls that focus on IT governance, security management, user account management and IT service continuity.

Figure 14 shows a reduction since the previous year in the number of auditees that had audit findings on IT controls. This improvement was largely due to an increase in the number of questionnaires completed to assess IT controls at low- and medium-capacity municipalities, as well as an increase in the number of municipal entities covered since the previous year.

Figure 14: Status of IT controls

Figure 14 above indicates the status of the IT controls in the areas we audited and the movement since the previous year. It shows the number of auditees

where the IT controls are either not in place (not designed) or not implemented, as well as those where IT controls are functioning effectively.

Effective IT governance ensures that the organisation’s IT control environment functions well and enables service delivery. The IT governance framework developed for government has not yet been implemented. All auditees are, however, required to adopt and implement the IT governance framework and guidelines for local government in phases over the next three financial years. In 2013-14 the implementation of phase 1 should be prioritised. A task team was established by the minister of CoGTA to guide municipalities, among others, in the implementation of the governance framework.

The majority of auditees did not have adequately designed and implemented IT controls for security management, user access management and IT service continuity. The most common findings were the following:

• Security management:

Municipalities generally did not have adequate IT resources to manage information security risks. The municipalities that did not have security controls in place also did not have an adequate IT security policy to manage and govern IT practices. As a result, external parties may gain unauthorised access to financial information without detection, which could compromise the confidentiality, integrity and availability of data.

• User access management:

The following contributed significantly to issues experienced with regard to user access management:

• The lack of approved and/or adequate user access management policies and procedures.

• The use of generic usernames on systems. • The lack of formal user access request documentation to be completed

for registering users, changing access rights, effecting password resets and terminating access rights.

• IT service continuity:

The majority of municipalities and entities audited did not have an effective business continuity plan and disaster recovery plan. In addition, we noted a lack of adequate policies and procedures to ensure that backups of data would be maintained and be restorable when required.

Management should prioritise the design and implementation of the security management, user access management and IT service continuity controls to mitigate the risk of unauthorised access to, and unavailability of IT systems or incompleteness of data in the event of major system disruptions or data loss.


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Financial health

Our audits included a high-level analysis of auditees’ financial health indicators at 69 auditees to provide management with an overview of selected aspects of their current financial management and to enable timely corrective action where the auditees’ operations and service delivery may be at risk. Three municipal entities - Safe City, Uthungulu Financing Partnership and Uthungulu House Development Trust - were not included in our analysis, as a majority of the indicators are not relevant to their operations. We also performed procedures to assess whether there are any events or conditions that may cast significant doubt on auditees’ ability to continue as a going concern.

Figure 1 indicates the number of auditees that had more than two of the indicators shown in figure 15 below (with findings) and auditees with material going concern uncertainties or adverse or disclaimed audit opinions (with material findings). There has been an increase in the number of auditees that had findings on financial health since the previous year.

The status of financial health in the province depicts a regression since 2011-12. In this regard, 18 auditees (26%) regressed, while 12 auditees (17%) improved their financial health.

Two districts, Ilembe and Ugu municipalities, had significantly better results when compared to the province as a whole. Their positive financial health indicators were due to better cash flow management and the recovery of debtors’ amounts within a shorter period of time. Further, they did not have bank accounts in overdraft, were not in a net current liability position at year end and their revenue exceeded expenditure during the year. The following good practices on financial health can be considered for replication in other districts:

• Following up debtors via telephone calls to ensure that the billing system has generated valid and accurate invoices for consumer services.

• Reducing entertainment and catering expenditure for municipal functions and meetings.

• Processing payments to suppliers on fewer occasions per month so that more interest is earned on positive cash balances.

• Scrutinising requests for procurement to ensure that only essential items are purchased.

• Discussing in-year budget reports at budget committee meetings.

• The municipal public accounts committee (MPAC) and audit committee discusses monthly expenditure and projected cash flow reports and pertinent questions are asked about expected revenue and expenses.

Figure 15: Areas of financial health concerns

The number of auditees with an emphasis of matter paragraph in the audit report relating to possible going concern problems had increased from 12 auditees (17%) in the previous year to 16 auditees (22%) for 2012-13. Eight auditees - Endumeni Municipality, Greater Kokstad Municipality, Ilembe Management Development Enterprise (Pty) Ltd, Mpofana Municipality, Msinga Municipality, Umtshezi Municipality, uMzinyathi District Municipality and uPhongolo Municipality - regressed to having going concern problems for 2012-13. Four auditees - Hibiscus Coast Development Agency, Mtubatuba Municipality, Big Five False Bay Municipality and Umngeni Municipality - succeeded in resolving going concern issues from the previous year .

There were two financial health indicators that notably regressed during the current year: underspending of conditional grants by 10% and a debt collection period of more than 90 days.

Thirty nine (59%) auditees underspent their conditional grants. The analysis has also shown that 40 (61%) auditees underspent their capital budgets by more than 10%. The key drivers contributing to underspending are vacancies in key positions to undertake planned projects, delays in the approval of tenders, materials not being available to commence with projects due to their specialised nature and/or the lack of skilled engineers to execute and oversee projects. Underspending has a far reaching impact on communities and the country as basic goods and services are not delivered to citizens, reducing public confidence. The result is strikes and service delivery protests, which are costly for the fiscus. Additionally, the non-execution of capital projects places a burden


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on existing infrastructure, leading to breakdowns. The cost of repairing infrastructure becomes more expensive and quick fixes are not a sustainable solution.

In the overall analysis, it is taking too long for debt to be collected, as 37 auditees (56%) do not collect their debts within 90 days. The low debt collection levels have an impact on financial viability as budgeted revenue is not realised for services rendered. There is a dire need for local government to stimulate payment by enforcing debt collection policies and procedures, which are aligned to legislated requirements. Alternative methods of revenue enhancement should be looked at via consultative processes with citizens to promote a culture of payment. Monthly follow-up of debts, risk profiling and review of debt statuses should be the norm, coupled with monthly reporting of debts to the council, provincial treasury and National Treasury. Multiplied and collaborated efforts are also required from all parties in government, including management at local government level, to instil fiscal discipline and ensure excellence in debt administration.

Fifty auditees (76%) reflect debtor impairment provisions being more than 10% of their total accounts receivable balance. This is reflective of many municipalities struggling to collect debts because of the economic stress placed on citizens by high levels of debt and inflationary pressures. These conditions require municipalities to be more conservative in their estimates and to have foresight when budgeting processes occur. Leadership needs to tighten spending, ensure that increases in tariffs are minimised and comply with benchmarks established by energy and water regulators as well as the National Treasury. This will partially insulate consumers from the effects of higher costs, result in budgets that are more realisable and reduce high impairment losses.

Significant deficiencies in internal controls and

root causes should be addressed to improve

audit outcomes

As part of our audits, we assessed internal controls to determine the effectiveness of their design and implementation in ensuring reliable financial and performance reporting and compliance with legislation.

Figure 16: Status of drivers of key controls

Figure 1 and figure 16 show the status of the different areas of control and the overall movement since the previous year.

Leadership has reflected an 11% deterioration from the previous year, which is a major obstacle that is stifling the velocity for clean audits. Prime areas where leadership has weakened include an effective leadership culture (integrity and ethical values), Human resource management (commitment to competence and accountability), and action plans (a control environment to ensure adherence to plans).The element of effective leadership requires both the political and administrative leadership to be exemplary and lead by example in setting the tone at the top. Additionally, deviations from expected standards of conduct are required to be remedied in good time and consequences need to follow for transgressions. These expectations of an effective leadership culture are not being met at 58% of the auditees. Human resource management as an element of leadership requires that the organisation provides the mentoring and training needed to attract, develop and retain sufficient and competent personnel. Management and the accounting officers are also required to establish mechanisms to communicate and hold individuals accountable for internal control responsibilities, including the adherence to standards of conduct and expected levels of competence, and to provide rewards or exercise disciplinary actions as appropriate. Critical to the success of human resource management is talent plotting for succession/contingency planning, and the prompt filling of vacancies. These human resource practices are a recipe for success to any auditee and to realise the goals of government, one of which is to make local government a career of choice. At 30% of the auditees, good human resource management practices have regressed year on year and are not evident of leadership’s urge to

Leadership Financial and performance

management Governance

Effective leadership Oversight

responsibility HR

management Policies and procedures

Action plans

IT governance

Proper record keeping Processing and

reconciling controls Reporting

Compliance IT system controls

Risk management Internal audit

Audit committee

Good Concerning Intervention required


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contain challenges that affect the well-being of administrations under their stewardship. Sustainable improvements in outcomes are only possible with audit action plans that are realistic, credible, implemented and monitored by leadership at frequent intervals. At 26% of the auditees, action plans have not been effectively designed and implemented and/or appropriately assessed for effectiveness.

Our assessment of financial and performance management reflects little improvement as there is still space to address reporting, compliance matters and IT controls. Reliable reporting requires information to be systematically assembled monthly and presented in a manner that is concise, credible and understandable to make informed decisions. Additionally, there must be a clear link between funds budgeted, used and reported and tangible service delivery that occurred in the year. At 19% of the auditees, reporting has regressed and requires decisive attention for improvements to materialise. Internal controls at 11% of the auditees depict a regression in compliance, as checklists are either not designed and/or implemented. This regression is also ascribed to the lack of training and vacancies in key posts, which requires the recurring use of consultants to assist municipalities. The failure to design and implement IT systems and controls can seriously hamper business continuity. At 21% of the auditees a regression has been noted in this component of control, and a more concerted effort is necessary.

Governance controls overall have regressed by 11%, primarily due to regressions in the drivers of risk management and audit committees by 32% and 27% respectively. It is evident that risk management, predominantly with respect to supply chain management, fraud risk indicators, performance reporting and technical accounting requirements are not receiving the required attention. The skills and competencies of audit committee members in the performance and technical financial reporting space still require improvement. The prevalence of skills and availability of audit committee members is also a challenge in deeply rural municipalities. It is vital for CoGTA, national and provincial treasury, the South African Local Government Association (SALGA) and district municipalities to assist in improving the effectiveness, knowledge and competencies of audit committees.

Many auditees did not get a clean audit opinion as their financial and performance reports were of a poor quality and they had high levels of non-compliance with legislation. The most common root causes of the audit outcomes that need to be addressed, as shown in figure 1, and recommendations to address them are listed below.

Slow response by management at 60% of the auditees

The slow response by management, although not one of the top three root causes in the previous year, has featured as a key root cause at 43 auditees (60%) for 2012-13. The prevalence of slow management response is influenced by the tone at the top, inadequate monitoring of performance and lack of training

programmes to improve the skills of managers that are involved in the day-to-day operations of auditees. In this regard, changes in financial reporting, compliance and performance management requirements arise on a continuing basis, and management is not always equipped to readily implement changes. These changes are also expected to be implemented within short spaces of time without sufficient guidance from standard setters and regulators. Additionally, vacancies of 14%in finance units, 11% in heads of supply chain management positions and 18% in senior management positions place immense pressure on staff that are unable to fulfil additional responsibilities when acting. Unless these underlying root causes are addressed, leadership’s action plans will not produce improved and sustained results.

The following actions should be taken to address this root cause:

• Leadership should set the tone and establish a culture of leading by example to promote the morale of management by being aware of challenges and developing strategies to address these.

• Performance needs to be more closely monitored to ensure that poor performance is rooted out and followed by appropriate consequences.

• Training programmes should be conducted well in advance to ensure that management is fully equipped to implement changes.

• Training should be followed by post-implementation reviews to assess its effectiveness. In addition, training service providers should offer on-site support and/or helpdesks to address practical challenges.

• Pilot projects should be run at selected auditees before changes occur in financial, legislative and performance reporting requirements. The problems identified at these auditees should enable the development of practical guidance and best practices to ensure that common issues are resolved before changes are implemented.

Instability and vacancies in key positions at 40% of the auditees

This root cause occurs at 29 auditees (40%), which is a deterioration of 14% from the previous year’s 26%. Instability and vacancies in key posts is an endemic issue despite the efforts to contain this challenge. The challenge arises largely from the following factors:

• Many accounting officers and chief financial officers do not meet the competency requirements of their positions.

• The landscape of local government is highly political.

• Smaller municipalities do not have sufficient budgets to offer salaries that attract highly qualified persons.

• Municipalities do not have adequate contingency plans that allow for possible vacancies.


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• The business acumen and skills of accounting officers, chief financial officers, heads of supply chain management and performance managers are scarce skills.

• Appointments on a contractual basis of five years create job insecurity.

• Councils and mayors do not give focused and prompt attention to filling critical posts and continuously skilling officials.


• Councillors, mayors and accounting officers must take full responsibility and ownership for filling key posts in good time and be involved in making the work environment attractive for administrations under their stewardship. They must take accountability for quality processes in hiring, mentoring and strengthening the workforce and not relegate such responsibility.

• CoGTA, provincial treasury and audit committee chairpersons should be involved in appointing chief financial officers at municipalities to ensure that skilled staff are appointed and retained through a performance management system that rewards superior performance.

• Requests for the secondment of national or provincial officials to municipalities should be done in good time to address the vacancy crises in key posts.

• A talent pool should be created provincially, based on information from provincial role players, to identify persons in government who could potentially fill posts where scarce skills are required and to allow a pipeline that can be tapped into in the event of a crisis.

• Salary levels for management and senior managers in the local government space should be uniform to prevent excessive staff movement and an incentive rural allowance can be considered for those auditees that are deeply rural.

• Accounting officers and accounting authorities must report to the executive authorities on the root causes of continued vacancies in key positions and their actions to address these.

• Vacancy management in respect of key positions must be included as a key performance area in the performance contracts of leadership.

• Strategies to ensure that skills are transferred from consultants to municipal staff and that consultancy contracts include specific clauses and plans for the transfer of skills and the provision of support should be in place.

• A better coordinated and focused approach and new level of collaboration is required, especially by the treasuries, SALGA and

CoGTA to ensure that the many programmes, commitments and action plans succeed.

Slow response by political leadership at 38% of the auditees

The slow response by political leadership as a key root cause is still of significant concern as it is prevalent across 38% of the auditees. Councillors, mayors/boards and accounting officers/accounting authorities are still not assessing the credibility and reliability of information presented to them with the requisite diligence. Additionally, many of the commitments made by mayors and councils/boards are not being taken seriously to address challenges in good time. The action plans to address internal and external audit findings are also not being monitored with the vigour they deserve. The lack of attention to detail in this regard has an impact on the effectiveness of the internal audit and risk management.


• National and provincial treasury, the Public Administration Leadership and Management Academy (PALAMA), SALGA and CoGTA should assess the effectiveness of the training interventions already provided to councillors through a post assessment process. Updates should also be provided to them on common areas/pitfalls to be aware of as custodians of public funds and a sense of continued awareness needs to be created about the responsibility attached to the positions that they hold.

• Monthly oversight and monitoring by council/boards, accounting officers/accounting authorities needs to be more focused, diligent, and clinical.

• Processes should be designed in a simple manner to make it easier for citizens to hold politicians accountable.

• Council should insist that action plans to address internal and external audit findings be specific and time-bound and that progress must be tabled at council meetings. Officials that are accountable to deliver as per the action plans should be performance managed by council.

• The progress on action plans should be assessed by CoGTA and provincial treasury, with reporting to the respective members of the executive committees to enable them to assess what further steps are necessary to assist councils that are not following up on action plans.

• Leadership at regressed municipalities should be called upon quarterly to account before the Provincial Public Accounts Committee (PPAC) on progress made in addressing audit findings, key risks, and financial management.


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The level of assurance provided by key role

players needs to be improved

The management and leadership of the auditee, and those that perform an oversight or governance function, should work towards improving the key controls, addressing the root causes and ensuring that there is an improvement in the six key risk areas. This would provide assurance on the quality of the financial statements and performance reports, as well as compliance with legislation.

Based on our assessment as shown in figure 1, these role players are not providing the necessary assurance. Below is an overview of the assurance provided by each assurance provider.

Senior management

Senior management, which includes the chief financial officer, chief information officer and head of the supply chain management, provides assurance by implementing basic financial and performance controls.

The level of assurance provided by senior management has decreased from 35% (2011-12) to 20% (2012-13). Some assurance is provided by 55% and limited or no assurance is provided by 15% of senior management. Vacancies in senior management account for 10% of the total vacancies at year-end. The underlying reasons for the reduced level of assurance are inadequate policies, controls, processes and standard operating procedures, as well as vacancies. There is a lack of understanding of financial and performance systems due to skills gaps, the unavailability of senior management during the audit process and a slow response in following up on the progress of actions plans that are meant to address internal and external audit findings. The effectiveness of the assurance provided by senior management can be improved by having a committed, dedicated and adequately skilled workforce and ensuring stability at this level. Further improvements in assurance levels can be made through CFO forums where new developments in the accounting framework, including MFMA circulars and changes in legislation, are discussed and best practices shared.

Accounting officer or accounting authority

Accounting officers and authorities are responsible for auditees’ internal controls, including leadership, planning, risk management as well as oversight and monitoring. While accounting officers and authorities depend on senior management for designing and implementing the required financial and performance management controls, they should create an environment that helps to improve such controls.

The level of assurance provided by the accounting officers and authorities decreased from 39% (2011-12) to 22% (2012-13). Some assurance is provided by 60% of accounting officers and authorities and 13% provided limited or no assurance. Vacancies at accounting officer and authority level constitute 6% of the total vacancies at year end. The assessment of providing limited or no assurance is based on commitments made at quarterly interactions not being actioned in good time, resulting in them not been honoured; slow responses in following up on action plans addressing audit findings; as well the necessary review procedures not being undertaken. Additionally, the risk appetite of accounting officers and authorities is too high for financial, compliance and performance matters, with heavy reliance being placed on consultants more often than not. This is not a sustainable practice and should be avoided by creating internal capacity. However, in the category of providing assurance and providing some assurance, accounting officers and authorities committed to improving and leading their administrations to improved audit outcomes by holding staff accountable for poor performance, exercising oversight responsibility over financial, performance and compliance reporting, holding regular meetings with senior management to track and monitor progress on action plans and evaluating the effectiveness of governance committees.

Mayor

Mayors have a monitoring and oversight role at both municipalities and municipal entities. They have specific oversight responsibilities in terms of the MFMA and the Municipal Systems Act, 32 of 2000 (MSA), which include reviewing the integrated development plan and budget management, as well as ensuring that auditees address the issues raised in audit reports.

Mayors can bring about improvements in the audit outcomes of their auditees by being actively involved in key governance matters and managing the performance of the accounting officers and authorities.

The level of assurance provided by mayors has decreased from 45% (2011 12) to 21% (2012-13). Some assurance is provided by 68% of mayors and 11% provided limited or no assurance. The reasons for mayors providing limited or no assurance is their lack of involvement in quarterly interactions, instability or turbulence in the political environment and not holding accounting officers and authorities accountable. Mayors should be proactive in ensuring that commitments are achieved by setting the correct tone at the top and regularly following up on the progress of action plans. Mayors should insist on credible monthly financial, performance and compliance reports from accounting officers and authorities and set key performance targets to promote a culture of performance management. Mayors should also be trained by CoGTA, provincial treasury and SALGA on key matters that they need to be aware of at municipalities and entities to enable them to have a quick snapshot of performance and financial affairs. Mayoral forums should serve as a platform for improving intergovernmental coordination at district and local levels and enable


32

best practices to be shared. Key issues such as skills, vacancies, human resource planning, employment equity and emerging risks should be standing agenda discussion items at these forums.

Internal audit

Internal audit units assist accounting officers and authorities in the execution of their duties by providing independent assurance on internal controls, financial information, risk management, performance management and compliance with legislation.

The level of assurance provided by internal audit decreased from 52% (2011-12) to 44% (2012-13). Some assurance is provided by 47% and limited or no assurance is provided by 7% of internal audit units. The assurance provided by internal audit is affected by the lack of effective and/or standardised methodologies and practice manuals. In many instances, the level of knowledge and proficiency in the local government space of internal auditors is often deficient. Capacity constraints and limited budgets further affect the ability of internal auditors to conduct their audits in a manner codified by the Institute of Internal Auditors as the required supervision, reviews and training cannot take place as expected. As a result, the necessary risk areas are sometimes not addressed by internal audit, delays arise in the finalisation of reports and the expectations of leadership are not met. Another major hurdle that affects the assurance derived from internal audit is the commitment of leadership to appreciate the importance of an internal audit function and to promptly implement their recommendations. This lack of commitment in many instances frustrates the internal audit unit and leads to vacancies or reduced efforts by internal auditors. To uphold the ethos of local government, the political and administrative leadership need to direct more effort into building the capacity and skills of internal auditors to strengthen control environments and proactively manage risks. This will also enable internal audits to be done throughout the year to focus on root causes and control weakness that need to be remedied. Heads of internal audit should also have full access to report to MPAC and council on their audit results, free of any reprisal, to enable leadership to be fully appraised of the status of administrations under their stewardship for informed decisions to be made.

Audit committee

An audit committee is an independent body that advises the council, mayor, accounting officer or authority and senior management on matters such as internal controls, risk management, performance management as well as evaluation and compliance with legislation. The committee is required to provide assurance to the council on the adequacy, reliability and accuracy of financial reporting and information.

The level of assurance provided by the audit committees decreased from 52% (2011-12) to 43% (2012-13). Some assurance is provided by 49% of audit committees and 6% provided limited or no assurance. Audit committees do not provide optimum levels of assurance due to a lack of authority, as their effectiveness is dependent on the support of the accounting officer and authority, senior management and internal audit. In many instances, members of audit committees are not skilled in matters affecting local government, particularly matters relating to performance management and technical accounting requirements. The value to the municipality is therefore not optimised. Chairs of audit committees do not frequently interface with councils and MPACs to appraise them on matters of importance. There is also a lack of alignment between the work plans of MPAC, audit committees and council, which is crucial to improving oversight. Members of audit committees should be appointed by council with the concurrence of CoGTA and provincial treasury based on skills and experience. The effectiveness of the audit committee should be formally assessed by council quarterly to ensure its effectiveness as an assurance provider. The chair of the audit committee should report to council and MPAC at least quarterly on the status of financial, performance and compliance matters and other matters required as per the audit committee charter. These practices will go a long way towards uplifting assurance levels.

Provincial treasury, premier’s office and provincial

department of cooperative governance and

traditional affairs

The Constitution stipulates that provincial government must support and strengthen the capacity of municipalities to manage their own affairs, to exercise their powers, and to perform their duties. The MFMA further requires provincial government to assist municipalities in building capacity to support efficient, effective and transparent financial management. Both the MFMA and the MSA define responsibilities to monitor financial and performance management in compliance with these acts.

The provincial departments that have a direct role to play in supporting and monitoring local government, and thereby providing a level of assurance, are the provincial treasury, CoGTA and the office of the premier. Our assessment of the assurance provided by these departments is based on their initiatives to support and monitor local government and the impact they have had on improving the internal controls of auditees.

The overall assurance provided by the provincial departments has remained unchanged from the 2011-12 level of providing some assurance. It is notable that assistance and support provided by these coordinating/monitoring institutions has had some impact on the improvement of audit outcomes. An Operation Clean Audit committee (OPCA) was formed by provincial treasury and CoGTA, as a joint support plan to assist municipalities with financial management and


33

33

governance. OPCA prepares a quarterly dashboard report on significant obstacles and risk areas to proactively manage risks and red flags. The quarterly dashboard reports are discussed with the AGSA leadership and compared to our assessments to ensure that risks are identified and responses are prompt. Various training interventions were conducted province-wide on systems and controls by using a concept described as “back to basics,” which aims to instil elementary financial disciplines and training at all staff levels. The provincial treasury developed recovery plans for all municipalities that had been qualified in 2011-12 at the request of the member of the executive committee for finance and the premier, and provided intense training and support to improve these outcomes. Additionally, a framework was developed for guidance on preventing unauthorised, irregular and fruitless and wasteful expenditure to ensure that financial reporting is conducted with probity and transparency. Municipalities should also be responsible for requesting assistance when required, as there have been instances where municipalities that were assisted attained clean audit opinions. Continued support will result in further improvements in audit outcomes. The involvement of the premier’s coordinating forum as well as the TROIKA (premier, member of the executive committee for finance and CoGTA), and strengthening their monitoring roles, will have a positive impact on the audit outcomes. Consequences for poor performance have been implemented in the province to hold officials accountable. Financial rewards will not be dispensed to senior management for regressions in audit opinions. The regulations for financial misconduct are still to be legislated and, once in force, will be a deterrent and reduce non-compliance and transgressions.

Municipal council and municipal public accounts

committee

The council is required to provide assurance through monitoring and oversight. This includes approving or overseeing certain transactions and events as well as investigating and acting on poor performance and transgressions, such as financial misconduct and unauthorised, irregular as well as fruitless and wasteful expenditure.

The MPACs were introduced as a committee of the council to deal specifically with the municipality’s annual report, financial statements and audit outcomes, and to improve governance, transparency and accountability. The committee is an important provider of assurance, as it needs to give assurance to the council on the credibility and reliability of financial and performance reports, compliance with legislation as well as internal controls.

The level of assurance provided by the municipal council decreased from 38% (2011-12) to 14% (2012-13). Some assurance is provided by 68% of the municipal councils and 18% provided limited or no assurance.

The level of assurance provided by the MPACs decreased from 31% (2011-12) to 11% (2012-13). Some assurance is provided by 74% of MPACs and 15% provided limited or no assurance.

The challenges preventing municipal councils and MPACs from being fully effective is their uncertainty of their responsibilities, inadequate understanding of the financial processes and not having a fully functional committee that meets regularly. A further complication at smaller municipalities is that if, in implementing the MPAC guidelines, the mayor, speaker or chief whip is excluded from MPAC membership, the result is only two or three councillors who can serve in MPACs, and these may not be adequately skilled. Any future review or amendment of guidelines has to take into account the manner in which municipalities are demarcated in terms of sufficiency of councillors to serve on council committees. The establishment and functioning of an MPAC at each municipality, or a shared committee for smaller municipalities, is a relatively new and evolving concept and needs greater clarity.

MPAC hearings should be prioritised to ensure that monitoring and review is conducive to the reporting timelines of municipalities. A rapid response to audit committees and a closer relationship with council portfolio committees is also required to ensure that resolutions are coordinated and monitored. New MPAC members should undergo a thorough induction session where all the concepts contained in the audit report are explained. MPACs can be improved by providing on-going training that will enable them to provide valuable inputs at steering committee meetings, to monitor action plans and to recommend remedial actions. However, support from internal audit units and audit committees in providing credible reports, is also necessary. The Provincial Public Accounts Committee (PPAC) has invited chairpersons of MPACs to attend their hearings where they will be trained in following the correct processes during hearings to improve assurance and oversight.

Provincial legislature and portfolio committee on

local government

In terms of the Constitution, the provincial legislature must maintain oversight of the executive authority responsible for local government. This executive authority includes the member of the executive committee for cooperative governance and traditional affairs and other executives involved in local government, such as the member of the executive committee for finance. The mechanism used to conduct oversight is the portfolio committee on local government.

The overall assurance provided by the provincial legislature and portfolio committee on local government had remained unchanged from their 2011-12 level of providing some assurance. Both the portfolio committees on CoGTA and finance have held joined hearings into some of the municipal audit outcomes for 2011-12. Resolutions were passed and are being followed up. More direct


34

intervention is required by these role players to impact positively on the audit outcomes.

District municipalities

Although we do not assess the assurance provided by district municipalities, we are convinced the support provided by these municipalities can assist in improving audit outcomes. District and CFO forums have been formed to assist in challenges encountered within the districts, and have had an impact on the Uthungulu District. A district MPAC has also been formed; although it is not yet properly constituted, it meets to share information on how to strengthen its oversight role. The district has an annual IDP roadshow to achieve alignment in the IDPs. Other districts can learn from these practices. In many cases, district municipalities lack the skills and capacity to provide support to local municipalities as originally intended, and a lack of clarity about how responsibilities are divided between the two tiers has created scope for conflict. It is acknowledged that a two-tier structure remains relevant where local municipalities lack capacity and are unable to recruit the necessary expertise and/or are poorly equipped to take on functions from districts. Intergovernmental district coordination requires leadership from national government, CoGTA, the National Treasury, provincial treasury, and SALGA to identify coordination problems and use their collective influences to ensure that disagreements are resolved promptly with regard to powers and functions. Where district municipalities are performing well and have the requisite skills and capacity in financial, performance and compliance dimensions, the need for support of ailing local municipalities is of paramount importance. This approach will assist in strengthening local government and building assurance levels.

The initiatives and commitments of all role

players should continue to have a positive

impact on future audit outcomes

We have shared our key message on the actions needed to improve audit outcomes with accounting officers and authorities, mayors, councils and MPACs through our reports and interactions with them.

Figure 17: Interactions with mayors

Figure 17 shows the number of meetings we had with mayors during 2012-13 and our assessment of the impact of these interactions.

We have increased our visibility and influence on audit outcomes by meeting with all mayors during the year. The number of interactions is dependent on our assessment of the needs of the individual municipality. The impact on the audit outcomes have been assessed as significant at 30% (18) of municipalities, with improvement in outcomes. Some impact with improvement in key controls was achieved at 36% (22) of municipalities and minimal impact with improvement expected in the next financial year was assessed at 27% (17) of municipalities. No impact was achieved at 7% (4) of municipalities.

Throughout the year, we obtain and monitor the commitments of mayors, councils and MPACs to implement initiatives that can improve audit outcomes. The progress of such commitments in response to the previous year’s audit outcomes and new commitments are included in the section on the results of municipalities.

During our road show on audit outcomes, we also shared this message with the provincial legislature, the premier, the provincial treasury and CoGTA. We further confirmed the progress of the commitments made by these role players in response to the previous year’s audit outcomes.

Commitments are being honoured, but the pace is slow. Role players are generally unable to honour commitments within their agreed time frames and the anticipated honour dates need to be adjusted to give sufficient time to ensure that the necessary impact can be achieved. Vacancies in key positions play a role in the delays experienced.


35

35

New commitments have been made in respect of audit outcomes, but often they deal with repeat findings, indicating that slow progress is being made by management to resolve matters and address the root causes. The following is a summary of the most common commitments and recommendations made in this report:

• Municipal oversight committed to compiling corrective action plans to address audit findings, which would be included in the annual report.

• Municipal councils committed to filling key vacant positions and fully implementing performance management systems to address poor performance and transgressions. Annual performance evaluations of all staff are planned. Revised disciplinary procedures will be approved and implemented.

• Municipal managers have committed to preparing regular, accurate and complete financial and performance reports, as well as designing and implementing compliance checklists.

It is recommended that financial and performance reports should be supported and evidenced with reliable information by exercising oversight responsibility regarding financial, performance and compliance reporting. Compliance with applicable laws and regulations must be reviewed and monitored through internal checklists. Councils and MPACs need to take ownership of the financial, performance and compliance aspects within the administration. The mayor, council, senior management and governance structures should monitor and track the progress on action plans and obtain assurance that key matters have been addressed monthly through a combined assurance assessment. Key positions should be filled in good time with qualified staff. On-going training programmes should be in place to ensure that all staff are regularly updated on key aspects regarding local government. A human resources succession plan should also be implemented to ensure business continuity. Councils should address their slow response, and that of management, by implementing consequences for non-performance, which will create an environment of accountability. Management reviews of financial and performance information must take place in good time and include procedures to verify the credibility of supporting information. Additionally, diligent and proactive reviews of the financial statements as well as records, the management accounts, and performance

reports should be undertaken by the internal audit unit to improve the assurance provided to leadership.

The audit outcomes for the province have improved and it is expected that as commitments are honoured, this improvement will gain momentum and be evidenced in future audit outcomes.

The provision of water and sanitation services

and road infrastructure should receive urgent

attention

The state of municipal infrastructure in South Africa is a crucial element to ensure service delivery to all communities. In support of this, we reviewed key aspects of the provision of water and sanitation services and roads infrastructure by municipalities and reported the findings in the management reports.

Water and sanitation

According to the Constitution of the Republic of South Africa, every person has the right to clean water. Government thus set a target to provide access to basic water and sanitation to all the people in South Africa by 2014. More than 5% of people countrywide are currently still without clean water.

As local government is responsible for providing water and sanitation services, this function lies with municipalities that have been classified as water services authorities. There are fourteen water services authorities in the province which were audited in the current year.

The lack of both these services increases the risk of poor health and premature deaths, while the lack of proper sanitation can pollute rivers and dams, thus negatively affecting the environment.

We identified red flags that could seriously impact on municipalities' ability to provide a large portion of the province's population with clean water and proper sanitation. These need urgent attention to ensure that government’s objectives relating to water and sanitation are achieved:

• The backlog in the provision of basic water will not be eradicated in 2014.

• The backlog in the provision of basic sanitation will not be eradicated in 2014.

• The municipality did not adopt a water services development plan.


36

Roads infrastructure

In terms of the Constitution, the functions and powers over roads lies with those municipalities classified as roads authorities. There were fifty one roads authorities in the province which were audited in the current year.

The condition of roads impacts on all citizens and as such poor road conditions create challenges for many with unnecessary time delays, increased transportation costs and reduced access to education, health care and social services.

We identified red flags that could seriously impact on municipalities' ability to provide the people with proper roads. These need urgent attention to ensure that government’s objectives relating to roads are achieved:

• The municipality does not have a road asset management system.

• There is no road maintenance plan that indicates the strategy to be followed.

• There is no plan to address the backlogs relating to roads infrastructure.


37 37 37

AUDIT OUTCOMES OF INDIVIDUAL MUNICIPALITIES


38

Audit outcomes and demographics of mayoral portfolios

This section of the report that follows is divided into 2 sections for each municipality which analyses the following:

Municipal demographics with an aim to provide context and an understanding of the environment that the municipality operates in. This includes a graphical illustration of general statistics relating to the population and basic services applicable to the specific municipality. Please note that the statistics used to populate these were obtained from the 2011 census report prepared by Statistics South Africa and have not been audited by the AGSA.

A one page illustrated overview and one page narrative overview of the status of the municipality from an audit perspective includes the following:

o Audit outcomes over a three year period,

o Drivers of key controls.

o Assurance provided by key players in accountability,

o A reflection of progress made in a number of critical risk areas,

o Root causes that underpin the audit outcomes and internal control weaknesses, and

o Commitments made by key role-players in the municipality.


39 39 39



Qualified with findings

Adverse or disclaimer with findings

Audits outstanding

Improved

Regressed

Stagnant or little progress

Municipal audit outcomes per district

61

2

1

6

2

1

4

Ugu

Umgungundlovu

Umzinyathi

43

Umkhanyakude

6Ilembe

1

2 Ethekwini (Metro)

54

Uthungulu

2

4

Zululand

2

5

Harry Gwala

4

1

Amajuba

1

3

1

1

Uthukela


40

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services

Of the households have access to electricity

EducationLabour

22% 22%

11%16%

20%

31%

6% 7%9%

20011996 2011

78%

8 57

2 30

2

9 58

4 12

9

10 2

67 3

00

Population status Age Male/Female

20011996 2011

36% 35% 32%

59% 60% 63%

5% 5% 5%

20011996 2011

47% 47% 48%

53% 53% 52%

20011996 2011

39%49%

33%

61%51%

67%

20011996 2011

4,9 4,

4

3,9 55% 60%

72%

34% 29%20%

11% 11% 8%

38 9

05

83 0

50

2001 2011

53%

61%

78%

47%

39%

22%

Of the households have access to piped water

34%

28%

14%

18%

24%

22%

48%

48%

64%

Of the households have access to toilet facilities

15%

16%

7%

44%

38%

38%

41%

46%

55%

93%

Higher

educationGR 12 No schooling

Employed Unemployed

Electricity No electricity

In house Communal No access

Flush/ Chemical Pit/ Bucket No access

0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

86%

2001

1996

2011

2001

1996

2011

The statistics above do not reflect partial primary or secondary schooling. The sum of the statistics therefore does not equal 100%

Formal dwelling Traditional dwelling Informal dwelling

Province of

KwaZulu-Natal

The statistics reflected in these graphics were sourced from the 2011 census (STATS SA) and are not information collated or audited by the AGSA. The colours of the legends used for these census graphics do not have the same meaning as those used in the rest of this report.


41 41 41 eThekwini Metropolitan


42

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

11% 10%4%

22%27%

37%

9% 10%12%

20011996 2011

90%

2 74

8 29

9

3 09

0 12

2

3 44

2 36

1


20011996 2011

28% 28% 25%

68% 68% 70%

4% 4% 5%

20011996 2011

49% 48% 49%

51% 52% 51%

20011996 2011

32%43%

30%

68%57%

70%

20011996 2011

4,1

3,8

3,5

71% 73% 80%

7% 8%4%

22% 19% 16%

56 2

20

112

830

2001 2011

74%

80%

90%

26%

20%

10%


4%

5%

3%

24%

25%

16%

72%

70%

81%


3%

4%

2%

32%

27%

20%

65%

69%

78%

98%

Higher

educationGR12 No schooling

Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

97%

2001

1996

2011

2001

1996

2011


eThekwini

Metropolitan

The statistics reflected in these graphics were sourced from the 2011 census (STATS SA) and are not information collated or audited by the AGSA. The

colours of the legends used for these census graphics do not have the same meaning as those used in the rest of this report.



43 43 43

eThekwini Metropolitan

Unqualified with

no findings

Unqualified

with findings

Regressionin audit outcome

Root causes to be addressed

Drivers of key controls not improving

Slow progress made in addressing risk areas

Implemented

Assurance levels should be improved

In progress Not implemented

67%

33%

100%

33%

67%

2012-13 2011-12 2010-11

100%

67%

67%

100%

100%

33%

100%

100%

33%

MPAC

Municipal council

Audit committee

Internal audit

Mayor

Municipal manager

Senior management

New

LeadershipFinancial and performance management

Governance

Status of key commitments by the mayor

Provides

assurance

Provides some

assurance

Provides limited/

no assuranceVacancy

Not

established

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and

reconciling controls

Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Review policies, processes, controls andresources of the SCM, Legal and Housingunit to ensure complete, accurate andtimely financial reporting in terms oflegislative and financial reportingstandards by 30 June 2014.

Appropriate disciplinary action to be takenby 30 June 2014 against employees thattransacted with the municipality.

IT general and application controls reviewand implementation to be completed by30 June 2014.

Revised SCM policy and a policy toregulate use and reporting of contractextensions/modifications in terms of116(3) has been approved forimplementation.

To facilitate workshops for councillors onfinancial management and businesscontrols that are key in terms of currentlegislative requirements to improve theiroversight effectiveness.


Improved Regressed

Stagnant or

little progress


Information technology controls Financial health


Quality of performance reports


No findings Findings Material findings Improved RegressedStagnant or

little progress

Slow response by management

Instability and vacancies in key position

Key officials lack appropriate competencies

67%

33%

33%

67%

33%

67%

33%33%

34%

67%

33%

100%


44

eThekwini Municipality and its entities Current year audit outcomes

■eThekwini Municipality: Unqualified with findings

■ Durban Marine Theme Park (Pty) Ltd: Unqualified with no findings

■I.C.C. (Pty) Ltd: Unqualified with findings

Significant movement in audit outcome

The regression in the audit outcome of ICC, from clean to financially unqualified with other matters was a result of the municipal entity receiving non-compliance findings related to supply chain management and material adjustments to the financial statements. The lack of improvement in the audit outcome of the municipality was as a result of non-compliance findings related to supply chain management and material adjustments to financial statements. Durban Marine Theme Park (Pty) Ltd retained its clean audit status for two consecutive years.

eThekwini Municipality incurred R325,27 million in irregular expenditure, which is 18% of the total amount incurred in the province. The irregular expenditure was incurred mainly as a result of contracts awarded to suppliers, which were in contravention of supply chain management legislation. However, it must be noted that the amount of irregular expenditure incurred by the municipality has decreased by 67% over the past three years, from R1 billion in 2010-11. This was a result of effective monitoring by leadership and processes in place to identify irregular expenditure in good time.

