Africa-Press – South-Africa. Amid evidence of financial misconduct and misrepresentation of the metro’s financial position, the Auditor-General of South Africa has warned there is “material uncertainty” around the City of Tshwane’s ability to continue as a going concern.
An adverse audit opinion expressed by the AGSA is detailed in a leaked report, of which News24 has obtained a copy, and pertains to the financial year spanning July 2021 to June 2022.
In the report, which is yet to be formally presented to the Mayoral Committee, Tsakani Maluleke said an unfavourable liquidity position, a recent negative rating by Moody’s, and other matters indicate that a “material uncertainty” exists that may cast “significant doubt on the municipality’s ability to continue as a going concern”.
In her report, the AG highlighted “significant difficulties encountered” in obtaining information requested from the accounting officer for audit purposes.
The AGSA highlighted a litany of issues in the report, including “material differences” between municipality’s incorrectly recorded budget and the actual amounts it spent.
The municipality also did not correctly prepare and disclose its net cash flows from operating, investing and financing activities. It further duplicated contingent liabilities, causing the contingencies disclosure to be overstated by R3.93 billion.
The municipality also did not have an adequate system for identifying and disclosing all irregular expenditure incurred, as is required by law, and so the AGSA could not determine what adjustment was needed to the stated irregular expenditure of R10.45 billion.
Trade payables were not correctly reconciled to supplier statements. As a result, not all liabilities were recorded, and in some instances, trade payables recorded in the accounting records could not be substantiated. This resulted in trade payables; and general expenses, bulk purchases, contracted services and property, plant and equipment additions being collectively understated by R4.93 billion.
The AGSA was also unable to obtain sufficient appropriate audit evidence for salaries and wages stated at R7.42 billion because the municipality could not provide information and supporting documentation “due to an inadequate system of internal control”.
The adverse audit opinion comes after its Tshwane’s CFO Umar Banda was suspended and then dismissed in December for submitting non-compliant annual financial statements to the AG on behalf of the City, causing it “a significant embarrassment”, the City said in legal papers.
The AGSA’s report will first be presented to the Mayoral Committee, after which it will be brought to the Tshwane Council meeting scheduled for 26 January.
‘Not remotely acceptable’
“The adverse opinion is a disappointment; it is not an outcome that is remotely acceptable within the context of good governance,” the executive mayor of Tshwane, Randall Williams, said in a statement.
Findings of financial misconduct and misrepresentation of the City of Tshwane’s financial statements and financial position “are being treated with the seriousness they deserve”, Williams said.
Williams said a process is under way to appoint a new CFO. “A report on the conduct of the ex-CFO in relation to the compilation of the financial statements and the auditing process will also be brought to Council,” he said.
Williams said the Auditor-General has also identified officials and councillors who benefited from supply chain processes. “A proper investigation will be conducted into the list of names compiled by the Auditor-General, and appropriate action will be taken to recover the monies and bring the culprits to justice,” he said.
The City said it is now working closely with National Treasury and the Auditor-General to address the findings. “National Treasury is further providing us with additional professional staff (two former CFOs) to assist the city. We will also be bringing in an external auditing firm to begin provisionally auditing the first half of this financial year ending 31 December 2022,” said Williams. “We are firmly committed towards ensuring that we improve the city’s future audit outcomes.”
The AGSA’s head of communications, Harold Maloka, referred News24 to the municipality for comment on the leaked report. “The AGSA will release the consolidated report on local government later in the year,” he said.
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