2011-12

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SECTION 2: OVERVIEW OF AUDIT OUTCOMES This section provides the 2011-12 local government audit outcomes (section 2.1), followed by further details on findings arising from the audit of the financial statements (section 2.2), reporting by auditees against their predetermined objectives (PDOs) (section 2.3) and compliance by auditees with key laws and regulations (section 2.4). Root causes of audit findings and recommended best practices are presented in section 3. 2.1 Summary of audit outcomes 2.1.1 Summary of overall audit outcomes Local government in the province comprises one metro, five district municipalities, 24 local municipalities and two municipal entities. The audits of 26 of the 28 auditees that had submitted financial statements by 31 August 2012, or by 30 September 2012 in the case of consolidated financial statements, were completed within the legislated time frame of three months from receipt of the financial statements. Arising mainly from late submission of financial statements for auditing, the audits of four (13%) auditees had not been finalised as at 31 March 2013, which was the cut-off date set by the AGSA for inclusion of their audit outcomes in this general report. The status and these outstanding audits are provided in section 2.1.4. The audit outcomes of the 2011-12 financial year for audits completed by 31 March 2013 and the audit outcomes of the prior year are summarised in table 2 below. Where applicable, audit opinions relate to the consolidated financial statements of auditees. ‘With findings’ denotes findings on PDOs and/or compliance with laws and regulations. Clean audit outcomes are achieved when the financial statements are unqualified and there are no reported audit findings in respect of either reporting on PDOs or compliance with laws and regulations. 13
Table 2: Summary of audit outcomes for current and prior years Audit outcomes Total Cape Town Metro District Municipalities Local Municipalities 2011-12 2010-11 2011-12 2010-11 2011-12 2010-11 2011-12 2010-11 Unqualified with no findings (clean audits) 5 2 0 0 1 1 4 1 Unqualified with findings 20 23 1 1 4 3 15 19 Unqualified financial statements 83% 83% 100% 100% 100% 80% 79% 83% Qualified opinion, with findings 1 3 0 0 0 1 1 2 Adverse opinion, with findings 0 0 0 0 0 0 0 0 Disclaimer of opinion, with findings 0 2 0 0 0 0 0 2 Number of audit reports not issued by 31 March 2013 4 0 0 0 0 0 4 0 Outstanding audits and qualified financial statements 17% 17% 0% 0% 0% 20% 21% 17% Total number of audits 30 30 1 1 5 5 24 24 Findings on reporting on PDOs only 0 0 0 0 0 0 0 0 Findings on compliance with laws and regulations only 9 7 0 1 2 1 7 5 Findings on both PDOs and compliance 12 21 1 0 2 3 9 18 Total number of audits "with findings" 21 28 1 1 4 4 16 23 Legend: Significant improvement Significant regression Seventeen (65%) of the auditees avoided qualified financial statements by correcting the material misstatements identified during the audit process. If the misstatements were not corrected, the unqualified financial statements would have effectively decreased from 25 to eight, as shown in the table below: Total Cape Town Metro District municipalities Local municipalities Unqualified financial statements 8 0 2 6 Also refer to section 2.2.1 for further detail. Annexure 1 lists all auditees with their current and prior year audit outcomes. While the preceding table showed the net change in audit outcomes from the prior year, the following figure highlights the detail of improvement and regression that caused the net change. 14
Page 1 and 2: 2011-12 General report on the audit
Page 3 and 4: General report on the audit outcome
Page 5 and 6: KEY ROLE PLAYERS NOT PROVIDING ASSU
Page 7 and 8: In working towards sustainable clea
Page 9 and 10: Aspect Indicator Key outcomes and t
Page 11 and 12: Aspect Indicator Key outcomes and t
Page 13: Aspect Indicator Key outcomes and t
Page 17 and 18: It is clear from the audit outcomes
Page 19 and 20: Indicator Key outcomes and trends c
Page 21 and 22: Indicator Key outcomes and trends L
Page 23 and 24: Indicator Key outcomes and trends A
Page 25 and 26: In 2011-12, one district municipali
Page 27 and 28: 2.1.4 Status and outcomes of audits
Page 29 and 30: Swellendam experienced a breakdown
Page 31 and 32: The purpose of the annual audit of
Page 33 and 34: The three most common qualification
Page 35 and 36: The Public Audit Act, 2004 (Act No.
Page 37 and 38: Findings on reliability relate to w
Page 39 and 40: The PAA requires the AGSA to audit
Page 41 and 42: Table 10: Summarised findings in ot
Page 43 and 44: The AGSA audits included an assessm
Page 45 and 46: Table 12: Prohibited awards to empl
Page 47 and 48: Table 13: Awards to close family me
Page 49 and 50: Suppliers were required to submit a
Page 51 and 52: eap the required benefits. More emp
Page 53 and 54: The MFMA requires accounting office
Page 55 and 56: The previous figure reflects the th
Page 57 and 58: The previous figure reflects the th
Page 59 and 60: Figure 11: Nature of and overall tr
Page 61 and 62: Indicator Auditors identify a large
Page 63 and 64: Root cause number 1: Slow response
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Root cause number 3: Key positions
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3.2 Significant deficiencies in aud
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Good Concerned Poor The status of t
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Driver no. 1: Leadership Movement A
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the requirement of the MFMA. Driver
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3.3 Human resource management Effec
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Indicator Vacant CFO positions Vaca
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Indicator minimum competencies CFO
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Unqualified with no findings (5) Un
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A lack of discipline, an absence of
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Indicator Key findings Allegations
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3.4.2 Summary of the overall audit
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3.4.3.1 Metropolitan municipalities
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Figure 15: Security management audi
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Minimal improvement Controls not de
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3.4.6 Information technology servic
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3.4.7 Quick wins and recommendation
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3.5 Audit committees and internal a
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Governance structure aspect Audit c
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Figure 21: Level of assurance provi
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Table 32: Comments on the level of
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Provincial role players do have a n
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Auditee Coordinating/ monitoring in
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• The role players within the mun
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4.3 Interactions with mayors In res
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4.4 Initiatives and commitments of
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Key role players Outline of initiat
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Key role players Outline of initiat
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ecome standard practice to brief th
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Management is responsible for the s
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69% (18) 100% (1) 60% (3) 70% (14)
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35% write-off of debts. Only three
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The following figure elaborates on
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5.2.4 Financial performance and pos
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2011-12 audit outcome 2010-11 audit
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ANNEXURE 3: Auditee’ audit opinio
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2011-12

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