Six key risk areas

Overall, there has been slow progress in addressing the six key risk areas. The status of supply chain management remains unchanged as the municipality had not implemented an effective monitoring control in the form of the management and review of conflict of interest forms for all employees and councillors of the municipality. This resulted in awards being made to employees and close family members of employees and councillors of the municipality. In addition, supply chain management non-compliance was noted at ICC in that council was not informed before contracts were amended.

The quality of the annual performance report has remained unchanged with no material findings reported for two consecutive years. This needs to be sustained. The human resource management findings were mainly due to senior management positions that were vacant for long periods, resulting in little or no monitoring taking place, as well as a break down in controls.

The quality of the financial statements is unsatisfactory as a result of a lack of processes to ensure that the information is validated before it is disclosed in the financial statements for both the ICC and the municipality. Material corrections to the financial statements were required. With respect to financial health, there was material underspending of both the capital budget and conditional grants received by the municipality. Progress has been made in addressing the key risk area of IT. The services of consultants were again engaged at the municipality in connection with financial reporting information at a cost of R46,27 million (2012: R41,5 million).

Key controls and root causes

Although, there has been a regression in key controls, largely due to ICC, the municipality improved due to the appointment of the head of internal audit, and this unit has now become more effective. The regression in the monitoring of processes at ICC was due to instability of employees in key positions. The following controls must be strengthened to create a control environment that supports reliable financial reporting and compliance with legislation:

• The mayor and municipal managers must ensure the review of policies, processes, controls and resources of the supply chain management, legal and housing unit to ensure complete, accurate and timely financial reporting in terms of legislative and financial reporting standards by 30 June 2014.

• The municipal manager must implement effective human resource management to ensure adequate and sufficiently skilled officials are in place, and whose performance is being monitored.

• The mayor and municipal manager must ensure that appropriate disciplinary action is taken by 30 June 2014, against employees that transacted with the municipality. In addition, the municipal manager will ensure that the City Integrity and Investigations unit will receive the resources they require to speed up the process.

The mayor and council should ensure that all key positions are filled in good time and address deficits in the competencies of staff in key positions through focused training. A human resources succession plan as well as


45 45

training programmes to address skills deficits, should be implemented Additionally, council needs to take ownership of the financial, performance and compliance aspects within the administration and obtain monthly assurance from management that key matters reported by internal and external audit have been addressed. The reports presented to council should be concise and credible, and produced in a timely manner by management, to enable councillors to identify areas that require corrective actions.

Impact of key role players on the audit outcomes For improved audit outcomes the assurance levels should be improved by ensuring stability at the level of municipal manager and senior management and by filling senior management vacancies with sufficiently skilled officials, in good time. We met with the mayor twice during the financial year and these interactions had an impact on the audit outcomes. The reason for our assessment is the reduction in irregular expenditure incurred and other non-compliance related matters at the municipality, and no matters being reported for Durban Marine Theme Park. However ICC did regress as a result of supply chain management non- compliance.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The mayor committed to fully implementing the previous year’s commitments, which were:

• to provide oversight and monitor progress made on the implementation and restructuring of the supply chain management processes and polices

• that appropriate disciplinary action would be taken against employees that transacted with the municipality..

The mayor, together with council, MPAC and the audit committee’s oversight of the municipality and its entities should be more effective in ensuring that there is progress on the commitments and action plans tabled by management.


46


47 47 Amajuba District Municipality


48

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

17% 16%

8%

16%21%

31%

5% 7%9%

20011996 2011

84%

410

790

468

036

499

839


20011996 2011

37% 35% 34%

59% 61% 61%

4% 4% 5%

20011996 2011

48% 48% 48%

52% 52% 52%

20011996 2011

41%55%

39%

59%45%

61%

20011996 2011

5,4

4,7

4,4

74% 78%88%

16% 14%7%10% 8% 5%

28 7

05

66 7

85

2001 2011

72%

72%

84%

28%

28%

16%


22%

22%

8%

20%

28%

16%

58%

50%

76%


4%

7%

4%

43%

43%

40%

53%

50%

56%

96%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

92%

2001

1996

2011

2001

1996

2011


Amajuba District

Municipality





49 49

Amajuba District Municipality

Stagnation in audit outcome


Drivers of key controls stagnating

No improvement but regression in addressing risk areas

Implemented


In progress Not implemented New

Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2012-13Unqualified with findings


2010-11Qualified

Senior management Provides limited assurance

Municipal manager Provides limited assurance

Mayor Provides some assurance

Internal audit Provides some assurance

Audit committee Provides some assurance

Municipal council Provides some assurance


Leadership Financial and performance management

Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Financial statements are reviewed by internal

audit and audit committee.

Specific attention is given to objectives,

indicators and targets and ensuring that they

are consistent with the IDP.

Key vacancies are filled in good time.

Clear time frames are set for achieving

recommendations of (internal and external )

audit findings.

Risk assessment is conducted and adequately

monitored.

Accounting officer to develop detailed action plan to address 2012-13 reported matters with specific allocations of responsibility to the role players.

Implementation of consequences as part of the performance management process.

MPAC Provides some assurance


Improved RegressedStagnant or

little progress


little progress

Instability or vacancies in key positions

Lack of consequences for poor performance

and transgressions



50

Amajuba District Municipality

Current year audit outcomes: ■ Unqualified with findings


The stagnation in the audit outcomes was caused by findings of non-compliance on supply chain management, predetermined objectives, IT and the lack of improvement to the municipality’s financial health. Amajuba Municipality incurred R38,15 million in unauthorised expenditure, which is 6% of the total amount incurred in the province. This was because budget spending and grants were not monitored as there were vacancies at senior management level.

Six key risk areas

Five of the six key risk areas denote the lack of progress due to the municipality not addressing findings on the key risks. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. This resulted in a competitive bidding process not being followed

The usefulness of the performance information has not improved, as it contained indicators that are not well defined and targets that are not measurable, specific and time-bound. This is due to inadequate monitoring, reviews and implementation of internal controls over performance reporting. Human resource management remained a challenge due to delays in filling the municipal manager and chief financial officer positions.

The quality of financial statements remained stagnant, arising from material amendments that were required for opening balances of property, infrastructure and equipment, capital commitments as well as operating expenditure. The municipality has failed to implement formal IT controls with regard to the IT framework, granting of user access, backup and recovery procedures and database security. The municipality disclosed that a material uncertainty existed with regard to its ability to operate in the foreseeable future as it does not have adequate cash reserves backing the unspent conditional grants and it is also operating in a net deficit position. The cost of the financial reporting consultant was R1,92 million (2012: R701 000) and there were no findings on the work performed by the consultants. Our concern relating to the continuing increase in the use of consultants is a lack of planning before the appointment of the consultants and a lack of transfer of skills.


The overall stagnation in the key controls was caused by the leadership taking too long to fill vacant key positions, specifically, that of a municipal manager and subsequently a chief financial officer, resulting in a breakdown of systems of internal controls. Controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation. The accounting officer must exercise oversight regarding financial and performance management and compliance with laws and regulations. Effective human resource management must be implemented to ensure vacant positions are filled with skilled staff in good time. The chief financial officer must regularly prepare a full set of quarterly financial statements for review by internal audit and submission to MPAC and council

The mayor and council should ensure that all key positions are filled within a reasonable time. Additionally, the council needs to take ownership of the financial, performance and compliance aspects within the administration and obtain assurance from management monthly that key matters have been addressed. Council should use the internal audit and audit committee to obtain independent assurance that the reports presented to it are concise and credible. This will enable them to identify areas that require corrective actions.

Impact of key role players on audit outcomes

For improved audit outcomes the assurance levels provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and reported performance. We met with the mayor four times during the financial year and these interactions had a minimal impact on the audit outcomes. The mayor lacked impact on the controls of the auditees as well as the status and impact of the commitments previously given. The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments, reviewing the IDP and monitoring the implementation of consequence management. The mayor committed to providing an action plan to address all the 2012-13 audit findings.


51 51


52

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

21%23%

9%10%

15%

25%

2% 3% 4%

20011996 2011

81%

99 2

16 10

2 77

9

102

161


20011996 2011

41% 41% 38%

55% 54% 57%

4% 5% 5%

20011996 2011

49% 47% 47%

51% 53% 53%

20011996 2011

46%

67%48%

54%

33%52%

20011996 2011

6,2

5,3

4,9

51%67%

84%

47%30%

14%2% 3% 2%

16 9

69

38 2

89

2001 2011

29%

43%

81%

71%

57%

19%


52%

46%

13%

31%

40%

37%

17%

14%

50%


3%

6%

3%

85%

77%

73%

12%

17%

24%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

87%

2001

1996

2011

2001

1996

2011


Dannhauser

Municipality





53 53

Dannhauser Municipality



Drivers of key controls regressed

Regression in addressing risk areas

Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health




Senior management Provides some assurance

Municipal manager Provides some assurance







Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Compliance checklists will be developed and maintained to address key legislation, performance management regulations, other legislation impacting on the entity in terms of financial performance reporting, and King 3 guidelines. Compliance to be monitored by the CFO and compliance officer.

The 2013/14 SDBIP will be reviewed

and amended where necessary to

ensure that all the measures/

indicators and targets meet the smart

principle.

Documented and approved internal policies and procedures exist to address planning, implementation, monitoring and reporting processes, and events pertaining to performance management and reporting.

Mayor and municipal manager to provide commitments based on the 2012-13 audit findings. A detailed action plan will allocate specific responsibilities to the role players, including the training of staff and filling in key vacant positions.




little progress


little progress

Slow response by management.




54

Dannhauser Municipality

Current year audit outcome: ■ Unqualified with findings


The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year and la ack of monitoring of compliance with laws and regulations. This, coupled with vacancies in key posts, contributed to repeat findings on the usefulness of planned performance information and compliance matters.

Six key risk areas

Little or no progress was made to address four of the six key risk areas. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations, which resulted in competitive processes not being followed. The usefulness of performance information has regressed. Inconsistencies between planned and reported indicators and targets and the non-measurability of the planned indicators were identified. This is due to inadequate monitoring, reviews and implementation of internal controls.

Human resource management remained a challenge due to continued vacancies and delays in filling the key positions. The quality of financial statements remained stagnant, arising from material amendments that were required. The municipality has failed to implement formal IT controls with regard to the IT governance framework, granting of user access and backup and recovery procedures. Financial health was stagnant, primarily because of strict budgetary controls and monitoring.

The municipality engaged consultants to assist with financial reporting information because of vacancies. The cost of the consultant was R2,1 million (2011-12: R1,24 million). The work done by the consultant on preparation of the annual financial statements and the asset register did not help to prevent the material adjustments. Our review of the contracts of the consultant revealed that measures to monitor contract performance and delivery are not clearly defined and monitored.


The regression in the key controls was caused by a lack of progress in addressing concerns over internal controls identified in all key areas. The following controls must be strengthened to create a control environment that

supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight regarding predetermined objectives and compliance with key laws and regulations.

• The municipal manager must review and monitor compliance with supply chain management.

• The chief financial officer must prepare regular financial statements and ensure that monthly reconciliations are performed for contractual commitments.

The mayor and council should ensure that all key positions are filled in a timely manner and address deficits in the competencies of staff in key positions. Additionally, council needs to take ownership of the performance reporting and compliance aspects within the administration and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be reviewed by the audit committee and internal audit for accuracy and credibility. This will enable councillors to identify areas that require corrective actions.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements planned performance and compliance. We met with the mayor four times during the financial year and these interactions had limited impact on the audit outcomes. The reason for our assessment is the limited impact of the mayor on the controls as well as the repetitive findings on financial and performance management and on compliance with laws and regulations.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments, to reviewing the integrated development and service delivery and budget implementation plans and monitoring compliance with laws and regulations. The mayor committed to providing an action plan to address all the 2012-13 audit queries and to improve the skills of officials within the administration.


55 55


56

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

27%25%

15%

8%11%

20%

6% 4% 5%

20011996 2011

48%

23 5

30

32 2

77

34 4

42


20011996 2011

39% 35% 36%

57% 60% 59%

4% 5% 5%

20011996 2011

54% 57% 51%

46% 43% 49%

20011996 2011

33% 39% 38%

67% 61% 62%

20011996 2011

6.2

4.7

5.2

42% 47%59%

57% 50%39%

1% 3% 2%

28 2

24 58

099

2001 2011

30%

29%

48%

70%

71%

52%


58%

50%

41%

4%

19%

20%

38%

31%

39%


47%

38%

16%

22%

33%

37%

31%

29%

47%

84%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

59%

2001

1996

2011

2001

1996

2011


eMadlangeni

Municipality





57 57

eMadlangeni Municipality



Drivers of key controls regressing


Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health



2010-11Unqualified with no findings









Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Develop and review on a monthly basis the compliance checklist and report to the audit committee and MPAC on compliance issues. Instances of non-compliance to be followed up.

Action plan to address both internal

and external audit findings still being

implemented.

Risks as per the risk strategy and fraud prevention plan are monitored monthly.

Municipal manager to develop detailed action plan to address 2012-13 audit findings, including training staff and filling vacant posts.




little progress


little progress


Slow response by oversight structures

Slow response by political leadership


58

eMadlangeni Municipality



The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year and in filling vacant positions. This contributed to repeat findings on supply chain management, usefulness and reliability of performance information and compliance matters. Financial and performance reporting disciplines have weakened, which also hindered further improvements.

Six key risk areas

Four of the six key risk areas remained unchanged. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. This resulted in a competitive bidding process not being followed.

The usefulness and reliability of the performance information has not improved due to inadequate monitoring, reviews and implementation of internal controls. This is indicated by the findings on consistency and presentation of planned and reported indicators and targets, as well as incomplete and invalid reported targets. Human resource management remained a challenge due to continued vacancies and the delay in filling the positions of the municipal manager and the chief financial officer.

The quality of financial statements remained stagnant, arising from material amendments that were required. The municipality has failed to implement formal IT controls with regard to the IT framework, backup and recovery procedures and antivirus protection. Financial health reflected findings on underspending of capital budgets and conditional grants. Additionally, the debtor collection period was high, indicating risks of financial sustainability.

The cost of the consultant was R883 000 (2012: R9 221) but this did not prevent material findings on the financial statements. Our concern relating to the continued increase in the use of consultants is a lack of planning before the appointment of the consultants.


The overall regression in the key controls was caused by slow responses by the political leadership, a lack of oversight, instability and vacancies in key positions. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager must exercise oversight of financial and

performance management, compliance with the supply chain management regulations and the framework for managing programme performance information, issued by the National Treasury.

• The municipal manager must implement effective human resource management to ensure vacant positions are filled with skilled staff in good time.

• The chief financial officer must regularly prepare a full set of monthly financial statements for review by internal audit.

Council also needs to take ownership of the financial, performance and compliance aspects within the administration and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be reviewed by the internal audit and the audit committee for accuracy and credibility. This will enable councillors to identify areas that require corrective actions.


For improved audit outcomes the assurance levels should be improved by ensuring stability at the level of municipal manager and senior management. We met with the mayor five times during the financial year and these interactions had little impact on the audit outcomes. The reason for the assessment is the inadequate impact the mayor had on the controls of the auditee as well as the status and impact of the commitments previously given.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments, and to designing and implementing an action plan to address the 2012-13 audit findings.


59


60

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

15% 13%

7%

19%23%

33%

6% 8%11%

20011996 2011

87%

287

659

332

981

363

236


20011996 2011

35% 34% 32%

61% 62% 63%

4% 4% 5%

20011996 2011

47% 47% 48%

53% 53% 52%

20011996 2011

40%54%

38%

60%46%

62%

20011996 2011

5.1

4.6

4.2

82% 83% 92%

5% 7%3%13% 10% 5%

31 8

62

74 3

20

2001 2011

87%

84%

87%

13%

16%

13%


12%

13%

4%

18%

26%

11%

70%

61%

85%


2%

4%

3%

32%

34%

33%

66%

62%

64%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

96%

2001

1996

2011

2001

1996

2011



Newcastle

Municipality

The statistics reflected in these graphics were sourced from the 2011 census (STATS SA) and are not information collated or audited by the

AGSA. The colours of the legends used for these census graphics do not have the same meaning as those used in the rest of this report.


61

61

Newcastle Municipality


Root cause to be addressed



Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2011-12Qualified



Mayor Provides limited assurance

Internal audit Provides limited assurance

Audit committee Provides limited assurance

Municipal council Provides limited assurance



Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

The credibility and reliability of financial, performance and compliance information is a standing item for discussion in all monthly council meetings.

A credible action plan is drawn up to address all internal control deficiencies identified by both internal and external auditors and their recommendations are taken seriously. Progress to be reported to council on a monthly basis.

Key vacant senior manager positions to be filled.

Monthly reconciliations and reviews are performed (asset register and creditors reconciliation).

An adequate risk assessment is conducted and regularly monitored to address critical matters relating to financial reporting.




little progress


little progress

Lack of consequences for poor performance and transgression

2012-13Qualified

2010-11Qualified


Slow response from oversight structures


62

Newcastle Municipality Current year audit outcomes: ■ Qualified

Stagnation in audit outcomes

The stagnation in the audit outcomes was caused by the municipality failing to address previous qualification areas and provide supporting documentation for adjusting entries processed during the year. This was caused by a complete breakdown in the system of internal controls around recording transactions, daily and monthly reconciliations, document management and a lack of consequences for poor performance by staff.

Six key risk areas

Of the six key risk areas, five remained unchanged and one regressed. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. This resulted in a competitive bidding process not being followed.

The usefulness and reliability of the performance information has remained good due to adequate monitoring, reviews and implementation of internal controls over performance management. Human resource management remained a challenge due to a lack of performance management.

The quality of financial statements remained stagnant, arising from repeat qualifications on assets, work in-progress, investments and VAT receivable. There has also been no improvement on IT findings, with the following findings being the most concerning: lack of an IT steering committee, lack of review of audit logs, lack of access user management procedure, developer’s access to the production environment and lack of logs for program changes on the financial system.

Financial health revealed findings as the capital budget and conditional grants were underspent and the municipality incurred a net deficit of R287 million, due to a debt impairment of R279 million and a share of deficit of the investment in associate. The debt impairment is considered to be a once-off impairment and is not expected to cause deficits year on year. Newcastle municipality again engaged a consultant to assist with financial reporting because of lack of skills. The cost of the consultants was R7,49 million (2011-12: R10,77 million). The work done by the consultant in preparing the financial statements did not help to prevent the qualification. Our concern relating to the continued use of consultants is a lack of transfer of skills.


The overall regression in the key controls can be directly attributed to the slow response from political leadership and other oversight bodies and the lack of consequences for poor performance. The following controls must be strengthened to create a control environment that supports reliable financial management and compliance with legislation: • The municipal manager should create and monitor an environment that

promotes the importance of internal controls in financial reporting, compliance with the municipal supply chain management regulations and information technology.

• The municipal manager must implement effective human resource management to ensure that the performance of officials is monitored and any non-performance identified is corrected.

• The municipal manager must develop and monitor a document management system to ensure that all transactions are supported.

The mayor and council should address the root causes by ensuring that deficits in the competencies of staff as well consequences for transgressions are implemented. Additionally, council and MPAC need to take ownership of the financial reporting and compliance aspects within the administration and obtain monthly assurance from management that key matters have been addressed.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and reported performance. We met with the mayor four times during the financial year and these interactions had no impact on the audit outcomes. The reason for our assessment is the lack of the mayor’s impact on the controls as well as the repetitive findings on financial management and compliance with laws and regulations.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments, to improving on the IT steering committee and performance of risk assessment and to filling key vacant positions with skilled staff.


63

63


64

uThukela Water (Pty) LTD



Drivers of key controls improving

Stagnation in addressing some risk areas

Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health





Chief Executive officer Provides some assurance

Accounting Authority

(Board of Directors) Provides some assurance

Internal audit Provides assurance

Audit committee Provides assurance

Board Chairperson Provides some assurance



Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

The internal audit unit has monitored and reviewed the annual financial statements, leading to improved quality of the annual financial statements.

The IT strategic plan has been developed and approved for implementation.



little progress


little progress

Slow response by managementPerformance to be cascaded to all staff members after the finalisation of the restructuring.

Board to provide commitments based on new action plan.



65 65

uThukela Water (Pty) LTD



The stagnation in the audit outcomes was caused by the municipal entity receiving findings of non-compliance on the preparation of the financial statements as there were material amendments that arose during the audit process. This is the only obstacle that is preventing the entity from obtaining the status of a clean audit outcome.

Six key risk areas

Four of the key risk areas remained stagnant. There were no findings on supply chain management, performance information and human resource management as leadership has implemented sound controls in these areas. The quality of financial statements remains a concern as material adjustments were required on property, infrastructure and equipment, assets held for transfer and debtors. The entity has implemented formal controls over IT, resulting in an improvement. Financial health has deteriorated, with a marginal increase in the creditors’ payment period as well as the debtors’ collection period. This was partly caused by the dispute between the entity and the two district municipalities (Amajuba and uMzinyathi), regarding money owed by these municipalities to the uThukela Water (Pty) Ltd for services rendered on their behalf, which in turn affected its ability to pay its creditors within a reasonable time.

uThukela Water (Pty) Ltd engaged consultants to assist with financial reporting, to prepare the fixed asset register and act as a chief financial officer, due to a vacancy in the position of a chief financial officer. The cost of consultants was R4,5 million (2011-12: R3,6 million). The work done by the consultant on financial statements did not help to prevent the material findings as the financial statements were subject to material misstatements. Our concern relating to the continued increase in the use of consultants is a lack of planning before the appointment of consultants as well as the lack of the transfer of skills.


The overall improvement in the key controls was caused by the attention in addressing financial management and governance control weaknesses.

The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The chief executive officer must exercise oversight of financial management, reporting and compliance with laws and regulations.

• The chief financial officer must regularly prepare a full set of financial statements for review by internal audit.

The audit committee and internal audit should review all critical accounting areas to ensure that they are correctly applied. Additionally, the board needs to take ownership of the financial reporting and financial management aspects within the entity and obtain monthly assurance from management that key matters have been addressed. Decisive actions are required by leadership to ensure that key positions are filled in good time.


For improved audit outcomes the assurance levels should be improved by ensuring stability. This should be done by implementing the recommendations of external audit and affording internal audit an opportunity to review the annual financial statements regularly.

We met with the board chairperson four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is the impact the board had on the controls of the auditee, especially the effectiveness of the audit committee. The entity did not implement all the commitments, as some became irrelevant due to a restructuring programme for the entity. Management and the board of directors should strengthen budget management and monitoring with the aim of improving the financial health of the entity.


66


67 67

Harry Gwala District


68

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


Education Labour

22%24%

10%6%

10%

19%

3% 4% 6%

20011996 2011

63%

385

063 45

2 23

1

461

419


20011996 2011

45% 42% 38%

50% 53% 57%

5% 5% 5%

20011996 2011

45% 45% 46%

55% 55% 54%

20011996 2011

51% 57%37%

49% 43%63%

20011996 2011

5,0

4,3

4,0

25% 31%41%

71% 65%55%

4% 4% 4%

18 9

52

45 9

03

2001 2011

14%

33%

63%

86%

67%

37%


68%

49%

35%

11%

23%

32%

21%

28%

33%


10%

10%

3%

79%

67%

69%

11%

23%

28%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

65%

2001

1996

2011

2001

1996

2011


Harry Gwala

District

Municipality





69 69

Harry Gwala District Municipality and its entity

Unqualified with

no findings

Unqualified

with findingsQualified with findings

Improvementin audit outcome


Improvement in drivers of key controls

Adverse/disclaimed

with findings

Outstanding

audits

Stagnation in addressing risk areas

Implemented



100%100% 100%

2012-13 2011-12 2010-11

100%

50%

50%

50%

100%

100%

100%

50%

50%

50%

MPAC

Municipal council

Audit committee

Internal audit

Mayor

Municipal manager

Senior management

New


Governance


Provides

assurance

Provides some

assurance

Provides limited/

no assuranceVacancy

Not

established

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Appointment of shared internal audit and audit committee.

Key vacancies to be filled.

Quarterly reporting of performance information and review by oversight

structures.

Irregular investigation completed.

Accounting polices and new generally recognised accounting practice standard implemented.

Improved audit outcomes.

Parent municipality to improve oversight of entity and develop action

plans


Improved Regressed

Stagnant or

little progress







little progress

Vacancies in key positions

A major challenge at of the auditees50%

Slow responses by political leadership




100 % 100%

50%

50%

100%100%

50%

50%


70

Harry Gwala District Municipality and its entity

Current year audit outcomes:

■ Harry Gwala District Municipality – Unqualified with findings

■ Sisonke Ecomonic Development Agency (Pty) Ltd - Unqualified with findings


The improvement in the audit outcomes was caused by the district municipality being able to address the previous qualification on property, infrastructure and equipment and irregular expenditure. The audit outcomes for 2010-2012 represent the opinions of Harry Gwala District Municipality only. However, in 2012-13 the outcomes include Harry Gwala District Municipality and the Sisonke Economic Development Agency, a new municipal entity, which traded during the year under review. The improvement in fundamental financial controls relating to asset management has been a primary factor contributing to the positive movement in the outcome for the district municipality. The district municipality incurred R417,70 million in irregular expenditure and R159,2 million in unauthorised expenditure, which is 23%% and 26% respectively of the total amount incurred in the province,.

Six key risk areas

Overall the six key risk areas remained stagnant. For the purposes of the movements in the risk areas, the entity is excluded as it did not trade during 2011-12. The municipal manager did not implement and monitor comprehensive supply chain management compliance checklists to prevent irregular expenditure. Additionally, awards were made to persons in the service of other institutions who did not submit a declaration of their interest, bid procedures were not in accordance with supply chain management legislation, tax clearance certificates were not in order and contracts were amended without council approval.

The usefulness and reliability of the information contained in the performance report was stagnant due to inadequate monitoring reviews and implementation of internal controls for the district municipality. The entity did not submit the performance information in time for audit purposes. Human resource management findings at the entity were mainly due to vacant positions and lack of policies and procedures. The quality of the financial statements remained stagnant arising from material amendments to

property, infrastructure and equipment, revenue and expenditure and disclosures. IT management is a concern as the district municipality and the entity did not implement the IT governance framework. The district municipality disclosed that a material uncertainty existed with regard to its ability to operate in the foreseeable future as its current liabilities exceeded its current assets, resulting in financial indicators remaining stagnant. Financial indicators displayed an overspending of the operating budget, excessive creditor repayment periods and a high percentage of debt impairment.

The cost of the financial reporting consultant for the district municipality was R1,8 million (2011-12: R3,2 million), the appointment of which contributed to improving the outcome. Our concerns relate to project management and the continued assistance sought from consultants, including the lack of transfer of skills.


The overall improvement in the key controls was caused by an intervention of leadership and governance structures to address the previous year’s qualification on assets at the district municipality. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation for the group:

• The municipal manager must exercise oversight of proper record management, preparation of financial statements and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial and performance reporting. Steps should also be taken to ensure that performance information for the municipal entity is submitted in good time

• The municipal manager must review and monitor compliance with applicable laws and regulations and design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information


71 71

• The chief financial officer must prepare accurate and complete financial statements and the municipal council must monitor and exercise oversight by holding the audit committee and municipal public accounts committee accountable for reporting on progress to address action plans regarding financial and performance management

Council needs to take ownership of the financial, performance and compliance aspects within the administration and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions. The vacancies in the internal audit unit, audit committee and key management posts of the municipal entity need to be prioritised. Additionally, skills and competencies of staff in the group need to be improved through continuous and focused training interventions.


For improved audit outcomes the assurance levels provided by the mayor, municipal manager, and senior management and governance structures should be improved. The internal audit, audit committee and MPAC should focus on improving the quality of financial statements, compliance with laws and regulations and performance reporting. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. Although the audit outcome has improved, commitments relating to procurement, IT and the usefulness and reliability of the annual performance report were not addressed.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council and MPAC committed to fully implementing the previous years’ commitment going forward. In addition, the district municipality will improve oversight of the entity including a shared internal audit and audit committee, as well as develop an action plan to address all findings in the audit report for the group.

.


72

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

12%10%

4%

11%

18%

28%

6%8%

11%

20011996 2011

75%

34 7

31

56 5

28

65 9

81


20011996 2011

35% 31% 31%

62% 66% 67%

3% 3% 3%

20011996 2011

48% 50% 49%

52% 50% 51%

20011996 2011

23%41%

29%

77%59%

71%

20011996 2011

3,9

2,7 3,

2

48%68%

85%

34%

21%

9%18% 11% 6%

29 3

25

44 0

23

2001 2011

34%

50%

75%

66%

50%

25%


15%

4%

2%

22%

22%

23%

63%

74%

75%


18%

15%

3%

33%

16%

24%

49%

69%

73%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

98%

2001

1996

2011

2001

1996

2011


Greater Kokstad

Municipality

The statistics reflected in these graphics were sourced from the 2011 census (STATS SA) and are not information collated or

audited by the AGSA. The colours of the legends used for these census graphics do not have the same meaning as those used in

the rest of this report.



73

Greater Kokstad Municipality

Improvement in audit outcome




Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2011-12Qualified









Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Adequate reviews of supply chain management, asset management and

disclosures prior to submission of annual financial statements.

Compliance checklists being developed and implemented to

monitor internal control over regulations and performance

information.

Financial and performance reports are being reviewed by internal audit, audit committee and MPAC quarterly.

A substantial number of commitments have been honoured, which improved

the audit outcomes.

Turnaround strategy being implemented to improve financial

sustainability.




little progress


little progress


Lack of consequences for poor performance and transgressions





74

Greater Kokstad Municipality



The improvement in the audit outcomes was caused by the municipality being able to address the previous qualification on property, infrastructure and equipment and investment property. Compliance findings were still noted on the quality of financial statements and performance reports, supply chain management, asset management and waste management. The improvement in fundamental financial controls such as basic reconciliations and checks has been a primary factor contributing to the positive movement in the outcome.

Six key risk areas

Overall, four of the six key risk areas remained stagnant. The status of supply chain management remained stagnant from the previous year as management did not implement and monitor comprehensive supply chain management compliance checklists to prevent irregular expenditure. Additionally three price quotations were not always obtained and awards were made to persons in the service of other institutions who did not submit a declaration of their interest.

The usefulness and reliability of the information contained in the performance report was stagnant due to inadequate monitoring reviews and implementation of internal controls. Additionally, the municipality did not meet its performance targets due to an inadequate mid-year review of realistic and achievable targets at year-end. Progress has been made in addressing human resource management as all positions were filled. The quality of the financial statements remained stagnant, arising from material amendments to property, infrastructure and equipment, investment property, commitments, irregular expenditure and the disclosure of unauthorised expenditure.

IT management is a concern as the municipality did not have a fully functional and effective IT governance framework. The municipality disclosed that a material uncertainty existed with regard to its ability to operate in the foreseeable future as its current liabilities exceeded its current assets, resulting in material financial indicator findings. The cost of the financial reporting consultant was R3,2 million (2011-12: R3,9 million), the appointment of which contributed to improving the outcome. Our concerns

relate to project management and the continued assistance sought from consultants, including the lack of transfer of skills.

Key controls

The overall regression in the key controls was caused by the slow response of oversight by leadership, no consequence management and a lack of response by management to address supply chain management and performance information issues. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight of the usefulness and reliability of predetermined objectives and compliance with key laws and regulations.

• The chief financial officer must prepare regular financial statements and ensure that monthly reconciliations are performed to support accurate and complete financial reporting.

• The IT steering committee should be formed and report to management and audit committee to monitor their outputs.

The municipality should enhance the skills of management through structured training courses. The councillors and members of MPAC need to be more vigorous and persistent in their quest for credible and reliable information and should hold officials accountable for non-performance.


For improved audit outcomes the level of assurance provided by leadership, senior management and governance structures should improve. As the internal audit and audit committee only provided some assurance, they should focus on improving the quality of financial statements and performance reporting. We met with the mayor four times during the financial year and these interactions had a positive impact on the audit outcomes. The mayor continuously exercised oversight of the action plan to address the previous year’s qualification items.

The assurance provided through oversight of the council and MPAC should be improved. The municipal council committed to fully implementing the previous years’ commitments going forward. In addition, the mayor committed to a financial turnaround strategy to be implemented for 2013-14.


75 75


76

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

34%31%

14%

6% 7%

18%

1% 3% 4%

20011996 2011

50%94 5

11

107

558

100

548


20011996 2011

47% 44% 40%

48% 51% 55%

5% 5% 5%

20011996 2011

44% 45% 46%

56% 55% 54%

20011996 2011

69% 67%54%

31% 33%46%

20011996 2011

5.4

5.0

4.0

18% 19%30%

81% 80%69%

1% 1% 1%

15 4

42 39

608

2001 2011

15%

27%

50%

85%

73%

50%


68%

50%

42%

16%

27%

26%

16%

22%

32%


12%

10%

4%

85%

77%

78%

3%

13%

18%

96%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

58%

2001

1996

2011

2001

1996

2011



Ingwe

Municipality



77 77

Ingwe Municipality



Drivers of key controls are regressing

No progress made in addressing risk areas

Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Internal controls to monitor key applicable laws and regulations

Chief financial officer to be appointed

Information technology steering committee is in place

Compliance checklist being developed

Human resource policies being workshopped with staff

Monthly management meeting held to monitor performance

Quarterly portfolio of evidence is being maintained

Information technology officer appointed

Mayor to provide commitments based on 2012-13 audit outcomes




little progress


little progress







78

Ingwe Municipality



The stagnation in the audit outcome was caused by the slow response of leadership in addressing the matters reported in the previous year. Additionally, the skills and competencies of financial and performance information were not at a desired level. This, coupled with vacancies in key posts, contributed to repeat findings on the usefulness and reliability of performance information and compliance matters.

Six key risk areas

Little or no progress was made to address four of the six key risk areas. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. Compliance deviations were noted as awards were made to persons in other state institutions. Procurement without three written quotations and from suppliers not on the database, no tax clearance certificates were provided and bid committees were not duly composed. The usefulness and reliability of the performance information has not improved due to inadequate monitoring, reviews and implementation of internal controls. Additionally, the annual performance report did not include measures taken to improve performance. Human resource management remained a challenge due to vacancies in key posts and the lack of skills in performance management and financial reporting. The quality of financial statements remained stagnant, arising from material amendments that were required for impairment on debtors, capital commitment disclosures, grant revenue incorrectly reflected in the cash flow statement, as well as irregular and unauthorised expenditure. The municipality has failed to implement formal IT controls with regard to formal access requests for documentation, granting user access, backup and recovery procedures and antivirus protection. Financial health revealed an improvement, primarily because of better budgetary controls and monitoring. The cost of the consultant was R418 000 (2012: R286 000) but this did not prevent material findings on the financial statements. Our concern relating to the continued increase in the use of consultants is a lack of transfer of skills.


The overall regression in key controls was caused by a slow response from the political leadership and oversight structures, coupled with the vacancy of the municipal manager for longer than six months. Controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation. This includes the municipal council holding the audit committee and MPAC accountable for reporting on action plans and the municipal manager exercising oversight regarding financial and performance management and reporting. The municipal manager must also review and monitor compliance with applicable laws and regulations and design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information

The mayor and council should ensure that all key positions are filled in good time and address deficits in the competencies of staff in key positions. Additionally, council needs to take ownership of the financial, performance and compliance aspects within the administration and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions.

Impact of key role player on audit outcomes

For improved audit outcomes the assurance levels provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and reported performance. We met with the mayor four times during the financial year and these interactions had little impact on the audit outcomes and the controls. There were repeat findings on financial and performance management and on compliance with laws and regulations. The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments, to improve on the IT steering committee.


79


80

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

20% 20%

8%10%

13%

22%

9%7%

9%

20011996 2011

77%

11 9

30

11 8

48 12

898


20011996 2011

31% 33% 25%

64% 62% 70%

5% 5% 5%

20011996 2011

52% 49% 52%

48% 51% 48%

20011996 2011

10%25%

17%

90%75%

83%

20011996 2011

3.2 3.0 4.

8 57% 62% 69%

41% 37% 22%

2% 1% 9%

26 2

18 92

849

2001 2011

49%

46%

77%

51%

54%

23%


24%

17%

16%

3%

18%

7%

73%

65%

77%


36%

31%

14%

63%

61%

64%

1%

8%

22%

86%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

84%

2001

1996

2011

2001

1996

2011



Kwa Sani

Municipality



81 81

Kwa Sani Municipality




Little progress made in addressing risk areas

Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health












Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Detailed action plan will be monitored

closely.

Policies will be reviewed.

Implementation of controls to improve

monthly reporting.

Upgrade information technology

system to include monthly reporting

Organisational organogram complete and key appointments filled.

Mayor to provide commitments based on 2012-13 audit outcomes.




little progress


little progress





82

Kwa Sani Municipality



The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year. Additionally, key officials lacked skills and competencies and financial and performance information reporting were not at a desired level. This contributed to repeat findings on the quality of the financial statements and the usefulness and reliability of performance information and compliance matters.

Six key risk areas

Little or no progress was made to address all six key risk areas. The status of supply chain management remained unsatisfactory and included repeat findings, as awards were made to persons in the service of other state institutions and goods and services were procured without obtaining three price quotations. The quality of the performance reporting has not improved due to findings on the consistency and measurability of the performance information. The quality of the financial statements remained stagnant arising from material amendments that were again required. The IT governance framework is of concern as the municipality did not have a fully functional and effective disaster recovery and back up policy, security management procedures, user access controls and change management policies in place.

The financial health findings revealed that creditor and debtor payment intervals had increased. The municipality did not achieve its targets with regard to roads infrastructure due to underspending on conditional grants. The cost of the financial reporting consultant was R1,9 million (2011-12: R1,1 million) but this did not prevent material findings on the financial statements. Our concerns relating to the continued assistance sought from consultants include their ineffective management, consultants being appointed for requirements that can be addressed by internal resources, over dependency on consultants and the lack of transfer of skills.


The overall stagnation in financial and performance reporting was caused by the slow response by oversight structures and key officials lacking appropriate competencies. A lack of financial management training with respect to preparing accurate financial statements was also noted. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and council must exercise effective oversight regarding the usefulness of predetermined objectives and compliance with key laws and regulations. They should also ensure that the IT governance framework and related IT policies are implemented and ensure that adequate system controls are in place.

• The chief financial officer must prepare regular and adequately supported financial statements, review monthly reconciliations and ensure that the financial statement submitted is free of material misstatements.

The municipality should enhance the skills of members of management through attendance of structured training courses. Council and members of MPAC need to be more vigorous and persistent in their quest for credible and reliable information.


For improved audit outcomes the level of assurance provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the audit outcomes and also increase their assurance levels. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes as commitments relating to financial statements and the annual performance report had not been adequately addressed. The assurance provided through oversight of the council and MPAC should be improved.


