IN-HOUSE COMPILATION OF ANNUAL
FINANCIAL STATEMENTS, AUDIT
OUTCOMES & CLEAN AUDIT
SALGA
29 APRIL 2013
PRESENTED BY: WILLIE FOUCHE
MUNICIPAL MANAGER
STEVE TSHWETE LOCAL MUNICPALITY
OVERVIEW ON CAUSES OF FINANCIAL
STATEMENT QUALIFICATIONS

Property Plant and Equipment (GRAP 17)
Residual values, Useful lives not reviewed
 Fixed asset register incomplete and not updated
 Reconciliations of registers with GL not performed.
 Supporting documentation to support evidence.
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Performance Information and Predetermined Objectives
Performance reports not submitted
 Usefulness of reported information measured against
relevance and measurability
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Non-Compliance with Laws and Regulations
Unauthorised, irregular & fruitless and wasteful expenditure
 Submitted financial statements required material adjustments
 Non functional audit committees & Internal Control
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OVERVIEW ON CAUSES OF FINANCIAL
STATEMENT QUALIFICATIONS
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Critical Supply Chain Management Issues
General non compliance to procurement and contract
management. (Bid committees, Quotations etc)
 Awards made to persons in the service of the state.
 Competitive bids not invited.
 Missing contract documentation

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Governance
Leadership
 Performance management
 Systems and processes
 Lack of proper record keeping
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ELEMENTS OF CLEAN AUDIT
Finance:
Unqualified
Report
Governance:
Performance
& Legislative
Compliance
Political:
Oversight &
Monitoring
Clean Audit
CORE COMPLIANCE
Identify and ensure core compliance issues are in
place:
 Governance
Internal Audit and Control.
 Performance Audits.
 Audit Committee.
 Legislative Compliance. (MFMA)

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Financial:
Unqualified Report.
 Proper Records and Documentation.
 Reporting and Legislative Compliance.
 Understand and Comply with Accounting Standards
Framework. (GRAP)

FINANCIAL MANAGEMENT
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Monthly & Yearend Procedures & Reconciliations
Institute measures and control procedures to ensure all
registers, control or suspense accounts are balanced
monthly for example debtors, creditors, bank
reconciliation, stores etc.
Prepare and commence timeously with financial year
end closure procedures- At least four months before
financial year end;
Benefits:
Immediately detect if monthly accounts are not balanced
and correct before next month end.
 It allows sufficient time to properly review general ledger
account balances.
 Bring team together to understand roles and
responsibilities with financial year end closure.

PREPARATION OF FINANCIAL STATEMENTS

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Outsourced versus In-House
68% of municipalities are assisted by consultants
Audit outcomes statistics
107 out of 127 - Qualified & Adverse/Disclaimed

93 out of 156 - Unqualified with findings

7 out of 13 - Unqualified with no findings

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Consultants were able to correct parts of financial
statements that had been misstated but are unable to
ensure that auditees progress towards unqualified
reports.
Disadvantages
Consultants Appointed close to year-end – No real impact
 Deficiencies in record keeping and reconciliations limit ability
to prepare GRAP compliant statements.
 Vacancies and capacity of finance department staff.

PREPARATION OF FINANCIAL STATEMENTS
Prepare Financial statements in-house.
 Benefits:

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Build in-house capacity.
Responsibility/Ownership rests with municipality.
Better control over balancing and verification of figures
in general ledger with source documents.
Informed responses to Auditor-General enquiries.
Better understanding of accounting records and
procedures
Defend fairness of enquiries raised.
Accurate and timeously response to AG on queries
raised.
OTHER IMPORTANT ISSUES
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With implementation of new accounting standards a gap
analysis was undertaken to inform on shortcomings.
Based on the results an action plan was implemented.
Capacitate responsible officials who implement
accounting standards.
Ensure each official has and understands their job
duties and responsibilities.
Understanding and application of policies and
procedures especially SCM.
Proper segregation of duties.
Share best practises with colleagues.
Commitment of every official to diligently perform their
duties from the lowest to highest level.
RELATIONSHIP WITH AUDITOR-GENERAL

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Know the Auditor-General.
Make sure there is a good and positive working
relationship.
Listen to their requirements during Audits.
Respond to informal enquiries quickly and efficiently.
Provide information as requested and if not available
inform AG accordingly.
Have a open office approach and assist as far as
possible.
Designate an official to be available during audit.
STLM APPROACH
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The municipality has achieved unqualified reports since
2002 with emphasis of matters and other matters.
With each audit report corrective and preventative
measures with action plans were implemented to rectify
these issues before the next audit.
Eventually everything came together and a clean audit
was achieved.
Clean Audit is a constant process.
Dedicated team.
Get the basics right.
Submit on time.
 Accuracy of information.
 No material misstatements.
 Supporting documentation.

CHALLENGES FOR 2012/13 AUDITS

New Standards of GRAP, effective date of 1 April 2012 i.e
applicable to 2012/2013 financial year.
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Impairment of non-cash-generating assets
Revenue from non-exchange transactions
Presentation of budget information in financial statements
Impairment of cash-generating assets
Heritage assets
Financial instruments
The ASB has issued the following additional Standard of GRAP,
effective date of 1 April 2013 i.e 2013/2014 financial year.

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GRAP 21 GRAP 23 GRAP 24 GRAP 26 GRAP 103 GRAP 104 -
GRAP 25 Employee benefits
Minimum competency regulations. As per regulation 15 and 18,
all municipalities must ensure that their staff comply with the
competency requirements with effect from 1 January 2013. This
means that the requirements are applicable for the financial year
2012-13 (financial period ending 30 June 2013). Municipalities
need to align their recruitment policies to the regulations and put
measures in place to ensure that their personnel comply with the
requirements.
OUR COMMITMENT
To always treat
everyone with
dignity and
respect.
To perform
duties with
integrity,
honesty and
diligence.
To diligently
apply the
principles of
Batho Pele in all
dealings.
OUR STANDARD OF GOOD FINANCIAL
GOVERNANCE
• Discipline
• Accountability
Fairness
• Transparency
• Responsibility
Social
Responsibility
There are many faces in the municipality
contributing to the clean audit achievement.
10 OTHER CRITICAL ISSUES
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Records Management
Delegation register
Legal Compliance register
Litigation register
Contract Management
Monitoring system (Political and Administrative)
Competent and qualified personnel
Billing system
PMS (SMART )
Internal control
THANK
YOU
NGIYATHOKOZA