The Makhado Municipality has done a lot to improve on its financial management during the 2009/10 financial year. This is clear through their response to questions raised with regard to the Auditor General’s (AG) assessment of their financial affairs for the 2008/9 financial year.

The AG issued a disclaimer with regard to the municipality’s statements for the year ending June 30, 2009. This means that the municipality could not supply the AG with the necessary evidence to support the financial statements they submitted. The AG contributed this to poor financial control, inadequate supervision by management and a lack of skilled personnel in the municipality’s finance department. The municipality’s failure to make appointments in key positions in their finance department was also highlighted, as well as the fact that the municipality did not have an external audit committee, as required by law, to monitor their financial management during the financial year in question. Another matter of concern for the AG was the R7,6 million of assets on the municipality’s asset register which they couldn’t account for.

The municipality’s poor financial control, inadequate supervision and lack of skilled personnel become evident when analysing several of the AG’s findings. Under the heading Cash and Cash Equivalents, the AG states “included in the bank overdraft to the amount of R22.8 million, are reconciling items of un-presented cheques and outstanding deposits amounting to R125 million and R102 million respectively”.

The municipality responded to this by stating that the issues around cash and cash equivalents emanate from the 2004 financial year after reconciling items were erroneously created by the bank reconciliation system they used at that stage. Since then, the municipality has ceased the use of this system and bank reconciliation is now prepared manually.

“The unknown deposits, amongst others, were the result of inconsistencies in the deposits of cash collected. It was noted during the Operational Clean Audit 2014 Committee meeting hosted by the Department of Local Government that this is a major problem in municipalities,” the municipality states.

As for the lack of skilled personnel in their finance department, the municipality stated that they had made progress in capacitating the relevant department through the filling of several key positions during the 2009/10 financial year. This included the appointment of a municipal manager, filling all managerial positions in the finance department and creating an internal audit division, as well as an asset management division, with all positions to be filled by the end op September this year.

With regard to the R7,6 million of assets unaccounted for, the municipality said that an asset team from the municipality was deployed to various asset locations during the 2009/10 financial year to verify all their assets.

“The result of the exercise was that R6,6 million of assets were physically verified and the remaining R1 million could not be found. A list of these assets that could not be found totalling R1 million was submitted to Council on July 29 this year for approval,” the municipality stated.

On the issue of not having an external audit committee, the municipality said that, for the 2009/10 financial year, they used the shared audit committee from the Vhembe District Municipality. The audit committee was, according to the municipality, functioning efficiently during the 2009/10 financial year.

“We [also] established an Operational Clean Audit Committee that comprises departmental directors, the municipal manager, departmental managers and assistant managers and internal auditors to consider and clear the issues that were raised in the 2008/9 audit report. Since the committee has been established, the majority of the issues raised in the 2008/9 audit report have been resolved,” the municipality says.