Another year, another shocking audit

From a press statement issued by Cllr. Kevin Mileham on behalf of the DA’s Buffalo City Caucus on 23/1/2012:

Reacting to the Auditor-General’s report on Buffalo City’s annual financial statements for 2010/11 released last week, the Democratic Alliance has again condemned the municipality’s lack of urgency in implementing good governance practices.

DA Chief Whip, Cllr. Kevin Mileham, noted that the Auditor-General had issued an adverse opinion on the metro’s finances for the 2010/11 financial year, following disclaimed opinions in 2008/09 and 2009/10. An adverse opinion is worse than a disclaimed opinion as it means that the Auditor-General believes that the financial statements of the municipality contain material misstatements, while a disclaimed opinion arises when the AG is unable to form an opinion on the statements as a result of lack of evidence.

Mileham pointed out that the issues raised in previous audit reports had, for the most part, remained unaddressed. “The Democratic Alliance has, on numerous occasions, advised the municipality of the problems inherent in its current supply chain management function, and has in fact raised a motion in council in this regard,” he said. “The irregular expenditure of R349,3 million in the 2009/10 financial year is testament to the municipality’s unwillingness to take bold steps to rectify the problem, including making the tender process more transparent and open to public scrutiny.”

According to Mileham, the poor quality of the municipality’s annual financial statements can be attributed to:

• A lack of understanding of the accounting requirements;
• Insufficient skill levels to manage the accounting function properly;
• A lack of supervision, monitoring and review of daily activities, resulting in underlying information that is inaccurate or not readily available;
• A lack of supervision and review during the preparation of the annual financial statements; and
• An inappropriate attitude towards accounting discipline in the municipality.

The report highlighted ongoing inventory problems, incorrect billing, and inadequate/inaccurate record keeping. A number of performance, legislative and operational issues were also emphasised as areas requiring attention.

“Good governance demands stringent control of the finances of the city,” said Mileham. “Buffalo City has been a rudderless ship for too long – the positions of City Manager, Chief Financial Officer and the heads other critical directorates must be filled as a matter of urgency, disciplinary action must be taken against those who have contravened the law and regulations, and processes implemented to ensure that there are no opportunities to waste citizens’ rates and taxes.”

The DA has indicated that it will submit further motions and questions to council regarding the state of the city’s finances and the steps being taken to address them.