83 83


84

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

30% 29%

16%

6%10%

20%

2% 4% 4%

20011996 2011

54%

78 5

42 101

959

101

691


20011996 2011

44% 41% 38%

51% 54% 57%

5% 5% 5%

20011996 2011

45% 45% 46%

55% 55% 54%

20011996 2011

50%62%

36%

50%38%

64%

20011996 2011

5.1

4.6

4.2

28% 23% 30%

65% 71% 61%

7% 6% 9%

19 4

82

41 0

51

2001 2011

13%

26%

54%

87%

74%

46%


69%

70%

34%

13%

18%

44%

18%

12%

22%


9%

12%

3%

80%

72%

75%

11%

16%

22%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

66%

2001

1996

2011

2001

1996

2011



Ubuhlebezwe

Municipality



85 85

Ubuhlebezwe Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health



Municipal manager Provides assurance

Mayor Provides assurance



Municipal council Provides assurance



Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

None

The appointment of the information technology officer to adopt the

corporate governance of information and communication technology policy

framework to address information technology issues

The municipality’s appointment of a full time performance management system manager and chief financial

officer

Monthly meetings by management on the credibility and reliability of

information across the financial and predetermined objectives were critical

in clearing all issues

Mayor and accounting officer have committed to monitoring the implementation of good practice within the municipality.

Council involvement to ensure service delivery.

MPAC Provides assurance



little progress


little progress





86

Ubuhlebezwe Municipality

Current year audit outcome: ■ Unqualified with no findings


The improvement in the audit outcome was caused by the appointment of skilled personnel to produce annual and interim financial statements that are free from material misstatement and improve on the quality of performance reporting. There was continuous involvement by the mayor and the accounting officer in addressing the external audit and internal audit areas of concern at monthly management meetings.

Six key risk areas

Overall, three of the six key risk areas had no findings. Progress has been made in addressing the key risk areas, most notably in the areas of supply chain management, quality of the submitted financial statements and performance information. Human resource management revealed no findings as all positions were filled per the mayor’s commitments. Management did not implement IT controls with regard to security awareness processes, review of access and login violations and processes to manage security settings. This resulted in a regression on IT.

Financial health was stagnant as the municipality did not fully spend capital budgets and conditional grants, as planned. Additionally, debtor and creditor settlement periods exceeded acceptable norms. Consultants were again engaged to assist with financial and performance reporting because leadership wanted to address the audit findings on assets and performance information highlighted in the prior year. The cost of the consultants was R2,1 million (2011-12: R345 000). Our review of the contracts of the consultants revealed the lack of transfer of skills, resulting in continued dependence on consultants.

Key controls

The overall improvement in the key controls was caused by improved leadership controls and commitments by the mayor, governance structures and management towards the audit to ensure that all areas of concern were addressed.

The IT systems and governance controls should be strengthened to create a control environment that supports reliable financial and performance

reporting. The municipality should appoint a permanent IT officer to address issues around IT systems and to enhance the IT governance framework.


To maintain the improved audit outcomes the assurance levels provided at the level of the municipal manager and senior management should be maintained and improved, respectively. These levels should implement the recommendations of internal audit and appropriately direct the work of the audit committee. We met with the mayor four times during the financial year and these interactions had a significant impact on the audit outcome. The reason for our assessment is the improvement in the audit outcome.

The assurance provided through the oversight of the municipal council and the MPAC should be maintained. The council committed to fully implementing the previous year’s commitments to address performance reporting issues; asset management and human resource vacancies for key posts. The following new commitments were also made:

Steps will be taken to ensure stability in key posts.

Council involvement to ensure that technical projects are on target will be maintained to ensure improved service delivery.


87 87


88

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

17%

22%

6%4%

7%

15%

3% 4% 5%

20011996 2011

65%

165

349

174

338

180

302


20011996 2011

48% 45% 41%

47% 49% 54%

5% 6% 5%

20011996 2011

44% 44% 45%

56% 56% 55%

20011996 2011

65% 68%

46%

35% 32%

54%

20011996 2011

5.2

4.8

4.1

16% 20%33%

82% 78%66%

2% 2% 1%

14 1

77

34 1

98

2001 2011

5%

31%

65%

95%

69%

35%


86%

64%

47%

5%

25%

36%

9%

11%

17%


7%

8%

3%

91%

86%

85%

2%

6%

12%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

53%

2001

1996

2011

2001

1996

2011



uMzimkhulu

Municipality



89 89

uMzimkhulu Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Senior managers are attending a training programme.

Assistance was obtained from provincial treasury to identify gaps in

information technology controls.

Majority of commitments accepted and implemented.

Annual financial statement prepared and reviewed by internal audit, audit

committee and municipal public accounts committee.

Management commitment to sustain clean audit.




little progress


little progress



None


90

uMzimkhulu Municipality



The improvement in the audit outcome was caused by the production of the annual and interim financial statements that were free from material misstatement and improved controls on the reliability of performance information. There was continuous involvement by the mayor, council and the management team at every monthly meeting to address the external audit and internal audit areas of concern.

Six key risk areas

Three of the six key risk areas had no findings. Progress has been made in addressing the key risk areas, most notably in the areas of supply chain management, quality of the submitted financial statements and performance information. Human resource management revealed no findings as all positions were filled per the mayoral commitments. The quality of financial reporting has improved due to dedicated and disciplined monthly reporting and reconciliation procedures. The municipality has failed to implement IT controls with regard to security awareness processes; review of access and login violations and processes to manage security settings. Financial health was stagnant as the municipality did not achieve its service delivery targets. The capital budget was also underspent. The provision for doubtful debts was R2,96 million as a result of the annual review of outstanding debtors which indicated low collection levels. The services of consultants were again engaged in connection with the preparation of performance information at a cost of R739 000 (2012: R945 000) to ensure that all the previous year’s issues were resolved. Our review of the contract of the consultants revealed a lack of transfer of skills, resulting in continued dependence on consultants.

Key controls

The following controls must be strengthened:

The municipal manager and municipal council must establish an IT governance framework that supports and enables the business, delivers value and improves performance.

• The municipal manager must design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information.

• The council must monitor service delivery targets and improve debtor recovery.


The assurance levels provided at the level of the municipal manager and senior management should be maintained and improved, respectively. These levels should implement the recommendations of internal audit and appropriately direct the work of the audit committee. We met with the mayor four times during the financial year and these interactions had a significant impact on the audit outcome. The reason for our assessment is the improvement in the audit outcome.

The assurance provided through the oversight of the municipal council and the MPAC should be maintained. The council committed to fully implementing the previous year’s commitments to address training programmes for senior managers and obtain assistance from provincial treasury to identify the gaps in the IT controls. A new commitment was also made by management to sustain a clean audit.


91 91

Ilembe District


92

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

45% 44%

26%

9% 11%

22%

2% 4% 5%

20011996 2011

73%

544

739

560

389

606

809


20011996 2011

37% 37% 34%

58% 58% 61%

5% 5% 5%

20011996 2011

47% 47% 48%

53% 53% 52%

20011996 2011

40%48%

31%

60%52%

69%

20011996 2011

4,9

4,5

3,8 44% 47%

65%

46% 42%

26%

10% 11% 9%

26 1

61

61 5

87

2001 2011

41%

49%

73%

59%

51%

27%


59%

48%

19%

9%

19%

37%

32%

33%

44%


24%

18%

6%

52%

49%

50%

24%

33%

44%

94%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

81%

2001

1996

2011

2001

1996

2011


Ilembe District

Municipality





93 93

Ilembe District Municipality and its entity

Unqualified

with findings

Stagnationin audit outcome




Implemented



100% 100% 100%

2012-13 2011-12 2010-11

100%

50%

50%

100%

100%

50%

50%

100%

100%

MPAC

Municipal council

Audit committee

Internal audit

Mayor

Municipal manager

Senior management

New


Governance


Provides

assurance

Provides some

assurance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Action plan to locate all water meters.

Completed assets to be updated on monthly asset register and reconcile to general ledger.

Reconciliation of daily cash collection to cash on hand.

Key vacancies to be filled.

Substantial commitments to be addressed.

Improvement in outcomes of information technology controls

risk manager appointed.

New accounting standards implemented.

Action plan to be developed to address 2012-13 outcomes by the

municipal manager.


Improved Regressed

Stagnant or

little progress


Information technology controls Financial

health




No

findingsFindings

Material

findings Improved RegressedStagnant or

little progress


A major challenge at of the

auditees

100%

Lack of consequence for poor

performance and transgressions


auditees100%

50%

50%

100%

50%

50%

50%

50%

50%

50%



auditees50%

100%


94

Ilembe District Municipality and its entity

Current year audit outcome: ■ Ilembe District Municipality: Unqualified with findings ■ Ilembe Management Development Enterprise (PTY) Ltd: Unqualified with findings


The stagnation in the audit outcome was caused by a slow response from the political leadership in addressing the matters reported in the prior year. Compliance deviations were noted with regard to revenue, expenditure and asset management at the district municipality and on expenditure at the entity.

Six key risk areas

Five of the six risk areas revealed little progress and one regressed. These included findings on supply chain management, mainly as a result of contracts awarded to suppliers in contravention of supply chain management regulations. The quality of the financial statements remained stagnant, arising from material corrections again being required. The municipality and its entity maintained their no findings on performance information. While an IT governance framework has been implemented, the remaining IT controls need to be addressed. Human resource management improved at the municipality, as all positions were filled, but the key positions of chief executive officer and chief financial officer at the entity are in acting capacity for longer than six months. Financial health indicators reflected that there was a material uncertainty as to the municipal entity’s ability to continue as a going concern. Consultants costs to assist with financial reporting for the Ilembe District Municipality was R1,16 million (2011-12: R2,52 million), however material misstatements were still not prevented. Our concerns relating to the continued assistance sought from consultants include the lack of transfer of skills, and the fact that internal capacity is available in this regard.


The overall regression of the key controls was caused by vacancies in key positions at the entity; the slow response of political leadership, the municipal manager and chief financial officer; and the lack of consequence for poor performance and transgressions for the group. Controls must be strengthened to create a control environment that supports reliable financial management and compliance with legislation. The municipal manager must

exercise oversight of the preparation of financial statements and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial reporting, including asset management. Compliance with applicable laws and regulations must be reviewed and monitored and formal controls over IT systems must be designed and implemented to ensure the protection of information. The board of the entity must fill all key positions.

The chief financial officer must prepare regular credible financial statements and ensure that monthly reconciliations are performed. In addition, an effective debt collection system must be implemented to address the risk of debt impairment and debt write off.

Council and the board need to take ownership of the financial, performance and compliance aspects within the administration and obtain monthly assurance from management that key matters have been addressed. The reports presented to council and the board should be concise and credible. This will enable councillors to identify areas that require corrective action.


For improved audit outcomes the assurance levels of the mayor, senior management, council and the board should be improved. This should be done by implementing the recommendations of internal audit and directing the work of the audit committee towards evaluating the credibility and reliability of financial information. We met with the mayor four times during the financial year and these interactions had little impact on the audit outcomes as commitments relating to procurement, revenue and asset management had not been adequately addressed. The assurance from internal audit needs to improve for the entity and proactive and focused internal audits of financial, performance and compliance results are encouraged for the group.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council and MPAC have committed to fully implementing the previous commitments going forward. In addition, commitments have been made to prepare a new action plan to address all the 2012-13 audit findings to improve the audit outcome.


95


96

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic Services


EducationLabour

24%21%

10%

16%19%

28%

4% 6%9%

20011996 2011

93%143

758

167

805

231

187


20011996 2011

29% 30% 29%

67% 66% 67%

4% 4% 4%

20011996 2011

50% 50% 49%

50% 50% 51%

20011996 2011

20%34%

25%

80%66%

75%

20011996 2011

3.6

3.6

3.2

68% 64%84%

16%15%

5%16% 21%

11%

41 0

52

87 7

84

2001 2011

69%

75%

93%

31%

25%

7%


14%

28%

44%

28%

24%

6%

58%

48%

50%


17%

13%

5%

38%

41%

48%

45%

46%

47%

95%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

56%

2001

1996

2011

2001

1996

2011



KwaDukuza

Municipality



97

KwaDukuza Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health












Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Proper record management over supply chain management, pre-

determined objectives, contracts and commitments not achieved

Annual performance report not aligned to test usefulness

Detailed action plan will be monitored

closely

Staff will be appointed with at least

the minimum competencies

Information technology issues will be

resolved

The organogram of the municipality has been revised





little progress


little progress



and transgressions



98

KwaDukuza Municipality



The lack of improvement in the audit outcome was caused by the slow response of leadership in addressing the matters reported in the previous year. Also, material amendments were required to the financial statements on commitments and irregular expenditure incorrectly condoned, and there were repeat performance information findings. Various compliance deviations were noted with regard to financial misconduct, transfers of conditional grants and the DoRA.

Six key risk areas

Overall five of the six risk areas revealed little progress. These include repeat findings on supply chain management due to inadequate records management. There was a lack of internal controls relating to the verifiability of measures taken to improve performance as well as the reliability of reported performance. Additional weaknesses were noted on non-compliance with minimum competency requirements and performance management for human resource management, which regressed. The lack of a proper commitments register resulted in material misstatements of the financial statements. Poor record management and the lack of review resulted in irregular expenditure being incurred. The remaining IT controls, including IT continuity, security settings and user access management, need to be addressed.

Financial health revealed repeat findings on capital budgets and conditional grants being unspent, which impacted on the achievement of planned performance targets. Consultants were again engaged to assist with financial and performance reporting because leadership wanted to address the audit findings on assets and performance information highlighted in the previous year. The cost of the consultants was R3,5 million (2011-12: R1,6 million).


The overall deterioration in the key controls was caused by leadership’s slow response and oversight, the lack of consequence management and limited

progress being made to address governance weaknesses. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight of the quality of predetermined objectives.

• The municipal manager must implement effective human resource management, appoint skilled officials and monitor performance.

• A proper record management system, coupled with standard operating policies and procedures, should be implemented for the maintenance of tender and contract documents and to support the reliability of reported performance.

The political and oversight structures in the municipality must take the commitments made in the dashboard reports more seriously and report monthly to council on progress. Additionally, consequence management should follow for officials that transgress delegated duties.


The assurance levels should be improved by implementing the recommendations of internal audit and directing the work of the audit committee towards evaluating reported performance. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is that commitments relating to procurement and the usefulness of the annual performance report had not been addressed. The senior management and municipal manager were assessed as providing limited assurance. There is no improvement on predetermined objectives and addressing the misstatements commitments. While the council, the MPAC, the internal audit unit and the audit committee have provided some assurance, the usefulness of the annual performance report as well as compliance requires increased audit coverage.


99 99


100

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

20% 19%

10%11%

20%

31%

3% 4% 5%

20011996 2011

83%

107

070

127

327

138

078


20011996 2011

36% 35% 33%

61% 61% 63%

3% 4% 4%

20011996 2011

47% 47% 47%

53% 53% 53%

20011996 2011

33%45%

29%

67%55%

71%

20011996 2011

4.5

4.3

3.5

53% 55% 59%

29% 33% 29%

18% 12% 12%

22 6

68

44 0

23

2001 2011

45%

63%

83%

55%

37%

17%


13%

21%

28%

50%

35%

17%

37%

44%

55%


25%

13%

4%

45%

44%

42%

30%

43%

54%

96%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

72%

2001

1996

2011

2001

1996

2011



Mandeni

Municipality



101 101

Mandeni Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Inadequate training to finance staff on preparations of annual financial

statements

Alignment of performance management system information.

Quarterly performance management system reviews.

Information technology steering committee to address shortcomings.

Developed an in house internal audit.

Approved organogram and vacancies now filled.

Timely implementation of the new accounting standards.

Municipal manager to finalise performance management system

and provide monthly reports.

Quarterly performance reports to be submitted to audit committee.




little progress


little progress







102

Mandeni Municipality



The stagnation in the audit outcome was caused by the slow response of leadership in addressing the matters reported in the previous year. Additionally, the skills and competencies of financial staff and performance information were not at a desired level. This contributed to repeat findings on performance information and compliance matters.

Six key risk areas

Little or no progress was made to address five of the six key risk areas. The status of supply chain management regressed, primarily as a result of the vacancy in the supply chain management manager position. In this regard, compliance deviations were noted as documents could not be produced to substantiate that three price quotations were received and awards were made to providers in the service of the state who failed to disclose their interest. The quality of the performance information has not improved due to inadequate monitoring, reviews and implementation of internal controls. Additionally, the annual performance report did not include measures taken to improve performance. Human resource management remains a challenge due to continued vacancies in key positions within the supply chain management unit and lack of skills in performance management and financial reporting. The quality of financial statements remained stagnant arising from material amendments that were required for residual values pertaining to infrastructure assets, disclosure of material losses and creditors not recorded at year end. IT management is of concern as the municipality did not have a fully functional and effective IT governance framework. Financial health findings indicated material underspending of the capital budget which resulted in the municipality not achieving its targets with regard to road infrastructure. The cost of the financial reporting consultant was R190 000 (2011-12: R733 000) but this did not prevent material findings on the financial statements.


The overall regression in the key controls was caused by the slow response of political leadership and oversight structures. A lack of financial management training with respect to preparing accurate financial statements

was also noted. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight of the usefulness and reliability of predetermined objectives and compliance with key laws and regulations.

• The chief financial officer must prepare regular and adequately supported financial statements.

• The IT steering committee should be formed and report to management and the audit committee on their performance.

The municipality should appoint a supply chain management manager and enhance the skills of members of management through attendance of structured training courses. The councillors and members of MPAC need to be more vigorous and persistent in their quest for reliable and accurate information and should hold officials accountable for non-performance.


For improved audit outcomes the level of assurance provided by leadership, senior management and governance structures should be improved. The audit committee and internal audit should focus on improving the quality of performance and financial reporting. We met with the mayor four times and these interactions had some impact on the audit outcomes. Commitments to train finance staff on the preparation of the financial statements and review of quarterly performance reports had not been addressed. The senior management, municipal manager, mayor, council and its governance committees were assessed as providing some assurance as they had not improved processes and systems with regards to compliance with laws and regulations and financial and performance reporting. The assurance provided through the oversight of the municipal council and the MPAC should be improved.


103 103


104

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

44%49%

31%

7% 8%

22%

1% 3% 4%

20011996 2011

34%

124

677

120

643

96 7

24


20011996 2011

44% 44% 41%

50% 50% 53%

6% 6% 7%

20011996 2011

44% 43% 45%

56% 57% 55%

20011996 2011

68% 76%

49%

32% 24%

51%

20011996 2011

5.9

5.4

4.8

16% 22%41%

84% 76%58%

2% 1%

13 7

59 36

948

2001 2011

12%

17%

34%

88%

83%

66%


1%

10%

32%

98%

88%

54%

1%

2%

14%


36%

31%

14%

63%

61%

64%

1%

8%

22%

86%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

68%

2001

1996

2011

2001

1996

2011



Maphumulo

Municipality



105 105

Maphumulo Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health



Municipal manager Vacant position

Mayor Provides no assurance



Municipal council Provides no assurance



Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Records management to safeguard critical documentation not addressed.

Municipal manager vacancy to be filled.

Policy and procedure framework to be reviewed by council.

Action plans not addressed and IT steering committee still to meet.

Performance reporting done quarterly.

Mayor to provide commitments based on 2012-13 audit outcomes.

MPAC Provides no assurance



little progress


little progress







106

Maphumulo Municipality



The stagnation in the audit outcome was caused by vacancies in key positions and the slow response by political leadership in addressing the matters reported in the previous year. Additionally, internal controls were not implemented in a manner that would detect weaknesses in the supply chain management process and misstatements in the financial statements in good time.

Six key risk areas

Overall, five of the six key risk areas revealed little progress. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality in many instances not complying with the legislative requirement of obtaining three quotations and to procure goods and services through a competitive bidding process. The material human resource management findings were mainly due to non-compliance with the prescribed competency level reporting requirements and unfilled key management positions. The quality of financial statements remains unsatisfactory due to deficient management reviews in the finance department. Consequently material adjustments arose relating to assets, debtors, investment property, grants and operating expenses. IT controls for user access management, program changes and upgrades and lack of IT service level agreements needs to be addressed. Although the quality of the performance reporting was maintained and financial health indicators improved, certain planned targets were not attained due to underspending on the corridor development, project rates and implementation and integrated national electrification programme grants. Consultant costs to assist with the preparation of financial statements have reduced to R1,4 million (2011-12: R2 million) as the municipality considered that it had sufficient capacity. The work done by the consultants on financial statements to prevent material findings was ineffective. Our review of contracts of the consultants revealed inadequate performance planning and monthly monitoring of consultants.


The stagnation in the key controls was caused by vacancies in key positions and the slow response by management and political leadership. The

following controls must be strengthened to create a control environment that supports reliable financial reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight of a proper record management system, preparation of financial statements, compliance with key laws and regulations and implementing monthly compliance checklists.

• The municipal manager and governance structures must ensure that the quality of the annual financial statements is subjected to detailed reviews prior to reporting to council.

• The chief financial officer must prepare regular financial statements, table monthly spending of grants and ensure that monthly reconciliations are performed for asset management.

Council should finalise the appointment of a permanent municipal manager. The slow response by management needs to be addressed by implementing consequences for non-performance. The MPAC and council needs to deepen their oversight and understanding of financial and performance management and insist on quality reports from all responsible officials in the administration in order to attain a better outcome.


For improved audit outcomes the assurance levels should be improved by implementing the recommendations of internal audit and directing the work of the audit committee towards evaluating the quality of the annual financial statements, performance information and compliance with laws and regulations. We met with the mayor four times during the financial year and these interactions had no impact on the audit outcomes. The senior management was assessed as providing some assurance and they had not adhered to some commitments to achieve clean administration. Additionally, there was a lack of monitoring controls over key legislation. While the internal audit unit and the audit committee have provided some assurance, the annual financial statements and compliance were not adequately reviewed. The assurance provided through oversight of the municipal council and the MPAC should be improved.


107 107


108

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

36%39%

22%

8%11%

22%

1% 2% 3%

20011996 2011

38%

169

234

144

615

140

820


20011996 2011

41% 39% 37%

54% 55% 57%

5% 6% 6%

20011996 2011

47% 46% 47%

53% 54% 53%

20011996 2011

60%68%

49%

40%32%

51%

20011996 2011

6.7

5.5

4.8

21% 29%49%

78% 68%

49%

1% 3% 2%

15 0

83 38

406

2001 2011

17%

18%

38%

83%

82%

62%


3%

10%

33%

85%

70%

30%

12%

20%

37%


27%

23%

7%

69%

56%

53%

4%

21%

40%

93%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

67%

2001

1996

2011

2001

1996

2011



Ndwedwe

Municipality



109 109

Ndwedwe Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Compliance with key laws and regulations.

The supplier database not reviewed annually.

Detailed action plans to be monitored

closely by leadership.

The municipality appointed a service provider to address all issues on

assets.





little progress


little progress


Key officials lack skills and competencies





110

Ndwedwe municipality



The stagnation in the audit outcomes was caused by leadership not taking effective steps to address the matters reported in the previous year. Additionally, the chief financial officer position was vacant for most of the financial year and internal controls were not implemented in a manner that would detect weaknesses in supply chain management, expenditure management and misstatements in the financial statements in good time.

Six key risk areas

Overall, four of the six key risk areas were stagnant or little progress was noted in certain areas. The status of supply chain management remains unsatisfactory, primarily as a result of repetitive instances of not complying with the legislative requirements. These requirements are to obtain declarations from bidders on whether they are employed by the state or have interests in other state institutions and validating whether construction projects are awarded to persons registered with the construction industry development board. The annual financial statements submitted were materially misstated and required corrections to losses on property, infrastructure and equipment capital commitments and irregular expenditure.

Human resource management regressed as the accounting officer and senior management did not have signed performance agreements for the year. The accounting officer was suspended at year end and the chief financial officer post was also vacant for most of the year. The municipality failed to implement formal IT controls with regard to security awareness processes; review of access and login violations and processes to manage security settings. Financial health findings revealed material impairments to debtors due to poor recoverability levels. The capital budget was also underspent, which impacted on the achievement of planned targets. The cost of financial reporting consultants was R1,5 million (2011-12: R650 000), In this regard, the work done by consultants did not prevent material findings on the financial statements. Our concern relating to the continued assistance sought from consultants include ineffective management over the dependency on consultants as a result of unfilled vacancies and a lack of transfer of skills.


The overall deterioration in the key controls was caused by a slow response from the political leadership and senior management. The financial and performance management and governance were stagnant. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight regarding financial information; compliance with key laws and regulations and related internal controls.

• The chief financial officer must prepare regular financial statements and ensure that monthly reconciliations are performed for contractual commitments, other account balances and disclosure items.

Council should address the slow response from political leadership by making them take ownership of the financial, performance management and appliance affairs of the municipality. Additionally, councillors and members of MPAC need to be more vigorous and persistent in their quest for reliable and accurate information and should hold officials accountable for non-performance.


For improved audit outcomes the assurance levels should be improved by implementing the recommendations of internal audit and directing the work of the audit committee towards evaluating performance information and regular review of financial statements. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is that the commitments and detailed action plans were not adequately addressed by the mayor and municipal council. While the internal audit unit and the audit committee have provided assurance, more focus is required on compliance matters, service delivery and supply chain management. The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the above commitments going forward and to prepare a new action plan to address all the 2012-13 audit findings.


111 111

Ugu District


112

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

28% 27%

13%10%

13%

24%

4% 5%7%

20011996 2011

72%

641

491

704

030

722

484


20011996 2011

40% 37% 33%

54% 57% 60%

6% 6% 7%

20011996 2011

45% 46% 47%

55% 54% 53%

20011996 2011

42%52%

36%

58%48%

64%

20011996 2011

5.2

4.6

3.9 45%

54%66%

53% 42%30%

2% 4% 4%

26 0

60

61 3

37

2001 2011

42%

48%

72%

58%

52%

28%


62%

52%

17%

10%

24%

49%

28%

24%

34%


13%

17%

5%

62%

53%

59%

25%

30%

36%

95%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

83%

2001

1996

2011

2001

1996

2011



Ugu District

Municipality



113 113

Ugu District Municipality and its entity

Unqualified


Regression in audit outcome



Adverse/disclaimed

with findings


Implemented



50% 50%

50% 50%

100%

2012-13 2011-12 2010-11

50%

50%

100%

100%

100%

50%

50%

50%

100%

50%

MPAC

Municipal council

Audit committee

Internal audit

Mayor

Municipal manager

Senior management

New


Governance


Provides

assurance

Provides some

assurance

Provides limited/

no assuranceVacancy

Not

established

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Commitment to address all qualification areas from the previous year was not implemented, resulting in repeat findings relating to asset

and revenue management.

Implementation of an IT governance framework, disaster recovery plan and business continuity plan are in

progress.

Management has undertaken that a work skills plan be developed and there are currently skills audits and

competency assessment being conducted.

An IT steering committee has been established.

COGTA will be assisting with the appointment of a consultant that will

assist with asset management.

Exception reports from the revenue system will be reviewed monthly to

ensure that bills are generated for all customers.



little progress







little progress


A major challenge at of the auditees

Lack of consequences for poor





50%

50%

100%

50%

50%

100%

50%

50%

50%

50%

50%


114

Ugu District Municipality and its entity


■ Ugu District Municipality: Disclaimer

■ Ugu South Coast Tourism (Pty) Ltd: Unqualified with findings


The regression in the audit outcomes of the district municipality was caused by management not addressing the previous year’s qualification areas relating to property, infrastructure and equipment, revenue and the leave provision. Sufficient appropriate evidence was not provided to support the amounts in the financial statements and on the reported performance, due to poor records management. The outcome of the entity remained unchanged as a result of material findings on the usefulness of performance information and non-compliance with regard to strategic planning and performance management and material amendments to the financial statements.

Six key risk areas

Overall, the district municipality made no progress in addressing the six key risk areas as two regressed and four remained unchanged. The status of supply chain management at the district municipality remains unsatisfactory. The supply chain management controls have improved at the entity. The quality of performance reports at both the district municipality and municipal entity remained unchanged with material findings due to inadequate reviews in ensuring that evidence is available to support reported performance. The quality of financial statements remains unsatisfactory due to deficient management reviews in the finance department. However, poor records management resulted in limitations and led to the financial statements of the district municipality receiving a disclaimer of audit opinion. Material human resource management findings were reported for the district municipality as the municipal manager and other senior managers did not sign performance agreements. The entity reported findings on overtime management. IT governance and controls are not in place at the district municipality as material findings were reported. No IT findings were identified at the entity. Overall financial health remained unchanged at the municipality. Material findings were reported in the current year due to the disclaimer of audit opinion as the information supporting the indicators was not reliable at the municipality. No findings were reported for the entity.

Key controls and root causes The overall regression in the key controls was caused by the slow response from the municipal manager, senior management and oversight structures in implementing the action plan to address key control deficiencies. Controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation. The mayor and municipal council must exercise oversight regarding financial and performance management by the district municipality and its entity. The quality of the financial statements and performance reports must be subjected to detailed reviews by the governance structures prior to reporting to council. Effective human resource management must be implemented for the group to ensure adequate and sufficiently skilled officials are in place, whose performance is being monitored. The municipal manager must review and monitor compliance with applicable laws and regulations and design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information The mayor and council should address deficits in the competencies of staff in key positions through focused training interventions. The mayor and council should take ownership of the compliance, performance and IT aspects within the administration and obtain monthly assurance from management that key matters have been addressed in good time. The reports presented to council should be reviewed by internal audit and the audit committee to ensure that they are concise and credible. This will enable councillors to identify areas that require corrective actions, including consequence management.


For improved audit outcomes the assurance levels should be improved by ensuring stability at the level of senior management and implementing the recommendations of internal and external audit. We met with the mayor four times during the financial year and these interactions had no impact on the audit outcomes. The mayor did not have an impact on the controls of the auditees. The municipal council and MPAC committed to fully implementing the previous year’s commitments to address the qualification areas. New commitments have been made to address the 2012-13 audit findings.


115 115


116

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

37% 35%

14%

5%8%

17%

2% 2% 4%

20011996 2011

80%

47 5

47 54

775

52 5

40


20011996 2011

42% 40% 38%

52% 55% 56%

6% 5% 6%

20011996 2011

44% 45% 46%

56% 55% 54%

20011996 2011

58% 61%44%

42% 39%56%

20011996 2011

5,5

5,0

4,4

30%47%

33%

68%51%

66%

2% 2% 1%

12 8

16 34

766

2001 2011

30%

37%

80%

70%

63%

20%


84%

78%

45%

8%

17%

41%

8%

5%

14%


26%

33%

6%

68%

56%

87%

6%

11%

7%

94%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

55%

2001

1996

2011

2001

1996

2011


Ezinqoleni

Municipality





117 117

Ezinqoleni Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health


2011-12Qualified










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

All material non-compliance matters to be addressed before year end.

Monthly reconciliations of assets and creditors.

Appointment of a performance manager.

Obtain approval for lease agreements that have been applied for.

IDP and SDBIP alignment to be addressed during the review of the

IDP.

Competency framework deviation approval conditions to be met.

Appointed an IT manager.

Action plan to be developed by municipal manager to address the current period’s findings, including filling vacancies and implementing

consequences as per the performance management system.




little progress


little progress





118

Ezinqoleni Municipality



The improvement in the audit outcome was caused by the leadership’s timely response in addressing the previous year’s issues relating to the qualification on assets.

Six key risk areas

Overall three of the six key risk areas remained unchanged with findings, two improved and one retained its status of no findings. The status of supply chain management remains unchanged with findings. The quality of the annual performance report has improved, due to monitoring and reviews of the internal controls over the usefulness and reliability of performance information. Although no findings were reported on human resource management, key posts were vacant during the year. The quality of the financial statements remains unsatisfactory due to deficient management reviews in the finance department. Material amendments to the financial statements were required. The review of IT governance and controls did not reveal material findings; however, back-up policies and business continuity plans must be finalised and implemented. Financial health remained unchanged with findings, primarily because of underspending of the conditional grants, overspending of the operating budget, and high impairment levels on debtors. The services of consultants were again engaged in connection with financial reporting and preparation of performance information at a cost of R749 777 (2012: R329 027).Our concerns relating to the continued assistance sought from consultants include their ineffective management, consultants being appointed for requirements that can be addressed by internal resources and the lack of transfer of skills. resulting in the continued dependence on consultants.


The overall regression in the key controls was caused by deficiencies in the financial and performance management and governance controls. Controls

must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation.

The municipal manager and governance structures must exercise oversight responsibility in ensuring that the quality of the financial statements is subjected to detailed reviews prior to reporting to council. Effective human resource management must be implemented to ensure adequate and sufficiently skilled officials are in place and that their performance is being monitored, which includes consequence management for non-performance. The municipality must complete a risk assessment to identify and address all risk areas at the municipality. The implementation of a risk management strategy must be monitored regularly by the municipal manager and council. The mayor and council are to ensure that key vacant posts are filled in good time. They must take ownership of the financial, performance and compliance aspects within the administration to obtain monthly assurance from management that key matters reported by internal and external audit have been addressed in good time. Skills deficits should be addressed by focused training initiatives. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions, including implementing consequence management.


For improved audit outcomes the assurance levels should be improved by ensuring stability at the level of the municipal manager and senior management by filling vacant posts with suitably qualified persons. The recommendations of internal audit should be implemented. We met with the mayor three times during the financial year and these interactions had some impact on the audit outcomes. This is based on the impact that the mayor had on the controls of the municipality and the status and impact of the commitments previously given. The mayor committed to fully implementing the previous year’s commitments, which included addressing the qualification on asset management. The mayor and council should ensure that all key positions are filled in good time and address deficits in the competencies of staff in key positions. The municipal council and MPAC followed up their commitment towards obtaining a clean audit by including this item as a standard agenda item at all their meetings. In addition, the municipal manager committed to developing an action plan to address the current period’s findings including filling of vacancies and implementation of consequences as per the performance management system.


119 119


120

Population

Households

Average

household size

Average dwelling

type per nr.of

households

Average

household

income

Basic services


EducationLabour

20% 20%

8%

15%19%

29%

7% 7%11%

20011996 2011

86%191

201

217

824

256

135


20011996 2011

33% 32% 28%

60% 61% 65%

7% 7% 7%

20011996 2011

46% 46% 47%

54% 54% 53%

20011996 2011

28%42%

28%

72%58%

72%

20011996 2011

4,4

4,1

3,4 75% 78% 84%

23% 17% 10%2% 5% 6%

39 4

70

86 3

83

2001 2011

75%

76%

86%

25%

24%

14%


33%

53%

16%

14%

33%

66%

53%

14%

18%


8%

15%

5%

43%

42%

43%

49%

43%

52%

95%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

84%

2001

1996

2011

2001

1996

2011


Hibiscus Coast

Municipality





121 121

Hibiscus Coast Municipality and entity

Unqualified






Implemented



50%

50%

100% 100%

2012-13 2011-12 2010-11

50%

50%

100%

100%

50%

50%

100%

50%

50%

50%

50%

MPAC

Municipal council

Audit committee

Internal audit

Mayor

Municipal manager

Senior management

New


Governance


Provides

assurance

Provides some

assurance

Provides limited/

no assuranceVacancy

Not

established

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

1. No reconciliation of asset register and general ledgers.

2. Fraud prevention plan not approved.

3. IT disaster recovery plan not implemented

4. Asset manager not appointed.

Risk assessments still being reviewed.

Comprehensive compliance checklist in the

process of being collated.

Supplier database not regularly reviewed.

Individuals are being sent on training regularly to

ensure they are at the required levels and have the

necessary knowledge.

Revised disciplinary procedures have been

approved and are in the process of being

implemented.

Portfolio of evidence supporting the performance report has been kept and made available for audit.

Organogram approved.

No new commitments. These are to be included in the next dashboard interactions when the action plan for the 2012-13 audit findings is compiled.


Improved Regressed

Stagnant or

little progress







little progress



Lack of consequences for poor





100%

50%

50%

50%

50%

100%

50%

50%

50%

50%


122

Hibiscus Coast Municipality and its entity


■ Hibiscus Coast Municipality: Unqualified with findings

■ Hibiscus Coast Development Agency: Qualified


The audit outcome of the municipality remained unchanged. The regression in the audit outcome of the municipal entity is due to qualifications on irregular expenditure, property, infrastructure and equipment and payables as sufficient and appropriate audit evidence was not provided.

Six key risk areas

No progress has been made in addressing the six key risk areas as three regressed and three remained unchanged. The status of supply chain management remained unsatisfactory, both at the municipality and the entity. The quality of the performance report remained unchanged, with material findings on the usefulness and reliability of performance at the entity and no findings reported at the municipality. Human resource management regressed due to new findings at both the municipality and its entity, as the approved staff establishment was not in place and the minimum competencies of senior management were not met. The quality of financial statements remains unsatisfactory due to deficient management reviews in the finance department. Consequently, material adjustments to the financial statements arose. IT controls remained unchanged with material findings at both the municipality and the entity. Financial health remains unchanged at the municipality,due to the underspending of the approved capital budget and the increased debtors collection period, but has improved at the entity. The services of consultants were again engaged in connection with financial reporting at a cost of R973 729 (2012: R304 831). Our concerns relating to the continued assistance sought from consultants include their ineffective management and a lack of transfer of skills, resulting in the continued dependence on consultants.


The overall lack of improvement in the key controls was caused by the lack of timely response by management to audit findings and inadequate follow up on action plans to address audit findings. There are inadequate

consequences for poor performance and transgressions that resulted in poor supply chain management practices. The municipal entity lacks the necessary skills and staff competencies, resulting in the regression in the audit opinion. Controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation. The municipal manager and municipal council must exercise oversight regarding a proper record management system, preparation of financial statements, compliance with key laws and regulations and implementation of monthly compliance checklists

The chief executive officer of the municipal entity must implement effective human resource management to ensure adequate and sufficiently skilled officials are in place, and that their performance is being monitored. The internal audit unit at both the municipality and the entity needs to be capacitated and strengthened to address the weakness in the governance structures.

The mayor and council should address deficits in the competencies of staff through focused training interventions. They must take ownership of the financial, performance and compliance aspects within the administration to obtain monthly assurance from management that key matters reported by internal and external audit have been addressed in good time. The MPAC and council needs to strengthen their oversight and understanding of financial and performance management and insist on quality reports from all responsible officials in the administration. Council should address the management’s slow response by implementing consequences for non-performance, thus creating an environment of accountability.


For improved audit outcomes the assurance levels provided by leadership and senior management should be improved. The internal audit and audit committee should focus on improving the quality of the financial statements and monitoring compliance with laws and regulations. We met with the mayor five times during the financial year and these interactions had no impact on the audit outcomes. The reason for our assessment is the impact that the mayor has had on the controls of the municipality and its entity and that most of the commitments made by the mayor were not honoured. The municipal council and MPAC committed to fully implementing the previous commitments going forward. New commitments are still to be obtained in the next dashboard interactions when the action plan for the 2012-13 audit findings is compiled.


