Following the disclaimer of opinion by the auditor general (AG) on the Makhado Municipality’s financial affairs, the municipality said that it would take time for them “to move out of disclaimer, but an audit plan has been developed to deal with all matters raised by the AG.”

The Makhado Municipality had a disclaimer of opinion in 2010/11 and 2009/10, with an adverse opinion in 2007/8 and a disclaimer in 2006/7. The report status is supplied by the AG and ranges from unqualified (best), to unqualified with other matters specified, qualified, adverse and disclaimed (worst).

The municipality was asked to highlight three or four of the most imperative factors that contributed towards the disclaimer and the actions to remedy those. “Unbundling of state assets,” was the most pressing factor and the only one mentioned in the short answer received from the municipal spokesperson, Mr Louis Bobodi.

The local ratepayers association, on the other hand, had much to say about the disclaimer by the AG for the financial year ended 30 June 2012. “The opinion that the AG has expressed has once again been the worst opinion that the AG can express. It means that there are so many material issues, missing information, non-compliance with accounting standards, poor or non-existent internal controls, a malfunctioning audit committee and poor internal functions, that the AG cannot express any opinion whatsoever," said Ms Inga Gilfillan, chairperson of the Soutpansberg Ratepayers Association (SRPA).

The SRPA regards the state of the financial affairs of the municipality as very serious and “it requires that very serious actions must be taken as a matter of urgency to prevent the situation from deteriorating further or to continue.”

According to the AG's report, assets (property, plant and equipment) to the value of R1.6 billion could not be verified for existence, completeness or valuation.  The municipality’s  CFO, Ms  Mikateko Makhubela, stated in a report that a new functional asset register has been compiled. Valuation and depreciation of assets are to be re-assessed as per GRAP 17 standards and there should be continuous improvement on asset register maintenance. The SRPA said that failure of an effective system of internal control for assets was serious financial misconduct that could imply a criminal offence.

The AG report indicated in note 17 that the municipality had disclosed unauthorised expenditure to the amount of R57 872 128 but failed to disclose a further amount of R124 208 021. “This means that the operational budget as approved by council was overspent by more than R180m. It is a contravention of Section 15 of the MFMA,” said Gilfillan. In note 25, the AG reported that the municipality had incurred R33 169 661 of unauthorised expenditure by utilising conditional grants for other purposes than what they had been granted for. “This is very serious financial misconduct as well as a contravention of the Division of Revenue Act. In terms of Section 3, Part 2: Criminal Offences, this constitutes a criminal offence,” Gilfillan said.

The SRPA said they could go on an on and cite many significant findings in the AG report. “There is a total lack of financial management and numerous contraventions of the MFMA and its regulations, as well as the Municipal Systems Act. Serious intervention is urgently required,” Gilfillan said.

The SRPA indicated that they were busy with a request to the national treasury to deploy well-experienced people to the municipality to assist in saving the municipality from total financial disaster and to establish proper internal controls and train the staff in accounting standards.