1.1.9 Introduction and scope
38. In accordance with the PAA and the general notice issued in terms thereof, I have a responsibility to report material findings on the compliance of the municipality with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.
39. The material findings on compliance with specific matters in key legislation are as follows:
Utilisation of conditional grants
40. The municipal infrastructure grant was not spent on its intended purposes in accordance with the applicable grant framework, as required by section 17(1) of Dora.
41. Performance in respect of programmes funded by the municipal infrastructure grant was not evaluated, as required by section 12(5) of Dora.
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42. The water services infrastructure grant was not spent on its intended purposes in accordance with the applicable grant framework, as required by section 17(1) of Dora.
43. Performance in respect of programmes funded by the water services infrastructure grant was not evaluated, as required by section 12(5) of Dora.
Human resource management
44. Appropriate systems and procedures to monitor, measure and evaluate the performance of staff were not developed and adopted, as required by section 67(1)(d) of the MSA.
Procurement and contract management
45. Some of the goods and services with a transaction value below R200 000 were procured without obtaining the required price quotations, in contravention of SCM regulation 17(a) and (c). Similar non-compliance was also reported in the prior year.
46. Sufficient appropriate audit evidence could not be obtained that some quotations were accepted only from prospective providers who were on the list of accredited prospective providers and met the listing requirements prescribed by the SCM policy, in contravention of SCM regulations 16(b) and 17(b).
47. Quotations and some contracts were accepted from bidders who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state, as required by SCM regulation 13(c). Similar non-compliance was also reported in the prior year.
48. Sufficient appropriate audit evidence could not be obtained that quotations and contracts were accepted only from bidders whose tax matters had been declared by the South African Revenue Service to be in order, as required by SCM regulation 43. Similar non-compliance was also reported in the prior year.
49. Some of the goods and services with a transaction value above R200 000 were procured without inviting competitive bids, as required by SCM regulation 19(a). Deviations were approved by the accounting officer even though it was not impractical to invite competitive bids, in contravention of SCM regulation 36(1). Similar non-compliance was also reported in the prior year.
50. Sufficient appropriate audit evidence could not be obtained that invitations for competitive bidding were advertised for the required minimum period, as required by SCM regulation 22(1) and 22(2).
Similar non-compliance was also reported in the prior year. This non-compliance was identified in the procurement processes for the upgrading and refurbishment of the sports facility in Koffiefontein/Dithlake and the new sports facility in Koffiefontein/Sonwabile.
51. Competitive bids were adjudicated by a bid adjudication committee that was not composed in accordance with SCM regulation 29(2). Similar non-compliance was also reported in the prior year. This non-compliance was identified in the procurement processes for the upgrading and refurbishment of the sports facility in Koffiefontein/Dithlake and the new sports facility in Koffiefontein/Sonwabile.
52. Some of the contracts and quotations were awarded to bidders based on pre-qualification criteria that differed from those stipulated in the original invitation for bidding and quotations, in
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contravention of preferential procurement regulation 4(1) and 4(2) of 2017. Similar non- compliance was also reported in the prior year. This non-compliance was identified in the procurement processes for the new sports facility in Koffiefontein/Sonwabile.
53. Some of the contracts and quotations were awarded to bidders that did not score the highest points in the evaluation process, as required by section 2(1)(f) of the Preferential Procurement Policy Framework Act of South Africa, 2000 (Act No. 5 of 2000) and the Preferential Procurement Regulations. This non-compliance was identified in the procurement processes for the new sports facility in Koffiefontein/Sonwabile.
54. Bid documentation for procurement of commodities designated for local content and production, did not stipulated the minimum threshold for local production and content as required by the 2017 preferential procurement regulation 8(2). This non-compliance was identified in the procurement processes for the supply and installation of electrical meters, frames, steel doors, windows and door locks.