123 123


124

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

17%19%

9%

18% 20%

31%

8% 8% 8%

20011996 2011

76%

54 2

01

62 3

75

78 8

75


20011996 2011

31% 29% 27%

62% 64% 65%

7% 7% 8%

20011996 2011

48% 48% 49%

52% 52% 51%

20011996 2011

26%42%

34%

74%58%

66%

20011996 2011

4.2

3.8

3.2 71%

62%75%

22%24%

12%

7% 14% 13%

40 5

36

73 1

47

2001 2011

69%

66%

76%

31%

34%

24%


30%

34%

4%

9%

24%

46%

61%

42%

50%


5%

8%

3%

38%

35%

42%

57%

57%

55%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

96%

2001

1996

2011

2001

1996

2011



Umdoni

Municipality




125 125

Umdoni Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health












Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Proper record management over SCM, performance reporting

contracts and commitments not achieved.

Annual performance report not aligned to test usefulness.

Irregular expenditure will be

investigated and followed up.


the minimum competencies.

IT issues will be resolved.

The organogram of the municipality has been revised to ensure that an SCM official is appointed to the bid adjudication committee to prevent

irregular expenditure.

The mayor and the accounting officer to provide commitments based on

2012-13 audit outcomes.




little progress


little progress



and transgressions



126

Umdoni Municipality



The stagnation in the audit outcome was caused by material misstatements to the annual financial statements, non-compliance with supply chain management requirements and performance information not being supported by sufficient, appropriate audit evidence.

Six key risk areas

Overall the six key risk areas reflect a state of stagnation. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality not complying with the legislative requirements of ensuring that the bid adjudication committee is properly constituted. Material findings were identified on performance reporting because evidence was not available to support reporting on service delivery. Human resource management findings were related to the high vacancy rate in key management positions. The quality of financial statements received remains unsatisfactory due to deficient management reviews. Material adjustments were again necessary.

IT controls for user access management, program changes, security management and IT governance aspects need to be addressed. Financial health findings were identified on underspending of capital budgets and conditional grants, as well as high creditor repayment periods and debt impairment provisions. The services of consultants were again engaged in connection with financial reporting at a cost of R1,4 million (2012: R543 736). Our concerns relating to the continued assistance sought from consultants include their ineffective management and lack of transfer of skills, resulting in the continued dependence on consultants.


The regression in the key controls was caused by vacancies in key positions, key officials not having appropriate competencies and slow responses by management and the political leadership. The following controls must be strengthened to create a control environment that supports reliable financial reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight regarding a proper record management system, policies

and procedures, preparation of financial statements and compliance with key laws and regulations, and implement monthly compliance checklists.

• The municipal manager and governance structures must ensure that the quality of the annual financial statements is subjected to detailed reviews prior to reporting to council.

• The chief financial officer must ensure that monthly reconciliations are performed for irregular expenditure, contingent liabilities, provisions for bad debt, investment property and capital commitments.

Council should finalise the appointment of a permanent performance manager. The slow response by management needs to be addressed by implementing consequences for non-performance. The MPAC and council need to deepen their oversight and understanding of financial and performance management and insist on quality reports from all responsible officials in the administration to attain a better outcome. Training of staff should be improved and consequence management instituted for officials not adhering to policies and procedures.


For improved audit outcomes the assurance levels of the mayor, municipal manager and senior management should be improved by implementing the recommendations of internal audit and directing the work of the audit committee towards evaluating the quality of the annual financial statements, performance information and compliance with laws and regulations. We met with the mayor four times during the financial year and these interactions had little impact on the audit outcomes, as many of the commitments were still in the progress. Additionally, there was a lack of monitoring controls over key legislation. Whilst the internal audit unit and the audit committee have provided some assurance, the annual financial statements and compliance were not adequately reviewed. The assurance provided through oversight of the municipal council and MPAC should be improved. The municipal council committed to fully implementing the previous commitments going forward. The mayor and the municipal manager are still to provide commitments based on 2012-13 audit outcomes.


127


128

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

30% 30%

16%

5%8%

15%

2% 4% 5%

20011996 2011

80%

82 1

03 92

327

96 5

56


20011996 2011

47% 43% 40%

48% 52% 55%

5% 5% 5%

20011996 2011

44% 44% 46%

56% 56% 54%

20011996 2011

53% 55%

33%

47% 45%

67%

20011996 2011

5.6

4.8

4.4

30%39%

49%

68%59%

49%

2% 2% 2%

14 9

25 41

837

2001 2011

15%

27%

80%

85%

73%

20%


84%

15%

2%

4%

37%

45%

12%

48%

53%


14%

15%

6%

77%

65%

65%

9%

20%

29%

94%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

98%

2001

1996

2011

2001

1996

2011



Umuziwabantu

Municipality



129

Umuziwabantu Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee




little progress


little progress




Municipality ensured that leave was capped in accordance with legislated

requirements.Senior officials undergoing training to acquire the required competencies.

Management to ensure that all commitments made to the auditors are addressed in a timely manner.Inadequate staffing relating to the

asset management.

Inappropriate record keeping processes.

Improve state of performance reporting.

Checklist formulated to monitor and keep track of compliance with

regulations and applicable legislation.

Performance evaluations to be completed for all staff members.

Timely submission of returns to relevant bodies as required by

legislation.



130

Umuziwabantu Municipality

Current year audit outcomes: ■ Unqualified with other matters

No change in audit outcome

The lack of improvement in the audit outcomes was caused by material findings on the usefulness and reliability of performance information and findings of non-compliance with respect to supply chain management, budgets, conditional grants, environmental legislation and material misstatements in the financial statements. This was due to delays by management in addressing the matters reported in the previous year.

Six key risk areas

There has been no progress made in addressing the six key risk areas, as three regressed, two remained unchanged with material findings and one improved. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality in many instances not complying with the legislative requirement. The quality of the annual performance report has remained unchanged, with material findings due to inadequate monitoring, reviews and implementation of internal controls on the usefulness and reliability of the performance reports. Human resource management regressed, with findings on leave management and annual performance evaluations not performed. The quality of financial statements has not improved due to the lack of detailed management reviews. Material amendments to the financial statements were again required.

IT governance and controls improved as they have no findings in the current year. Financial health remained unchanged, primarily because of underspending of the capital budget and conditional grants, extended creditors payment period and high impairment levels on debtors. The services of consultants were again engaged in connection with financial reporting at a cost of R1,36 million (2012: R1,29 million). Our concerns relating to the continued assistance sought from consultants include their ineffective management, continued dependency on consultants as a result of officials lacking competencies and a lack of transfer of skills.


The overall lack of improvement in the key controls was caused by the management’s slow response in preventing and detecting non-compliance with laws and regulations, and an inadequate record management system. Controls must be strengthened to create a control environment that supports

reliable financial and performance reporting and compliance with legislation. The municipal manager and municipal council must exercise oversight of proper records management and coordinate processes to ensure that relevant and accurate information is accessible and available to support performance reporting. The financial statements must be subjected to detailed reviews by governance structures prior to reporting to council. Compliance with applicable laws and regulations must be reviewed and monitored at monthly management meetings.

The municipality must implement effective human resource management to ensure adequate and sufficiently skilled officials are in place and that their performance is being monitored. The mayor, council, senior management and governance structures should together address the root causes of audit outcomes and inadequate controls. This should be done by improving the timeliness of responses through consistently and regularly monitoring the progress of action plans that address internal and external audit findings. Skills deficits should be addressed by focused training initiatives. Reports presented to council should be concise and credible. This will enable councillors to identify areas requiring corrective actions, including implementing consequence management.


For improved audit outcomes the assurance levels should be improved. This should be done by strengthening the municipal manager’s oversight of compliance with laws and regulations, directing internal audit towards the review of performance information and training key officials to obtain minimum competency levels. We met with the mayor five times during the financial year and these interactions had little impact on the audit outcomes. The reason for our assessment is the impact the mayor had on the controls of the municipality as well as the status and impact of the commitments previously given. Commitments with regard to asset management, record keeping, performance reporting and compliance were not implemented.

The municipal council and MPAC committed to fully implementing the previous year’s commitments, which were to improve follow up on the action plans. New commitments on performance evaluations for all staff and timely submission of returns were made.


131 131


132

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

33% 32%

17%

6%8%

20%

1% 2% 4%

20011996 2011

49%

166

830

193

768

160

975


20011996 2011

44% 41% 37%

50% 53% 56%

6% 6% 7%

20011996 2011

45% 45% 46%

55% 55% 54%

20011996 2011

69% 72%52%

31% 28%48%

20011996 2011

5.9

5.0

4.5

20%39%

48%

79%60%

51%

1% 1% 1%

14 2

05 35

538

2001 2011

16%

29%

49%

84%

71%

51%


90%

72%

34%

8%

17%

49%

2%

11%

17%


15%

16%

5%

84%

68%

82%

1%

16%

13%

95%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

66%

2001

1996

2011

2001

1996

2011



Umzumbe

Municipality



133 133

Umzumbe Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

A formal code of ethics and conduct has been implemented to address poor performance.

MPAC resolutions have been fast tracked to enhance management responses to risks.

Monitoring of a compliance checklist has been implemented.

IT Policies and the disaster recovery plan have been tabled to council.




little progress


little progress






Full implementation of the performance management system in addressing poor performance and transgressions, as well as reviewing leaderships

roles and responsibilities.


134

Umzumbe Municipality



The stagnation in the audit outcome was caused by management’s slow response to addressing matters reported in the previous year. This contributed to findings on the usefulness of performance information and compliance findings on supply chain management, as well as material misstatements in the financial statements.

Six key risk areas

Overall, slow progress has been made in addressing the key risk areas, most notably in the areas of supply chain management, the quality of performance reports and submitted financial statements. The status of supply chain management remains unsatisfactory, primarily as a result of management not complying with the legislative requirement to procure goods and services through a competitive bidding process. The quality of performance reporting remained stagnant with material findings; therefore leadership should focus on improving the measurability of targets to address the audit findings on the usefulness of its performance report. With respect to human resource management, staff did not meet the competency requirements and there were delays in capturing the leave transactions. Material adjustments were made to the financial statements on expenditure, irregular expenditure, contingent liabilities and related party transactions. IT governance and controls, and financial health have both improved with no findings.


The overall lack of improvement in the key controls was caused by a lack of consequences for poor performance and transgressions, slow response by the political leadership and management, and deficiencies in governance controls. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The mayor and municipal council must exercise oversight of financial and performance management, which includes regular monitoring of the risk strategy.

• The municipal manager must implement effective human resource management to ensure adequate and sufficiently skilled officials are in place, and their performance is being monitored.

• The municipal manager and governance structures must ensure that the quality of the financial statements is subjected to detailed reviews prior to reporting to council.

The mayor and council must take ownership of the financial, performance and compliance aspects within the administration, and obtain monthly assurance from management that key matters reported by internal audit, the audit committee and external audit have been addressed in good time. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions and the implementation of consequence management.


For improved audit outcomes the assurance levels of the mayor, municipal manager and senior management should be improved. This should be done by implementing the recommendations of internal audit and directing the audit committee towards evaluating compliance with laws and regulations, as well as financial and performance reporting. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is the limited impact that the mayor had on the controls of the municipality as well as the status and impact of the commitments previously given.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to the full implementation of a performance management system to address poor performance and transgressions, as well as to reviewing leadership roles and responsibilities.


135 135


136

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

38% 37%

24%

6%10%

21%

1% 2% 2%

20011996 2011

37%99 6

10

82 9

61

77 4

03


20011996 2011

44% 40% 37%

51% 54% 57%

5% 6% 6%

20011996 2011

45% 46% 47%

55% 54% 53%

20011996 2011

60% 66%53%

40% 34%47%

20011996 2011

6.0

5.2

4.7

19%30% 31%

80%68% 68%

1% 2% 1%

19 7

88

34 1

53

2001 2011

14%

20%

37%

86%

80%

63%


88%

61%

15%

5%

30%

71%

7%

9%

14%


18%

25%

5%

77%

54%

71%

5%

21%

24%

95%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

85%

2001

1996

2011

2001

1996

2011



Vulamehlo

Municipality



137 137

Vulamehlo Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2012-13Disclaimer



Senior management Provides limited/no assurance

Municipal manager Provides limited/no assurance

Mayor Provides limited/no assurance



Municipal council Provides limited/no assurance



Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Proper record management not achieved for financial and performance information.

Inadequate controls over the preparation, review and reconciliation of the financial statements, as well as

the reported performance against predetermined objectives.

Establish a system to prevent non-compliance with laws and regulations.

Detailed action plan will be monitored.


the minimum competencies.

IT issues will be resolved.

The organogram of the municipality has been revised.

The accounting officer to implement consequence management at the

municipality.

A detailed action plan addressing all findings raised will be completed,

monitored and reported on regularly.

MPAC Provides limited/no assurance



little progress


little progress



and transgressions


I


138

Vulamehlo Municipality

Current year audit outcome: ■ Disclaimer


The regression in the audit outcome was caused by the officials of the municipality not providing sufficient and appropriate audit evidence related to unspent conditional grants, property, infrastructure and equipment, payables, irregular expenditure, commitments and general expenses to support the amounts disclosed in the financial statements. Key vacancies in the finance department contributed to the regression. There were also significant findings on performance information and compliance with laws and regulations.

Six key risk areas

Slow progress has been made in addressing the six key risk areas, as four remain unchanged, two improved and one regressed. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality in many instances not complying with the legislative requirement to obtain three quotations or to procure goods and services through a competitive bidding process. The quality of the annual performance report has remained unchanged with material findings due to inadequate monitoring, reviews and implementation of internal controls on the usefulness and reliability of the performance reports. Although no findings were reported on human resource management, vacancies in the finance department remain a challenge. The quality of financial statements remains unsatisfactory due to deficient management reviews in the finance department. Poor records management resulted in limitations and led to the financial statements receiving a disclaimer of audit opinion.

Although IT governance and controls improved from having material findings, IT controls for super user access management, program changes and upgrades, lack of IT service level agreements and no secure offsite storage facility, need to be addressed. Financial health regressed in the current year due to the disclaimer of audit opinion as the information supporting the indicators was not reliable. The services of consultants were again engaged in connection with financial reporting at a cost of R 1,1 million (2012: R 257 395), which did not prevent material findings. Our concerns relating to assistance sought from consultants by the municipality include their ineffective management and lack of transfer of skills, resulting in the continued dependence on consultants.


The overall deterioration in the key controls was caused by ineffective leadership controls in addressing weaknesses identified. Controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation. The municipal manager and municipal council must exercise oversight of proper records management and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial and performance reporting. The quality of the financial statements must be subjected to detailed reviews by the governance structure prior to reporting to council. The municipal manager must review and monitor compliance with applicable laws and regulations and design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information

The mayor and council should ensure that all key positions are filled in good time. Together with the senior management and governance structures they should address the root causes of audit outcomes and inadequate controls by improving the timeliness of management’s responses through consistently and regularly monitoring the progress of action plans that address internal and external audit findings. Council needs to take ownership of the financial, performance and compliance aspects and obtain monthly assurance from management that key matters have been addressed. Reports to council should be concise and credible. This will enable councillors to identify areas that require corrective actions, including implementing consequence management.


For improved audit outcomes the assurance levels of leadership, senior management and oversight structures should be improved. This should be done by implementing the recommendations of internal audit and directing the audit committee towards evaluating the quality of annual financial statements, performance information and compliance with laws and regulations. We met with the mayor four times during the financial year and these interactions had no impact on the audit outcomes. Commitments to achieve clean administration were not acted on.

The limited assurance provided through oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous commitments going forward. In addition, commitments have been made to prepare a new action plan to address all the 2012-13 audit findings.


139 139

Umgungundlovu District


140

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

18% 17%

9%

16%20%

30%

7% 8%11%

20011996 2011

86%

881

674

932

121

1 01

7 76

3


20011996 2011

32% 31% 28%

63% 64% 67%

5% 5% 5%

20011996 2011

47% 47% 48%

53% 53% 52%

20011996 2011

38% 46%31%

62% 54%69%

20011996 2011

4.5

4.1

3.6

64% 65% 71%

29% 25%22%

7% 10% 7%

43 4

13

92 9

86

2001 2011

60%

74%

86%

40%

26%

14%


21%

16%

9%

24%

21%

13%

55%

63%

78%


5%

6%

3%

53%

44%

41%

42%

50%

56%

97%

Higher


Employed Unemployed

Electricity No Electricity



0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

91%

2001

1996

2011

2001

1996

2011



Umgungundlovu

District Municipality

The statistics reflected in these graphics were sourced from the 2011 census (STATS SA) and are not information collated or audited by the AGSA. The colours of the legends used for

these census graphics do not have the same meaning as those used in the rest of this report.


141 141

Umgungundlovu District Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health












Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Internal audit effectiveness to be

assessed quarterly.

Pastel financial system to produce

exception reports and master file

amendments to be supported by valid

input forms.

Supply chain management policies

and procedures to be adhered to and

monitored.

Workshop on fraud prevention held with all staff.

Asset register reviewed monthly by the asset manager.

Calculation of depreciation and asset register reconciliation done monthly.

Municipal manager to develop detailed action plan to address the 2012-13 audit outcomes




little progress

No findings Findings Material findings

(No movement: IT

not assessed in

2011-12)

RegressedStagnant or

little progress




142

Umgungundlovu District Municipality



The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year and the general lack of oversight of implementing internal controls. This has led to findings on supply chain management, and compliance findings on the quality of the financial statements.

Six key risk areas

Four of the six key risk areas remained stagnant. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. In this regard, compliance deviations were noted as awards were made to persons at other state institutions who did not declare their interests. Procurement was also made without obtaining three written quotations, bids were advertised for less than 21 days and awards were not made to bidders with the highest points. The district municipality has maintained the good quality of performance information with adequate monitoring, reviews and implementation of internal controls. Human resource management has also remained effective, with the municipality being able to retain skilled staff in key positions. The quality of financial statements remained stagnant, arising from material amendments required for property, infrastructure and equipment, commitments and irregular expenditure. The district municipality has failed to implement formal IT controls with regard to IT governance, compile a service continuity plan as well as address poor user access controls. This is due to a lack of oversight of the implementation of internal controls.


The overall deterioration in the key controls was caused by leadership’s slow response in taking corrective actions on matters highlighted in the previous year. The following controls must be strengthened to create a control

environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager must exercise oversight regarding financial management and compliance with supply chain management.

• The municipal manager must design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information.

The municipal manager must exercise oversight of proper record management, preparation of financial statements and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial reporting.

The mayor and council should take ownership of the financial reporting, IT and compliance aspects within the administration, and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be reviewed by internal audit and the audit committee to ensure that they are concise and credible. This will enable councillors to identify areas that require corrective actions.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and compliance with laws and regulations. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is the limited impact that the mayor had on the controls as well as the repetitive findings on financial management and on compliance with laws and regulations. The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments to monitor the implementation of the compliance checklists and improve the operating effectiveness of internal audit and the audit committee. The mayor committed to providing an action plan to address all the 2012-13 audit findings.


143 143


144

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

25%

35%

15%

8% 8%

22%

2% 3% 4%

20011996 2011

84%

39 9

57

37 8

44

33 1

05


20011996 2011

42% 41% 38%

52% 52% 56%

6% 7% 6%

20011996 2011

46% 45% 47%

54% 55% 53%

20011996 2011

55%73%

45%

45%27%

55%

20011996 2011

5.6

4.5

4.0

16%

39% 44%

82%

60% 56%

2% 1% 0%

13 5

27

38 5

69

2001 2011

19%

55%

84%

81%

45%

16%


42%

26%

14%

12%

18%

32%

46%

56%

54%


1%

3%

2%

95%

89%

82%

4%

8%

16%

98%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

86%

2001

1996

2011

2001

1996

2011



Impendle

Municipality



145 145

Impendle Municipality



Drivers of key controls are improving


Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health












Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Credible action plan to address all

internal and external audit findings.

Adequate risk assessment is

conducted and regularly monitored to

address critical matters.

Filling key management positions in good time.

Leave administration in terms of the South African local government bargain council.

Ensure adequate staffing of the shared internal audit unit.

Municipal manager to develop detailed action plan to address the 2012-13 audit findings primarily on SCM, including training staff and monitoring responsibilities by leadership.




little progress


little progress




146

Impendle Municipality


Stagnation in audit outcomes

The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year. This has contributed to repeat findings on the usefulness and reliability of performance information, and compliance matters.

Six key risk areas

Three key risk areas have remained unchanged, two have regressed and one improved. The status of supply chain management regressed, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. In this regard, compliance deviations were noted as awards were made to persons in other state institutions who did not submit their declarations of interest. The usefulness and reliability of the performance information has not improved due to inadequate monitoring, reviews and implementation of internal controls, which resulted in the municipality setting indicators that are not measurable and reporting invalid performance targets. Human resource management remained a challenge as the municipality does not have an approved organisational structure. The quality of financial statements remained stagnant, arising from material amendments that were required for accumulated surplus. Improvements were reported in the area of IT controls due to leadership addressing the deficiencies that were identified in the previous financial year. Financial health remained stagnant, primarily because of the high debtors’ collection period.


The overall improvement in the key controls is the result of the municipality filling key vacancies, which led to improvements in internal controls. The root causes for audit outcomes was the slow response by political leadership and oversight structures. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight regarding predetermined objectives and compliance with municipal supply chain management regulations.

• The chief financial officer must regularly prepare a full set of annual financial statements for review by internal audit.

• The municipal manager must exercise oversight of proper record management , preparation of financial statements and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial reporting.

The mayor and council should take ownership of the compliance, performance and financial reporting within the administration, and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be reviewed by the internal audit and audit committee to ensure that they are concise and credible. This will enable councillors to identify areas that require corrective actions. The council should also strengthen monitoring over the budget.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and reported performance. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is the limited impact of the mayor on the controls as well as the repetitive findings on financial and performance management and on compliance with laws and regulations. The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments to improve monitoring the implementation of the compliance checklists. The mayor also committed to providing an action plan to address all the 2012-13 audit findings, which would be developed under the guidance of the municipal manager.


147 147


148

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

38%

29%

19%

7% 9%

21%

2% 3% 5%

20011996 2011

65%

45 1

74

59 0

67

63 1

42


20011996 2011

36% 36% 32%

60% 59% 63%

4% 5% 5%

20011996 2011

48% 48% 48%

52% 52% 52%

20011996 2011

30%44%

29%

70%56%

71%

20011996 2011

5.2

4.4

4.0 50% 46% 50%

49% 52% 47%

1% 2% 3%

25 2

55

52 6

59

2001 2011

31%

42%

65%

69%

58%

35%


46%

41%

34%

9%

13%

13%

45%

46%

53%


25%

20%

8%

60%

49%

71%

15%

31%

21%

92%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

66%

2001

1996

2011

2001

1996

2011



Mkhambathini

Municipality



149 149

Mkhambathini Municipality

Stagnationin audit outcome



Progress in addressing risk areas

Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee




little progress


little progress






All key positions will be filled with people with adequate skills by

the end of September 2013.

Internal audit to be fully staffed.

Municipal manager to develop detailed action plan to address the 2012-13 reported audit matters, including training staff, filling vacant posts and monitoring responsibilities by leadership.


150

Mkhambathini Municipality



The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year. Additionally, vacancies in key management positions as well as skills and competency deficits contributed to the findings on performance management and the quality of the annual financial statements.

Six key risk areas

Some progress was made in addressing three of the six key risk areas. The status of supply chain management improved due to stronger leadership oversight over compliance with the supply chain management regulations. The usefulness of the performance information has not improved due to performance indicators that were not measurable. This was caused by inadequate monitoring and reviews, and poor internal controls. Human resource management remained a challenge due to continued vacancies in key positions and the lack of skills in performance management and financial reporting. The quality of financial statements remained stagnant, arising from material amendments that were again required. The municipality has implemented formal IT controls, resulting in an improvement. Financial health deteriorated due to underspending of conditional grants and capital budgets, as well as an increase in the debt impairment provision. The services of consultants were again engaged for financial reporting at a cost of R150 000 (2012: R590 000). Our concern is the dependency on consultants due to the lack of skills within the municipality.


The overall regression in the key controls was caused by the political leaders’ slow responses in filling key positions such as the chief financial officer and the failure to address weaknesses in internal controls over daily processing and reporting of transactions. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal council must monitor, exercise oversight of and take ownership of the financial, performance and compliance aspects within the administration. The activities of the audit committee and internal audit must be channelled towards an improvement in the quality of performance information. The municipal council must ensure that management implements their recommendations.

• The municipal manager must exercise oversight of proper record management, daily processing of transactions, preparation of financial statements and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial and performance reporting.

• A comprehensive risk assessment needs to be performed and a risk strategy developed to ensure that key risks are managed, mitigated and monitored. Additionally, vacancies should be filled in good time to ensure that services are not interrupted.

The mayor and council should ensure that all key positions are filled within a reasonable period of time and address deficits in the competencies of staff in key positions. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and reported performance. We met with the mayor four times during the financial year and these interactions had little impact on the audit outcomes. The mayor lacked impact on the controls, and there were repetitive findings on financial and performance management and on compliance with laws and regulations.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments to fill all key positions with adequately skilled staff and to have a fully functional internal audit unit. The mayor also committed to providing an action plan to address all the 2012-13 audit queries.


151 151


152

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

25%26%

15%12%

15%

26%

8%5% 6%

20011996 2011

72%

25 5

12

36 8

32

38 1

03


20011996 2011

34% 31% 30%

62% 65% 66%

4% 4% 4%

20011996 2011

50% 52% 49%

50% 48% 51%

20011996 2011

21%

44%24%

79%

56%76%

20011996 2011

4.8

3.6

3.5

69% 72% 77%

29% 25% 21%

2% 3% 2%

32 6

37

60 4

33

2001 2011

48%

53%

72%

52%

47%

28%


30%

24%

17%

8%

9%

8%

62%

67%

75%


18%

20%

11%

38%

28%

26%

44%

52%

63%

89%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

83%

2001

1996

2011

2001

1996

2011



Mpofana

Municipality



153 153

Mpofana Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2012-13Qualified



Senior management Provides no assurance

Municipal manager Vacant

Mayor Provides no assurance

Internal audit Provides no assurance

Audit committee Provides no assurance

Municipal council Provides no assurance



Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Proper record management over SCM, performance management, contracts and commitments not achieved.

Annual performance report not aligned to test usefulness.

Detailed action plan to address the

weaknesses identified has been

developed for implementation.

The positions of the municipal manager and the CFO were filled in October 2013.

Municipal manager and mayor to develop detailed action plan to address 2012-13 audit findings including training staff, filling vacant posts and monitoring responsibilities by leadership.




little progress


little progress





154

Mpofana Municipality Current year audit outcomes: ■ Qualified


The regression in the audit outcomes was caused by leadership not addressing the matters reported in the previous year on time and instability in the positions of municipal manager and chief financial officer. This contributed to findings on the usefulness and reliability of performance information, non-compliance with supply chain management regulations and a qualified opinion being issued on the financial statements.

Six key risk areas

Little or no progress was made to address five of the six key risk areas. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to supply chain management regulations. This resulted in competitive processes not being followed. The usefulness and reliability of the performance information has not improved due to inadequate monitoring, reviews and implementation of internal controls. Human resource management regressed due continued vacancies, the delay in filling the municipal manager and chief financial officer positions and the lack of skills in performance management and financial reporting.

The quality of financial statements regressed due to material misstatements in irregular expenditure, leading to a qualified opinion being expressed. This was also caused by instability in the position of the chief financial officer and the municipal manager and the lack of skills and competencies in the finance division. IT revealed an improvement due to the IT governance framework and the IT policies being in place, as well as access and user controls being put in place and monitored by management. Financial health revealed a regression caused by credit payment periods not being within the required norm, conditional grants not cash backed, poor debtors’ collection and a deficit that was realised for the year. The services of consultants were again engaged in connection with the preparation of financial information at a cost of R723 000 (2012: R713 000). Our concern is the continued dependence on consultants.


The overall regression in the key controls was caused by the slow response from political leadership and oversight structures. The vacancies at the position of municipal manager for seven months and chief financial officer for five

months, and instability or vacancies in other key positions added to the problem. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager must provide effective leadership and good governance and protect the interests of the municipality.

• The municipal manager must implement effective human resource management to ensure adequate and sufficiently skilled officials are in place, and their performance is being monitored.

• The mayor and municipal council should exercise oversight responsibility of financial and performance reporting and compliance, and related internal controls. They should take ownership of the financial, performance and compliance aspects within the administration and obtain monthly assurance from management that key matters have been addressed.

The mayor and council should ensure that all key positions are filled within reasonable periods of time and should address deficits in the competencies of staff in key positions. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and reported performance. We met with the mayor four times during the financial year and these interactions had no impact on the audit outcomes. The mayor lacked impact on the controls and there were findings on financial and performance management and on compliance with laws and regulations.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments to monitor records management, compile compliance checklists and workshop human resource policies. The mayor committed to providing an action plan to address all the 2012-13 audit findings.


155 155


156

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

12% 11%5%

20%24%

34%

8% 9%13%

20011996 2011

92%

524

266

552

837

618

536


20011996 2011

30% 29% 27%

65% 66% 68%

5% 5% 5%

20011996 2011

47% 47% 48%

53% 53% 52%

20011996 2011

40%48%

33%

60%52%

67%

20011996 2011

4.3

4.1

3.6

71% 69% 75%

20% 18%17%

9% 13% 8%

50 1

78

108

926

2001 2011

73%

86%

92%

27%

14%

8%


8%

6%

4%

32%

24%

10%

60%

70%

86%


1%

3%

2%

47%

39%

36%

52%

58%

62%

98%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

96%

2001

1996

2011

2001

1996

2011



Msunduzi

Municipality



157 157

Msunduzi Municipality and its entity

Unqualified with

no findings

Unqualified


Regressionin audit outcome




Implemented



50%

50%

100%

50% 50%

2012-13 2011-12 2010-11

100%

100%

50%

100%

50%

100%

50%

50%

50%

50%

MPAC

Municipal council

Audit committee

Internal audit

Mayor

Municipal manager

Senior management

New


Governance


Provides

assurance

Provides some

assurance

Provides limited/

no assuranceVacancy

Not

established

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Roll out the IT governance framework and new IT system.

Monitoring the progress of action plans to address both internal and

external findings.

Compilation of a compliance checklist and appointment of a compliance

officer.

Key positions in Internal audit and the finance department were filled as well

as the appointments of sections 56 managers completed.

All meters to be read at regular intervals. The policy and process with respect to meter readings and billing

accounts to be reviewed.


Improved Regressed

Stagnant or

little progress







little progress

50%

50%

50%

50%

50%

50%

50%

50%100%

N/A

50%



Instability and vacancies in key positions


158

Msunduzi Municipality and its entity

Current year audit outcome:

■ Msunduzi Municipality: Qualified

■ Safe City: Unqualified with no findings


The regression in the audit outcomes was as a result of Msunduzi Municipality receiving a qualified audit opinion. This was due to a lack of processes to monitor and address the implications of revenue from service charges based on estimates for extended periods and therefore not being reliable. The audit outcome for Safe City remains unchanged with a clean audit opinion.

Six key risk areas

Slow or little progress has been made to address the six key risk areas. The status of supply chain management remains a concern, as a result of the municipality not complying with the legislative requirement to procure goods and services through a competitive bidding process. While the quality of the annual performance report has improved, the municipality should focus on the presentation of the performance information.

With respect to human resource management, the leadership needs to continue with the appointment of suitably qualified people at critical posts. The quality of financial statements remained stagnant, arising from material amendments that were required as a result of a lack of process to ensure that t information is validated before it is recorded in the financial statements. Additionally, the qualification received related to inadequate supporting documentation for the recognition of revenue from services charges.

IT findings remain a concern and management should continue to design and implement action plans to address weaknesses. There has been a regression in financial health as there was material underspending of both the capital budget and conditional grants received, as well as trade receivables that have been materially impaired. Financial health was not applicable for the entity as its operations are funded by the municipality and

most indicators are not relevant. The services of consultants were again engaged in connection with financial reporting at the municipality, at a cost of R1,11 million (2012: R750 000). Our concerns relating to the continued assistance sought from consultants include their ineffective management, consultants being appointed for requirements that can be addressed by internal resources and a lack of transfer of skills resulting in the continued dependence on consultants.


The overall deterioration in the key controls was caused by inadequate processes, policies and monitoring controls over financial transactions and the financial reporting process, as well as audit recommendations not being implemented in good time at the municipality. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipality must exercise oversight of financial and performance management by ensuring that there are monthly and daily controls. Effective human resource management must be implemented to ensure adequate and sufficiently skilled officials are in place, and their performance is being monitored. Additionally, management should maintain proper record management and processes to ensure that relevant and accurate information is accessible and available to support financial and performance reporting.

• The internal audit plan needs to be aligned to an updated risk management strategy and reported accordingly to the audit committee, which needs to monitor the progress made in reducing the risk to an acceptable level.

The mayor and council should ensure that all key positions are filled in good time and address deficits in the competencies of staff in key positions. Additionally, council needs to take ownership of the financial, performance and compliance aspects within the administration and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be concise and


159 159

credible. This will enable councillors to identify areas that require corrective actions.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance and oversight structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements. We met with the mayor twice during the financial year and these interactions had little impact on the audit outcomes. The reason for our assessment is the lack of impact the mayor had on the controls as well as the repetitive findings on financial management and on compliance with laws and regulations. The municipal council committed to fully implementing the previous year’s commitments to establish IT governance, procure a new IT system, compile compliance checklists and ensure that all key vacancies are filled. The mayor committed to providing an action plan to address all the 2012-13 audit queries. A new commitment was also made to review the policies and processes with respect to electricity and water meter readings from 1 January 2014.


160

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

33%31%

16%

9% 10%

22%

4% 4% 4%

20011996 2011

81%

62 0

99

63 2

23

65 7

93


20011996 2011

35% 35% 34%

60% 60% 61%

5% 5% 5%

20011996 2011

47% 47% 48%

53% 53% 52%

20011996 2011

39% 43%27%

61% 57%73%

20011996 2011

4.8

4.5

3.9 42% 43%

55%

55%42%

42%

3%15%

3%

25 8

56

45 9

25

2001 2011

49%

54%

81%

51%

46%

19%


55%

51%

17%

12%

20%

39%

33%

29%

44%


6%

6%

3%

72%

73%

56%

22%

21%

41%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

83%

2001

1996

2011

2001

1996

2011



Richmond

Municipality



161 161

Richmond Municipality



Most drivers of key controls not improving


Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health












Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Risk management strategy to be approved and implemented without further delay.

Strategy to address risks concerning material errors in the financial statements, key compliance areas, regular asset register maintenance and review.

Ensure that the financial statements are subjected to thorough review by the audit committee prior to submission to audit.

Mayor and municipal manager to provide commitments based on the 2012-13 audit findings reported. A detailed action plan allocating specific responsibilities to the role players (management and oversight) including filling key vacant positions, should be compiled.




little progress


little progress





162

Richmond Municipality



The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the previous year’s findings. This has contributed to the findings on human resource management and compliance findings on the quality of the financial statements.

Six key risk areas

Three of the six key risk areas have remained unchanged, two regressed and one improved. The status of supply chain management remains good due to adequate leadership oversight of supply chain management compliance matters. The municipality has maintained good quality over performance information, with adequate monthly monitoring and reviews. Human resource management deteriorated due to key vacancies, which resulted in persons acting in posts for more than six months. The quality of financial statements remained stagnant, arising from material amendments that were required for property, infrastructure and equipment, provisions and accumulated surplus. Financial health has remained stagnant as conditional grants and the capital budget were underspent. Additionally, the creditor’s settlement and the debtor’s collection periods were excessive. The cost of the financial reporting consultant was R622 000 (2012: R164 000), but this did not prevent material adjustments to the financial statements. Our concern relating to the continued increase in the use of consultants is a lack of planning before the consultants are appointed and the lack of transfer of skills.


The overall regression in the key controls was caused by the slow response by management and oversight structures in addressing the previous year’s audit findings. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The finance unit, with the oversight of the municipal manager, must

ensure that budgets are monitored and managed in terms of the service delivery and budget implementation plan.

• The municipal manager must be proactive in ensuring that vacant key positions are filled in good time.

• The chief financial officer must regularly prepare a full set of quarterly financial statements for review by internal audit and the audit committee, and submission to MPAC and council.

Council needs to take ownership of the financial reporting and compliance aspects within the administration, and obtain monthly assurance from management that key matters have been addressed. Human resource planning should be proactive to reduce disruptions that arise in the event of vacancies, and a greater focus should be placed on continually up-skilling staff.


For improved audit outcomes the assurance levels should be improved by directing the internal audit and the audit committee towards critically evaluating the financial statements. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is the impact the mayor had on the controls of the auditee as well as the status and impact of the commitments previously given. The municipal manager and the senior management team were always available during the audit. Nevertheless, the assurance provided by the mayor, municipal manager and the senior management team can still be improved to realise and sustain a clean audit.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments to fill all key positions with adequately skilled staff. The mayor also committed to providing an action plan to address all the 2012-13 audit findings.


163 163


164

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

16% 15%

6%

18%22%

29%

12% 12%16%

20011996 2011

85%

69 7

42

73 8

96

92 7

10


20011996 2011

27% 27% 24%

67% 66% 68%

6% 7% 8%

20011996 2011

49% 49% 48%

51% 51% 52%

20011996 2011

30% 34%23%

70% 66%77%

20011996 2011

4.2

3.4

2.8 76% 80% 87%

9%12% 4%15% 8% 9%

66 1

35

117

881

2001 2011

65%

74%

85%

35%

26%

15%


9%

8%

5%

21%

17%

8%

70%

75%

87%


3%

3%

2%

36%

27%

21%

61%

70%

77%

98%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

95%

2001

1996

2011

2001

1996

2011



uMngeni

Municipality



165 165

uMngeni Municipality




Slow progress in addressing audit outcomes

Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health








Audit committee Provides limited assurance




Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

To ensure policies and procedures

are in place for the major

infrastructure assets and asset

maintenance.

To ensure monthly monitoring of

risks per the risk strategy and the

fraud prevention plan.

To establish a risk monitoring

committee.

To ensure urgent filling of key

vacancies.

Municipal manager to develop detailed action plan to address the 2012-13 audit findings, including training staff, filling vacant posts.

MPAC Provides limited assurance



little progress


little progress




(No movement: IT

not assessed in

2011-12)


166

uMngeni Municipality

Current year audit outcomes:■ Unqualified with findings


The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year. Additionally, the instability in the positions of the municipal manager and chief financial officer contributed to findings on the usefulness of performance information and compliance matters.

Six key risk areas

Little or no progress was made to address four of the six key risk areas. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. This resulted in competitive processes not being followed. The usefulness of performance information has not improved due to inadequate monitoring, reviews and implementation of internal controls. Human resource management remained a challenge due to continued instability in the positions of municipal manager and chief financial officer. The quality of financial statements remained stagnant, arising from material amendments that were required. The municipality has failed to implement formal IT controls with regard to granting user access, backup and recovery procedures and implementation of the IT governance framework. Financial health revealed an improvement, as there was no going concern uncertainty. The capital budget and conditional grants were underspent and the bank account was in overdraft; however, these grants are covered by adequate investments.


The overall deterioration in the key controls was caused by instability in the leadership positions and was partially due to the municipality taking too long to fill vacant senior management positions. The following controls must be strengthened to create a control environment that supports

reliable financial and performance reporting and compliance with legislation: The municipal manager must exercise oversight of financial and

performance management and ensure that effective human resource management is in place to recruit and retain talented staff. This will create overall stability in key positions.

