The City of Tshwane Metropolitan Municipality recently released its Annual Financial Statements (AFS) for the year ended 30 June 2023, accompanied by a qualified audit opinion from the Auditor-General South Africa (AGSA). This article delves into the financial challenges faced by the municipality, the material irregularities identified, and the remedial actions taken or recommended.
Qualified Audit Opinion and Material Uncertainties
The AGSA’s qualified audit opinion highlights material uncertainties related to the municipality’s negative liquidity position and a recent negative rating by Moody’s. These factors raise concerns about the City of Tshwane’s ability to continue as a going concern.
Table 1: Summary of Material Uncertainties
| Factors | Description |
|---|---|
| Negative liquidity position | Indicates financial challenges and potential cash flow difficulties. |
| Moody’s negative rating | Reflects external perception and impacts on borrowing costs and funding. |
Material Irregularities Identified
The AGSA identified several material irregularities during its audit process, indicating areas of concern within the municipality’s financial management practices.
Table 2: Overview of Material Irregularities
| Irregularity | Description |
|---|---|
| Inadequate controls for consultant payments | Lack of verification processes leading to potential financial losses. |
| Overpayment for fuel purchases | Financial losses due to overpayments for fuel supply. |
| Interest not levied on sundry debtors | Non-compliance with interest levying policies, resulting in potential revenue losses. |
| Procurement of unused software licenses | Expenditure on unused licenses, indicating inefficiencies in procurement practices. |
| Vandalism of water infrastructure | Losses due to vandalism, highlighting asset protection and security challenges. |
Actions Taken and Recommended
In response to the identified irregularities, the accounting officer initiated various remedial actions and recommendations to address these issues and improve financial governance.
Table 3: Remedial Actions and Recommendations
| Actions Taken | Description |
|---|---|
| Appointing service providers | Engaging external expertise for audits and investigations. |
| Policy revisions and disciplinary actions | Implementing stricter controls and consequences for non-compliance. |
| Terminating unused licenses and recovering losses | Reducing unnecessary expenditures and pursuing financial recoveries. |
| Strengthening asset protection measures | Enhancing security and preventive measures against vandalism and losses. |
Financial Restatements and Corrections
The AFS for the year ended 30 June 2021 underwent significant restatements and corrections, reflecting the municipality’s efforts to rectify previous errors and ensure accurate financial reporting.
Table 4: Overview of Financial Restatements
| Errors and Corrections | Description |
|---|---|
| Inventory revaluation and corrections | Adjustments to correct inventory values and ensure accuracy in asset recording. |
| Impairment expenses and adjustments | Rectifying overstatements and ensuring proper assessment of impairment expenses. |
| Revenue corrections and adjustments | Addressing revenue discrepancies and ensuring accuracy in income recognition. |
| Asset valuation and depreciation | Adjusting asset values and depreciation rates to align with financial standards. |
Conclusion
The City of Tshwane Metropolitan Municipality faces significant financial challenges and material irregularities, as highlighted by the qualified audit opinion and identified issues during the audit process. However, the municipality has taken proactive steps through remedial actions, policy revisions, and financial corrections to address these challenges and improve financial governance.
It is imperative for the municipality to continue strengthening its controls, enhancing transparency, and implementing robust financial management practices to regain trust, mitigate risks, and ensure sustainable financial health in the future. By learning from past mistakes and adhering to best practices, the City of Tshwane can navigate through its financial challenges and work towards achieving long-term financial stability and success.
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