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Auditing /o build public confidence 


AUDITOR-GENERAL 
SOUTH AFRICA 


Auditor-General of South Africa 

Zululand District Municipality 
Audit report 2015-16 


Report of the auditor-general to the KwaZulu-Natal 
Provincial Legislature and the council on Zululand 
District Municipality 

Report on the financial statements 

Introduction 

1 . I audited the financial statements of the Zululand District Municipality set out on pages x 
to x, which comprise the statement of financial position as at 30 June 2016, the 
statement of financial performance, statement of changes in net assets, cash flow 
statement and the statement of comparison of budget with actual information for the year 
then ended, as well as the notes, comprising a summary of significant accounting 
policies and other explanatory information. 

Accounting officer's responsibility for the financial statements 

2. The accounting officer is responsible for the preparation and fair presentation of the 
financial statements in accordance with the South African Standards of Generally 
Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the 
Local Government: Municipal Finance Management Act of South Africa, 2003 (Act No. 

56 of 2003) (MFMA) and the Division of Revenue Act of South Africa, 2015 (Act No. 1 of 
2015) (DoRA), and for such internal control as the accounting officer determines is 
necessary to enable the preparation of financial statements that are free from material 
misstatement, whether due to fraud or error. 


Auditor-general's responsibility 

3. My responsibility is to express an opinion on the financial statements based on my audit. 

I conducted my audit in accordance with the International Standards on Auditing. Those 
standards require that I comply with ethical requirements, and plan and perform the audit 
to obtain reasonable assurance about whether the financial statements are free from 
material misstatement. 

4. An audit involves performing procedures to obtain audit evidence about the amounts 
and disclosures in the financial statements. The procedures selected depend on the 
auditor’s judgement, including the assessment of the risks of material misstatement of 
the financial statements, whether due to fraud or error. In making those risk 
assessments, the auditor considers internal control relevant to the municipality’s 
preparation and fair presentation of the financial statements in order to design audit 
procedures that are appropriate in the circumstances, but not for the purpose of 
expressing an opinion on the effectiveness of the municipality’s internal control. An audit 
also includes evaluating the appropriateness of accounting policies used and the 
reasonableness of accounting estimates made by management, as well as evaluating 
the overall presentation of the financial statements. 

5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide 
a basis for my audit opinion. 


Opinion 


6. In my opinion, the financial statements present fairly, in all material respects, the 

financial position of the Zululand District Municipality as at 30 June 2016 and its financial 
performance and cash flows for the year then ended, in accordance with the SA 
Standards of GRAP and the requirements of the MFMA and DoRA. 


Additional matters 

7. I draw attention to the matters below. My opinion is not modified in respect of these 
matters. 


Unaudited supplementary schedules 

8. The supplementary information set out on pages x to x does not form part of the 
financial statements and is presented as additional information. I have not audited these 
schedules, and accordingly, I do not express an opinion thereon. 

Unaudited disclosure notes 

9. In terms of section 125(2)(e) of the MFMA, the municipality is required to disclose 
particulars of non-compliance with the MFMA. This disclosure requirement did not form 
part of the audit of the financial statements, and accordingly, I do not express an opinion 
thereon. 


Report on other legal and regulatory requirements 

10. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) 

(PAA) and the general notice issued in terms thereof, I have a responsibility to report 
findings on the reported performance information against predetermined objectives for 
the selected development priorities presented in the annual performance report, 
compliance with legislation and internal control. The objective of my tests was to identify 
reportable findings as described under each subheading but not to gather evidence to 
express assurance on these matters. Accordingly, l do not express an opinion or 
conclusion on these matters. 


Predetermined objectives 

11. I performed procedures to obtain evidence about the usefulness and reliability of the 
reported performance information for the Basic service delivery, Local economic 
development as well as Good governance and public participation development 
priorities presented in the annual performance report of the municipality for the year 
ended 30 June 2016. 

12. I evaluated the reported performance information against the overall criteria of 
usefulness and reliability. 


13. I evaluated the usefulness of the reported performance information to determine 
whether it was consistent with the planned development priorities. I further performed 
tests to determine whether indicators and targets were well defined, verifiable, specific, 
measurable, time bound and relevant, as required by the National Treasury’s 
Framework for managing programme performance information. 

14. I assessed the reliability of the reported performance information to determine whether it 
was valid, accurate and complete. 

15. I did not identify any material findings on the usefulness and reliability of the reported 
performance information for the selected three development priorities. 

Additional matters 

16. I identified no material findings on the usefulness and reliability of the reported 
performance information for the selected three development priorities, however, I draw 
attention to the following matters. 

Achievement of planned targets 

17. The annual performance report on pages x to x and x to x presents information on the 
achievement of planned targets for the year. 


Adjustment of material misstatements 

18. 1 identified material misstatements in the annual performance report submitted for 

auditing on the reported performance information for the Basic service delivery as well as 
Good governance and public participation development priorities. As management 
subsequently corrected the misstatements, I did not raise any material findings on the 
usefulness and reliability of the reported performance information. 

Compliance with legislation 

19. I performed procedures to obtain evidence that the municipality complied with applicable 
legislation regarding financial matters, financial management and other related matters. 
My material findings on compliance with specific matters in key legislation, as set out in 
the general notice issued in terms of the PAA, are as follows: 


Annual financial statements 

20. The annual financial statements submitted for auditing were not prepared in all material 
respects in accordance with the requirements of section 1 22 of the MFMA. Material 
misstatements of capital commitments identified by the auditors in the submitted financial 
statements were subsequently corrected, resulting in the financial statements receiving 
an unqualified audit opinion. 


Procurement and contract management 

21 . Goods and services with a transaction value below R200 000 were procured without 
obtaining the required price quotations, in contravention of supply chain management 
(SCM) regulations 17(a) and (c). 

22. Person in service of the municipality whose close family member had a private or 
business interest in contracts awarded by the municipality failed to disclose such 
interest, in contravention of SCM regulation 46(2)(e) and the code of conduct for staff 
members issued in terms of the Municipal Systems Act, 2000 (Act No. 32 of 2000). 


Expenditure management 

23. There was no evidence that reasonable steps were taken to prevent irregular 
expenditure, as required by section 62(1 )(d) of the MFMA. 


Internal control 

24. I considered internal control relevant to my audit of the financial statements, annual 
performance report and compliance with legislation. The matters reported below are 
limited to the significant internal control deficiencies that resulted in the findings on the 
annual performance report and the findings on compliance with legislation included in 
this report. 


Financial management 


25. Management did not perform adequate review procedures and reconciliations in respect 
of financial reporting and compliance with laws and regulations which led to the financial 
statements being material misstated. 


Other report 

26. 1 draw attention to the following engagement that could potentially impact the 

municipality’s financial, performance and compliance related matters. My opinion is not 
modified in respect of this engagement. 

Investigation 

27. The department of Cooperative Governance and Traditional Affairs appointed an 

independent consulting firm to conduct an investigation covering the period 1 July 2011 
to 30 June 2012. The investigation relates to allegations of nepotism, misappropriation 
of municipal assets and cash, contravention of SCM policies and regulations, 
irregularities in human resources management as well as the abuse of subsistence and 
travel allowances and overtime payments. The investigation has been finalised and the 
municipality is awaiting the final report thereon from the department. 



Pietermaritzburg 
30 November 2016 



AUDITOR-GENERAL 
SOUTH AFRICA 


Auditing to build public confidence