NORTH WEST For Print - Part2

SECTION 3: FINDINGS FROM THE AUDIT OF
SUPPLY CHAIN MANAGEMENT

3.1 Background to the audit of supply chain management
The audits included an assessment of procurement processes, contract management
and the related controls in place to ensure a fair, equitable, transparent, competitive
and cost-effective SCM system, the processes and controls need to comply with
legislation and that minimises the likelihood of fraud, corruption, favouritism as well
as unfair and irregular practices. The assessment was performed at a total of nine
(100%) municipalities and two (100%) municipal entities.
As is evident from the analysis of irregular expenditure (section 2.4.5), R165 million
(100%) of the irregular expenditure incurred by auditees was as a result of the
contravention of SCM legislation. Ninety-six per cent of the irregular expenditure
was identified during the audit process.
Findings from the audit were reported in the management reports of 91% of the
auditees where the assessment was performed, while the findings were material
enough to warrant reporting in the auditors report of 91% of them.
The following figure presents a summary of SCM findings with a comparison to the
results of the previous year. Details of the most prevalent findings are provided under
the headings as depicted in the figure. The percentages are based on the number
of auditees where the findings were audited.
Figure 21: Summary of findings on supply chain management
45%
Limitation on planned
scope of audit of awards
Awards to employees and
councillors or other state
officials
Awards to close family
members of employees and
councillors
68%
64%
21%
18%
11%
82%
Uncompetitive or unfair
procurement processes
84%
36%
Inadequate contract
management
26%
82%
Inadequate controls
79%
41
2010-11
2009-10
3.2 Limitations on planned scope of audit of awards

Sufficient appropriate audit evidence could not be provided at five (45%)
auditees that awards had been made in accordance with the requirements of
SCM legislation. No alternative audit procedures could be performed to obtain
reasonable assurance that the expenditure incurred on these awards was not
irregular. The reasons for the limitations were inadequate record keeping and
document management systems.
The following table depicts the auditees where limitations were experienced.
Those auditees where limitations were also experienced in the previous year are
highlighted in red.
GENERAL REPORT ON THE AUDIT OUTCOMES OF THE NORTH WEST LOCAL GOVERNMENT 2010-11
The following table depicts the audit findings for the auditees where prohibited
awards were identified with an indication of the positions of the officials involved.
If prohibited awards were also identified in the previous year the name of the
auditee is highlighted in red.
Table 24: Limitations experienced

Municipalities and municipal entities
Auditees
Number of awards
Value of awards
R
Table 25: Awards to officials in the service of the auditee

Awards made to
42
City of Matlosana
41
133 476 625
Greater Taung Local Municipality
3 667 533
Madibeng Local Municipality
28
185 022 012
Maquassi Hills Local Municipality
38
19 486 282
Naledi Local Municipality
13 412 467
Total
119
355 064 919
As a result of the limitations experienced, the findings reported in the rest of this
section might not reflect the full extent of irregularities and SCM weaknesses at the
auditees. This effectively means that 57% of the value of all awards selected for
testing could not be audited due to the required information or documentation not
being made available by auditees.
Auditees
Officials in service of the auditee
No.
Official Official was

did not involved in
declare making the
interest
award
Awards made to officials of other state

institutions
Positions
No.
Councillors, other
officials
94%
0%
37
R000
Provider
did not
declare
interest
Municipalities
City of Matlosana
34
5 580 374
725 398
100%
Madibeng Local
Municipality
14
5 173 143 Other officials
0%
0%
100%
Maquassi Hills
Local Municipality
46 950 Other officials
0%
0%
100%
Naledi Local
Municipality
43 808
100%
Ratlou Local
Municipality
1 269 775
100%
3.3 Awards to state officials
Ventersdorp Local
Municipality
3 500 983
100%
SCM Regulation 44 prohibits awards to persons or to entities owned/managed

by them if they are in the employ of the auditee (i.e. employees and councillors) or
if they are in the employ of any other state institution. Expenditure incurred in this
regard is also considered irregular.
Dr. Kenneth
Kaunda District
Municipality
3 706 855
100%
56
9 246 819
100%
The audit included the identification of such prohibited awards. Further testing was
also performed to determine whether the legislated requirements with regard to
declarations of interest were adhered to.
Total
51
10 800 467
* Number: indicates number of instances
63%
0%
3.4 Awards to close family members of state officials
3.5 Uncompetitive or unfair procurement processes
Awards to persons or to entities owned/managed by persons that are close family

