For the fifth consecutive year, the auditor general (AG) has reported adversely on the financial affairs of the Makhado Municipality.

“Once again the auditor general was unable to give an audited opinion (disclaimer of opinion) on the financial statements of the municipality,” said a local chartered accountant (CA) after studying the negative AG report for the financial year ended June 30, 2010.

“This report is really very bad. They need a drastic intervention and will have to sort out the previous years’ issues if they ever want to achieve a clean slate,” was the comment of a Gauteng CA on the report. The AG report has, however, in no way dampened the confidence of the Makhado Municipality.

“We still maintain that there is great improvement in our financial management, as we have observed and are busy rectifying the shortcomings. Much work still has to be done and we are confident that, come the next financial audit, we will have improved,” stated the Makhado municipal manager, Mr Shadrack Tshikalange, by word of his director of community services, Mr Elias Mugari.

The Democratic Alliance was strong in its disdain for the way the finances of the municipality are being managed.

“It is generally accepted that the auditor general’s findings are sufficient ´scientific´ proof that the finance department at the Makhado Municipality is in a very serious crisis. Clearly the ‘top management’ of the Makhado Municipality is so lacking in skills and abilities that they are oblivious to the fact - and have no concept of how serious the situation and the possible repercussions actually are!” reads the DA‘s statement with regard to the AG report.

Among the findings of the AG was that the Makhado Municipality had written off R4,8 million in cash and bank reconciling items without carrying out an investigation. Bank deposits totalling R48,7m were also not recorded in the accounting records. The bank reconciliation further showed R24,9m in outstanding deposits which could not be traced to the bank statements or supporting documentation, and movable assets amounting to R173,5 million could not be verified. The municipality also wrote off unidentified bank deposits from prior periods, amounting R122 million, without an investigation.

A shackle on the leg of the municipality remains the unresolved issues that date back to the 2004/2005 financial year. The municipality is encouraged by the fact that “many issues that were raised in the prior years affecting the financials, such as asset management, with the exception of movable assets, has improved.”

The AG also reported on the performance information of the Makhado Municipality. He stated, amongst others, that the accounting officer, who is the municipal manager, had not adhered to his statutory responsibilities.

“Contrary to section 62 (1) (d) of the MFMA, the accounting officer did not comply with his legislative responsibilities to implement effective, efficient and transparent processes of financial management and risk management to prevent and detect unauthorized expenditure and fruitless and wasteful expenditure,” reads point 32 of the report. “It was alarming to read that the accounting officer also does not exercise oversight responsibility over reporting and compliance with laws, regulations and internal policies,” said Mr André Prinsloo, a chartered accountant with a local accountancy firm.

The DA viewed the municipality’s non-compliance to the MFMA (Municipal Finance Management Act) as serious enough to press criminal charges. “According to the MFMA and in the light of the auditor general’s report, the top management of the Makhado Municipality and its financial department have committed punishable offences,” stated DA Cllr Annette Kennealy and quoted several sections of the MFMA that had been contravened.

Kennealy also pointed out that the first six months of the current financial year proved non-compliance and poor financial management. The municipality closed in December on a deficit of R26,5 million. “The consolidated income budget of R67,5 million was reduced by R61m. Outstanding debts rose from R107 million to R131 million,” Kennealy said.