Makana Municipality's financial statements could be out by at least R7.2 million while ratepayers forked out R13.6m for ghost employees in the past financial year.
Makana Municipality's financial statements could be out by at least R7.2 million while ratepayers forked out R13.6m for ghost employees in the past financial year.
These are just two of the shocks in the draft Auditor General's report for Makana municipality.
The report, still in its draft form, is for the 2011/2012 financial year. The Auditor General announced a disclaimer for this period.
Grocott's Mail is in possession of the document. Among other things revealed in the draft are ghost employees who are paid salaries but cannot be physically verified, incorrect service billings for consumers, irregular expenditure and the municipal manager not signing a performance agreement.
The draft report reveals that the municipality used an inadequate system to bill consumers.
"Currently consumers are billed using incorrect rates, as meter readings are not performed or performed too infrequently to determine an appropriate average rate," the draft report reads.
The resulting potential misstatement was a shocking R52m. "Services charges… are potentially overstated by R7.2m due to incorrect billings recorded on the statements."
The AG further said service charges for the period 15 to 30 June 2012 were not recognised in Makana's financial statements, due to inadequate cut-off measures implemented by the municipality.
In employee-related costs, which amounted to R102.7 million for 2012 and R98.5 million for 2011 (six months for each year), the AG did not receive any supporting documentation, including employee contracts, allowances, wages and overtime.
"It was either not submitted for audit purposes or that which was submitted was incomplete. Furthermore, not all salaried employees and wage earners selected for testing could be physically verified…," the report reads.
"I was unable to confirm expenditure of R13.6m by alternative means and was unable to determine whether any further adjustments to employee related costs were necessary."
In their draft annual report for the same financial year, the municipality had no record of irregular expenditure; however, the AG said there were payments made by the municipality in contravention to Supply Chain Management requirements.
“These were not included in irregular expenditure, which resulted in irregular expenditure understated by R19.4m.” He said the municipality had only disclosed irregular expenditure of R5.8m. The latter is not in Makana's annual financial statements.
"Neither a schedule of the items making up this amount nor sufficient audit evidence was available as evidence of this irregular expenditure. I was unable to confirm the accuracy or completeness of the irregular expenditure by alternative means," the AG report reads.
He said a number of employees were paid amounts exceeding the uppermost limits for their approved salary scales.
As a result, the irregular expenditure could be understated by R 3.8m.
"The municipality does not have an adequate process of identifying and preventing irregular, unauthorised and fruitless and wasteful expenditure."
The AG said in the report the municipality incorrectly disclosed all expenditure for the year as unauthorised. "Unauthorised expenditure are amounts totalling to R333.9m… unauthorised expenditure is therefore overstated by R285.7 million."
This meant the actual unauthorised expenditure amounts to R48m. The AG gave the basis of a disclaimer of opinion on several matters in the draft report.
“I have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, I do not express an opinion on the financial statements," he said in the draft report.
According to municipal spokesperson Mncedisi Boma the municipality is still waiting for the final Auditor General's report.
Executive Mayor Zamuxolo Peter at the end of last month tabled the draft Annual Report in council and revealed that the municipality had been issued a disclaimer from the AG.
The draft annual report did not include a report from the AG, however. The mayor said there would be no change in the final report and that the disclaimer would stand.
