4 September 2006
Cape Town � The Auditor-General today tabled its quarterly report on the
submission of financial statements by municipalities and the status of audit
reports for the financial year ended 30 June 2005.
The purpose of the quarterly report, the last to be tabled by outgoing AG
Shauket Fakie for the financial year 2004/05, is to inform Parliament and
provincial legislatures of the names of any municipalities or municipal
entities whose financial statements are still outstanding at the end of this
quarter. The report provides an indication where audits have not been finalised
within prescribed time frames, and the reasons why deadlines were not met.
The AG's quarterly report found that there are currently 284 municipalities
in the country which according to the Municipal Finance Management Act (MFMA),
are required to prepare annual financial statements; and within two months
after the end of the financial year to which these statements relate, submit
the statements to the AG for auditing.
Originally 159 municipalities met the submission date of 31 August 2005 as
prescribed by the MFMA. However, 33 financial statements were subsequently
withdrawn mainly due to material errors in the financial statements
submitted.
This means that only 126 (44 percent) of the 284 municipalities complied
with the 31 August deadline.
Between 1 September 2005 and 30 June 2006, 141 (50 percent) municipalities
had submitted annual financial statements. These statements are regarded as
late submissions. Late submissions also include statements that were submitted
by 31 August 2005 but were subsequently withdrawn and resubmitted.
When the financial statements received by 31 August 2005 (44 percent) are
combined with the late submissions (50 percent), a total of 94 percent of the
statements was received by 30 June 2006 compared to 90 percent as at 31 March
2006.
A total of 17 (six percent) of the 284 municipalities had not submitted
financial statements by 30 June 2006. Five percent had not submitted any
financial statements while the statements of two municipalities (one percent)
had been withdrawn and were not resubmitted by 30 June 2006.
In addition, section 126 (1) (b) of the MFMA requires that municipalities
with municipal owned entities prepare consolidated annual financial statements
incorporating the annual financial statements of the municipality and its
entities.
There are currently 20 municipalities that have control of municipal owned
entities. Of the 20 municipalities, only four (20 percent) submitted
consolidated annual consolidated annual financial statements by 30 September
2005, while three (15 percent) submitted consolidated financial statements
between 1 October 2005 and 30 June 2006.
By 30 June 2006, 13 municipalities (65 percent) had not submitted
consolidated financial statements by 30 June 2006.
Says AG, Shauket Fakie, "There has been little change from my previous
report. The slow rate at which consolidated financial statements are submitted
for auditing is a matter of serious concern. For consolidation to be completed,
all the information on municipalities and municipal entities is required to be
complete."
Financial statements of municipal entities must be submitted to both the
parent municipality and the AG within two months of the end of the financial
year for auditing.
Of the 74 municipal entities, 30 (41 percent) met the MFMA deadline, 34 (46
percent) originally met the submission date however four of these withdrew
their financial statements. A further 12 (16 percent) submitted statements
between 1 September 2005 and 30 June 2006, while 32 (43 percent) did not submit
their statements.
In contravention of the MFMA, 10 municipal entities appointed their own
auditors. This resulted in these entities failing to submit their annual
financial statements for auditing by the AG.
"This contravention of the MFMA is a serious matter not only for the entity
involved but also for the municipality to which the entity reports. I believe
that the list of entities mentioned is not complete. It is very possible that
more entities may be added to this list as time unfolds and greater clarity
about the identification of municipal entities is gained. While I recognise
that the continued existence of many of the entities is still under debate, the
slow rate of submission of their financial statements is still a matter of
concern.
"The key attributes of good governance are accountability and transparency
which are achieved through the timely submission of financial statements and
audit reports. Receiving the financial statements after the set deadline not
only impacts on the ability of my office to perform its function in this regard
but could impact on the ability of the municipality to perform within the
accountability framework," says Fakie.
Media note: A complete quarterly report with a list of municipalities that
withdrew financial statements or did not submit before deadline is available on
our website: http://www.agsa.co.za
For further information, please contact:
Africa Boso
Media Liaison: Auditor-General of South Africa
Tel: (012) 426 8273
Cell: 082 8899 527
E-mail: africab@agsa.co.za
Issued by: Auditor-General of South Africa
4 September 2006
Source: Auditor-General of South Africa (http://www.agsa.co.za/)
