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30 March 2021 Media Statement: One finding away from a Clean Audit: Garden Route DM receives its 3rd consecutive Unqualified Audit Outcome

Media Statement: One finding away from a Clean Audit: Garden Route DM receives its third consecutive Unqualified Audit Outcome

30 March 2021
For Immediate Release

Garden Route District Municipality (GRDM), one (1) of the five (5) district municipalities in the Western Cape, obtained its third consecutive unqualified audit outcome. For the year under review (2019/2020), the Auditor-General of South Africa’s (AGSA) reported one (1) finding; an improvement for the GRDM compared to 2018/19.

Alderman Memory Booysen, Executive Mayor for GRDM welcomes the Audit outcome, and he said, “We invested a lot of time and energy in assuring that we comply with all relevant legislative prescripts in Local Government environment and that we apply the relevant standards when preparing our financial statements.

According to GRDM Municipal Manager, Monde Stratu: “There were no financial material misstatements, no performance management misstatements and no material inconsistencies reported in our Annual Report”. The only material finding identified by the AGSA relates to the composition of our Bid Adjudication Committee, which was the same finding raised in the previous audit and was corrected in November 2019, however it was raised even though it was corrected. The AGSA regarded this as a transversal matter and dealt with it as such. It was subsequently revealed by the AGSA that the GRDM is in a sound financial position.

The final step for the GRDM was to for its Municipal Public Accounts Committee (MPAC), to compile an Oversight Report in accordance with Section 129 of the Local Government Municipal Finance Management Act, 2005. This report was considered by the GRDM Council during a Special Council meeting today, 30 March 2021.

According to the GRDM Oversight Report and re-highlighted by Cllr Clodia Lichaba (MPAC Chairperson), the GRDM administration was congratulated “for maintaining an unqualified audit outcome, given the pandemic challenges. Many audit-related engagements took place during a critical time when the the institution only had skeleton staff to assist”. MPAC’s Chairperson furthermore noted that there was a vast improvement on the content of the Audit Report because of a drastic reduction in material matters.

During a GRDM Council meeting (top, left), two chairpersons logged in to discuss the Annual Report and Oversight Reports. Logged in via Zoom (right), Dr Adele Potgieter (Chairperson: Audit and Performance Audit Committee) and at the bottom, Cllr Clodia Lichaba (Chairperson: Municipal Public Accounts Committee).

The finding – Composition of the Bid Adjudication Committee

In the 2018/19 Auditors were of the view that the competitive bids were adjudicated by a bid adjudication committee that was not composed in accordance with Supply Chain Management Regulations 29(2), which provide guidance for the composition of Bid Adjudication Committees.

This regulation reads:

–  a bid adjudication committee must consist of at least four senior managers of the municipality or municipal entity which must include

(i) the chief financial officer or, if the chief financial officer is not available, another manager in the budget and treasury office reporting directly to the chief financial officer and designated by the chief financial officer;

(ii) at least one senior supply chain management practitioner who is an official of the municipality or municipal entity;

(iii) and a technical expert in the relevant field who is an official of the municipality or municipal entity, if the municipality or municipal entity has such an expert.

After the above finding was raised by the AGSA in 2018/19, management swiftly and formally appointed the Manger: Supply Chain Management, as a member of the BAC. This appointment was done during that audit in November 2019.  At the time of the AGSA’s final report, this was already corrected.

However, the same finding that was raised in 2018/19 and corrected in November 2019, has again been raised as a repeat finding, in the current year’s audit (2019/20 Audit). Management disputed this finding and it was referred to the AGSA Technical Unit. The reason for this dispute was based on the following premises:

  • That the matter was raised in previous audit as material finding affecting the audit opinion. The matter was immediately corrected even before the conclusion of 2018/19 audit.
  • Management is of the view that it serves no purpose to again raise the material finding that has already been rectified. The root cause has been identified in the previous year and the defect cured. It is an exercise in futility and actually negates the principles of fairness.
  • There is no remedial action proposed by the Office of the Auditor General and therefore this results in a situation where the municipality was found guilty the previous year, was punished, served the sentence and is again subjected to the same trial even after having corrected what was wrong. This is double jeopardy, a situation frowned upon by our legal system especially in the light of the fact that the decisions of the Auditor are administrative in nature and must adhere to the principles of fairness.

The AGSA acknowledged that this finding is raised as matter of consistency and is a result of their methodology and therefore cannot be ignored. They also acknowledge that they did not recommend any action to address this finding, as the Municipality has already addressed the matter.

However, they remain of the view that the non-compliance remained “material”, when considering the period (July 2019 to October 2019) before the GRDM Supply Chain Manager was appointed as a BAC member.

The GRDM management further confirms that this finding will not re-occur in 2020/21 audit, as this matter is now settled.

GRDM remains on a path that delivers and works in the best interests of all who live in the Garden Route.

Did you know?

Clean Audit Outcomes: The financial statements are free from material misstatements and there are no findings on reporting on performance objectives or non-compliance with legislation.

Unqualified Audit Opinions: The financial statements contain no material misstatements. Findings may have been made on either reporting on predetermined objectives or non-compliance with legislation, or both these aspects.

Qualified Audit Opinions: The financial statements contain material misstatements in specific amounts, or there is insufficient evidence for us to conclude that specific amounts included in the financial statements are not materially misstated.

Disclaimer of Opinion: On some occasions, an AQ is unable to complete an accurate audit report. This may occur for a variety of reasons, such as an absence of appropriate financial records. When this happens, the auditor issues a disclaimer of opinion, stating that an opinion of the firm’s financial status could not be determined.