Auditing /o build public confidence
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
Report on the financial statements
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.
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
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.
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.
7. I draw attention to the matters below. My opinion is not modified in respect of these
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
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.
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.
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).
23. There was no evidence that reasonable steps were taken to prevent irregular
expenditure, as required by section 62(1 )(d) of the MFMA.
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
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.
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.
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.
30 November 2016
Auditing to build public confidence