55. Sufficient appropriate audit evidence could not be obtained that the performance of some of the contractors or providers was monitored on a monthly basis, as required by section 116(2)(b) of the MFMA. Similar non-compliance was also reported in the prior year. This non-compliance was identified in the contract management processes for the upgrading of the Koffiefontein electricity sub-station and the Luckhoff wastewater treatment plan.
56. Sufficient appropriate audit evidence could not be obtained that all extensions or modifications to contracts were approved by a properly delegated official, as required by SCM regulation 5. Similar non-compliance was also reported in the prior year.
57. Sufficient appropriate audit evidence could not be obtained that contract performance and monitoring measures and methods were sufficient to ensure effective contract management, in contravention of section 116(2)(c) of the MFMA. Similar non-compliance was also reported in the prior year.
Annual financial statements and annual reports
58. The financial statements submitted for auditing were not prepared in all material respects in accordance with the requirements of section 122(1) of the MFMA. Material misstatements of non- current assets, current assets current liabilities, revenue, expenditure and disclosure items identified by the auditors in the submitted financial statements were subsequently corrected and the supporting records provided, but the uncorrected material misstatements and supporting records that could not be provided resulted in the financial statements receiving a qualified audit opinion.
59. The 2017-18 annual report was not tabled in the municipal council after the end of the financial year, as required by section 127(2) of the MFMA.
Expenditure management
60. Money owed by the municipality was not always paid within 30 days or an agreed period, as required by section 65(2)(e) of the MFMA.
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61. Reasonable steps were not taken to ensure that the municipality implemented and maintained an effective system of expenditure control, as required by section 65(2)(a) of the MFMA.
62. Reasonable steps were not taken to prevent irregular expenditure, as required by section 62(1)(d) of the MFMA. The expenditure disclosed does not reflect the full extent of the irregular expenditure incurred, as indicated in the basis for qualification paragraph. The majority of the disclosed irregular expenditure was caused by unspent conditional grants that were not cash-backed at the end of the financial year.
63. Reasonable steps were not taken to prevent unauthorised expenditure amounting to R119 091 292, as disclosed in note 49 to the financial statements, in contravention of section 62(1)(d) of the MFMA. The majority of the unauthorised expenditure was caused by non- cash items that were not adequately budgeted for.
64. Reasonable steps were not taken to prevent fruitless and wasteful expenditure amounting to R2 046 204, as disclosed in note 48 to the financial statements, in contravention of section 62(1)(d) of the MFMA. The majority of the disclosed fruitless and wasteful expenditure was caused by interest levied on overdue payables due to cash-flow constraints experienced by the municipality.
Revenue management
65. Revenue due to the municipality was not calculated on a monthly basis, as required by section 64(2)(b) of the MFMA.
66. Accounts for municipal tax and charges for municipal services were not prepared on a monthly basis, as required by section 64(2)(c) of the MFMA.
67. An effective system of internal control for debtors and revenue was not in place, as required by section 64(2)(f) of the MFMA.
Asset management
68. An adequate management, accounting and information system was not in place to account for assets, as required by section 63(2)(a) of the MFMA.
Consequence management
69. Unauthorised expenditure incurred by the municipality was not investigated to determine if any person is liable for the expenditure, as required by section 32(2)(a) of the MFMA.
70. Irregular expenditure incurred by the municipality was not investigated to determine if any person is liable for the expenditure, as required by section 32(2)(b) of the MFMA.
71. Fruitless and wasteful expenditure incurred by the municipality was not investigated to determine if any person is liable for the expenditure, as required by section 32(2)(b) of the MFMA.
176 Strategic planning and performance management
72. Sufficient appropriate audit evidence could not be obtained that the service delivery and budget implementation plan was revised during the year with council approval following the approval of an adjustments budget, contrary to section 54(1)(c) of the MFMA.
73. The performance management system and related controls were not maintained or were inadequate as it did not describe how the performance planning, monitoring, measurement, review, reporting and improvement processes should be conducted and organised or managed, as required by municipal planning and performance management regulation 7(1).