The municipal manager must implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information.

The mayor and council should create an environment where the municipality becomes an employer of choice to ensure that it is able to attract and retain skilled employees. Additionally, council needs to take ownership of the financial, performance and compliance aspects within the administration, and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be reviewed by internal audit and the audit committee to ensure that they are concise and credible. This will enable councillors to identify areas that require corrective actions.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and reported performance as their assurance levels are low. We met with the mayor four times during the financial year and these interactions had no impact on the audit outcomes. There was a lack of impact by the mayor on the controls as well as repetitive findings on financial and performance management and on compliance with laws and regulations.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitments, reviewing the SDBIP, and compiling compliance checklists. The mayor committed to providing an action plan to address all the 2012-13 audit findings.


167


168

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

32%29%

16%

9% 10%

21%

2% 3% 5%

20011996 2011

73%

114

924

108

422

106

374


20011996 2011

36% 36% 33%

59% 59% 62%

5% 5% 5%

20011996 2011

46% 47% 47%

54% 53% 53%

20011996 2011

40% 44%25%

60% 56%75%

20011996 2011

4.8

4.3

3.7 42%

53%63%

57% 42%33%

1% 5% 4%

20 3

43

50 0

58

2001 2011

26%

53%

73%

74%

47%

27%


63%

36%

20%

6%

18%

17%

31%

46%

63%


15%

14%

7%

68%

62%

58%

17%

24%

35%

93%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

80%

2001

1996

2011

2001

1996

2011



uMshwathi

Municipality



169

uMshwathi Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health












Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Policies and procedures to enable and support understanding of the financial reporting framework as well as the IT security framework; user access privileges; user access management; change management; backup and restoration.

Action plan to address both internal

and external audit findings.

The financial statements were reviewed by the internal audit unit and audit committee before they were submitted to AGSA.

Mayor to provide commitments based on 2012-13 audit findings.

A detailed action plan will allocate specific responsibilities to the role players, including the training of staff.




little progress


little progress




170

uMshwathi Municipality



The stagnation in the audit outcome was caused by management’s slow response in addressing the matters reported in the previous year. This contributed to findings on usefulness and reliability of performance information and compliance with supply chain management regulations.

Six key risk areas

Three of the six key risk areas regressed, two remained unchanged and one improved. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. This resulted in competitive processes not being followed.

The usefulness and reliability of the performance information has not improved due to inadequate monitoring, reviews and implementation of internal controls. This has resulted in findings on the consistency and measurability of reported and planned indicators and targets. Human resource management remained a challenge due to continued vacancies in the finance and internal audit departments. The quality of financial statements has improved due to the detailed level of reviews performed. The municipality has failed to implement formal IT controls with regard to the IT governance framework, granting user access, as well as backup and recovery procedures. Financial health deteriorated, primarily because of underspending on capital budgets, as well as high impairment levels on debtor balances.


The overall improvement in key controls was caused by management’s response in addressing the previous year’s internal control weaknesses. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight of predetermined objectives and compliance with supply chain management regulations.

• The municipal manager must develop policies and standard operating procedures should be implemented to ensure the reliability of reported performance information.

• The municipal manager must design and implement formal controls over IT systems to ensure the implementation of the IT governance framework, IT service continuity and protection of information.

The mayor and council should address deficits in the competencies of staff in key positions through focused training interventions. The mayor and council should take ownership of the compliance, performance and information technology aspects within the administration, and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be reviewed by internal audit and the audit committee to ensure that they are concise and credible. This will enable councillors to identify areas that require corrective actions.


For improved audit outcomes the assurance levels should be improved by implementing the recommendations of internal audit and directing the audit committee towards evaluating performance information and supply chain management. We met with the mayor and the municipal manager four times during the financial year and these interactions had some impact on the audit outcomes, specifically regarding the quality of the financial statements. The municipal manager and senior management were assessed as providing some assurance as they had not adhered to some commitments to achieve clean administration. While the internal audit unit and the audit committee have provided some assurance, the usefulness of performance information as well as compliance did not receive adequate coverage.

The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council committed to fully implementing their commitments going forward. In addition, a commitment has been made to prepare a new action plan to address all the 2012-13 audit findings.


171 uMkhanyakude District


172

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

48% 46%

25%

8%12%

25%

2% 4% 5%

20011996 2011

38%

503

757

573

341

625

846


20011996 2011

46% 43% 40%

50% 52% 55%

4% 5% 5%

20011996 2011

46% 45% 46%

54% 55% 54%

20011996 2011

54%63%

43%

46%37%

57%

20011996 2011

6.8

5.5

4.8

29%45%

72%

70%51%

26%

1% 4% 2%

19 1

73 47

201

2001 2011

12%

20%

38%

88%

80%

62%


83%

57%

38%

10%

27%

25%

7%

16%

37%


15%

57%

20%

72%

25%

49%

13%

18%

31%

80%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

62%

2001

1996

2011

2001

1996

2011



uMkhanyakude

District Municipality



173 173

uMkhanyakude District Municipality and its entity

Unqualified with

no findings

Unqualified





Adverse/disclaimed

with findings


Implemented



50% 50% 50%

50% 50% 50%

2012-13 2011-12 2010-11

50%

50%

100%

100%

100%

100%

100%

50%

50%

MPAC

Municipal council

Audit committee

Internal audit

Mayor

Municipal manager

Senior management

New


Governance


Provides

assurance

Provides some

assurance

Provides limited/

no assuranceVacancy

Not

established

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Interim annual financial statements to be prepared by 31 March 2014 and

given to internal audit.

Position of the municipal manager to be filled.

Internal audit to issue reports to audit committee regularly.

The mayor and the accounting officer to provide commitments based on



Improved Regressed

Stagnant or

little progress







little progress







50%

50%

50%

50%

50%

50%

100%

50%

50%

50%

50%


174

uMkhanyakude District Municipality and its entity


■ Umkhanyakude district municipality – Qualified

■ Umhlosinga Development Agency – Unqualified with findings


The improvement in the audit outcomes was attributable to the hands-on approach exercised by the leadership of the district municipality. This enabled the majority of the previous year’s issues to be resolved in the current year by recovering the burnt documents, engaging a consultant to prepare a fixed asset register, close monitoring of the action plan and ensuring that they are available to the auditors throughout the audit process.

Six key risk areas

Overall the six key risk areas have not improved. Five of the six areas remained stagnant and one regressed. The status of supply chain management remains unsatisfactory, primarily as a result of the district municipality not complying with legislative requirements. The usefulness and reliability of the performance information has not improved due to inadequate monitoring, reviews and implementation of internal controls. Human resource management regressed at the district municipality as senior managers did not sign performance agreements during the period under review. The quality of the financial statements submitted for audit has not improved due to the lack of detailed reviews, as material adjustments were required for the district municipality and the entity.

The district municipality has failed to implement formal IT controls with regard to the IT governance framework, including security management, user access control, change management and backup and recovery procedures. IT was not assessed in the previous year. Financial health at the district municipality remained unchanged as a result of underspending on conditional grants, as well as high impairment levels on debtor balances. The services of consultants were again engaged in connection with financial reporting at a cost of R2,80 million. (2012: R1,65 million). Our concerns relating to the continued assistance sought from consultants include the lack of transfer of skills, resulting in the continued dependence on consultants. The entity did not have material findings reported in the other five areas.


The overall lack of improvement in addressing risk areas in the key controls was caused ineffective leadership, monitoring and oversight controls. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation in the group:

The mayor and municipal council must implement effective human resource management to ensure adequate and sufficiently skilled officials are in place, and their performance is being monitored. The position of the municipal manager must be filled urgently.

The mayor and municipal council together with management must exercise oversight of proper record management, preparation of financial statements and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial and performance reporting.

Management must review and monitor compliance with applicable laws and regulations, and design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information

The mayor and council must take ownership of the financial, performance and compliance aspects within the administration, and obtain monthly assurance from management that key matters reported by internal and external audit have been addressed in good time. The post of the municipal manager must be filled. The reports presented to council and oversight committees should be concise and credible and produced in a timely manner by management. This will enable councillors to identify areas that require corrective actions. Furthermore, this will assist the oversight committees in effectively performing their functions.


The assurance levels of senior management, leadership and governance structures should be improved. This should be done by ensuring stability at the level of municipal manager, implementing the recommendations of internal audit and directing the audit committee towards evaluating financial reporting, compliance with laws and regulations and performance information. We met with the mayor twice during the financial year and these interactions had a significant impact on the audit outcomes. The reason for


175 175

our assessment is the impact of the mayor had on the controls of the auditee as well as the status and impact of the commitments previously given.

The municipal council and MPAC committed to fully implementing the previous year’s commitments to approve the IT policies, compile compliance checklist and implement consequence management for poor performance. The mayor committed to providing an action plan to address all the 2012-13 audit findings.


176

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

42% 43%

22%

8%13%

27%

1% 3% 3%

20011996 2011

55%

65 9

78

69 2

69

71 9

25


20011996 2011

48% 45% 41%

48% 50% 54%

4% 5% 5%

20011996 2011

45% 45% 46%

55% 55% 54%

20011996 2011

65%76%

54%

35%24%

46%

20011996 2011

7,6

6,4

5,6

25%

48%66%

75%

50%

33%

2% 1%

15 5

66 47

263

2001 2011

18%

29%

55%

82%

71%

45%


83%

59%

57%

13%

32%

9%

4%

9%

34%


55%

44%

7%

44%

39%

58%

1%

17%

35%

93%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

43%

2001

1996

2011

2001

1996

2011


Hlabisa

Municipality





177 177

Hlabisa Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2011-12Qualified with findings

Senior management Provides limited or no assurance








Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Reconciliation of general ledger and fixed asset register on a quarterly

basis.

Adequate record management and filing system.

To undertake diligent reviews of the

financial statements by responsible

officials.

To ensure that key positions are filled with people who possess the

necessary skills.

To ensure that performance is assessed and poor performance dealt

with.

MPAC Provides limited or no assurance



little progress


little progress

Instability and vacancies in key positions

Lack of consequence for poor performance and transgressions





178

Hlabisa Municipality

Current year audit outcomes: ■ Qualified


The lack of improvement in the audit outcomes was caused by management’s slow response in addressing the previous year’s qualification on property, infrastructure and equipment, findings on the performance report and compliance with laws and regulations.

Six key risk areas

Overall the five key risk areas remained stagnant as no progress was made in addressing any of the key risk areas. The status of supply chain management regressed, with material findings as a result of not formulating and monitoring a compliance checklist to adhere to the supply chain management regulations. The quality of the performance reports has remained unchanged with material findings on the usefulness of performance information. Human resource management regressed to having material findings as a result of delays in signing performance agreements for senior managers, performance assessments not being performed and vacancies in key positions. The quality of the financial statements submitted for audit has not improved due to the lack of detailed reviews. Material adjustments were again required.

The municipality has not adequately implemented formal IT controls with regard to the IT governance framework. Financial health remains unchanged due to underspending on grants, and high impairment levels on debtors. The services of consultants were again engaged in connection with financial reporting and performance information at a cost of R1,93 million (2012: R6,42 million), but this did not prevent material findings on the financial statements. Our concerns relating to the assistance sought from consultants and dependence on them includes them being appointed for requirements that can be addressed by internal resources and a lack of transfer of skills and workings.


The overall lack of improvement in the key controls was caused by vacancies in key management, resulting in the leadership not being effective in its oversight role. The performance of senior management is not evaluated to ensure that poor performance is addressed and the

performance management system is not fully implemented for all employees of the municipality. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The mayor and council must exercise oversight regarding financial and performance management and ensure that a full set of monthly financial statements are prepared and reviewed. Effective human resource management will ensure adequate and sufficiently skilled officials are in place, and their performance is being monitored.

• Management must review and monitor compliance with applicable laws and regulations and design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information

The mayor and council are to ensure that key vacant posts are filled in good time. They should take ownership of the financial, performance and compliance aspects within the administration, and obtain monthly assurance from management that key matters reported by internal and external audit have been addressed in good time. The mayor and council should carry out their oversight role effectively and with due diligence in achieving the desired outcomes of the municipality. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions, including consequence management.


For improved audit outcomes the assurance levels of senior management, leadership and governance structures should be improved. This should be done by ensuring stability at the level of senior management, implementing the recommendations of internal audit and directing the audit committee towards evaluating performance information. We met with the mayor four times during the financial year and these interactions had little or no impact on the audit outcomes. This was because the high vacancy rate in the senior manager positions had not been addressed. The mayor’s new commitment is to ensure that key positions are filled with skilled persons, performance is assessed and poor performance dealt with. The municipal council and MPAC committed to fully implementing the commitment to address the asset qualification and made the new commitment to address the current year’s audit findings.


179


180

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

51% 51%

27%

8% 11%

25%

1% 3% 5%

20011996 2011

29%

151

747

184

206

186

502


20011996 2011

46% 45% 41%

50% 51% 55%

4% 4% 4%

20011996 2011

46% 45% 46%

54% 55% 54%

20011996 2011

60% 60%44%

40% 40%56%

20011996 2011

6.8

5.4

4.8

22%40%

77%

75%56%

22%

3% 4% 1%

16 4

18 47

018

2001 2011

4%

10%

29%

96%

90%

71%


84%

51%

42%

11%

37%

28%

5%

12%

30%


75%

64%

24%

22%

21%

42%

3%

15%

34%

76%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

58%

2001

1996

2011

2001

1996

2011



Jozini

Municipality



181

Jozini Municipality

Improvement in the audit outcome




Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2011-12Qualified









Governance

Effective

leadership

Oversight

responsibility

HR

managementPolicies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Amend the indicators in the integrated development plan, making

them specific measurable and time bound.

Implement consequences for poor performance.

Develop and implement a compliance checklist in 2014 to ensure that

supply chain management, performance and financial matters are

addressed in good time.

To set both input and output/outcome indicators to measure all

objectives in the integrated development plan.




little progress


little progress



2010-11Qualified


182

Jozini Municipality



The improvement in the audit outcome was as a result of the chief financial officer and the municipal manager implementing a detailed action plan to address the qualification on assets and reliability of the performance information. Additionally, financial management has improved, in that processing and reconciling of transactions is done regularly.

Six key risk areas

The municipality made little progress in addressing the key risk areas. Four of the six areas remained unchanged, one regressed and one improved. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality not complying with the legislative requirement to procure goods and services through a competitive bidding process, as well as the extensive use of deviations from prescribed processes. While the quality of the annual performance report has improved, the municipality should focus on controls and processes to measure both input and output indicators. Vacancies in key posts were filled by skilled and competent staff. A municipal manager, chief financial officer and a finance manager were appointed early in the year under review. The quality of the financial statements submitted for audit has not improved, resulting in material adjustments being made.

IT controls are not in place to prevent unauthorised access and there is a lack of processes to manage financial system updates. The services of consultants were again engaged in connection with financial reporting (asset register) at a cost of R1,25 million (2012: R450 300). Our concerns relating to the continued assistance sought from consultants include their ineffective management, consultants being appointed for requirements that can be addressed by internal resources and an over dependency on consultants.


The overall lack of improvement in addressing risk areas in the key controls was caused by inadequate monitoring and oversight controls. Controls must

be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation. The municipal manager and mayor must exercise oversight regarding financial and performance management by the municipality. A compliance checklist must be developed, The chief financial officer must prepare regular financial statements that are reviewed by the municipal manager and internal audit. The municipal manager must ensure that relevant and accurate information is accessible and available to support financial and performance reporting

The mayor and council must take ownership of the financial, performance and compliance aspects within the administration, and obtain monthly assurance from management that key matters reported by internal and external audit have been addressed in good time. The reports presented to council should be concise and credible and produced in a timely manner by management. This will to enable councillors to identify areas that require corrective actions, including consequence management.


For improved audit outcomes the assurance levels of senior management, leadership and governance structures should be improved. This should be done by implementing the recommendations of internal audit and directing the audit committee towards evaluating financial and performance information. We met with the mayor three times during the financial year and these interactions had a significant impact on the audit outcomes. The mayor had a positive impact on the controls of the auditee, as well as the status and impact of the commitments previously given in improving the audit opinion. The assurance provided through the oversight of the municipal council and the MPAC should be improved. The municipal council and the MPAC committed to fully implementing the previous year’s commitments to ensure that senior management responsible for performance reporting amends the indicators in the integrated development plan making them specific, measurable and time bound; implement consequences for poor performance and transgressions; and to develop and implement a compliance checklist in 2013-14 to ensure that supply chain management, performance and financial matters are addressed in good time.


183


184

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

40%37%

20%

8%14%

28%

2% 5% 6%

20011996 2011

65%128

559

145

820

175

425


20011996 2011

45% 41% 40%

51% 55% 56%

4% 4% 4%

20011996 2011

45% 46% 46%

55% 54% 54%

20011996 2011

45%60%

40%

55%40%

60%

20011996 2011

6.7

5.8

4.9

45%60%

81%

54%37%

15%

1% 3% 4%

27 2

84

55 9

20

2001 2011

29%

44%

65%

71%

56%

35%


76%

51%

31%

11%

25%

18%

13%

24%

51%


46%

39%

21%

41%

36%

45%

13%

25%

34%

79%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

69%

2001

1996

2011

2001

1996

2011



Mtubatuba

Municipality



185

Mtubatuba Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls:(No movement: IT not

assessed in 2011-12)

Financial

health

2011-12Disclaimer






Municipal council Provides limited or no assurance



Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

VAT account to be revisited and cleaned up from source.

Permit for landfill site to be obtained during the 2013-14 financial year.

Declarations of interest to be received from all suppliers, leading to a reduction in the number of audit findings

Municipality to pay suppliers within 30 days as cash flow situation is improving.

Mayor’s commitment to an improved annual report realised with the production of the annual report.

Controls at registry being addressed, with improvement in filing space as well as recording of documentation.

Suspense account was cleared at year end as committed to.

MPAC Provides limited or no assurance



little progress


little progress



2012-13Qualified


Slow response by oversight structures Vacancies to be filled.

Monitoring responsibilities of oversight committees to be tracked by the leadership.


186

Mtubatuba Municipality

Current year audit outcomes: ■ Qualified audit opinion


The improvement in the audit outcome was caused by management intervention and reviewing the financial information. Management, with the assistance of provincial treasury, also implemented the audit improvement strategy that, among others, assisted them in monitoring compliance with laws and regulations. The auditee also improved their registry, which made for better safekeeping of all documentation.

Six key risk areas

Overall, slow progress was made to address four of the six key risk areas. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality not complying with legislative requirements to procure goods and services through a competitive a bidding process. Although the previous material findings on the performance report remained, the performance report submitted in the current year was in the correct format as prescribed. Human resource management remained unchanged with no findings reported. The quality of the financial statements remained the same with findings, resulting in material amendments being required.

The municipality did not have a dedicated IT officer and no written and approved framework policy was implemented. Financial health findings included underspending of the conditional grants received, an extended creditors payment period and high impairment levels on debtors. The services of consultants were again engaged in connection with financial reporting and performance information at a cost of R2,3 million (2012: R370 128). Our concerns relating to the continued assistance sought from consultants include the consultants being appointed for requirements that can be addressed by internal resources and a lack of a transfer of skills and workings, resulting in the continued dependence on consultants.


The overall lack of improvement in the key controls was caused by inadequate oversight responsibility by management and oversight

committees. Controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation. The municipal manager must exercise oversight of records management, preparation of financial statements and coordinate processes to ensure that relevant and accurate information is available to support financial and performance reporting. A full set of monthly financial statements should be prepared and reviewed. Filling all critical vacant posts in the performance management and finance sections must receive quick attention. The municipal manager and council must ensure that the audit committee and MPAC monitor action plans regarding financial and performance management and report accordingly.

The mayor and council should ensure that all key positions are filled in good time. Furthermore, the mayor and council together with the senior management and governance structures should address the root causes of audit outcomes and inadequate controls by improving the timeliness of responses by management. This should be done through consistent and regular monitoring of the progress of action plans addressing internal and external audit findings. Council should establish and communicate MPAC’s roles and responsibilities to enable them to perform their oversight function effectively.


For improved audit outcomes the assurance levels should be improved by ensuring stability at the level of mayor, oversight role players and senior management. In addition, the recommendations of internal and external audit should be implemented and the work of the audit committee directed towards evaluating the financial statements and performance information. We met with the mayor four times during the financial year and these interactions had some impact on the improved audit outcome. The mayor committed to monitoring the audit improvement strategy monthly to ensure that all tasks in the strategy are addressed in the set time frames.

The assurance levels by council and MPAC should be improved. The council and MPAC approved the audit improvement strategy and committed to monitoring the action plan, which is a standing item on the council agenda.


187 187


188

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

47%

40%

26%

9% 12%

24%

3% 4% 5%

20011996 2011

43%28 8

57

31 4

82

35 2

58


20011996 2011

42% 41% 38%

54% 54% 58%

4% 5% 4%

20011996 2011

48% 48% 47%

52% 52% 53%

20011996 2011

27%47%

27%

73%53%

73%

20011996 2011

6.5

4.8

4.0

36%50%

81%

59%45%

18%5% 5% 1%

20 7

09

57 2

18

2001 2011

11%

19%

43%

89%

81%

57%


88%

68%

4%

1%

5%

52%

11%

27%

44%


80%

57%

13%

10%

15%

47%

10%

28%

40%

87%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

96%

2001

1996

2011

2001

1996

2011



The Big 5 False

Bay Municipality




189 189

The Big Five False Bay Municipality

Improvement in the audit outcome




Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2011-12Qualified







Status of key commitments by the Mayor


Governance

Effective

leadership

Oversight

responsibility

HR

managementPolicies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

The mayor and the accounting officer

are to implement monitoring controls

to prevent non-compliance with laws

and regulations

The mayor is to fill key vacant posts,

include the current year findings in

the action plan and monitor and track

progress monthly, as well as fully

implement the performance

management system.




little progress


little progress







190

The Big 5 False Bay Municipality



The improvement of the audit outcome was due to effective leadership and proper record keeping, resulting in the previous year’s qualifications being resolved in the current year. In addition there were improvements in the usefulness and reliability of performance information.

Six key risk areas

Overall the six key risk areas showed slow progress. Four areas remained unchanged, one improved and one regressed. The status of supply chain management remained stagnant, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. This resulted in a competitive tender process not being followed. The quality of the performance report has improved due to monitoring and reviews of controls over performance reporting. Human resource management remained a challenge due to continued vacancies and the delay in filling the finance manager position. The quality of financial statements remained unchanged, arising from material amendments that were required. No findings were identified on IT governance and controls. Financial health improved; however findings due to overspending on the operating budget, high impairment levels on debtors and extended creditors payment periods, were reported. The municipality engaged the services of a consultant to assist with financial reporting due the vacancies in the finance department. The cost of the consultant was R916 664 (2012: nil), but this did not prevent material findings on the financial statements. Our concern relating to the use of consultants is a lack of transfer of skills.


The lack of overall improvement in the key controls was due to leadership not implementing all recommendations given in the previous year. Some improvement was noted in the financial and performance management processes. Controls must be strengthened to create a control environment

that supports reliable financial and performance reporting and compliance with legislation. The municipal manager must implement effective supply chain management procedures to prevent, detect and report on irregular expenditure; implement effective processes regarding financial statement disclosures; review and monitor compliance with applicable laws and regulations and ensure that the risk management strategy is implemented.

The mayor and council should ensure that all key positions are filled in good time. Furthermore, the mayor and council together with the senior management and governance structures should address the root causes of audit outcomes and inadequate controls. This should be done by improving the timeliness of responses by management through consistent and regular monitoring of the progress of action plans addressing internal and external audit findings. Council needs to take ownership of the financial, performance and compliance aspects within the administration, and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions, including consequence management.


For improved audit outcomes the assurance levels should be improved by ensuring stability at the level of senior management and implementing the recommendations of internal and external audit. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The mayor had limited impact on the controls of the municipality, as well as the status and impact of the commitments previously given. The mayor committed to filling key vacant posts, implementing the performance management system and monitoring the progress of the action plan monthly.

The assurance provided by the municipal council and MPAC should be improved. The municipal council and MPAC committed to fully implementing the previous year’s commitments and are committed in strengthening their oversight responsibility and holding management accountable for slow responses, as well as filling the key vacant positions in good time.


191 191


192

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

56% 54%

31%

7% 9%

22%

1% 2% 5%

20011996 2011

14%128

616

142

565

156

736


20011996 2011

45% 44% 40%

50% 51% 55%

5% 5% 5%

20011996 2011

45% 44% 46%

55% 56% 54%

20011996 2011

62% 69%

47%

38% 31%

53%

20011996 2011

6.5

5.3

4.6

24%36%

58%

75%60%

42%

1% 4%

16 1

22

36 1

64

2001 2011

2%

6%

14%

98%

94%

86%


85%

68%

43%

9%

19%

27%

6%

13%

30%


70%

70%

19%

29%

18%

59%

1%

12%

22%

81%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

57%

2001

1996

2011

2001

1996

2011



uMhlabuyalingana

Municipality




193 193

uMhlabuyalingana Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health


2011-12Disclaimer










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

IT policies not approved by council.

Performance management to be

implemented for all staff, including

those below section 56/57.

Consequences to be implemented for

poor performance.

Proper record management system has been implemented and registers

of irregular, unauthorised and wasteful and fruitless expenditure

have been implemented.

The accounting officer and senior management to provide

commitments based on 2012-13 audit outcomes




little progress


little progress





194

uMhlabuyalingana municipality

Current year audit outcome: ■ uMhlabuyalingana municipality- Unqualified with findings


The improvement in outcome is largely attributed to the hands-on approach exercised by leadership of the municipality which enabled all of the material previous year’s findings to be resolved in the current year. Furthermore, close monitoring of the action plan and availability of key management throughout the audit also contributed to the improved audit outcome.

Six key risk areas

Overall, slow progress was noted in the six key risk areas. Four remained unchanged, one improved and one remained unchanged with no findings. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality not complying with the legislative requirement to procure goods and services through a competitive bidding process. The quality of the annual performance report has improved due to monitoring, timely reviews and the implementation of internal controls. Human resource management remained unchanged with no findings reported. The quality of financial statements has not improved due to the lack of detailed reviews. Material corrections were again required.

The municipality has failed to implement formal IT controls with regard to the IT governance framework, granting user access, security management, back-up procedures and disaster recovery plans. Financial health remained with findings on the debtors’ collection period and underspending of conditional grants. The services of consultants were again engaged in connection with financial reporting at a cost of R228 428 (2012: R110 000). Our concerns relating to the continued assistance sought from consultants include their lack of transfer of skills, resulting in the continued dependence on consultants.


The overall lack of improvement in the key controls was caused by delays in responses by management, political leadership and oversight structures. The following controls must be strengthened to create a control environment

that supports reliable financial and performance reporting and compliance with legislation: • Management reviews of financial and performance information must

take place in good time and must include both procedures to verify credibility of information as well as evidence of review, to isolate responsibility.

• The municipal manager must exercise oversight regarding preparation of financial statements and coordinate processes to ensure that accurate and complete financial and performance reports are prepared regularly. Compliance with legislation must be ensured along with regular monitoring of compliance through the use of a compliance checklist.

The mayor and council must take ownership of the financial, performance and compliance aspects within the administration, and obtain monthly assurance from management that key matters reported by internal and external audit have been addressed in good time. The reports presented to council should be concise and credible and produced in a timely manner by management. This will enable councillors to identify areas that require corrective actions, including consequence management. Furthermore, this will assist the oversight committees in effectively performing their functions.


For improved audit outcomes the assurance levels of leadership, senior management and governance structures should be improved. This should be done by implementing the recommendations of internal and external audit and directing the audit committee towards evaluating compliance with laws and regulations and financial reporting. We met with the mayor twice during the financial year and these interactions had a significant impact on the audit outcomes. The mayor had an impact on the auditees’ controls as well as the status and impact of the commitments previously given.

The assurance provided by the municipal council and MPAC should be improved. The municipal council and MPAC committed to fully implementing the previous year’s commitments to approve the IT policies, compile compliance checklists and implement consequence management for poor performance. The mayor committed to providing an action plan to address all the 2012-13 audit queries.


195 195

uMzinyathi District


196

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

45% 44%

26%

9% 11%

22%

2% 4% 5%

20011996 2011

49%

446

298

480

088

510

838


20011996 2011

44% 43% 40%

51% 52% 55%

5% 5% 5%

20011996 2011

44% 44% 45%

56% 56% 55%

20011996 2011

57% 63%

37%

43% 37%

63%

20011996 2011

5.5

5.0

4.4

31% 38%55%

67% 60%43%

2% 2% 2%

21 3

82

46 6

37

2001 2011

17%

24%

49%

83%

76%

51%


66%

56%

34%

12%

22%

32%

22%

22%

34%


45%

44%

13%

38%

33%

58%

17%

23%

29%

87%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

66%

2001

1996

2011

2001

1996

2011



uMzinyathi District

Municipality

The statistics reflected in these graphics were sourced from the 2011 census (STATS SA) and are not information collated or audited

by the AGSA. The colours of the legends used for these census graphics do not have the same meaning as those used in the rest of

this report.


197 197

uMzinyathi District Municipality




Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee




little progress


little progress




Established and communicated policies and procedures.

Action plans developed to address internal audit findings.

Established an IT governance framework.

Performance of all staff to be measured.

Exception reports to be reviewed.

Audit committee to assess effectiveness of internal audit.

Management will monitor expenditure on contracts by updating the contracts register monthly.

Management will review the contracts register monthly.




No movements: IT

not assessed in

2011-12


198

uMzinyathi District Municipality

Current year audit outcome ■ Unqualified with findings


The stagnation in the audit outcome was a result of a repeat finding related to material corrections made to the annual financial statements for expenditure and disclosure items. Moreover, the municipality persisted in making use of a consulting chief financial officer to manage its financial affairs, with no evidence of performance monitoring, and leadership relied on the consultant to achieve the desired audit outcomes. Clearly, there was no positive benefit to the municipality as the financial statements had to once again be materially amended.

Six key risk areas

The municipality has made minimal or no improvement in addressing four of the six key risk areas. The area of supply chain management has remained unchanged from the previous year. The municipality was again unable to produce credible and reliable quality financial statements and material adjustments were required. The quality of reporting on the usefulness and reliability of the performance information, as well as human resource management, was maintained. The financial health of the municipality deteriorated because of a significant loss of revenue due to water losses, a significant provision of R100,47 million for impairment of consumer debtors, a high reliance on grants and a deterioration in the payment period of suppliers/creditors. The financial health of the municipality has deteriorated, which has given rise to a material uncertainty of a going concern over the year.

The IT environment showed a decline, as evidenced by the number weaknesses noted. The services of consultants were again engaged in connection with financial reporting at a cost of R4,32 million. (2012: R4,52 million). Our concerns relate to the recurring use of consultants and the lack of transfer of skills to the municipal staff, which has not had a positive impact on the district municipality’s audit outcome.


The overall regression in key controls was caused by the slow response of political leadership, oversight structures and management coupled with the

continued reliance on consultants. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting as well as compliance with legislation:

• The municipal manager must implement proper controls over daily and monthly processing and reconciling of transactions to ensure that complete, relevant and accurate information is accessible and available to support financial reporting and the preparation of quality financial statements. A turnaround strategy should be devised to address the deterioration in the financial health of the municipality, and to prevent supply chain deviations, which is to be monitored monthly.

• The municipal manager must design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information is achieved.

The council, mayor and municipal manager should address the root causes by ensuring that internal audit and audit committees as well as MPAC perform their statutory duties in a robust manner so that emerging risks can be identified and mitigated in good time. Additionally, management must be held accountable and consequences should follow for non-performance.


For improved audit outcomes the assurance levels provided by leadership, management, the executive authority and oversight structures (MPAC and council) should be improved. Council and MPAC should direct senior management towards the preparation and submission of credible and reliable financial statements and to vigorously monitor the finances and IT plans of the municipality monthly. We met with the mayor at least four times during the financial year and these interactions have not had an impact on the audit outcome. There were repetitive findings relating to the quality of the financial statements, supply chain management non-compliances and weaknesses in the IT environment. Council has committed to addressing the matters raised in the 2012-13 reports.


199 199


200

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

16% 15%

7%

19%22%

32%

7% 8%11%

20011996 2011

80%

44 4

02

51 1

01

64 8

62


20011996 2011

32% 32% 31%

63% 64% 64%

5% 4% 5%

20011996 2011

49% 49% 49%

51% 51% 51%

20011996 2011

33%46%

26%

67%54%

74%

20011996 2011

4,5

3,9

3,7 77% 82% 88%

14%13% 7%

9% 5% 5%

44 9

95

87 4

30

2001 2011

67%

67%

80%

33%

33%

20%


8%

7%

8%

7%

14%

9%

85%

79%

83%


5%

5%

4%

17%

17%

14%

78%

78%

82%

96%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

92%

2001

1996

2011

2001

1996

2011


Endumeni

Municipality





201 201

Endumeni Municipality Stagnation in audit outcome




Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health


Senior management Vacant








Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee



RegressedStagnant or

little progress


little progress





Internal audit and audit committee will perform their statutory duties.Internal audit will review the quarterly performance reports.The effectiveness of internal audit will be assessed by management and the audit committee.

Management and council will review quarterly performance reports in good time.Key vacant posts such as chief financial officer and other section 57 officials to be filled.Bi-annual financial statements will be prepared and reviewed by management.Management will evaluate the process of granting users to all financial systems, monitor IT service level agreements and implement IT controls in other areas.Internal audit and audit committee will review quarterly performance reports.

Performance evaluations of all staff will be performed at least annually.Asset register will be maintained and reviewed, and fixed asset counts will be performed bi-annually by management.Management will perform inventory counts bi-annually and reconcile to the general ledger.


Improved


202

Endumeni Municipality



The stagnation in the audit outcome was caused by the instability in the municipal council and vacancies in key positions, as well as by the leadership’s slow response in addressing the matters reported in the previous year. Moreover, the skills and competencies of financial and performance reporting officials were not at a desired level. This contributed to repeat findings on the annual financial statements, on the annual performance report and compliance matters.

Six key risk areas

Overall five of the six key risk areas revealed no progress from the previous year. Supply chain management was the only area that showed remarkable improvement, indicating that the municipality’s supply chain management system was equitable, transparent, fair and competitive. The quality of financial statements remained stagnant, arising from material amendments that had to be made to investment property. The usefulness and reliability of the report on performance information has regressed. Human resource management remained stagnant mainly due to the delay in filling positions and the lack of skills in performance management.

IT controls also regressed relating to the lack of a formally documented and approved process to manage granting users access to all financial systems. The financial health of the municipality has also deteriorated due to a loss of revenue arising from significant electricity distribution losses, a high rate of non-payment of debtors, making a substantial provision for consumer bad debts and an increase in the creditor payment period. Further, unspent conditional grants exceed cash on hand at year end and the municipality is in a net liability position, which has affected the ability of the municipality to continue as a going concern.

The services of consultants were again engaged in connection with financial reporting/preparation of performance information at a cost of R1,59 million (2012: R767 732). Our concerns relating to the continued assistance sought from consultants include the ineffective management of consultants, continued dependency on consultants and a lack of transfer of skills.


The overall regression in key controls was caused by the slow response from the leadership and oversight structures coupled with the political instability within the municipality and vacancies in key management positions for longer than six months. The municipal manager should strengthen the following controls to create a control environment that supports reliable financial, compliance and performance reporting:

• The municipal council must ensure that management prepares credible and reliable financial and performance reports in good time, which is subjected to review by internal audit and the audit committee, as well as direct MPAC to exercise oversight over these reports.

• The municipal manager must take responsibility for ensuring that key vacancies and skill deficits in the performance management unit are addressed as a matter of urgency.

• The municipal manager must ensure that the IT controls and IT environment are enhanced so that information is protected and unauthorised access to the information management systems is restricted.

The mayor and council should improve on the response to risk and findings identified by audit and ensure that management also responds appropriately.


For improved audit outcomes the assurance levels provided by the municipal manager, mayor, municipal council and MPAC, should be improved. This should be done by directing senior management towards evaluating information relating to the report on predetermined objectives and a focused review of the annual financial statements. In addition, the recommendations of internal audit and the audit committee should be implemented by management. We met with the mayor on four occasions during the financial year and these interactions had minimal impact on the audit outcome. The on-going political instability at the municipality is hindering the efforts of proper management and oversight as well as the achievement of a clean audit opinion. The filling of vacancies across the municipality must be prioritised.


203


204

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

67% 68%

41%

6% 6%17%

1% 2% 3%

20011996 2011

25%

160

149

167

274

177

577


20011996 2011

48% 47% 44%

46% 47% 51%

6% 6% 5%

20011996 2011

42% 42% 43%

58% 58% 57%

20011996 2011

80% 79%

50%

20% 21%

50%

20011996 2011

5.8

5.1

4.6

13% 18%33%

87% 81%67%

1%

13 5

04 35

939

2001 2011

2%

8%

25%

98%

92%

75%


92%

86%

54%

5%

10%

34%

3%

4%

12%


75%

70%

24%

24%

23%

65%

1%

6%

11%

76%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

46%

2001

1996

2011

2001

1996

2011



Msinga

Municipality



205

Msinga Municipality




Progress made in addressing risk areas

Implemented

Assurance levels should be maintained


Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health


Senior management Provides assurance






Management to monitor cashflow

monthly and follow up on

outstanding debtors.



Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Fixed asset register and general ledger to be reconciled monthly.

Compliance checklists to be completed and monitored monthly.

Audit committee reviewed the performance information reports.

Audit committee evaluated the effectiveness of internal audit.

The municipality’s action plan now includes clear time frames and responsibilities to allow for the effective implementation of external audit recommendations.




little progress


little progress



No root causes to be addressed


206

Msinga Municipality


Improvement in audit outcomes

The improvement in the audit outcome of the municipality is primarily attributed to the hands-on approach by its political leadership and management. The municipality has progressed from financially unqualified audit opinions with findings in the previous financial years to a financially unqualified audit opinion with no findings (clean audit) in the current financial year. This is attributed to the municipality improving the preparation of the financial statements, which required no material audit adjustments in the current year. Moreover, the municipality addressed their material weaknesses in findings on compliance with laws and regulations as well as findings on their annual performance report from the previous year.

Six key risk areas

Overall there were no audit findings in five of the six risk areas, four of which reflected improvements from the previous year. These were supply chain management, IT controls, quality of the financial statements, and quality of annual performance report. Human resource management maintained no findings from the previous year. However, there has being a deterioration in the municipality’s financial health. In this regard, being a rural municipality, it is reliant mainly on grant funding and has impaired a significant portion of its trade receivables in the current year. These indicators of a potential risk of a going concern issue at the municipality, need to be monitored continuously and exemplary budgetary and financial management is required by management.

Key controls

The improvement in key controls is due to a dedicated and disciplined effort undertaken by political leadership, management and staff to ensure that commitments and key controls reflected in quarterly dashboard meetings were monitored and implemented.

The municipality should strengthen the following controls to sustain a control environment that supports reliable financial and performance reporting:

• Regular reconciliations and reviews, especially relating to areas such as assets and supply chain management.

• Quarterly reporting on performance information.

Even though no material findings were raised on financial and performance management, management should continue to monitor action plans to address findings that were not material, monitor key controls to maintain its clean audit outcome and monitor its cash flow monthly.


