Oudtshoorn Municipality’s first unqualified audit since 2013/4

Oudtshoorn, 10 December 2019 – Oudtshoorn Municipality has received its first unqualified audit since the 2013/2014 financial year. The Municipality improved from an “adverse” opinion in 2014/2015, followed by three consecutive “qualified” opinions to this “unqualified” opinion for the 2018/2019 financial year.

The Auditor-General (AG) expressed the following opinion:

“In my opinion, the financial statements present fairly, in all material respects, the financial position of the Oudtshoorn Municipality as at 30 June 2019.”

Although this represents an “Unqualified” audit opinion, there were emphasis placed on certain matters that prevented the municipality to receive a clean audit.

The Auditor-General can express one of the following audit opinions:

Clean Audit Outcomes:

The financial statements are free from material misstatements and there are no findings on reporting on performance objectives or non-compliance with legislation.

Unqualified Audit Opinions:

The financial statements contain no material misstatements. Findings may have been raised on either reporting on predetermined objectives or non-compliance with legislation, or both these aspects.

Qualified Audit Opinions:

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.

Adverse audit opinion

The financial statements contain material misstatements that are not confined to specific amounts, or the misstatements represents a substantial portion of the financial statements.

Disclaimer of Opinion:

The auditee provided insufficient evidence in the form of documentation on which to 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.

The main matter that the Auditor-General emphasised in the audit report was the occurrence of “irregular expenditure”.

It is critical to clarify the misperceptions about irregular expenditure and it is incumbent upon the Municipality to respond to misleading media reports which create the impression that irregular expenditure equates to money that has been misappropriated/stolen. This kind of reporting adversely impact on the reputation of a municipality and have consequences for all municipalities. In the interest of Stakeholder Relationship Management, it becomes important that the Auditor General take reasonable steps to ensure that the public is properly informed, to avoid unnecessary tension between Municipalities and its citizens. 

It is important to firstly define the term irregular expenditure. Irregular expenditure referred to money that was not spent in the manner prescribed by law. As per the Municipal Finance Management Act “MFMA 56/2003” “irregular expenditure”, in relation to a municipality or municipal entity means – 

  • expenditure incurred by a municipality or municipal entity in contravention of, or that is not in accordance with, a requirement of the MFMA, and which has not been condoned in terms of section 170;
  • expenditure incurred by a municipality or municipal entity in contravention of, or that is not in accordance with, a requirement of the Municipal Systems Act, and which has not been condoned in terms of that Act 
  • expenditure incurred by a municipality in contravention of, or that is not in accordance with, a requirement of the Public Office Bearer Act, 1998 (Act No. 20 of 1998); or
  • expenditure incurred by a municipality or municipal entity in contravention of, or that is not in accordance with, a requirement of the supply chain management policy of the municipality or entity or any of the municipality by-laws giving effect to such policy, and which has not been condoned in terms of such policy or bylaw, but excludes expenditure by a municipality which falls within the definition of “unauthorized expenditure”

The majority of the instances where irregular expenditure was identified the expenditure was related to non-compliance matters in the supply chain management processes.

All the instances regarding irregular expenditure must be investigated and in accordance with the MFMA Section 32, be investigated and reported to Council as prescribed for the required attention.

The Municipal Manager, Mr. Allen Paulse, expressed his appreciation to all involved in the process of achieving this improved result but reiterated that a massive effort will be needed to address the matters raised in the audit report.

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