Catalogue of a Council’s mess

Apart from the shock of Mayor MR Mthethwa’s dismissal, Mfolozi Municipal Councillors at a special Council meeting sat with bowed heads on Thursday while a representative of the Office of the Auditor General (AG) read from a ten-page document, cataloguing the decision to issue the third disclaimer in as many years on the financial performance of the local authority. The gist of the AG’s disclaimers was that notes and explanations to the financial statements were at variance with the financial statements.
• There was an amount of R934 044 outstanding for more than a year, while no interest was raised thereon.
• The AG was unable to obtain satisfactory information as to the existence and completeness of a VAT receivable balance of R1 578-million.
• Under ‘current assets’ is an amount of R6 632 195 in respect of unspent conditional grants, with no evidence thereof provided.
• There is no evidence of the movement of R17 892 320 from a liability of R11 260 125 at the end of June 2008 to the amount reflected as receivable.
• The opening value as at 1 July 2008 of R20 908 542 as per note 4 does not agree with the closing value of R25 716 650 at the end of June.
• During the physical verification of assets, items could not be located. Property of R18 364 768 in the financial statements, based on the fixed register amounts, could not be evidenced.
• No investment property register was provided to support an amount of R1 590 000 as per the notes to the statements. The AG was unable to satisfy himself as to the existence of this amount.
• Suspense accounts of some R8 389 584, plus a debit balance of R1 946 582, could not be verified to assess the accounting treatment thereof.
• Adjustments (trade and other payables) totalling R4 358 091 were not supported by any documents. There is no formal system in place for creditors and invoices are processed only when payment is made.
• Provision for leave and bonus is reflected at R1 167 826. Based on calculations this provision should be R656 104.
• The bank overdraft is reflected as R13 994 017. However, the bank confirmed that the municipality has a credit balance of R155 871. No reconciliation exists to clear the difference between the two amounts.
• Note 28.4 to the financial statements reflects an amount of R6 564 733 in respect of backlog depreciation, which does not agree with the backlog depreciation per the fixed asset register, which reflects R4 868 492.
• Revenue from government grants and subsidies is overstated by R1 338 717.
• Employee related costs showed discrepancies and allowances and benefits in respect of key staff were omitted.
• Financial statements in respect of contracted services of R3 482 436 are not supported.
• The comparative figure for general expenses reflected at R32 390 921 does not agree with the amount in the prior year of R10 650 873 and no supporting documents were provided.
• Note 30 to the financial statements reflects an amount of R12 542 467 in respect of unauthorised expenditure. Subsequent notes in respect of wasteful expenditure do not fully describe the nature of the amounts disclosed.
After the AG’s damning report, reaction from the Council floor was mixed, with ANC and IFP Councillors united in their expressed resolve to do the best for their constituencies and to make democracy work in the region.
A suggestion to implement an internal forensic investigation into the AG’s findings is receiving attention.

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