For a sustainable clean audit outcome assurance levels should be maintained by ensuring stability at senior management levels and implementing the recommendations of internal audit in good time. Management needs to ensure that risk assessments are undertaken regularly to mitigate any emerging risks in good time. We met with the mayor four times during the financial year and these interactions had a significant impact on the audit outcome. The reason for our assessment is that the mayor makes time for our engagement, honours his commitments to address any identified internal control deficiencies and follows up on the progress of implementing the municipality’s action plans. He has also included recommendations from the 2012-13 audit findings in this plan.

The assurance provided through the oversight of the municipal council and the MPAC is satisfactory as they are reviewing information regularly and have taken ownership in running the municipality. Management has committed to monitoring cash flow and following up monthly on outstanding debtors to improve the financial health of the municipality.


207


208

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

38% 39%

18%

7%11%

20%

2% 2% 4%

20011996 2011

53%

151

497 16

9 41

9

165

307


20011996 2011

47% 44% 43%

48% 51% 52%

5% 5% 5%

20011996 2011

45% 45% 45%

55% 55% 55%

20011996 2011

77% 82%

45%

23% 18%

55%

20011996 2011

6.6

5.7

5.2

24%39%

63%

76%59%

36%

2% 1%

17 7

97

35 1

04

2001 2011

5%

16%

53%

95%

84%

47%


63%

43%

21%

30%

46%

47%

7%

11%

32%


44%

41%

9%

55%

45%

82%

2%

14%

8%

91%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

79%

2001

1996

2011

2001

1996

2011



Nquthu

Municipality




209

Nquthu Municipality



Drivers of key controls slightly improving


Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2011-12










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Council and MPAC have started to include credibility and reliability of information in their agenda.

Performance contracts have been signed by senior managers in order to allow for performance evaluations.

Management to monitor action plans monthly to address internal control deficiencies as well as internal and external audit findings.

A compliance checklist for predetermined objectives is in the process of being developed.

An IDP/ PMS manager appointed to address the planning, collecting and reporting on predetermined objectives.

A compliance checklist for financial reporting has been implemented.




little progress


little progress




2012-13


2010-11


No movements: IT

not assessed in

2011-12


210

Nquthu Municipality



The stagnation in the audit outcome was caused by the slow response of leadership and oversight in addressing the matters reported in the previous year. Additionally, the skills and competencies of staff responsible for performance information were not at a desired level. This, together with vacancies in key positions, gave rise to repeat findings on the municipality’s annual performance report and compliance with laws and regulations.

Six key risk areas

Little or no progress was made to address four of the six key risk areas. The status of supply chain management improved. There was no progress in the quality of the financial statements, which remained stagnant mainly due to financial statements not being prepared regularly. The usefulness and reliability of the performance information has not improved due to inadequate monitoring and reviews, and skills deficits in the performance management unit. Human resource management remained stagnant as a result of vacancies not being filled timely, particularly in performance management.

IT showed no material audit findings and a movement was not determined, as no IT assessment was done in 2011-12. The financial health has regressed due to long outstanding debts not being collected, loss of revenue due to material electricity distribution losses, reliance on grant funding, an increase in the debtors’ impairment provision and underspending of the overall budget. The services of consultants were again engaged in connection with financial reporting at a cost of R102 525 (2012: R85 481). Our concerns relating to the continued assistance sought from consultants includes ineffective management, dependency on consultants as a result of vacancies and a lack of transfer of skills.


The slight improvement in the key controls was caused by the slow response of political leadership and oversight, coupled with a vacancy of the IDP/ PMS manager. This resulted in corrective measures not being taken and key controls not being implemented effectively. The following key controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager must implement proper controls over daily and monthly processing and reconciling of transactions to ensure that complete, relevant and accurate information is accessible and available to support financial reporting and the preparation of quality financial statements.

• The municipal manager needs to devise a strategy to address the deterioration in the financial health of the municipality, and to prevent supply chain deviations. This is to be monitored monthly.

• The municipal council and MPAC must exercise their oversight responsibility by reviewing financial and performance information prepared by management and ensuring that adequate and sufficiently competent officials are appointed and their performance is monitored.

The municipal council is committed to filling key vacancies in a timely manner to ensure the municipality is not negatively affected by vacancies that occur during the year. Council has also included the credibility and reliability of financial and performance information in their agenda. Council and the municipal manager must ensure that adequate oversight and direction is given to the audit committee and internal audit.


For improved audit outcomes, the assurance levels provided by the senior management, municipal manager, mayor, internal audit, audit committee, municipal council and MPAC should be improved. This should be done by ensuring that internal and external audit’s recommendations are implemented and directing the audit committee and MPAC towards evaluating performance information and financial reporting. We met with the mayor four times during the financial year and these interactions had a minimal impact on the audit outcomes. This assessment is based on the fact that there were repetitive findings relating to the quality of the financial statements, annual performance report and supply chain management. Council has committed to implementing the previous year’s commitments to improve the quality of performance reports, quality of the financial statements, supply chain management and financial health of the municipality. The mayor is committed to providing an action plan to address the matters raised in the 2012-13 reports.


211 211


212

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

41%37%

27%

10% 12%

23%

3% 5% 5%

20011996 2011

59%

90 2

50

92 2

94

103

093


20011996 2011

36% 39% 36%

59% 56% 59%

5% 5% 5%

20011996 2011

45% 44% 44%

55% 56% 56%

20011996 2011

36% 41%31%

64% 59%69%

20011996 2011

4.4

4.3

3.7 45% 42%

54%

53% 55%41%

2% 3% 5%

24 9

31

49 6

95

2001 2011

29%

34%

59%

71%

66%

41%


61%

58%

37%

3%

10%

25%

36%

32%

38%


24%

29%

9%

48%

39%

49%

28%

32%

42%

91%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

63%

2001

1996

2011

2001

1996

2011



Umvoti

Municipality



213 213

Umvoti Municipality




Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health








new



Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Management will prepare and review quarterly performance reports in good time.

The court challenge over the appointment of the mayor to be resolved as soon as possible.

Skills retention policy was approved.

IT policy was implemented.

A fraud prevention plan was rolled out.

The internal audit annual plan was improved to cover review of compliance and significant financial statement items.

Position of speaker to be filled urgently.

MPAC to be reconstituted and to be fully functioning.

Performance evaluations of non-section 57 staff to be performed.

Bi-annual financial statements to be prepared by the finance team.

A compliance checklist to be implemented for predetermined objectives.




little progress


little progress





2010-11Qualified


No movements: IT

not assessed in

2011-12


214

Umvoti Municipality


Stagnation in the audit outcome

The stagnation in the audit outcome was caused by leadership’s slow response in addressing the matters reported in the previous year. The stagnation can also be attributed to political instability being experienced at the municipality, which is negatively impacting on council’s ability to perform its oversight role.

Six key risk areas

Overall, three of the six risk areas remained stagnant with no findings in the current year. These were supply chain management, human resource management and quality of financial statements. There were no material IT findings; however, the movement could not be determined as no assessment was conducted in 2011-12. There were still concerns regarding the risk area of performance information. These included measures to improve performance not being reflected in the annual performance report for certain planned targets not achieved, reported indicators/targets not being consistent with planned indicators/targets and material audit adjustments in the annual performance report being corrected by management. Finally, the municipality’s financial health indicated a regression mainly due to consumer accounts not being collected in good time.

The services of consultants were again engaged in connection with financial and performance reporting at a cost of R395 010 (2012: R628 365). Our concerns relate to assistance sought from consultants for requirements that can be addressed by internal resources.


The overall improvement in the key controls were mainly due to improved monitoring over compliance with laws and regulations, filling of vacancies and addressing previously identified governance weaknesses. The following key controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager must undertake proper reviews of performance information in good time and include procedures to verify the credibility of information as well as evidence of the review process.

• Council and leadership should perform their oversight responsibility of the credibility, reliability and accuracy of reported performance information and fill the vacancy of the PMS manager without delay.

• The municipal manager must ensure that the performance management unit is adequately capacitated with the appropriate skills.

The municipal council must take responsibility for ensuring that the vacancy and skill shortages in the performance management unit are addressed as a matter of urgency. In addition, the municipal manager should ensure that management prepares in a timely manner credible and reliable performance reports, which are subjected to review by internal audit, the audit committee and MPAC.


For improved audit outcomes, the assurance levels provided by senior management, the municipal manager, mayor, municipal council and MPAC should be improved. The instability of the political leadership of the municipality is negatively affecting service delivery and an improvement in the audit outcome of the municipality. We met with the mayor three times during the financial year and these interactions had a minimal impact on the audit outcome. The reason for our assessment is the lack of impact that the mayor had on the controls of the auditee as well as the status and impact of the commitments previously given. There has been great political instability regarding the position of the speaker and mayor. The position of the mayor is currently being disputed in a court of law, thus hindering council’s oversight role. The municipal council needs to take ownership of the affairs of municipality by implementing an action plan to address external audit queries and directing MPAC towards ensuring the credibility and reliability of financial and performance reporting.


215 215 uThukela District


216

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

28% 27%

14%12%

16%

27%

3% 5% 6%

20011996 2011

75%

556

550

657

736

668

848


20011996 2011

41% 38% 36%

55% 57% 59%

4% 5% 5%

20011996 2011

46% 46% 47%

54% 54% 53%

20011996 2011

49%59%

40%

51%41%

60%

20011996 2011

5.8

4.8

4.5

46%53%

67%

52% 44%32%

2% 3% 1%

22 5

42

56 3

16

2001 2011

44%

58%

75%

56%

42%

25%


38%

33%

20%

27%

31%

30%

35%

36%

50%


16%

18%

9%

60%

54%

51%

24%

28%

40%

91%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

80%

2001

1996

2011

2001

1996

2011



uThukela District

Municipality



217 217

uThukela District Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2011-12

Disclaimer with findings









Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

All section 57 staff vacancies with the exception of chief financial officer filled.

Council and MPAC will review quarterly reports for credibility and reliability on a monthly basis.

A filing clerk position has been created, a system will be developed and a person designated to monitor the movement of financial information.

Processes to be put in place within the municipality to address poor performance due to skills mismatch.

Municipal staff are currently attending training to address the lack of skills.

Reconciliations to be prepared and reviewed monthly.

Monitor irregular expenditure (especially in supply chain management).

Monitor losses, cash flow and follow up on outstanding debtors.

Monitor compliance with laws and regulations monthly.




little progress


little progress




2012-13


2010-11



218

uThukela District Municipality

Current year audit outcome: ■ Disclaimer


The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the lack of supporting documentary evidence reported upon in the previous year and vacancies in key senior management positions. Moreover, there was a lack of consequences for repeated poor performance and transgressions in the municipality. The credibility and reliability of the financial statements and performance reports could not be confirmed due to the high number of material misstatements identified by the auditors, many of which remained uncorrected. Unfortunately, the municipal council has not implemented a decisive strategy to identify and mitigate the risks facing the district municipality.

The district municipality incurred unauthorised expenditure of R200,3 million and irregular expenditure of R90,8 million, which constitute 33% and 5% respectively of such provincial expenditure.

Six key risk areas

No progress was made to address all six key risk areas. Material audit findings were noted in five of the six risk areas, no improvement was noted in human resource management and there was a deterioration in IT controls. Supply chain management regressed to an area of great concern as audit evidence could not be provided to the auditors that all contracts and quotations were awarded in an equitable, fair and transparent manner as well as in terms of the legislative requirements. In other instances, awards were made to close family members of persons in the service of the state. In addition, there were instances where procurement was made without three written quotations being obtained, suppliers who did not have valid tax certificates and the suppliers’ database was inaccurate or incomplete. The usefulness and reliability of the performance information has not improved due to inadequate monitoring, reviews and implementation of internal controls. In this regard, the quality of performance reporting was not supported by adequate evidence. Human resource management remained a challenge due to continued vacancies in the key positions of municipal manager and chief financial officer at year-end. There was an acute lack of skills in the performance management and financial reporting sections. Furthermore, there were no consequences for non-performance of staff. The

quality of financial statements remained stagnant, arising from pervasive and material misstatements identified by the audit.

IT controls remained unsatisfactory due to policies and procedures not being implemented. There were weaknesses in access control, IT was not informed of terminated users and there were no user access and IT service continuity controls. Financial health is also of concern as there was significant loss of revenue due to water losses, a high rate of non-payment of debtors and a high reliance on grants. The services of consultants were again engaged in connection with financial reporting at a cost of R728 333 (2012: R1,04 million) after provincial treasury had provided a consultant in the previous financial year to prepare financial statements. Our concerns relating to the continued assistance sought from consultants include their ineffective management, over dependency on consultants as a result of unfilled vacancies and a lack of transfer of skills.


The overall stagnation in key controls and root causes was caused by vacancies in key positions, slow response management and a lack of consequences for poor performance and transgressions. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager must implement proper controls over document and record management, daily and monthly processing and reconciling of transactions. This will ensure that complete, relevant and accurate information is accessible and available to support financial and performance reporting and the preparation of credible and reliable financial statements and performance reports.

• The municipal manager needs to implement a turnaround strategy to address the concerns over the financial health of the municipality, and to prevent supply chain deviations and a lack of supporting evidence, which is to be monitored monthly.

• The municipal manager must implement effective human resource management to ensure adequate and sufficiently competent officials are appointed. Furthermore, steps must be taken to ensure that


219

accountability as well as roles and responsibilities are properly established within the district municipality

The council, mayor and municipal manager should address the root causes by ensuring that internal audit and audit committees, as well as MPAC perform their statutory duties in a robust manner so that emerging risks can be identified and mitigated in good time. Additionally, management must be held accountable and consequences should follow for non-performance.


For improved audit outcomes the assurance levels provided by MPAC and the executive authority should be improved. Council and MPAC should direct senior management towards the preparation and submission of credible and reliable financial statements and performance reports. In addition, the municipal manager must ensure that there is stability at the level of the senior management team and that the recommendations of internal and external audit are implemented. We met with the mayor four times during the financial year and these interactions had no impact on the audit outcome. The reason for our assessment is the lack of impact of the mayor had on the controls of the municipality and the status and impact of the commitments previously given, which has shown little improvement. The assurance provided through the oversight of the municipal council and the municipal public accounts committee should be improved. The municipal council has committed to implementing an action plan to address the matters raised by the auditors and to influence a turnaround in their current audit outcome.


220

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


Education Labour

16% 16%

8%

15%

21%

31%

5%7%

9%

20011996 2011

83%

178

514

225

459

237

437


20011996 2011

36% 34% 34%

60% 62% 62%

4% 4% 4%

20011996 2011

46% 47% 47%

54% 53% 53%

20011996 2011

34%49%

34%

66%51%

66%

20011996 2011

5,2

4,4

4,0

66% 65%81%

30% 30%17%

4% 5% 2%

30 4

86

70 5

61

2001 2011

62%

68%

83%

38%

32%

17%


24%

20%

8%

15%

25%

24%

61%

55%

68%


8%

9%

3%

43%

43%

36%

49%

48%

61%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

92%

2001

1996

2011

2001

1996

2011


eMnambithi/

Ladysmith

Municipality





221

eMnambithi/Ladysmith Municipality




Progress in addressing risk areas

Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Fill key vacant posts.

Perform annual performance assessments of staff.

Approve and implement disaster recovery plan.

Prepare and review quality bi-annual financial statements.

Perform bi-annually fixed assets counts and reconciliations.

Appoint a compliance officer .

Skills retention policy was approved.

IT policy was implemented.

Accounts are reconciled monthly.

Mid-year performance reporting has been improved.

A fraud prevention plan was rolled out.

The internal audit annual plan now includes the review of compliance and significant financial statement items.

The audit committee will confirm the credibility and reliability of financial and performance reports to MPAC and council quarterly




little progress


little progress







222

eMnambithi/Ladysmith Municipality



The stagnation in the audit outcome was caused by management’s slow response in addressing the matters reported in the previous year. Additionally, the skills and competencies regarding financial and performance information, were not at a desired level. This contributed to repeat findings on annual financial statements and related compliance findings, which prevented the municipality from achieving a clean audit.

Six key risk areas

Overall, two of the six key risk areas have shown good improvement from the previous year. Although, the quality of the performance reporting was one of the improvements, certain planned targets were not attained. The municipality also improved in its financial health status, which included improvement in the debtors’ collection period. However, the quality of its financial statements remained stagnant and material corrections had to again be made.

IT controls was the other key risk area that was unchanged with material matters mainly due to the number of IT internal control weaknesses, the non-implementation of an IT governance framework, and a lack of proper backup procedures and processes. Supply chain management improved as a result of awards made to officials of the municipality, who declared their interest. Although, the municipality has made progress in the overall management of vacancies, it still remains a risk area, particularly as the chief financial officer’s post remains vacant for more than six months. The services of consultants were again engaged in connection with financial reporting at a cost of R3,86 million. (2012: R2,68 million). Our concerns relating to the continued assistance sought from consultants include consultants being appointed for requirements that can be addressed by internal resources and a lack of transfer of skills to municipal staff.


The improvement in key controls is due to a dedicated and disciplined effort undertaken by political leadership, management and staff to ensure that commitments and key controls reflected in quarterly dashboards were monitored and implemented.

The municipality should strengthen the following controls to create a control environment that supports reliable financial and performance reporting:

• The municipal manager should improve the frequency and level of the review of reports to ensure that accurate and complete financial statements and annual performance reports are compiled and that supporting documentation relating to asset management is readily available.

• The municipal manager should improve the review and monitoring of compliance with legislation.

• The municipal manager should enhance the IT system and internal controls, as well as implement an IT governance framework.

The municipal manager must prioritise filling vacancies across the municipality and address the root causes related to the stagnant audit outcomes. The municipal council should also ensure that the municipality properly applies the system of performance management such that there are consequences for poor performance and transgressions.


For improved audit outcomes, the assurance levels provided by senior management and MPAC should be improved. This should be done by directing the management team and the committees of council towards evaluating and reviewing the annual financial statements and information relating to predetermined objectives. We met with the mayor on four occasions during the financial year and these interactions have not had the desired positive impact on the audit outcome. This assessment is based on the fact there has been a slow response by management and vacancies existed in key positions, which resulted in material repeat findings. MPAC is encouraged to pursue its function more vigorously to achieve the desired outcome. The audit committee has committed to confirming the credibility and reliability of financial and performance reports submitted to MPAC and council. The municipal council has committed to addressing the matters reported upon in the 2012-13 reports and monitoring these through an action plan.


223 223


224

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

29%32%

16%11% 12%

26%

1% 2% 3%

20011996 2011

70%

112

522 12

0 62

2

113

073


20011996 2011

41% 41% 37%

55% 55% 58%

5% 5% 5%

20011996 2011

46% 45% 47%

54% 55% 53%

20011996 2011

60%73%

48%

40%27%

52%

20011996 2011

6,3

5,2

5,0

18%

46%59%

81%

53%41%

1% 1%

12 0

43 39

062

2001 2011

41%

64%

70%

59%

36%

30%


50%

44%

25%

46%

50%

61%

4%

6%

14%


17%

11%

3%

82%

85%

90%

1%

4%

7%

97%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

75%

2001

1996

2011

2001

1996

2011


Imbabazane

Municipality





225 225

Imbabazane Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Key vacant posts of chief financial officer, directors of technical and corporate services, as well as IDPmanager still to be filled.

Management to implement and monitor compliance checklists monthly.

Management will draw and review IT exception reports monthly, and implement masterfile amendment forms for system changes.

Management to follow up overdue debtors monthly.

Management to compile and review bi-annual financial statements.

Management has started including credibility and reliability of financial and performance information on the agendas for MPAC and council meetings.

Key post of municipal manager filled.

Internal audit and audit committee is reviewing financial and performance reports.




little progress


little progress






A risk management strategy is to

be developed and implemented.

Recently approved IT policies to be

implemented.


226

Imbabazane Municipality



The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year. Moreover, there has also been a slow response by the political leadership of the municipality in filling critical vacancies in senior management positions. This has contributed to repeat findings on the annual performance report as well as a regression in financial health.

Six key risk areas

Overall, two of the six key risk areas have shown notable improvement from the previous year. The supply chain manager implemented a compliance checklist for improvement in supply chain management practices and the municipality submitted financial statements that were free of material misstatements. Little or no progress was made to address the other four key risk areas. The quality of the annual performance report remained stagnant due to slow progress in addressing the previous year’s matters, such that indicators and targets were not consistent with those as per the approved integrated development plan being reported upon. Human resource management regressed with material findings due mainly to key vacancies in the posts of the municipal manager and chief financial officer, as well as the lack of skills in the area of performance management. The financial health has regressed mainly due to underspending of conditional grants and the capital budget as well as abnormally high debt collection levels.

The municipality has failed to implement an IT security policy and formal controls/reviews with regard to access control, logon violations and adequate user access. The services of consultants were engaged in connection with financial reporting at a cost of R1,66 million (2012: R475 467). Our concerns relating to the assistance sought from consultants include their ineffective management and a lack of transfer of skills, resulting in the continued dependence on consultants due to vacancies in key positions.


The overall stagnation in the key controls was caused by vacancies in key positions and a lack of skills and competence in the finance and

performance departments, resulting in corrective measures and key controls not been taken and implemented effectively. The following key controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal council must ensure that management prepares credible and reliable performance reports in good time, which is subjected to review by internal audit, audit committee as well as direct MPAC to exercise oversight.

• The municipal manager must take responsibility for ensuring that key vacancies and skill deficits in the performance management unit are addressed as a matter of urgency.

• The municipal manager must ensure that the IT controls and IT environment are enhanced so that information is protected and unauthorised access to the information management systems restricted appropriately.

Council has also has started to include the credibility and reliability of financial and performance information as a standing item on their meetings’ agenda. Council must also ensure that stability is returned to the municipality such that there will no longer be dependence on CoGTA officials, who are currently deployed at the municipality.


For improved audit outcomes, the assurance levels provided by senior management, the mayor, internal audit, the audit committee, municipal council and MPAC should be improved. This can be achieved by ensuring stability at the level of the municipal manager and senior management as well as in the implementation of the recommendations of internal and external audit. Council needs to direct the audit committee and MPAC towards evaluating performance information and financial reporting. We met with the mayor four times during the financial year and these interactions have had minimal impact on the audit outcome. The reason for our assessment is the impact the mayor had on the controls of the municipality as well as the status and impact of the commitments previously given. Moreover, there were repeat findings relating to the quality of the annual performance report, IT controls and human resource management. Council has committed to implementing an action plan to address the matters raised in the 2012-13 reports.


227


228

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

44%40%

22%

8% 10%

21%

1% 2% 2%

20011996 2011

58%

98 4

78 11

3 64

4

103

116


20011996 2011

47% 45% 43%

48% 50% 52%

5% 5% 5%

20011996 2011

44% 44% 45%

56% 56% 55%

20011996 2011

76% 84%

57%

24% 16%

43%

20011996 2011

6.5

5.3

5.1

34%45%

62%

64%54%

38%

2% 1%

11 3

91 34

599

2001 2011

28%

47%

58%

72%

53%

42%


45%

38%

32%

28%

20%

12%

27%

42%

56%


36%

38%

20%

64%

46%

63%

16%

17%

80%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

68%

2001

1996

2011

2001

1996

2011



Indaka

Municipality



229

Indaka Municipality




Progress was made in addressing risk areas

Implemented

Assurance levels have improved


Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2011-12Qualified









Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee


Performance of all staff will be assessed.

A disaster recovery plan will be drafted, approved and implemented.

Bi-annual financial statements will be compiled and asset counts performed.

Quarterly performance reports will be prepared by management and reviewed by council in good time.

A compliance officer will be appointed and report to management monthly

Audit committee will evaluate the effectiveness of internal audit.

Implemented skills retention policy.

IT governance and systems have been improved.

Reconciliations being performed monthly.

Mid-year performance reporting has improved.

Management of risk has been improved.

The audit committee will confirm the credibility and reliability of financial and performance information to MPAC and council quarterly.




little progress


little progress





2010-11Disclaimer


230

Indaka Municipality



The improvement in the audit outcome was due to the hands-on approach of the political leadership and management of the municipality in addressing the previous year’s audit findings. The municipality has progressed from a qualified audit opinion in the previous year to an unqualified audit opinion with findings on the annual performance report. There were no material adjustments to the financial statements and no material findings on compliance with laws and regulations. Moreover, the municipality’s audit opinion has shown a steady improvement from a disclaimer (2011), to qualified (2012) and to financially unqualified with findings in the current year.

Six key risk areas

The municipality has made a significant improvement in two of the six risk areas. These were supply chain management, where no material findings were noted and the financial statements, which required no material corrections. The quality of the annual performance report and IT controls revealed material findings. A significantly important performance target was materially misstated, causing stagnation in the reliability of the reported performance information. The deterioration in IT controls relate mainly to delays in exception reporting/review, logs of super users’ access not being maintained/reviewed and masterfile amendment forms not been used. In the final two risk areas, human resource management and financial health, there was little or no improvement. With regards to human resource, the management of vacancies and filling of key positions remains a challenge, especially after the CoGTA deployed finance team’s contract term comes to an end. . Regarding financial health, the capital budget was underspent, as were conditional grants, while the cash available at year end does not cover the amount outstanding for conditional grants. The services of consultants were again engaged in connection with financial reporting at a cost of R2,07 million. (2012: R1,4 million). Our concerns relate to the continued assistance sought from consultants, including overdependence on consultants as a result of vacancies.


The overall improvement in the key controls can be attributed to the improvement in the municipality’s leadership and stability of its governance structures. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager must implement effective human resource management to ensure adequate and sufficiently skilled officials are appointed.


• The municipal manager must implement proper record management to ensure that complete, relevant and accurate information is accessible and available to support financial and performance reporting.

Council should improve on its response time to risk by ensuring risk assessments are conducted regularly and mitigated in a timely manner. Leadership of the municipality must also ensure the timely implementation of audit committee and internal audit recommendations. Council must take ultimate accountability for credible and reliable financial and performance reporting by directing MPAC, and by ensuring that management has effective measures to comply with the relevant laws and regulations.


For improved audit outcomes, the assurance levels provided by the mayor, municipal council and MPAC should be improved by performing their oversight role rigorously and improving the quality of performance reporting. We met with the mayor on four occasions during the financial year. The dashboard report interactions have had a positive impact on the audit outcomes. The reason for our assessment is that the mayor always makes time for our engagements and has progressively honoured the commitments he has made by addressing the identified internal control deficiencies. The mayor has also committed to implementing an action plan to address all the 2012-13 audit findings.


231


232

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

36% 37%

17%

8% 10%

23%

2% 4% 4%

20011996 2011

76%

119

342

137

924

132

068


20011996 2011

45% 41% 39%

51% 55% 56%

4% 4% 5%

20011996 2011

46% 46% 47%

54% 54% 53%

20011996 2011

62% 59%44%

38% 41%56%

20011996 2011

6.0

5.0

4.6

31%41% 42%

68% 56% 57%

1% 3% 1%

18 0

57 44

522

2001 2011

26%

39%

76%

74%

61%

24%


52%

48%

32%

36%

39%

39%

12%

13%

29%


15%

24%

11%

80%

66%

65%

5%

10%

24%

89%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

68%

2001

1996

2011

2001

1996

2011



Okhahlamba

Municipality



233

Okhahlamba Municipality




Slow progress was made in addressing risk areas

Implemented

Assurance levels have improved


Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee


Perform annual performance evaluations of all staff.

Implement an IT framework and improve IT control environment.

Prepare and review quarterly performance reports in good time.

Compile and review bi-annual financial statements and the assets register.

Credibility and reliability of information to be a standing item on Council meeting agendas.

Fraud prevention plan to be rolled out to all staff.

Register to monitor unauthorised, irregular, as well as fruitless and wasteful expenditure implemented.Action plans were implemented.A disaster recovery plan was implemented.Registers and reconciliations are updated/ performed monthly.Improvement in collection of debtors.Compliance checklists implemented.Internal audit plan improved to include significant financial statement items and compliance matters.

The audit committee will confirm the credibility and reliability of financial and performance information to MPAC and council quarterly.




little progress


little progress

None



No movements: IT

not assessed in

2011-12


234

Okhahlamba Municipality



The improvement in the audit outcome is mainly attributed to the hands-on approach by the municipality’s political leadership and its fairly new and dedicated management team. The municipality has progressed from a financially unqualified opinion with findings in the previous financial year to financial unqualified audit opinion with no findings (clean audit) in the current financial year. This is attributed to the fact that the municipality has ensured there was an improvement in the preparation of the financial statements, which required no material audit adjustments in the current year, as well as addressed their material weaknesses in findings on compliance with laws and regulations and findings on their annual performance report from the previous year.

Six key risk areas

The municipality has made minimal or no improvement in addressing four of the six key risk areas. The area of supply chain management has improved from the previous year. In this regard findings were identified whereby awards were made to officials of other state institutions and declarations had not been submitted. Although the quality of the performance reporting was maintained, certain planned targets were not achieved and management had to make corrections to the annual performance report. Human resource management regressed mainly due to vacancies in key positions. The municipality maintained the quality of its financial statements, which has enabled it not to have material corrections. The regression relating to IT was mainly due to an IT governance framework not being implemented. The municipality’s financial health remained stagnant, in that the number of days taken to receive payment from debtors’ as well as the impairment thereof is high. Additionally, capital budgets and conditional grants were not spent at year end. The services of consultants were again engaged in connection with financial reporting/preparation of performance information at a cost of R1,42 million (2012: R248 290).Our concerns relating to the continued assistance sought from consultants include consultants being appointed for requirements that can be addressed by internal resources


The overall improvement in key controls is mainly due to a dedicated and disciplined effort undertaken by leadership to ensure that commitments made by the mayor and key risk areas reflected in quarterly dashboard meetings were monitored and rectified. The municipality should strengthen the following controls to sustain a control environment that supports reliable financial and performance reporting:

• The municipal manager needs to design and implement formal controls over IT systems to ensure the reliability of systems and the availability, accuracy and protection of information.

• The municipal manager needs to implement a strategy to address the concerns over the financial health of the municipality, and to enhance its internal controls over supply chain management processes.

• The municipal manager must implement effective human resource management to ensure adequate and sufficiently competent officials are appointed.

Even though no material findings were raised on financial and performance management, management should continue monitoring action plans to address findings that were not material, monitor key controls so as to maintain its clean audit outcome and monitor its cash flow monthly.


For improved audit outcomes the assurance level provided by MPAC should be improved. The council, mayor and municipal manager should ensure that MPAC performs its mandated duties in a robust manner so that emerging risks can be identified and mitigated in good time. We met with the mayor on six occasions during the financial year. The dashboard report interactions had a significant impact on the audit outcome. The reason for our assessment is that the mayor made time for our engagements and honoured his commitments in addressing the internal control deficiencies. The mayor has committed to maintaining their clean audit and strengthening MPAC’s oversight function.


235 235


236

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

29%26%

17%17%20%

27%

6% 7% 8%

20011996 2011

74%47 6

93

60 0

87

83 1

53


20011996 2011

36% 34% 34%

59% 62% 62%

5% 4% 4%

20011996 2011

46% 48% 46%

54% 52% 54%

20011996 2011

39%55%

37%

61%45%

63%

20011996 2011

5.1

4.4

4.2

84%

60%70%

14%

38%28%

2% 2% 2%

38 3

58

72 9

37

2001 2011

24%

63%

74%

76%

37%

26%


24%

24%

20%

16%

21%

18%

60%

55%

62%


18%

23%

18%

25%

25%

22%

57%

52%

60%

82%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

80%

2001

1996

2011

2001

1996

2011



Umtshezi

Municipality




237 237

Umtshezi Municipality




Slow response by managementSlow response by management




Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

financial

statements

submitted

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

• The position of the Integrated Development Plan (IDP) manager to be advertised and filled as soon as possible.

Performance of all non–section 57 staff members was measured annually.

Reliable, complete and accurate reports on performance against predetermined objectives were prepared.

Key finance officials to be provided with training on the preparation of financial statements.

Deviations and detailed contracts registers to be compiled, implemented and reviewed monthly by the supply chain manager.

Quarterly financial statements to be compiled and reviewed by management, internal audit and audit committee for accuracy and credibility.

A compliance checklist to be completed monthly and reviewed by the compliance senior manager.




little progress


little progress


2012-13Qualified

2010-11



No movements:

IT not assessed

in 2011-12



238

Umtshezi Municipality

Current year audit outcome: ■ Qualified


The regression in the audit outcome from two consecutive clean audits to a qualified audit opinion was most disappointing. This was caused primarily by the lack of a properly implemented human resource retention policy and the slow response of management and MPAC. Moreover, key officials lacked the appropriate skills and competencies, particularly in the financial department.

Six key risk areas

Overall, three of the six risk areas regressed. Firstly, with regards to supply chain management, we were unable to obtain sufficient appropriate audit evidence that management had properly accounted for all irregular expenditure and noted that the preference point system was not always applied. Goods and services were procured without inviting competitive bids and, in other instances, without obtaining the required written price quotations. Secondly, the annual financial statements were qualified in respect of capital commitments, liabilities and irregular expenditure. Thirdly, the municipality’s financial health reflected indicators of a going concern risk as the unspent grants and liabilities were not cash backed and it has impaired a significant portion of its debtors. Human resource management remained stagnant mainly due to vacancies and employees in acting positions in excess of six months. With regards to IT, material findings were noted relating to user access and program change controls as well as vacancies in the IT department. In addition, the movement could not be determined as no IT assessment was conducted in 2011-12. There were no findings on the quality of performance reports due to the stability in the performance management unit and in the technical department.


The overall regression in key controls was caused by the slow response of oversight structures and reliance on the chief financial officer, who resigned at year-end. This has exposed the lack the appropriate skills and competencies in the finance department. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager must implement proper controls over daily and monthly processing and reconciling of transactions to ensure that complete, relevant and accurate information is accessible and available to support financial reporting and the preparation of quality and credible financial statements.

• The municipal manager needs to devise a strategy to address the deterioration in the financial health of the municipality and to prevent supply chain deviations, which is to be monitored monthly.


The mayor and municipal council must exercise its oversight responsibility by holding management, internal audit and the audit committee accountable for credible and reliable financial and performance reporting, as well as compliance with laws and regulations. Moreover, the municipal council and municipal manager must regularly review the risk assessment and updated the risk management strategy so that emerging risks can be identified and mitigated in good time.


For improved audit outcomes the assurance levels provided by senior management, the municipal manager, mayor, internal audit, audit committee, municipal council and MPAC should be improved. In this regard, MPAC needs to be urgently resuscitated and oversee the implementation of the recommendations of internal and external audit. We met with the mayor four times during the financial year and these interactions did not have the desired impact in maintaining the clean audit. The reason for our assessment is the lack of impact that the mayor had on the controls of the auditee as well as the status and impact of the commitments previously given. The mayor has committed to sending key finance officials for training on the preparation of financial statements and implementing the retention policy effectively to ensure that there is continuity in the municipality. In addition, financial statements will be prepared quarterly and reviewed by internal audit and the audit committee to ensure the credibility and reliability of information produced throughout the year. A contract register and deviation register will be compiled and monitored monthly by the supply chain management manager, and reported to municipal manager. Furthermore, a compliance checklist will be completed and reviewed monthly by a senior compliance officer.


239 239

Uthungulu District


240

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic Services


EducationLabour

33% 32%

16%13%

17%

30%

4% 6%9%

20011996 2011

76%

762

585

885

965

907

519


20011996 2011

41% 38% 35%

55% 58% 60%

4% 4% 5%

20011996 2011

46% 46% 47%

54% 54% 53%

20011996 2011

45% 50%36%

55% 50%64%

20011996 2011

6.0

5.0

4.3

39%53%

71%

59%42%

27%

2% 5% 2%

37 4

36 80 0

54

2001 2011

39%

53%

76%

61%

47%

24%


66%

45%

16%

7%

17%

19%

27%

38%

65%


34%

30%

12%

41%

38%

44%

25%

32%

44%

88%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

84%

2001

1996

2011

2001

1996

2011



Uthungulu District

Municipality



241 241

Uthungulu District Municipality and its entities

Unqualified with

no findings

Unqualified





Adverse/disclaimed

with findings

Outstanding

audits


Implemented

Assurance levels should be maintained


33% 33%

100%

67% 67%

2012-13 2011-12 2010-11

100%

100%

100%

100%

100%

100%

100%

MPAC

Municipal council

Audit committee

Internal audit

Mayor

Municipal manager

Senior management

New


Governance


Provides

assurance

Provides some

assurance

Provides limited/

no assuranceVacancy

Not

established

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

To assess the IT environment and implement the necessary IT controls

in the systems and IT processes.

The Supply chain management system was reviewed for possible conflict of interest during SCM processes.

Monitored and reviewed the annual performance report for the credible, accurate and reliable reporting of predetermined objectives.


Improved Regressed

Stagnant or

little progress

100%

100%


Information technology controls

Financial health: uThungulu DM only


Quality of performance reports: uThungulu DM only



little progress

none

100%

100% 100%

33%

67%


242

Uthungulu District Municipality and its entities


Uthungulu District Municipality ■ Unqualified with no findings: Uthungulu Financing Partnership ■ Unqualified with no findings: Uthungulu House Development Trust ■ Unqualified with no findings


The improvement in the audit outcomes for the Uthungulu District Municipality was the result of management addressing the material findings on the predetermined objectives and improving the reliability of the performance information. Both the Uthungulu Financing Partnership and Uthungulu House Development Trust retained their previous unqualified audit opinions with no findings.

Six key risk areas

Overall five of the six key risk areas remained unchanged with no findings from the previous year noted in the areas of supply chain management, the quality of the submitted financial statements, and human resource management. The Uthungulu District has improved on compliance relating to performance reporting by adopting a compliance checklist where all legislative requirements are tracked. IT controls have improved for the Uthungulu District; however, there were findings relating to the implementation of the business continuity strategy as approved by council. Financial health was only assessed for the Uthungulu District Municipality and not for the two entities in the group, as minimal transactions are processed in these entities, with the result that most indicators are not relevant. Nevertheless, no findings were noted for financial health. The services of consultants were engaged in connection with reviewing financial reporting and performance information at a cost of R1,22 million (2012: R1,1 million). No concerns have been identified relating to the continued assistance sought from consultants as the majority of the controls and processes are institutionalised.

Key controls

The overall improvement in the key controls was caused by political leadership and other structures improving the oversight roles in the areas of

governance by addressing the performance management weaknesses identified in the previous year.

The following controls must be maintained to create a control environment that supports reliable financial and performance reporting and compliance with legislation: • The leadership must focus on ethics, honesty and compliance with

applicable laws and regulations. Furthermore, it must continue to prepare and review a full set of monthly financial statements and performance reports to ensure that errors on the reports are corrected in good time.

• The municipal manager must review and monitor compliance with applicable laws and regulations and design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information.

• Effective human resource management strategies that ensure that sufficiently skilled officials are always recruited and that their performance is being monitored, must be maintained.


To sustain audit outcomes the assurance levels should be maintained by ensuring stability at the level of municipal manager and senior management, implementing the recommendations of internal audit and directing the audit committee towards evaluating performance information. We met with the mayor four times during the financial year and these interactions had a significant impact on the audit outcomes. The reason for our assessment is the impact of the mayor on the controls of the Uthungulu District Municipality as well as the status and impact of the commitments previously given. The assurance levels should also be maintained by the council, MPAC, internal audit and the audit committee. The municipal council committed itself to clean administration by implementing the previous year’s commitment to evaluate compliance with laws relating to performance information. Furthermore, an action plan to address all audit findings for 2012-13 was approved by council.


243 243


244

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

34%30%

15%

9%13%

30%

1% 2% 3%

20011996 2011

84%

96 4

61

106

942

122

889


20011996 2011

41% 40% 36%

55% 56% 60%

4% 4% 4%

20011996 2011

47% 47% 48%

53% 53% 52%

20011996 2011

49%59%

42%

51%41%

58%

20011996 2011

6.7

5.5

4.7

24%

53%74%

74%

42%

23%

2% 5% 3%

27 5

67

46 1

30

2001 2011

33%

50%

84%

67%

50%

16%


84%

70%

17%

8%

13%

28%

8%

17%

55%


45%

40%

13%

47%

35%

64%

8%

25%

23%

87%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

83%

2001

1996

2011

2001

1996

2011



Mfolozi

Municipality



245 245

Mfolozi Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Improve quality of the financial statements.

Implement the new supply chain management policies and procedures.

Reduction of creditors and improvement of the cash flow.

Filling vacancies in the finance department.

Filling of the municipal manager position and other senior officials.

Municipal manager to develop detailed action plan to address 2012-13 audit outcomes.



Improved RegressedLittle progress

No findings Findings Material findings Improved Regressed

Stagnant or

little progress







246

Mfolozi Municipality Current year audit outcomes: ■ Unqualified with findings


The stagnation in the audit outcomes was caused by the repeat findings on the quality of submitted financial statements and performance reports. In addition, controls were not implemented to address findings relating to supply chain management and human resource management, which stifled progress. Mfolozi municipality incurred R1,1 million in fruitless and wasteful expenditure which represents 10% of the total amount of fruitless and wasteful expenditure incurred in the province. This was due to interest and penalty charges levied on the late payment of accounts.

Six key risk areas

No progress has been made in the six key risk areas. Supply chain management has regressed and remains an area of concern. Findings include three quotes not being obtained, deviations not being approved, the preferential point system not being applied and tax clearance certificates not being obtained. The quality of the performance report did not improve due a lack of documented evidence. Findings were noted on the reliability and usefulness of the performance report. Instability at leadership level was noted where senior managers were hired on monthly contracts after their employment contracts had expired. Human resource regressed and material misstatements on accumulated depreciation, property, infrastructure and equipment, bad debts recovered, provision for bad debts, other debtors and debtors payments in advance, were identified and subsequently adjusted. IT controls were not designed and implemented to support financial and performance reporting. Financial health remains a challenge as the municipality did not have sufficient cash to fund daily operation and, as a result, the current liabilities exceeded current assets by R21,45 million. Material overspending of the operational budget by 102% and underspending of capital budget by 77% was also noted. The services of consultants were engaged in connection with financial reporting and preparation of performance information at a cost of R2,90 million (2012:R3,83 million). Our concern relating to the continued assistance sought from consultants includes them being appointed for requirements that could be addressed by internal resources, but has not been. This is a result of a lack of transfer of skills from the consultants when they were previously engaged, resulting in a continued dependence on them.


The overall stagnation in the key controls was caused by slow response from the political leadership, oversight structures and management, coupled with the delays in filling the positions of municipal manager, director of corporate services and chief financial officer. Filling vacancies takes longer than six months, which delays the implementation of action plans, policies and procedures and daily key controls. The following controls must be improved to create a control environment that supports reliable financial and performance reporting and compliance with legislation: • The council and MPAC must exercise oversight and hold the senior

management accountable for the action plans on financial and performance management and compliance with laws and regulations.

• The municipal manager must implement the human resource management system to ensure that skilled officials are employed timely, and their performance is being monitored. The design and implementation of action plans, policies and procedures, and the daily reconciliation and capturing of information relating to financial and performance management must be reviewed

The mayor has committed to addressing the root causes of poor audit outcomes and inadequate controls by monitoring the quality of the financial, compliance and performance reports monthly. In addition, filling critical vacancies will be monitored monthly to ensure that the performance of the municipality is not affected. Council must take ownership of the financial, performance and compliance reports by holding management accountable for the credibility and reliability of reports.

Impact of key role player on audit outcomes

For improved audit outcomes the assurance levels provided by the leadership and senior management should be improved. The internal audit and audit committee should focus on evaluating and improving the quality of the financial and performance information. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The mayor had managed to employ the municipal manager and senior management before 30 June 2013.The assurance providers through the oversight of the municipal council and MPAC should be improved. The municipal council should fully implement the previous year’s commitments, which were to implement a new supply chain management policy, compile a compliance checklist and reduce fruitless and wasteful expenditure. The mayor and council committed to providing an action plan to address all 2012-13 audit findings.


247 247


248

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

44%37%

23%

8%13%

22%

2% 4% 5%

20011996 2011

69%

36 8

27

50 3

82

47 8

18


20011996 2011

43% 39% 38%

52% 56% 57%

5% 5% 5%

20011996 2011

45% 46% 46%

55% 54% 54%

20011996 2011

35%50%

31%

65%50%

69%

20011996 2011

6.4

4.7

4.4

28%41%

55%

71%56%

42%

1% 3% 3%

18 5

75

44 7

83

2001 2011

18%

30%

69%

82%

70%

31%


79%

57%

28%

4%

7%

24%

17%

36%

48%


38%

26%

12%

48%

47%

45%

14%

27%

43%

88%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

72%

2001

1996

2011

2001

1996

2011



Mthonjaneni

Municipality



249 249

Mthonjaneni Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health







LeadershipFinancial and performance

management+-Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Action plan and MFMA checklist is discussed and monitored at portfolio meetings.

Suppliers with conflict of interest are removed from the supplier database.

Bid adjudication committee will strive to comprise of the required members.

Monthly reconciliations between the asset register and the ledger will be performed.

Municipal manager to prepare action plans to address audit findings as per the management report and audit report



Improved Regressedlittle progress

No findings Findings Material findings Improved RegressedLittle progress






Oversight

responsibility

Municipal Manager Provides some assurance



250

Mthonjaneni Municipality



The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year. Additionally, the skills and competencies of financial staff were not at the desired level. This, coupled with senior managers being hired on monthly contracts after their employment contracts had expired, contributed to repeat findings on the usefulness and reliability of performance information and compliance matters.

Six key risk areas

Overall two of the six key risk areas improved, one had no findings, two regressed and one remained with material findings. No progress has been made in addressing deficiencies in the areas of financial health, the quality of the submitted financial statements and supply chain management. Supply chain management regressed as non-compliance findings were reported on unauthorised expenditure incurred and irregular expenditure regarding awards made to suppliers in the service of the state. The quality of the performance report improved significantly as no finding was noted on the performance report submitted for audit. Human resource management remained stagnant as the positions of municipal manager and chief financial officer were not filled within three months. The number of material adjustments to the financial statement did not decrease as errors were identified on biological assets, landfill site provision, contracted services, property, infrastructure and equipment, investment property; value added tax and government grants. Financial non-compliance was also noted where interest was not charged on long outstanding debtors. The IT system is adequately used and monitored to ensure it supports reliable and credible financial and performance information. Financial health regressed, primarily because of weaker budgetary controls, resulting in overspending in operating expenditure by R638 890.There was also underspending on capital grants. The services of consultants were engaged in connection with the preparation of financial and performance information at a cost of R372 000 (2012:R44 000). Concerns relate to the dependency on consultants appointed for tasks that should be performed by internal resources, which are not available due to a lack of skills.


The overall regression in the key controls was caused by the slow response of the leadership, political leadership and oversight structures. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

The municipal council must monitor and exercise oversight by holding the audit committee and MPAC accountable to monitor the action plans regarding financial and performance management.

The municipal manager must continue to exercise oversight regarding proper records management, preparation of financial statements and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial and performance reporting.

The municipal manager must review and monitor compliance with applicable laws and regulations, and design and maintain formal controls over IT systems, to ensure the reliability of the systems and the availability, accuracy and protection of information.

The mayor has committed to addressing the root causes of poor audit outcomes and inadequate controls by monitoring the quality of the financial and compliance reports monthly. Furthermore, council must take ownership of the financial, performance and compliance reports by holding management accountable for the credibility and reliability of information.


For improved audit outcomes the assurance levels provided by leadership, senior management and oversight structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and monitor the implementation of the compliance checklist. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is that the mayor had employed a municipal manager and senior management before 30 June 2013. Some assurance was provided through the oversight of the municipal council and MPAC. The previous year’s commitments were implemented, which were to appoint a municipal manager, chief financial officer and other senior managers. Despite this, the assurance provided by the oversight should be further improved. The mayor committed to providing an action plan to address all the 2012-13 audit findings.


251 251


252

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

49% 50%

29%

7% 10%

21%

1% 3% 5%

20011996 2011

45%

129

493

133

602

114

416


20011996 2011

47% 44% 40%

47% 50% 54%

6% 6% 6%

20011996 2011

43% 43% 44%

57% 57% 56%

20011996 2011

77% 77%

45%

23% 23%

55%

20011996 2011

6.6

5.4

4.9

8%19%

32%

92%78%

68%

3%

19 5

42 39 6

79

2001 2011

1%

5%

45%

99%

95%

55%


93%

67%

33%

3%

16%

17%

4%

17%

50%


46%

43%

13%

51%

44%

58%

3%

13%

29%

87%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

67%

2001

1996

2011

2001

1996

2011



Nkandla

Municipality



253 253

Nkandla Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health






Audit committee Vacant




Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Action plans to address the AoPOwere not implemented, resulting in a limitation finding.

In progress are the commitments made in the 2012-13 financial year:

Filling of finance vacant positions.

Management of SCM processes.

The municipality has filled section 57 vacancies.

The municipality has improved cash flows.

Action plan for the audit findings on the audit report and management report to be compiled and implemented..



Improved RegressedStagnant/Little

progress


little progress






(No movement: IT not assessed in 2011-12)


254

Nkandla Municipality



The stagnation in the audit outcome was caused by the leadership’s slow response in addressing the matters reported in the previous year. Moreover, there has also been a slow response by the oversight and political leadership of the municipality, resulting in repeat findings on the quality of submitted financial statements and performance reports. In addition, controls were not implemented to address findings relating to supply chain management and human resource management.

Six key risk areas

Overall the six key risk areas have not improved. Supply chain management has improved but remains an area of concern as competitive processes have not been followed. The quality of the performance report did not improve due a lack of documentary evidence for the usefulness and reliability criteria. Human resource management has not been properly addressed as the financial department lacked skilled and competent staff for nine months of the financial year and it was noted that a consultant was appointed in the chief financial officer position for six months of the financial year. Regarding the quality of financial statements, material misstatements had to be corrected again. An audit committee was not appointed to advise council on financial, performance and compliance matters.

IT controls are not properly designed and implemented to support financial and performance reporting. Financial health remains a concern as the capital budget was underspent due to a lack of planning, creditors representing a large portion of cash and both creditors payment days and debtors collection days being excessive. The services of consultants were engaged in connection with financial reporting to the value of R5 million (2012: R3,71 million). Our concern relating to the continued assistance sought from, and dependence on, consultants, includes them being appointed for requirements that can be addressed by internal resources, but is not addressed as skills were not previously transferred.


The overall regression in the key controls was caused by the slow response of management, political leadership and oversight bodies, coupled with the delays in filling key positions. Filling vacancies takes longer than six months, which delays

the implementation of action plans, policies and procedures and daily key controls. The following controls must be improved to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The council and MPAC must exercise oversight and hold the senior management accountable for the action plans on financial and performance management and compliance with laws and regulations.

• The municipal manager must implement an effective human resource management system to ensure that adequate and sufficiently skilled officials are employed and that their performance is being monitored.

• The municipal manager must monitor and review the design and implementation of action plans, policies and procedures, as well as daily reconciliations and capturing information relating to financial and performance management.



The assurance levels should be improved by implementing the recommendations of the internal and external auditors. An audit committee should be established and their work directed towards evaluating the financial and performance information. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is that the chief financial officer was appointed in March 2013 as committed to by the mayor. The assurance provided through the oversight of the municipal council and MPAC is limited and should be improved. The municipal council should fully honour the previous year’s commitments, which were to implement a new supply chain management policy and compile a compliance checklist. The mayor and council committed to providing an action plan to address all the 2012-13 audit findings and appoint the audit committee to assist the municipal council with their oversight responsibilities.


255 255


256

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

44%38%

21%

7% 10%

23%

1% 1% 3%

20011996 2011

62%

72 7

05 84

771

74 3

36


20011996 2011

44% 41% 39%

51% 54% 56%

5% 5% 5%

20011996 2011

45% 46% 46%

55% 54% 54%

20011996 2011

31%

58%50%

69%

42%50%

20011996 2011

1.9

6.6

5.7

16%32%

53%

84%66%

46%

2% 1%

23 1

72

56 4

83

2001 2011

6%

28%

62%

94%

72%

38%


88%

73%

32%

10%

18%

46%

2%

9%

22%


54%

53%

25%

44%

31%

69%

2%

16%

6%

75%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

68%

2001

1996

2011

2001

1996

2011



Ntambanana

Municipality



257 257

Ntambanana Municipality




Slow progress in addressing risk areas

Implemented

Assurance levels should improved


Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls(No movement: IT not assessed in 2011-12)

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

The Municipality has assessed the IT environment and will implement the necessary IT

controls in the systems and IT processes.

The Municipality has reviewed the supply chain management system for possible conflict of interests during the SCM processes.

Action plan to address overtime not per the basic conditions of employment act which is included in annexure B of the management report.




little progress


little progress

None




258

Ntambanana Municipality



The improvement in the audit outcome to a clean audit is the result of the commitment of the leadership and council, and the assistance from the KwaZulu-Natal Provincial Treasury, which provided staff to the finance department of the municipality to assist with the performance information prior to the audit.

Six key risk areas

Overall the six key risk areas showed little movement. Supply chain management control design and implementation is effective as the municipality implemented a compliance checklist. The municipality has maintained the key controls on performance management, resulting in no findings on the performance report submitted for audit. Human resource management has regressed as the municipality is struggling to fill vacancies within six months due to the unavailability of skills within the municipal area. It was also noted that some staff had worked excessive overtime hours. The quality of the financial statements improved due to improved controls over their review. The municipality relies on a service provider for IT as it does not have funds to hire full time IT personnel. The IT governance framework is limited to monitoring changes of users and sourcing offsite backup storage. There is no movement of IT controls indicated as an assessment was not performed in the previous year. With regards to the financial health indicators, it was noted that the municipality underspent its final approved capital budget and conditional grants. The services of consultants were engaged in connection with reviewing financial and performance information at a cost of R163 191 (2012: R166 026). Our concern relating to the continued assistance sought from consultants includes the unavailability of staff to fill the vacancies at the municipality, creating an on-going reliance on consultants.

Key controls

The overall improvement in the key controls is a result of the political leadership and oversight identifying staff shortages at the municipality in advance, and requesting the assistance of the KwaZulu-Natal Provincial

Treasury and a consultant to review financial and performance information. The following controls must be maintained to ensure a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The leadership must focus on ethics, honesty and compliance with applicable laws and regulations. It must continue to prepare and review a full set of monthly financial statements and performance reports to ensure that errors on the reports are corrected in good time. Effective human resource management strategies must ensure that sufficiently skilled officials are always recruited and that their performance is being monitored.

• The council and MPAC must exercise extensive oversight regarding financial and performance management by the municipality. IT systems must be a standing item on the agendas of the audit committee, MPAC and council meetings.



To sustain the audit outcomes the assurance levels should be maintained. Furthermore, the mayor and municipal council must ensure stability at the oversight level. The municipal manager and the chief financial officer should be appointed to prevent a regression in audit outcomes, as both positions had become vacant after year-end. We met with the mayor five times during the financial year and these interactions had a significant impact on the audit outcomes. The mayor had worked closely with the internal audit and audit committee to ensure that the information produced by the municipal officials is credible and reliable. The assurance provided through the oversight of the municipal council and MPAC has improved significantly. The municipal council has fully implemented the previous year’s commitments on the supply chain management checklist and improving the quality of the financial statements. The mayor and council committed to providing an action plan to address all the 2012-13 audit findings and appointing the municipal manager and chief financial officer.


259 259


260

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

15%18%

8%

24% 25%

39%

10% 11%15%

20011996 2011

93%196

894

289

190

334

459


20011996 2011

34% 33% 29%

63% 64% 68%

3% 3% 3%

20011996 2011

48% 48% 49%

52% 52% 51%

20011996 2011

62%

41%32%

38%

59%68%

20011996 2011

18.4

4.1

3.6

76% 77%89%

19% 15%8%

5% 8% 3%

59 4

79

121

177

2001 2011

73%

86%

93%

27%

14%

7%


26%

11%

3%

11%

20%

5%

63%

69%

92%


8%

9%

4%

31%

38%

30%

61%

53%

66%

96%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

97%

2001

1996

2011

2001

1996

2011



uMhlathuze

Municipality



261 261

uMhlathuze Municipality





Implemented

Assurance levels improved


Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

IT governance was developed and approved by council. Is awaiting implementation.

Monitoring and review of the water and electricity losses is still in progress.

Identify the suppliers in service of state and take action for any misrepresentations by suppliers.

Implemented stricter procedures for the AOPO compliance.

Approved IT governance development awaiting implementation.

Action plan to address annexure B of the management reports and IT findings.




progress

No findings Findings Material findings Improved RegressedStagnant/Little

progress

None




262

uMhlathuze Municipality Current year audit outcomes: ■ Unqualified with no findings


The improvement in the audit outcomes is the result of the municipality addressing the previous year’s findings on performance information and supply chain management. In addition, basic disciplines and controls were designed and effectively implemented, coupled with focused attention towards the key control dashboard commitments by leadership.

Six key risk areas

Five of the six key risk areas have remained stagnant. Supply chain management remained the same due to the municipality being in the process of taking legal action against suppliers that are dealing with the municipality while in the service of the state, as well as there being new cases identified during the 2013 audit. There is significant improvement in performance management as performance reports are reviewed monthly and monitored for usefulness, reliability and compliance with laws and regulations. Furthermore, quarterly reports are submitted in good time to internal audit for review. Human resource strategies are implemented and reviewed to ensure that sufficiently skilled staff are recruited and retained. The municipality continues to perform independent reviews of the financial statements to ensure that there are no material misstatements when submitted for audit. IT has remained stagnant although the number of findings decreased compared to the previous year with the implementation of the governance frameworks, service level agreements and renewal of the IT infrastructure. These need to be monitored by the IT department going forward. The financial health of the municipality is monitored by reconciling water losses, electricity losses, revenue, receivables, expenditure and payable accounts; however, material underspending on the capital budget was noted. Furthermore, prior to approval, expenses against budget are reported to the finance committee monthly to avoid unauthorised expenditure.

Key controls

The overall improvement in the key controls was caused by an improvement in the oversight responsibilities in ensuring that financial statements and performance reports are accurate and non-compliance with supply chain management is identified in good time.

The following controls must be maintained to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The leadership must focus on the ethics, honesty and compliance with applicable laws and regulations. Furthermore, it must continue to prepare and review a full set of monthly financial statements and performance reports to ensure that errors on the reports are corrected in good time.

• The council and MPAC must exercise extensive oversight of financial and performance management. Furthermore, IT systems must be a standing item on the agendas of the audit committee, MPAC and council meetings.

• Effective human resource management strategies must ensure that sufficiently skilled officials are always recruited and that their performance is being monitored.



For sustainable audit outcomes the assurance levels should be maintained by ensuring stability at the level of the municipal manager and senior management. The recommendations of the internal audit unit must be implemented and the audit committee directed towards evaluating financial and performance information, IT systems, and compliance with laws and regulations. We met with the mayor four times during the financial year and these interactions had a significant impact on the outcomes. A clean audit task team was formed, which had a significant influence on directing the municipal staff in their daily tasks. The assurance levels should also be maintained by the council, MPAC, internal audit and the audit committee. The municipal council committed itself to clean administration by implementing the previous year’s commitments to evaluate compliance with laws relating to supply chain management and performance information. Furthermore, an action plan to address all audit findings for 2012-13 was approved by council, including a three-year budget to address the IT infrastructure requirements.


263 263


264

Population

Households

Average

household size

Average dwelling

type per nr of

households

Average

household

income

Basic services


EducationLabour

39% 39%

23%

8%12%

23%

3% 4% 6%

20011996 2011

58%

230

205

221

078

213

601


20011996 2011

42% 40% 37%

53% 55% 57%

5% 5% 6%

20011996 2011

45% 45% 46%

55% 55% 54%

20011996 2011

49% 53%37%

51% 47%63%

20011996 2011

6.3

5.5

4.6

30%42%

61%

69%56%

37%

1% 2% 2%

24 7

98

49 0

96

2001 2011

30%

39%

58%

70%

61%

42%


82%

65%

25%

3%

16%

33%

15%

19%

42%


46%

46%

24%

43%

35%

45%

11%

19%

31%

76%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

75%

2001

1996

2011

2001

1996

2011



Umlalazi

Municipality



265 265

Umlalazi Municipality



Drivers of key controls have little improvements


Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Review supply chain management system for possible conflict of interests during the SCM processes.

Assess the IT environment and implement the necessary IT controls in the system and IT processes.

Monitor and review electricity losses.

Appointment of the internal audit and audit committee was achieved by the municipality.

Appointed the section 57 employees as previous contracts expired.

Municipal manager to ensure action plans are implemented for the findings on the audit report and management report.




progress

No findings Findings Material findings Improved RegressedStagnant/Little

progress






(No movement: IT not assessed

in 2011-12)


266

Umlalazi Municipality



The stagnation in the audit outcomes was caused by the previous year’s findings not being addressed, which resulted in repeat findings that included material misstatements of trade and other payables, irregular expenditure and cash flow for the year, which were subsequently corrected. Additionally, the municipality did not have adequate resources to implement action plans to address the previous year’s audit findings in good time.

Six key risk areas

Overall three of the six key risk areas did not improve as no progress has been made in addressing these deficiencies. Supply chain management remains an area of concern regarding three quotes not being obtained, deviations not being approved, a preferential point system not being applied, dealing with suppliers whose directors are in the service of the state and payments to suppliers made after 30 days of receipt of invoices. The performance management systems were improved and implemented to clear the previous year’s significant findings on the usefulness and reliability of performance information. Human resource management had weakness as senior managers were hired on monthly contracts after their employment contracts had expired. Material misstatements on property, infrastructure and equipment, receivables, irregular expenditure, unauthorised expenditure, unspent conditional grants and fruitless and wasteful expenditure were identified. IT controls were not properly designed and implemented to support the financial and performance reporting. It should be noted that no movement has been recorded as IT was not assessed in the previous year. Financial health remains a challenge due to underspending of conditional grants and capital budgets, as well as high debt impairment levels. The services of consultants were engaged in 2013 in connection with the preparation of financial and performance information at a cost of R1,64 million. Concern exists relating to the dependency on consultants appointed for tasks that should be performed by internal resources, but which are not available due to a lack of skills.


The overall little improvement in the key controls was caused by the slow response of leadership, political leadership and the oversight structures. The

following controls must be strengthened to create a control environment that supports reliable financial reporting and compliance with legislation:

• The council and MPAC must exercise oversight and continue to hold the senior management accountable for the action plans on financial and performance management and compliance with laws and regulations.

• The municipal manager must implement an effective human resource management system to ensure that adequate and sufficiently skilled officials are employed, and their performance is being monitored.

The municipal manager must monitor and review the implementation of action plans, policies and procedures, daily reconciliation and capturing of information relating to financial and performance management.



The assurance levels should be improved by ensuring stability in the finance department and implementing the internal and external audit recommendations on supply chain management. We met with the mayor four times during the financial year and these interactions had some impact on the audit outcomes. The reason for our assessment is that the chief financial officer was appointed in March 2013 and performance systems were implemented as committed to by the mayor. The assurance provided through the oversight of the municipal council and MPAC should be improved. The municipal council should fully implement the previous year’s commitments, which were to implement a new supply chain management policy and compile a compliance checklist. The mayor and council committed to providing an action plan to address all 2012-13 audit findings.


267 267

Zululand District


268

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

36%39%

19%

11% 13%

27%

3% 4% 5%

20011996 2011

70%

691

055

780

069

803

575


20011996 2011

44% 42% 40%

52% 53% 55%

4% 5% 5%

20011996 2011

46% 46% 46%

54% 54% 54%

20011996 2011

55% 61%41%

45% 39%59%

20011996 2011

6.5

5.4

4.9

43%53%

74%

55%44%

25%

2% 3% 1%

24 7

45

53 4

00

2001 2011

27%

39%

70%

73%

61%

30%


59%

49%

31%

15%

22%

16%

26%

29%

53%


34%

39%

21%

48%

36%

46%

18%

25%

33%

79%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

69%

2001

1996

2011

2001

1996

2011



Zululand District

Municipality



269 269

Zululand District Municipality





Implemented


In progress

Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Inventory module in process of being activated on the financial system.

Creditors reconciliation in progress and module in process of being activated on the financial system.

Consequences to be implemented for non-performance.

Implementation of controls to identify conflict of interest for state officials.




little progress


little progress





Improved

Action plan to be updated to address the current year’s audit findings to be monitored regularly by management.

New


270

Zululand District Municipality

Current year audit outcomes: ■ Financial unqualified with findings


The lack of movement in the audit outcomes was caused by the leadership’s slow response in addressing matters reported in the previous year. This contributed to the findings arising from supply chain management non-compliance and material misstatements in the financial statements that had to be corrected.

Six key risk areas

Slow progress has been made in addressing the six key risk areas as five remained unchanged and one regressed. The status of supply chain management remained unsatisfactory, primarily as a result of the municipality not following a compliance checklist to adhere to the supply chain management regulations. This resulted in competitive process not being followed. The quality of financial statements has not improved due to the lack of detailed reviews. Material amendments to the financial statements were required for contingent liabilities, contingent assets and irregular expenditure. The municipality has failed to implement formal IT controls with regard to security controls, user access controls, and backup and recovery procedures. Financial health regressed, primarily because of underspending of the capital budget, extended creditors payment period and high impairment levels on debtors. The services of consultants were engaged in connection with financial reporting at a cost of R931 000 (2012: R281 000), but this did not prevent material findings on the financial statements. Our concern relating to the continued increase in the use of consultants is a lack of transfer of skills. The quality of performance reports and human resources management remained with no findings reported.


The overall improvement in the key controls was caused by the municipality filling all key vacant posts and governance structures committee providing assurance and ensuring information provided to council was credible and reliable. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with laws and regulation:

The municipal manager must exercise oversight regarding the preparation of financial statements and coordinate processes to ensure that accurate and complete financial reports are prepared regularly.

The municipal manager must review and monitor compliance with applicable laws and regulations and design and implement formal controls over IT systems to ensure reliability of the systems and the availability, accuracy and protection of information.

The municipal manager must ensure that the risk management strategy is implemented.

The mayor and council, together with the senior management and governance structures, should address the root causes of audit outcomes and inadequate controls. This should be done by improving the timeliness of management responses through consistently and regularly monitoring the progress of action plans addressing internal and external audit findings. Additionally, council needs to take ownership of the financial, performance and compliance aspects within the administration and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions, including consequence management.


For improved audit outcomes the assurance levels provided by leadership and senior management should be improved. The internal audit and audit committee should focus on improving the quality of the financial statements. We met with the mayor four times during the financial year and these interactions had little impact on the audit outcomes. The reason for our assessment is the lack of impact the mayor had on the controls and the repetitive findings on financial management and compliance with laws and regulations. The assurance provided through the oversight of the municipal council and MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitment in activating all relevant modules in the financial system to ensure credible financial reporting. The new commitments relate to monitoring the updated action plan.


271


272

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

27%30%

17%

11%16%

28%

5% 6% 7%

20011996 2011

72%

167

904

191

019

211

060


20011996 2011

40% 38% 40%

56% 57% 55%

4% 5% 5%

20011996 2011

48% 48% 47%

52% 52% 53%

20011996 2011

43%59%

36%

57%41%

64%

20011996 2011

5,9

4,2

4,6 59% 60%

80%

38% 37%

18%3% 3% 2%

27 6

24

62 2

78

2001 2011

36%

43%

72%

64%

57%

28%


34%

36%

17%

15%

20%

13%

51%

44%

70%


21%

26%

13%

35%

31%

36%

44%

43%

51%

87%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

83%

2001

1996

2011

2001

1996

2011


Abaqulusi

Municipality





273

Abaqulusi Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2012-13Qualified opinion


2011-12Disclaimed opinion









Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Oversight will be exercised by ensuring that the relevant council committees are convened.

An exercise is currently underway in reviewing all HR policies to ensure compliance with legislation, including incorporating policies relating to training of staff to improve competencies.

Filling of vacant posts.

Assess capacity of internal audit.




little progress


little progress




Monitor previous year’s

action plan to resolve

previous year’s qualification

issues.

Establish a risk committee

Table action plan for

2013/14 to council.


274

Abaqulusi Municipality

Current year audit outcomes: ■ Qualified audit opinion


The improvement in the audit outcomes was caused by the management addressing the limitations that resulted in the previous year’s disclaimer of opinion. This improvement was also a result of stringent efforts by the oversight committees in overseeing the action plans and consultants engaged to assist. Additionally, there were CoGTA interventions into the administration of the municipality.

Six key risk areas

Overall there has been slow progress in addressing the six key risk areas, as five areas have remained stagnant and one has regressed. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality not complying with legislative requirements. While the quality of the annual performance report has improved marginally, the municipality should focus on the measurability of the performance information to address the significant audit findings on the usefulness of its performance report. Human resource management continued to be a challenge due to the instability of the key management positions as these were filled by persons in acting positions for periods exceeding a year. Although the quality of the financial statements submitted for audit was subject to material corrections, there has been a reduction in misstatements since the previous year. The municipality did not have an approved IT policy and an approved disaster recovery plan as part of the IT governance framework. The financial health of the municipality remained with key findings with regard to underspending of conditional grants and capital budget, as well as high debt impairment ratios. The services of consultants were engaged in connection with financial reporting at a cost of R454 207 (2012: nil). Our concerns relating to the assistance sought from consultants include their lack of transfer of skills, resulting in the continued dependence on consultants.


The lack of significant improvement in the key controls was caused by the governance structures having regressed due to the lack of capacity in internal audit unit, which has affected the operations of the audit committee

in achieving pre-planned objectives. Leadership controls has remained unchanged from the previous reporting period; however, the commitments obtained encompass the strengthening of these structures to ensure improvement in audit outcomes. The improvement in the financial and performance management controls has impacted on the improved audit outcome. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight regarding the preparation of financial statements and performance reporting, and implement monthly compliance checklists.

• The municipality must implement effective human resource management to ensure adequate and sufficiently skilled officials in accordance with the policies and procedures, as provided for in the human resource policies.

• Capacitating internal audit must be achieved to ensure the governance structures are strengthened.

The mayor and council, together with the senior management and governance structures, should address the root causes of poor audit outcomes and inadequate controls. This should be done by improving the timeliness of management responses through consistently and regularly monitoring the progress of action plans addressing internal and external audit findings. Furthermore, the mayor and council should ensure that all key positions are filled in good time and address deficits in the competencies of staff in key positions through focused training.


For improved audit outcomes the assurance levels should be improved. This should be achieved by ensuring stability at the level of senior management, fast-tracking the timelines of delivery by internal audit and directing the audit committee towards evaluating performance information, financial reporting and supply chain management. We met with the mayor five times during the financial year and these interactions had a significant impact on the audit outcomes. The reason for our assessment is the impact of the mayor and CoGTA on the controls of the municipality as well as the status and impact of the commitments previously made in the areas of the 2011-12 disclaimer items. The municipal council and MPAC, with the assistance of CoGTA, committed to fully implementing the previous year’s commitments, which


275 275

were to monitor the action plan to resolve the previous year’s disclaimer issues. The following new commitments were made during the tabling of the 2012-13 action plan in council: regular oversight meetings, reviewing and workshopping policies, assistance from National Treasury on IT policies, assessing the capacity of internal audit and formalising the risk committee processes.


276

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

37% 38%

18%

8%11%

22%

2% 3% 4%

20011996 2011

63%65 3

68

82 2

41

82 0

53


20011996 2011

44% 42% 40%

51% 53% 56%

5% 5% 4%

20011996 2011

46% 47% 47%

54% 53% 53%

20011996 2011

50% 57%38%

50% 43%62%

20011996 2011

6,3

5,3

5,0 53%

62%74%

44%36%

25%

3% 2% 1%

24 9

24

45 4

11

2001 2011

31%

31%

63%

69%

69%

37%


48%

37%

22%

27%

29%

14%

25%

34%

64%


26%

30%

10%

66%

54%

56%

8%

16%

34%

90%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

78%

2001

1996

2011

2001

1996

2011


eDumbe

Municipality





277 277

eDumbe Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health









Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

IT action plan to be developed

A compliance checklist to be developed and implemented

Quarterly financial statements to be prepared

Leadership affirmed its commitment to attaining clean audit for year 2014

Implement controls over daily and monthly transactions

Quarterly review of performance assessment report per department

Monitoring of previous year’s issues on action plan on a quarterly basis.

Internal audit to audit performance on a continuous basis

Council to perform an assessment of the effectiveness of audit committee




little progress


little progress



2012-13

Qualified opinion

2010-11

Qualified opinion

2011-12Disclaimed with findings


278

eDumbe Municipality



The improvement in the audit outcomes was caused by management addressing the limitations that resulted in the previous year’s disclaimer of audit opinion. In addressing the limitation, the municipality used consultants and the assistance of CoGTA to monitor the action plans and improve records management.

Six key risk areas

Overall the six key risk areas reveal little progress as five of the six areas remained unchanged with findings. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality not complying with the legislative requirement to procure goods and services through a competitive bidding process. The quality of the annual performance report has improved only marginally. Human resource management findings remained unchanged. The quality of financial statements has not improved due to the lack of detailed reviews. Material amendments to the financial statements were required. IT controls improved to having no findings. Financial health remained unchanged due to underspending on the conditional grants and capital budget, and high impairment levels on debtors. The municipality disclosed in the financial statements that a material uncertainty existed with regard to its ability to operate in the foreseeable future. The services of consultants were again engaged in connection with financial and performance reporting at a cost of R3,53 million (2011-12: R676 117), which did not prevent material findings on the financial statements. Our concerns relating to continued assistance from consultants include their ineffective management, the lack of a policy or strategy for the use of consultants and consultants being appointed for requirements that can be addressed by internal resources.


Overall there was stagnation in key controls. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager and municipal council must exercise oversight regarding the preparation of financial statements and performance report, compliance with key laws and regulations and a proper record management system, and appropriately implement a compliance checklist which is monitored regularly. Effective human resource management must be implemented to ensure adequate and sufficiently skilled officials are in place and that their performance is being monitored.

• The municipal manager must develop an appropriate risk management strategy and, with the assistance of governance structures, monitor risk management activities regularly.

The mayor and council should address deficits in the competencies of staff in key positions through focused training interventions. They must take ownership of the financial, performance and compliance aspects within the administration to obtain monthly assurance from management that key matters reported by internal and external audit have been addressed in good time. The MPAC and council needs to strengthen their oversight and understanding of financial and performance management and insist on quality reports from all responsible officials to further improve audit outcomes. The slow response by management needs to be addressed by implementing consequences for poor performance


For improved audit outcomes the assurance levels should be improved by implementing the recommendations of internal audit and directing the audit committee towards evaluating the quality of financial statements, compliance and performance information. We met with the mayor five times during the financial year and these interactions had an impact on the audit outcomes. While internal audit and the audit committee have provided some assurance, the financial statements as well as compliance were not adequately reviewed. The assurance provided by senior management, the municipal manager, municipal council and MPAC should be improved. The municipal council committed to fully implementing the previous year’s commitment to improve its records management. In addition, the following new commitments were received: to follow up on the action plan addressing all 2012-13 audit findings, as well as for internal audit to audit performance information continuously.


279 279


280


281 281

Nongoma Municipality Regression

in audit outcome




Implemented


Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls(No movement: IT not

assessed in 2011-12)

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Performance management system implemented.

Performance manager has been appointed.




little progress


little progress


Lack of appropriate competencies and skills



Consequences to be implemented for transgressions.

Staff to be appropriately skilled and trained.

In progress


Performance management system implemented.

New


282

Nongoma Municipality

Current year audit outcomes: ■ Qualified with findings


The regression in audit outcome was caused by management not providing sufficient and appropriate audit evidence to support work in progress. Furthermore, noncompliance matters related to budgets, quality of financial statements, audit committees, internal audit, revenue, expenditure and asset management and repeat findings on the usefulness of performance information contributed to the regression in the audit outcome.

Six key risk areas

Overall the six key risk areas showed no progress. Four areas remained unchanged and one regressed. IT was not assessed in the previous year. The status of supply chain management improved; however, findings were reported as a result of the municipality not complying with legislative requirements. The usefulness of the performance information has not improved due to inadequate monitoring of internal controls. Human resource management remained a challenge due to a lack of skills in the performance management and finance units. The quality of financial statements remained stagnant, arising from material amendments that were required. The municipality has failed to implement adequate IT controls. Financial health remained unchanged with findings, primarily because of underspending of the capital budget, extended creditors payment period and high impairment levels on debtors. The services of consultants were again engaged in connection with financial and performance reporting at a cost of R1,94 million (2011-12: R400 000), which did not prevent material findings on the financial statements and performance reports. Our concerns relating to continued assistance from consultants include their ineffective management, the lack of a policy or strategy for the use of consultants, consultants being appointed for requirements that can be addressed by internal resources and over dependency on consultants as a result of a lack of transfer of skills, resulting in the continued dependence on consultants.


The overall lack of improvement in the key controls was caused by a slow response from the municipal manager and oversight structures, coupled with

the lack of skilled and competent staff in key positions in the finance and performance management sections. The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

The municipal council must monitor and exercise oversight by holding senior management accountable for reporting on progress to address action plans regarding financial and performance management.

The municipal manager must exercise oversight regarding proper records management, preparation of financial statements and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial performance reporting.

The municipal manager must review and monitor compliance with applicable laws and regulations and design and implement formal controls over IT systems to ensure the reliability of the systems and availability, accuracy and protection of information.

The mayor and council should ensure that skills deficits in the competencies of staff are addressed through focused training. Additionally, they should address the slow response by management through the performance management system by implementing consequences for non-performance and obtain monthly assurance from management that key matters have been addressed. The reports presented to council should be concise and credible. This will enable councillors to identify areas that require corrective actions.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance and oversight structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements and usefulness of reported performance. We met with the mayor three times during the financial year and these interactions had little impact on the audit outcomes. The municipal council committed to fully implementing the previous year’s commitments, to implementing a performance management system and appointing a performance manager, implementing consequences for transgressions and ensuring that staff is adequately trained and skilled.


283 283


284

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

39%45%

21%

12% 15%

30%

3% 5% 6%

20011996 2011

73%

170

551

188

585

188

317


20011996 2011

46% 43% 40%

49% 52% 55%

5% 5% 5%

20011996 2011

45% 45% 45%

55% 55% 55%

20011996 2011

65% 67%50%

35% 33%50%

20011996 2011

6.8

5.5

5.1

29%46%

65%

70%50%

34%

1% 4% 1%

26 7

60

55 8

04

2001 2011

23%

40%

73%

77%

60%

27%


69%

54%

34%

11%

20%

12%

20%

26%

54%


21%

34%

19%

65%

41%

41%

14%

25%

40%

81%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

66%

2001

1996

2011

2001

1996

2011



Ulundi

Municipality



285 285

Ulundi Municipality





Implemented


In progress

Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Cash flow management policy will be developed and approved by the

municipality to address all the issues of expenditure to be incurred by the

municipality.

Furthermore the municipality has submitted the payment plan with

ESKOM which seeks to address the issues of the electricity debt.

Consequences to be implemented for poor performance.

Training staff to be done to up-skill officials.

Seventeen audit recommendations accepted by management in the previous year regarding matters

included in the auditor’s report and other important matters were implemented and resolved.




little progress


little progress


Lack of consequences for transgressions





286

Ulundi Municipality



The lack of movement in the audit outcomes was caused by the leadership’s slow response in addressing matters reported in the previous year. This contributed to the findings on supply chain management non-compliance and material misstatements in the financial statements that had to be corrected.

Six key risk areas

Slow progress has been made in addressing the six key risk areas as two regressed, two remained unchanged with material findings one regressed, and one remained unchanged with no findings. The status of supply chain management remained unsatisfactory. The usefulness and reliability of the performance information improved due to adequate monitoring, reviews and the implementation of internal controls. Human resource management remained a challenge due to the lack of skills in financial reporting. The quality of financial statements has not improved due to the lack of detailed reviews, resulting in material amendments being required. Although the municipality improved on IT governance and controls, formal access controls, backup and recovery procedures must still be implemented. Financial health remained unchanged. The municipality disclosed in the financial statements that a material uncertainty existed with regard to its ability to operate in the foreseeable future. The services of consultants were engaged to assist with financial reporting and performance information at a cost of R720 662 (2012: R2,15 million), but this did not prevent material findings on the financial statements. Our concerns relating to the continued assistance from consultants include their ineffective management, the lack of a policy or strategy for the use of consultants, consultants being appointed for requirements that can be addressed by internal resources and an over dependency on consultants as a result of a lack of transfer of skills, resulting in the continued dependence on consultants.


The overall regression in the key controls was caused by slow response from the municipal manager, senior management and oversight structures.

The following controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation:

• The municipal manager must exercise oversight of proper record management, the preparation of financial statements and coordinate processes to ensure that relevant and accurate information is accessible and available to support financial reporting. Compliance with applicable laws and regulations must be reviewed and monitored and formal controls over IT systems designed and implemented to ensure the reliability of the systems and the availability, accuracy and protection of information.

• The chief financial officer must prepare and review a full set of monthly financial statements.

The mayor and council should address deficits in the competencies of staff in key positions through focused training interventions. The mayor and council should take ownership of the compliance, performance and IT aspects within the administration, and obtain monthly assurance from management that key matters have been addressed in good time. The reports presented to council should be reviewed by internal audit and the audit committee to ensure that they are concise and credible. This will enable councillors to identify areas that require corrective actions, including consequence management.


For improved audit outcomes the assurance levels provided by leadership, senior management and governance and oversight structures should be improved. The internal audit and audit committee should focus on improving the quality of financial statements as well as compliance with laws and regulations. We met with the mayor four times during the financial year and these interactions had little impact on the audit outcomes. The reasons for our assessment are the lack of notable impact the mayor had on the controls as well as the repetitive findings on financial management and on compliance with laws and regulations. The municipal council and MPAC committed to fully implementing the previous year’s commitments, which were to reduce audit findings and prepare the financial statements using internal staff by appointing staff with the necessary skills, and reducing its reliance on consultants to fully prepare the financial statements. Commitments for the 2012-13 year will be obtained during the next interaction.


287 287


288

Population

Households

Average

household size

Average dwelling

type per nr. of

households

Average

household

income

Basic services


EducationLabour

37% 37%

20%

10%12%

26%

3% 4% 5%

20011996 2011

73%98 2

74

119

781

127

238


20011996 2011

43% 41% 36%

53% 55% 59%

4% 4% 5%

20011996 2011

46% 47% 48%

54% 53% 52%

20011996 2011

43% 49%36%

57% 51%64%

20011996 2011

6.1

4.6

4.4 53%

66%85%

45%32%

14%2% 2% 1%

20 1

91

48 9

84

2001 2011

41%

54%

73%

59%

46%

27%


56%

39%

27%

17%

20%

21%

27%

41%

52%


44%

46%

28%

46%

37%

55%

10%

17%

17%

72%

Higher


Employed Unemployed




0-14 15-64 65+ Male Female

20011996 2011 20011996 2011

2001

1996

2011

73%

2001

1996

2011

2001

1996

2011



uPhongolo

Municipality



289 289

uPhongolo Municipality





Implemented



Supply chain

management

Quality of

performance

reports

Human resource

management

Quality of

submitted

financial

statements

Information

technology

controls

Financial

health

2012-13Qualified

2011-12Disclaimer










Governance

Effective

leadership

Oversight

responsibility

HR

management

Policies and

procedures

Action

plans

IT

governance

Proper

record keeping

Processing and


Reporting

Compliance

IT

system controls

Risk

management

Internal audit

Audit committee

Leadership to ensure all monthly reconciliations are completed in good

time.

Annual performance report to be aligned to test usefulness.

Performance information to be compiled monthly to facilitate the

quarterly reporting, and action to be implemented against those officials not complying with the deadlines.

Staff performance to be monitored in

terms of the performance

agreements.

Staff competencies will be assessed.

Vacant posts to be filled by

appropriately qualified people.

Signed performance agreements in place.

The mayor and accounting officer to provide commitments based on





little progress


little progress




and transgressions


290

uPhongolo Municipality



The improvement in the audit outcomes was caused by management addressing the previous year limitations by implementing an improved records management system and appointing a qualified chief financial officer. However, the validity, accuracy and completeness of assets, accuracy of the leave provision and completeness of the irregular expenditure were not adequately addressed, resulting in these areas still being qualified.

Six key risk areas

Overall little progress has been made in addressing the key risk areas, as five areas remained unchanged with material findings. The status of supply chain management remains unsatisfactory, primarily as a result of the municipality in many instances not complying with the legislative requirement. The quality of the performance reports has remained unchanged with material findings on the usefulness and reliability of performance information, which has not improved due to inadequate monitoring and reviews. Although key vacant positions were filled, material findings were reported on human resource management with regard to minimum competencies. The quality of the financial statements submitted for audit has not improved due to the lack of detailed reviews. Material adjustments were required. IT governance and controls improved with no material findings. Financial health was not favourable due to the underspending on conditional grants, extended creditors payment periods and debtors collection periods. The municipality disclosed a material uncertainty with regard to its ability to operate in the foreseeable future. The services of consultants were again engaged in connection with financial reporting and the preparation of performance information at a cost of R876 659 (2012: R1,11 million). Our concerns relating to the continued assistance sought from consultants include their ineffective management, consultants being appointed for requirements that can be addressed by internal resources and a lack of transfer of skills, resulting in the continued dependence on consultants.


The overall improvement in the key controls was caused by filling the post of the chief financial officer and municipal manager and by addressing the oversight and governance weaknesses. Controls must be strengthened to create a control environment that supports reliable financial and performance reporting and compliance with legislation. The municipal manager and municipal council must exercise oversight regarding the preparation of financial statements and performance reporting, and implement monthly compliance checklists that are monitored on an on-going basis. Effective human resource management will ensure adequate and sufficiently skilled officials are in place and their performance is being monitored. The municipal manager must ensure that the risk management strategy is implemented.

The mayor and council should address deficits in the competencies of staff in key positions through focused training interventions. The mayor and council should take ownership of the compliance and performance aspects within the administration, and obtain monthly assurance from management that key matters have been addressed in good time. The reports presented to council should be reviewed by internal audit and the audit committee to ensure that they are concise and credible. This will enable councillors to take corrective actions, including implementing consequence management.


For improved audit outcomes the assurance levels of senior management, leadership and governance structures should be improved. The recommendations of internal audit should be implemented and the work of the audit committee directed towards evaluating performance information. We met with the mayor six times during the financial year and these interactions had some impact on the audit outcomes. The mayor had an impact on the controls of the municipality as well as the status and impact of the commitments previously given. The assurance provided through the oversight of the municipal council and MPAC should be improved. The mayor and municipal manager are still to provide commitments based of 2012-13 audit outcomes.


291 ANNEXURES


292

ANNEXURE 1

Auditees' audit outcomes, areas qualified, findings on predetermined objectives, non-compliance and specific focus areas


293


294


295

Legend (Audit

outcomes)




Improved RegressedAdverse

with findings


Audit not finalised at legislated date

New auditee

Legend (Findings)

Addressed(A)

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ANNEXURE 2 Assessment of auditees’ key controls at the time of the audit

Auditee

F P C F P C F P C F P C F P C F P C F P C F P C F P C F P C F P C F P C F P F P C F P C F P C F P C

Metropolitan MunicipalitieseThekw ini Metro h h h 1 1 1 1 1 1 2 2 2 1 1 1 1 1 1 1 1 1 n n n 2 1 1 2 1 1 2 1 1 1 1 2 2 2 n n n 1 1 1 1 2 1 1 1 1District MunicipalitiesAmajuba District h h h 2 2 2 3 3 2 2 2 2 1 1 2 2 2 2 3 3 3 i i i 3 2 2 2 1 1 3 2 2 3 2 2 3 3 i i i 3 3 3 2 2 2 2 2 2Harry Gw ala District h i h 1 2 1 2 3 3 1 1 1 2 1 1 2 3 2 2 2 2 h n n 1 3 2 2 2 2 2 2 2 2 2 3 3 2 h h h 1 1 2 2 2 2 2 2 2Ilembe District h h h 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 i n i 2 1 1 3 1 3 3 1 3 2 1 2 2 1 h n h 1 1 1 1 1 1 1 1 1Ugu District i i i 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 n n n 3 3 3 3 3 3 3 3 3 3 3 3 3 3 h h h 2 2 2 2 2 2 2 2 2Umgungundlovu District i i i 3 1 2 3 1 3 2 1 2 1 1 1 1 1 1 3 3 3 i h i 3 1 3 2 1 2 3 1 2 3 1 2 3 3 h h h 2 2 2 2 2 2 2 2 2uMkhanyakude District h h h 2 2 2 2 2 2 3 3 3 1 1 1 2 2 2 2 2 2 i n n 3 3 3 3 3 3 3 3 3 3 3 3 3 3 i i i 2 2 2 3 3 3 3 3 3uMzinyathi District i h h 2 2 2 2 2 1 2 2 2 2 2 2 2 2 2 2 2 2 i n n 1 1 1 2 1 1 2 2 2 1 1 1 2 2 h h h 2 2 2 1 1 2 1 1 2uThukela District n n n 2 2 2 3 3 3 3 3 3 2 3 2 3 3 3 2 3 3 n n i 3 3 3 3 3 3 3 3 3 3 3 3 2 3 n n n 3 3 3 2 2 2 2 2 2Uthungulu District h h n 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 n h h 1 1 1 1 1 1 1 1 1 1 1 1 2 1 n n n 1 1 1 1 1 1 1 1 1Zululand District h n n 2 2 2 2 2 2 2 2 2 2 2 2 2 1 2 2 2 2 h h h 2 2 2 2 1 1 2 2 2 2 1 2 2 2 n n n 2 2 2 1 1 1 1 1 1Local MunicipalitiesAbaqulusi n n n 2 2 2 2 2 2 2 2 2 3 3 3 2 2 2 2 2 3 h h h 2 2 2 2 2 2 2 2 2 2 3 2 2 2 i i i 2 2 2 2 2 2 2 2 2Dannhauser n n n 2 1 2 2 3 2 2 3 2 2 3 2 2 2 2 2 2 2 i n i 3 1 3 2 1 2 2 1 1 3 2 3 2 2 i i i 2 2 2 2 2 2 2 2 2eDumbe h h n 2 2 2 2 2 3 2 2 2 2 2 3 2 2 3 2 2 2 h h h 2 2 2 2 2 2 2 2 2 2 2 3 2 2 i i i 3 3 3 2 2 2 2 2 2eMadlangeni n i h 2 2 2 3 2 2 1 1 1 2 2 2 2 2 2 2 2 2 h i i 2 2 2 1 1 1 2 3 3 2 2 2 2 2 h i h 2 3 1 1 3 1 2 3 1eMnambithi / Ladysmith h h h 2 1 1 1 2 2 2 2 2 1 1 1 1 1 1 2 2 2 h h i 2 2 2 2 1 1 2 3 3 2 2 2 2 2 h h h 2 2 2 1 1 1 1 1 1Endumeni i i i 2 2 1 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 n i n 1 1 1 1 1 1 3 3 3 1 1 1 2 2 h h h 2 2 2 1 1 1 1 1 1Ezinqoleni h h h 1 2 2 2 2 1 2 2 1 2 2 1 2 2 2 2 2 2 h h h 1 2 2 1 2 2 2 2 2 2 2 2 2 2 i i i 3 3 3 2 2 2 2 2 2Greater Kokstad n i i 2 2 2 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 h i i 1 2 1 2 1 2 2 2 2 1 2 2 2 2 i n i 2 2 2 2 1 2 2 1 2Hibiscus Coast i h h 2 1 1 2 2 2 2 1 1 2 2 3 3 2 3 2 2 2 i h n 3 2 2 2 2 2 3 2 3 3 2 3 2 2 n n n 3 1 1 1 1 1 1 1 1Hlabisa i i i 2 3 2 2 3 2 3 2 3 2 2 2 2 2 2 3 3 3 n n n 2 2 2 3 3 3 3 3 3 3 3 3 3 3 i i i 2 2 2 2 2 2 2 2 2Imbabazane n i i 2 2 2 2 2 2 3 3 3 1 2 1 2 2 2 3 3 3 h i h 1 2 1 1 1 1 2 3 2 2 2 2 3 3 h h h 2 2 2 1 1 1 1 2 1Impendle h h h 1 3 2 2 3 2 2 2 2 2 2 2 1 2 1 1 1 1 h h h 1 2 2 1 1 1 2 3 1 2 2 2 1 1 h h h 2 2 2 1 1 1 2 2 2Indaka h h h 2 2 2 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 h h h 1 2 2 1 1 1 2 2 2 2 2 2 2 2 h h h 2 2 2 1 1 1 1 1 1Ingw e n n i 2 2 2 1 2 2 2 2 2 1 2 2 2 2 2 2 2 2 i i i 2 2 2 2 2 2 2 2 2 1 2 2 2 2 i n n 1 1 1 2 2 2 2 2 2Jozini h h h 2 2 2 1 2 2 1 1 1 1 2 2 2 2 2 2 2 2 n n n 2 2 1 1 1 1 2 2 2 2 2 2 2 2 n n n 2 2 2 1 1 1 1 1 1Kw a Sani h h i 1 2 1 2 2 3 1 2 2 1 2 1 2 1 2 2 2 2 i h i 2 2 2 2 2 1 2 2 2 2 2 2 2 2 h h h 1 1 1 2 2 1 2 2 1Kw adukuza n i i 2 2 2 2 3 3 2 2 3 2 3 2 2 2 2 1 1 1 i i i 3 3 3 3 1 3 2 3 1 2 1 3 2 2 h h n 2 2 2 1 2 2 2 2 2

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Mandeni i i h 2 2 2 1 2 1 1 2 2 1 2 2 2 2 1 2 1 2 h i i 1 2 1 2 2 1 2 2 2 2 2 2 2 1 n h n 2 2 2 1 1 1 2 2 2Maphumulo h h h 2 1 2 3 1 3 3 2 1 3 2 2 2 2 2 2 2 2 i h n 3 1 2 3 1 2 3 1 2 2 1 3 2 2 n n n 2 2 2 2 2 2 2 2 2Mfolozi n n n 2 2 2 2 2 3 2 1 2 1 2 2 2 2 2 3 1 1 n n n 2 2 2 3 2 2 3 3 3 3 2 3 3 1 i i i 2 2 2 1 1 1 2 2 2Mkhambathini i i i 3 3 3 3 3 3 3 3 3 1 1 2 3 3 3 2 1 2 i i i 2 2 2 3 3 3 3 3 3 1 1 1 1 1 i i i 3 3 3 3 3 3 2 2 2Mpofana i i i 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 1 1 1 i i i 3 3 3 3 3 3 3 3 3 3 3 3 1 1 i i i 3 3 3 3 3 3 3 3 3Msinga h h h 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 h h h 1 1 1 2 1 1 1 1 1 1 1 1 1 1 h h h 1 1 1 1 1 1 1 1 1Msunduzi h n n 2 2 2 2 2 1 2 2 2 2 2 1 2 2 1 3 3 3 i h h 3 1 3 3 1 3 3 2 3 3 2 3 3 3 n n n 2 2 2 2 2 2 2 2 2Mthonjaneni n h h 2 2 2 2 1 2 2 2 2 2 2 2 2 2 2 1 2 2 n h h 1 1 1 2 2 1 2 1 2 2 2 2 1 1 i n n 2 1 1 2 1 2 2 1 1Mtubatuba h h h 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 2 2 h h h 2 2 2 2 2 2 2 2 2 2 2 2 2 2 h h h 2 2 2 2 2 2 2 2 2Ndw edw e h i i 2 1 2 1 2 3 1 1 2 1 1 2 1 2 2 1 1 1 h i i 1 1 1 2 1 1 2 2 2 1 2 3 2 1 h n n 2 1 2 1 1 1 1 1 1New castle n n n 3 1 3 3 1 3 3 1 3 3 1 3 3 1 3 2 1 2 n n n 3 1 3 3 1 3 3 1 3 3 1 3 2 1 n n n 2 2 2 3 2 2 3 2 2Nkandla n n n 2 2 2 3 3 3 2 2 2 2 3 2 2 2 2 2 2 2 n n n 2 2 2 3 3 3 3 3 3 3 3 3 2 2 n n n 2 1 2 1 1 1 3 3 3Nongoma n n n 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 n n n 2 2 2 2 2 2 2 2 2 3 2 2 2 2 i i i 2 2 2 2 2 2 2 2 2Nquthu n n i 2 2 2 2 2 2 2 2 2 1 1 1 2 2 2 1 1 1 h h h 1 3 1 2 2 2 2 2 2 2 2 2 1 1 h h n 2 2 2 2 2 2 2 2 2Ntambanana h h h 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 h h h 1 1 1 1 1 1 1 1 1 1 1 2 1 3 h h h 1 1 1 1 1 1 1 1 1Okhahlamba h h h 1 1 1 1 1 1 2 2 2 1 1 1 1 1 1 2 2 2 h n h 1 1 1 2 2 2 1 1 1 2 2 2 2 2 h h h 1 1 1 1 1 1 1 1 1Richmond n n n 2 2 2 2 1 2 2 1 2 1 1 1 1 1 1 1 1 1 h n h 1 1 1 1 1 1 2 1 2 2 2 2 3 1 n n n 2 2 2 2 2 2 2 1 2The Big Five False Bay n n i 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 n n i 1 1 1 2 2 2 2 2 2 2 2 2 2 2 n n n 2 2 2 1 1 1 1 1 1Ubuhlebezw e h h h 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 h h h 1 1 1 1 1 1 1 1 1 1 1 1 2 2 h h h 1 1 1 1 1 1 1 1 1Ulundi h h h 2 2 2 1 1 1 1 1 1 3 3 3 2 2 2 3 3 3 h h h 2 2 2 2 2 2 3 2 3 2 2 3 3 3 h h h 2 2 2 1 1 1 1 1 1Umdoni n n n 2 2 2 2 2 2 2 1 2 3 3 3 2 2 2 3 3 3 i i i 2 3 2 2 3 2 2 3 2 2 3 2 3 3 h h h 2 2 2 2 2 2 2 2 2uMhlabuyalingana h n n 2 2 2 2 2 2 1 1 1 1 1 1 3 1 1 3 1 1 h h n 1 1 1 1 1 1 3 3 3 3 3 3 3 1 h n n 2 2 2 1 1 1 1 1 1uMhlathuze h h n 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 1 n h n 1 1 1 1 1 1 1 1 1 1 1 1 1 1 n n n 1 1 1 1 1 1 1 1 1Umlalazi h h n 2 2 2 2 1 2 2 2 2 2 2 2 2 2 2 2 2 1 n h h 1 1 1 2 1 1 2 1 1 1 1 2 1 1 n n n 1 1 1 1 1 1 1 1 1Umngeni h h h 2 2 2 2 2 2 1 2 2 2 1 1 3 3 3 2 2 2 i i h 3 1 1 3 3 2 3 1 1 2 2 2 3 3 i i i 2 2 2 3 3 3 3 3 3uMshw athi h i i 2 2 2 2 3 3 2 2 2 2 3 3 1 3 1 2 2 3 h h h 1 3 2 2 1 2 2 3 3 1 3 3 2 1 h h h 2 2 2 2 2 2 2 2 2Umtshezi i i i 2 1 2 2 1 2 2 2 1 2 1 1 2 2 2 2 1 2 i i i 2 2 2 2 1 1 2 1 1 2 1 2 2 1 i i i 2 2 2 2 2 2 2 2 2Umuziw abantu i h h 2 2 2 2 2 2 2 1 2 2 2 2 2 2 2 2 2 2 h h h 2 2 2 2 2 2 2 2 2 3 3 3 2 2 n n n 2 2 2 2 2 2 2 2 2

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Umvoti h h h 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 h n h 1 1 1 1 1 1 1 2 1 1 1 1 1 1 h h h 1 1 1 1 1 1 1 1 1uMzimkhulu h h n 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 2 1 2 h h h 1 1 1 1 1 1 1 1 1 1 1 1 2 1 h h h 1 1 1 1 1 1 1 1 1Umzumbe n n n 2 2 2 2 2 2 2 2 2 1 1 1 2 2 2 1 1 1 h h h 1 1 2 1 1 1 2 1 2 2 2 2 1 1 n n n 2 2 2 1 1 1 1 1 1uPhongolo h i h 1 2 2 2 2 2 2 3 3 2 3 3 1 3 2 1 2 2 n n n 2 3 2 2 3 2 2 3 2 2 3 2 1 3 n i n 2 2 2 2 2 2 2 2 2Vulamehlo i i i 3 2 2 3 3 3 3 3 2 3 2 2 3 2 2 3 2 2 i i i 3 3 3 3 2 2 3 3 3 3 2 2 3 2 i n n 3 2 2 2 2 2 2 2 2Municipal EntitiesDurban Marine Theme Park (Pty) Ltd n n n 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 n n h 1 1 1 1 1 1 1 1 1 1 1 1 2 1 n n n 1 1 1 1 1 1 1 1 1Hibiscus Coast Development Agency i i n 2 2 2 3 3 3 3 3 3 2 3 3 3 3 3 3 3 3 i i i 3 3 3 3 3 3 3 3 3 3 3 3 3 3 h h h 3 3 3 2 2 2 2 2 2ICC, Durban (Pty) Ltd n n n 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 n n n 2 2 2 2 2 2 2 2 2 2 2 2 2 2 n n n 1 1 1 1 1 1 1 1 1Ilembe Management Development Enterprise (Pty) Ltd n n n 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 1 1 n n n 1 1 1 1 1 1 2 1 2 2 1 2 1 1 n n n 1 1 1 1 2 2 1 1 1

Safe City Pietermaritzburg n n n 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 n n n 1 1 1 1 1 1 1 1 1 1 1 1 1 1 n n n 1 1 1 2 2 2 2 2 2Sisonke Economic Development Agency n n n 2 2 2 2 2 2 2 2 2 2 2 3 2 2 2 1 1 1 n n n 3 3 1 1 3 1 2 3 3 2 3 3 1 1 n n n 2 2 2 2 2 2 2 2 2Ugu South Coast Tourism h h h 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 1 2 2 i h h 1 2 1 2 2 2 2 2 2 2 2 2 1 1 h i i 1 1 1 1 2 2 1 2 2uMhlosinga Development Agency n n n 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 i i i 2 1 1 1 1 1 2 1 1 2 2 2 1 1 n n n 1 1 1 1 1 1 1 1 1Uthukela Water (Pty) Ltd n n h 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 1 1 n i h 1 1 1 1 1 1 2 2 2 2 2 2 1 2 h h h 1 1 1 1 1 1 1 1 1uThungulu Financing Partnership n n n 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 n n n 1 1 1 1 1 1 1 1 1 1 1 1 1 1 n n n 1 1 1 1 1 1 1 1 1uThungulu House Development Trust n n n 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 n n n 1 1 1 1 1 1 1 1 1 1 1 1 1 1 n n n 1 1 1 1 1 1 1 1 1

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ANNEXURE 3 Comparison of five-year audit outcome

Audit outcome 2012-13 Audit outcome 2011-12 Audit outcome 2010-11 Audit outcome 2009-10 Audit outcome 2008-09

Financial AuditsMetropolitan Municipalities

1 eThekwini M etro Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

District Municipalities2 Amajuba District Unqualified with findings Unqualified with findings Qualified Unqualified with findings Qualified

3 Harry Gwala District Unqualified with findings Qualified Unqualified with findings Unqualified with findings Unqualified with findings

4 Ilembe District Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

5 Ugu District Disclaimer Qualified Unqualified with findings Unqualified with findings Unqualified with findings

6 Umgungundlovu District Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

7 uM khanyakude District Qualified Disclaimer Adverse Qualified Disclaimer

8 uM zinyathi District Unqualified with findings Unqualified with findings Unqualified with no findings Unqualified with findings Unqualified with findings

9 uThukela District Disclaimer Disclaimer Qualified Unqualified with findings Unqualified with findings

10 Uthungulu District Unqualified with no findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

11 Zululand District Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

Local Municipalities12 Abaqulusi Qualified Disclaimer Unqualified with findings Unqualified with findings Unqualified with findings

13 Dannhauser Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Qualified

14 eDumbe Qualified Disclaimer Qualified Disclaimer Disclaimer

15 eM adlangeni Unqualified with findings Unqualified with findings Unqualified with no findings Unqualified with findings Qualified

16 eM nambithi / Ladysmith Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Qualified

17 Endumeni Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

18 Ezinqoleni Unqualified with findings Qualified Unqualified with findings Unqualified with findings Unqualified with findings

19 Greater Kokstad Unqualified with findings Qualified Unqualified with findings Unqualified with findings Unqualified with findings

20 Hibiscus Coast Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

21 Hlabisa Qualified Qualified Qualified Unqualified with findings Unqualified with findings

22 Imbabazane Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

23 Impendle Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

Audit opinionAuditeeNo.


300


24 Indaka Unqualified with findings Qualified Disclaimer Adverse Disclaimer

25 Ingwe Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

26 Jozini Unqualified with findings Qualified Qualified Unqualified with findings Unqualified with findings

27 Kwa Sani Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

28 Kwadukuza Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

29 M andeni Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

30 M aphumulo Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

31 M folozi Unqualified with findings Unqualified with findings Unqualified with findings Qualified Disclaimer

32 M khambathini Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

33 M pofana Qualified Unqualified with findings Unqualified with findings Unqualified with findings Qualified

34 M singa Unqualified with no findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

35 M sunduzi Qualified Unqualified with findings Unqualified with findings Qualified Qualified

36 M thonjaneni Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

37 M tubatuba Qualified Disclaimer Unqualified with findings Unqualified with findings Unqualified with findings

38 Ndwedwe Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

39 Newcastle Qualified Qualified Qualified Qualified Qualified

40 Nkandla Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Disclaimer

41 Nongoma Qualified Unqualified with findings Unqualified with findings Unqualified with findings Disclaimer

42 Nquthu Unqualified with findings Unqualified with findings Unqualified with findings Qualified Disclaimer

43 Ntambanana Unqualified with no findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

44 Okhahlamba Unqualified with no findings Unqualified with findings Unqualified with findings Qualified Disclaimer

45 Richmond Unqualified with findings Unqualified with findings Unqualified with no findings Unqualified with findings Unqualified with findings

46 The Big Five False Bay Unqualified with findings Qualified Unqualified with findings Unqualified with findings Qualified

47 Ubuhlebezwe Unqualified with no findings Unqualified with findings Unqualified with findings Unqualified with findings Disclaimer

48 Ulundi Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

49 Umdoni Unqualified with findings Unqualified with findings Unqualified with no findings Unqualified with findings Unqualified with findings

50 uM hlabuyalingana Unqualified with findings Disclaimer Unqualified with findings Unqualified with findings Unqualified with findings

51 uM hlathuze Unqualified with no findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

52 Umlalazi Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

No. AuditeeAudit opinion


301

No. Auditee Audit opinion


53 Umngeni Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

54 uMshwathi Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

55 Umtshezi Qualified Unqualified with no findings Unqualified with no findings Unqualified with findings Unqualified with findings

56 Umuziwabantu Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

57 Umvoti Unqualified with findings Unqualified with findings Qualified Unqualified with findings Unqualified with findings

58 uMzimkhulu Unqualified with no findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

59 Umzumbe Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

60 uPhongolo Qualified Disclaimer Unqualified with findings Unqualified with findings Unqualified with findings

61 Vulamehlo Disclaimer Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

Municipal Entities

62 Durban Marine Theme Park (Pty) Ltd Unqualified with no findings Unqualified with no findings Unqualified with findings Unqualified with findings Unqualified with findings

63 Hibiscus Coast Development Agency Qualified Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

64 ICC, Durban (Pty) Ltd Unqualified with findings Unqualified with no findings Unqualified with findings Unqualified with findings Unqualified with findings

65 Ilembe Management Development Enterprise (Pty) Ltd Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

66 Safe City Pietermaritzburg Unqualified with no findings Unqualified with no findings New auditee New auditee New auditee

67 Sisonke Economic Development Agency Unqualified with findings New auditee New auditee New auditee New auditee

68 Ugu South Coast Tourism Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings New auditee

69 uMhlosinga Development Agency Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

70 Uthukela Water (Pty) Ltd Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings Unqualified with findings

71 uThungulu Financing Partnership Unqualified with no findings Unqualified with no findings Unqualified with no findings New auditee New auditee

72 uThungulu House Development Trust Unqualified with no findings Unqualified with no findings Unqualified with no findings New auditee New auditee


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GLOSSARY OF TERMS, ANNEXURES AND ABBREVIATIONS


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Glossary of key terminology used in this report Adverse audit opinion (on financial statements) The financial statements contain misstatements (see ‘misstatement’)

that are not confined to specific amounts, or the misstatements represent a substantial portion of the financial statements.

Asset (in financial statements) Any item belonging to the auditee,including property, infrastructure, equipment, cash as well as debt due to the auditee.

Assurance / assurance provider As used in this report, a positive declaration that is intended to give confidence in the credibility of financial and performance reports tabled by auditees as well as confidence in the extent to which auditees have adhered to applicable legislation. Through the audit report, we provide assurance on the credibility of auditees’ financial and performance information as well as their compliance with legislation. There are role players in local government, other than the external auditors, that are also required to contribute to assurance and confidence by ensuring that adequate internal controls are implemented to achieve auditees’ financial, service delivery and compliance objectives. Such assurance providers include senior auditee officials, various committees (for example, municipal public accounts, performance and audit committees) and internal audit units. Other role players that should provide assurance further include oversight structures and coordinating or monitoring departments (which are defined elsewhere in this glossary).

Capital budget The estimated amount planned to be spent by auditees on capital items in a particular financial period; for example, fixed assets such as property, infrastructure and equipment with long expected lives and that are required to provide services, produce income or support operations.

Cash flow (in financial statements) The flow of money from operations: incoming funds are revenue (cash inflow) and outgoing funds are expenses (cash outflow).


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Clean audit The financial statements receive a financially unqualified audit opinion and there are no material findings on the quality of the annual performance report or non-compliance with legislation.

Commitments from role players Initiatives and courses of action communicated to us by role players in local government aimed at improving the audit outcomes.

Conditional grants Money transferred from national government to auditees, subject to certain services being delivered or on compliance with specified requirements.

Consolidated financial statements Financial statements that reflect the combined financial position and results of a municipality and those of the municipal entities under its control.

Creditors Persons, companies or organisations that the auditee owes money to for goods and services procured from them.

Current assets (in financial statements) These assets are made up of cash and other assets, such as inventory or debt for credit extended, which will be traded, used or converted into cash in less than 12 months. All other assets are classified as non-current, and typically include property, infrastructure and equipment as well as long-term investments.

Disclaimer of opinion (on financial statements) The auditee provided insufficient evidence in the form of documentation on which we could base an audit opinion. The lack of sufficient evidence is not confined to specific amounts, or represents a substantial portion of the information contained in the financial statements.

Financial and performance management (as one of the drivers of internal control) The performance of internal control and monitoring-related tasks by management and other employees to achieve the financial management, reporting and service delivery objectives of the auditee. These controls include the basic daily and monthly controls for processing and reconciling transactions, preparing regular and credible financial and performance reports as well as reviewing and monitoring compliance with legislation.


306

Financially unqualified audit opinion (on financial statements) The financial statements contain no material misstatements (see ‘material misstatement’). Unless we express a clean audit opinion, findings have been raised on either the annual performance report or non-compliance with legislation, or both these aspects.

Fruitless and wasteful expenditure Expenditure that was made in vain and could have been avoided had reasonable care been taken. This includes penalties and interest on the late payment of creditors or statutory obligations as well as payments made for services not utilised or goods not received.

Going concern The presumption that an auditee will continue to operate in the near future, and will not go out of business and liquidate its assets. For the going concern presumption to be reasonable, the auditee must have the capacity and prospect to raise enough financial resources to stay operational.

Governance (as one of the drivers of internal control) The governance structures (audit committees) and processes (internal audit and risk management) of an auditee.

Human resource (HR) management The management of an auditee’s employees, or human resources, which involves adequate and sufficiently skilled people as well as the adequate management of their performance and productivity.

Information technology (IT) The computer systems used for capturing and reporting financial and non-financial transactions.

IT controls Computer-related controls ensure the confidentiality, integrity and availability of state information, enable service delivery and promote national security.

IT governance The leadership, organisational structures and processes which ensure that the auditee’s IT resources will sustain its strategies and objectives.

IT security management The controls preventing unauthorised access to auditee networks, operating systems and application systems that generate financial information.

IT service continuity The processes managing the availability of hardware, system software, application software and data to enable auditees to recover or re-establish information system services in the event of a disaster.


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IT user access management The procedures through which auditees ensure that only valid, authorised users are allowed segregated access to initiate and approve transactions on the information systems.

Internal control / key controls The process designed and implemented by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of the auditee’s objectives with regard to the reliability of financial reporting, the effectiveness and efficiency of operations, and compliance with applicable legislation. It consists of all the policies and procedures implemented by auditee management to assist in achieving the orderly and efficient conduct of business, including adhering to policies, safeguarding assets, preventing and detecting fraud and error, ensuring the accuracy and completeness of accounting records, and timeously preparing reliable financial and service delivery information.

Irregular expenditure Expenditure incurred without complying with applicable legislation.

Key drivers of internal control The three components of internal control that should be addressed to improve audit outcomes, namely leadership, financial and performance management, and governance (which are defined elsewhere in this glossary.)

Leadership (as one of the drivers of internal control) The administrative leaders of an auditee, such as municipal managers and senior management. It can also refer to the political leadership (including the mayor and the council) or the leadership in the province (such as the premier).

Material finding (from the audit) An audit finding on the quality of the annual performance report or non-compliance with legislation that is significant enough in terms of either its amount or its nature, or both these aspects, to be reported in the audit report.

Material misstatement (in financial statements or annual performance reports) An error or omission that is significant enough to influence the opinions or decisions of users of the reported information. Materiality is considered in terms of either its rand value or the nature and cause of the misstatement, or both these aspects.


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Misstatement (in financial statements or annual performance reports) Incorrect or omitted information in the financial statements or annual performance report.

Net current liability The amount by which the sum of all money owed by an auditee and due within one year exceeds the amounts due to the auditee within the same year.

Net deficit (incurred by auditee) The amount by which an auditee’s spending exceeds its income during a period or financial year.

Operational budget / operating budget A short-term budget, usually prepared annually, based on estimates of income and expenses associated with the auditee’s operations, such as service delivery costs, administration and salaries.

Oversight structures as well as coordinating and monitoring departments Oversight structures consist of the provincial legislatures, the portfolio committees on local government and the National Council of Provinces. Coordinating or monitoring departments include the Department of Performance Monitoring and Evaluation, the National Treasury and provincial treasuries, the national and provincial departments of cooperative governance as well as the offices of the premiers.

Property, infrastructure and equipment (in financial statements) Assets that physically exist and are expected to be used for more than one year, including land, buildings, leasehold improvements, equipment, furniture, fixtures and vehicles.

Qualified audit opinion (on financial statements) The financial statements contain material misstatements in specific amounts, or there is insufficient evidence for us to conclude that specific amounts included in the financial statements are not materially misstated.

Receivables / debtors (in financial statements) Money owed to the auditee by persons, companies or organisations that have procured goods or services from the auditee.

Reconciliation (of accounting records) The process of matching one set of data to another; for example, the bank statement to the cheque register, or the accounts payable journal to the general ledger.


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Root causes (of audit outcomes) The underlying causes or drivers of audit findings; in other words, why the problem occurred. Addressing the root cause helps ensure that the actions address the real issue, thus preventing or reducing the incidents of recurrence, rather than simply providing a one-time or short-term solution.

Supply chain management (SCM) Procuring goods and services through a tender or quotation process and monitoring the quality and timeliness of the goods and services provided.

Unauthorised expenditure Expenditure that was in excess of the amount budgeted or allocated by government to the auditee, or that was not incurred in accordance with the purpose for which it was intended.


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Acronyms and abbreviations

AFS annual financial statements

AG auditor-general (the person)

AGSA Auditor-General of South Africa (the institution)

APAC Association of Public Accounts Committees

APP annual performance plan

BCP business continuity plan

CEO chief executive officer

CFO chief financial officer

CGICTPF corporate governance of information and communication technology policy framework

CoGTA Department of Cooperative Governance and Traditional Affairs

CWP community works programme

DBSA Development Bank of Southern Africa

DM district municipality

DoRA Division of Revenue Act

DPME Department of Performance Monitoring and Evaluation

DPSA Department of Public Service and Administration

DRP disaster recovery plan

FMPPI framework for managing programme performance information

GITO government information technology officer

GRAP Generally Recognised Accounting Practice


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HR human resources

ICT information and communication technology

IDP integrated development plan

IGR inter-governmental relations

IT information technology

LGTAS local government turnaround strategy

LM local municipality

MAT municipal assessment tool

ME municipal entity

MEC member of the executive council

metro metropolitan municipality

MFMA Municipal Finance Management Act, 2003 (Act No. 56 of 2003)

MIG municipal infrastructure grant

MIS management information system

MISA Municipal Infrastructure Support Agent

MPAC municipal public accounts committee

MPAT management performance assessment tool

MSA Municipal Systems Act, 2000 (Act No. 32 of 2000)

MSIG municipal systems improvement grant

MTEF medium-term expenditure framework

MTREF medium-term revenue and expenditure framework

NCOP National Council of Provinces


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OCA Operation clean audit

PAC public accounts committee

PDO predetermined objective

PFMA Public Finance Management Act, 1999 (Act No. 1 of 1999)

PMS performance management system

Rxx b billions of rand

Rxx k thousands of rand

Rxx m millions of rand

SALGA South African Local Government Association

SCM supply chain management

SCOA standard chart of accounts

SDBIP service delivery and budget implementation plan

SLA service level agreement

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