members of persons in the service of the state, whether at the auditee or any other
state institution, are not prohibited. However, such awards of more than
R2 000 must be disclosed in the financial statements of the auditee for the sake of
transparency and as required by SCM Regulation 45. Close family member is a
spouse, child or parent of a person in the service of the state.
The principles of contracting for goods and services in a manner that is fair,
equitable, transparent, competitive and cost-effective come from our Constitution.
Legislation, most notably the MFMA and SCM Regulations, prescribes the
processes and rules to be followed by municipalities and municipal entities in order
to consistently and correctly apply the constitutional principles and to safeguard
the process against abuse. The preferential procurement framework further gives
effect to the constitutional principle of providing preference to the previously
disadvantaged in the allocation of work by the public sector.
The audit included the identification of awards to close family members, but
information on close family members could only be obtained only at 11 (100%)
auditees. Further testing was also performed to determine whether the financial
statement disclosure was made and the legislated requirements with regard to
declarations of interest were adhered to.
The following table depicts the audit findings for the auditees where awards to
close family members of officials of the auditee were identified with an indication
of the positions of the officials involved. If such awards were also identified in the
previous year the name of the auditee is highlighted in red.
Table 26: Awards to close family members
Auditees
No
disclosure
in financial
statements
Official did
not declare
interest
Provider did
not submit
declaration of
interest
Provider
did not
declare
interest
Positions
Awards made to close family members

of persons in service of the auditee
Number*
R000
Our audits also focus on whether procurement processes followed were fair and
competitive in that it provided all suppliers equal opportunity to compete for public
sector contracts and that the process does not favour some suppliers over others.
It is important that the prescribed processes are followed to ensure that the selected
supplier meets the requirements, has the capacity and ability to deliver the goods
and services, and that procurement is done at competitive and economical prices.
The procurement processes of 164 contracts (R240 million) and 339 quotations
(R24,.8 million) were tested. The top five most prevalent findings on non-compliance
with SCM legislation that resulted in uncompetitive or unfair procurement processes
are summarised in the following table. If the findings were also identified in the
previous year the name of the auditee is highlighted in red.
Municipalities
Maquassi Hills
Local Municipality
17 535 Other official
0%
0%
0%
0%
Ratlou Local
Municipality
163 960 Other official
0%
0%
0%
0%
Total
0%
0%
0%
0%
181 495
43
Table 27: Findings on uncompetitive or unfair procurement processes
Auditees
Three price quotations not

obtained
Number
Competitive bids not invited

Number
Procurement from suppliers

without SARS tax clearance
Number
Points incorrectly allocated/

calculated incorrect bidder won
award
Number
Bids specifications not

compiled by properly
constituted committee
Number
Other findings
Number
Municipalities
Bojanala Platinum District Municipality
18
1 748 604
City of Matlosana
14
1 167 104
Dr. Kenneth Kaunda District Municipality
918 265
52 529
507 024
16 662 381
17
22 273 409
4 744 881
31 000
18
2 400 284
11
7 324 049
24
3 193 714
10
1 141 895
3 570 804
13 379 423
2 077 355
10
10 507 682
9 670 090
64
45 675 895
44
Ratlou Local Municipality
132 004
Ventersdorp Local Municipality
206 097
13 379 423
1 622 459
261 402
10
10 507 682
Municipal entities
Dr KKDM Economic Agency (Pty) Ltd
Total
67
6 795 988
21
26 351 631
# No R-value for this finding
14 350 217
2 390 885
19
31 914 944
Further details on the legislation not complied with are as follows:
Table 29: Findings on contract management
Table 28: Findings on non-compliance with legislation

Finding
Detail
Three price quotations not obtained
A price quotation process is prescribed for the procurement of goods and services below R200 000.
Three written price quotations were not always obtained from prospective providers as prescribed and
the deviations were not approved by a delegated official
Competitive bids not invited
A competitive bidding process should be followed for the procurement of goods and services above
R200 000. Competitive bids were not always invited and the deviations were not approved by a
properly delegated official.
Procurement from suppliers without SARS Awards were made to suppliers without proof from South African Revenue Service (SARS) that their
tax clearance
tax matters were in order.
Points incorrectly allocated/ calculated incorrect bidder won award
The Preferential Procurement Regulations require that the awarding of tenders and quotations be done
on a preference points system. Due to mistakes in the calculation of the points, the incorrect wrong
bidders won the award.
Bids specifications not compiled by

properly constituted committee
Bid specifications for each case of procurement of goods and services were not compiled by a properly
constituted committee as per SCM Regulation 27.
Auditees
No
Shortcomings in the manner that contracts are managed result in delays, wastage
and fruitless expenditure, which impact directly on service delivery to the citizens.
The top five most prevalent findings on inadequate contract management are
summarised in the following table. If the findings were also identified in the previous
year the name of the auditee is highlighted in red.
Inadequate contract
performance
measures and
monitoring
Contracts amended
or extended
reasons not tabled
in council
No signed contract/
not signed by
delegated official
No
No
No
Payments made
in excess of approved contract
price (with
further approved
extensions)
No
R
Municipalities
City of
Matlosana
Ratlou Local
Municipality
Ventersdorp
Local
Municipality
Dr. Kenneth
Kaunda
District
Municipality
Total
3.6 Inadequate contract management
Performance of
contractors not
monitored on monthly
basis
46
150 139 007
34
1 386 980
1 386 980
9 670 090
9 670 090
746 256
52
161 942 333
11 057 070
13 395 055
13 395 055
34
163 286 744
163 286 744
219 865
219 865
45
Further details on the findings are as follows:

Table 30: Findings on contract management
Finding
Detail
Performance of contractors not monitored on a

monthly basis
The performance of the contractor in terms of the contract or agreement was not monitored
on a monthly basis as required by the MFMA.
Inadequate contract performance measures and

monitoring
Measures applied in monitoring the performance of contractors were not always sufficient to
ensure that contractors delivered in accordance with the contract.
Contracts amended or extended - reasons not

tabled in the council
In order to enable accountability and oversight the MFMA prescribes that reasons for
amendment or extension of contracts should be tabled in the council. Instances were
identified where the council was not informed.
No signed contract/not signed by delegated official
Goods and services were received and payments made to suppliers without a written, signed
contract or the contracts were not approved by a delegated official.
Payments made in excess of approved contract

price (with further approved extensions)
A contract prescribes the prices, terms and maximum values, which can be increased through
approved extensions and variations. Instances were identified where payments were made
to suppliers in excess of these approved contract prices.
3.7 Inadequate SCM controls
Table 32: Findings on SCM controls
Findings on deficiencies in fundamental SCM controls are summarised in the

following table.
Table 31: Findings on SCM controls
Auditees
Inadequate
controls to
ensure interest
is declared
SCM policy/ proNo controls

cedures in conflict
to monitor
with applicable
Other controls
performance of legislation/ do not
contractors
include all requirements
Bojanala Platinum District Municipality
suppliers declare any connections to persons in the service of the auditee or other state
constitutions.
No controls to monitor performance
of contractors
The controls at some auditees were inadequate to ensure that contractor performance is monitored
in accordance with the contract.
SCM policy/ procedures in conflict

with applicable legislation/ do not
include all requirements
The auditees SCM policy and procedures were in conflict with the application legislation or did not
include all of the requirements of the legislation.
Despite findings raised on the same matters in prior years no improvements have
been noted, which is indicative of auditees disregard for legislation rather than
a lack of understanding or not being aware of the requirements. Poor document
management systems remain a huge problem at most municipalities and resulted in
limitations on the scope of the audit of awards at five auditees.
Dr. Kenneth Kaunda District Municipality

Madibeng Local Municipality
Ratlou Local Municipality
Ventersdorp Local Municipality
Percentage of auditees tested
The controls at some auditees were inadequate to ensure that:
3.8 Overall conclusion on SCM matters
City of Matlosana
Total
Detail
Inadequate controls to ensure

interest is declared
officials declare whether they or their close family members, partners and associates have
interests in suppliers to the auditee;
Municipalities
46
Finding
6
55%
4
36%
3
27%
Further details on the findings are as follows:
4
36%
Despite prior year commitments made to improve the controls relating to SCM,
auditees have failed to improve the document management systems. Appropriate
action plans to address the control weakness identified have not been developed
or implemented. Internal audits continued lack of appropriate audit coverage of
compliance with SCM policies remains a concern. The only way how this situation
can be turned around is if the leadership sets the tone at the top to improve the
officials attitude towards compliance.

?
?
47
48
SECTION 4: DRIVERS OF AUDIT OUTCOMES

4.1 Significant deficiencies in auditees systems of internal control
4.1.1 Statutory responsibility of accounting officers and senior officials to maintain
effective systems of internal control
A key responsibility imposed by the MFMA and other legislation on accounting
officers and other municipal officials is to implement and maintain effective, efficient
and transparent systems of financial and risk management and internal control.
The implementation of effective internal control helps achieve important objectives
and sustain and improve performance. Objectives are derived from the regulatory
environment and fall into the categories of:

operations - Effectiveness and efficiency of operations, including goals

for operational and financial performance and safeguarding against loss
(financial and performance management).
reporting Pertaining to the reliability of reporting including internal and
external reporting of financial and non financial information.
compliance - Pertaining to compliance with laws and regulations.
information and the communication of information are required to carry out

day-to-day internal control activities. The ongoing monitoring of activities (good
governance) is necessary to ascertain whether all components of internal control are
present and functioning.
When internal control is effective, management and those charged with
governance have reasonable assurance that the entity understands the extent to
which the operations are managed effectively and efficiently, prepares reliable
reports, and complies with laws and regulations.
An explanation of the details of each driver of internal control is contained in the
glossary of terms.
The assessment below is based on significant deficiencies relating to the following:
Material misstatements in the financial statements presented for audit
purposes (whether or not these have been corrected as a result of the audit)
Findings on PDOs
Findings on compliance with laws and regulations.
49
The objectives are driven by the mandate and the mission and vision of the
organisation. Setting objectives is a prerequisite to internal control and a key part of
strategic planning.
Internal control is a multi-dimensional iterative process of ongoing tasks and
activities which are performed by the people, not just policies and systems,
which give assurance concerning the achievement of objectives. The fundamental
principles contained in the key drivers of internal control must be present and
operate together in order for the system of internal control to be effective.
The leadership of an organisation establishes the tone from the top regarding the
importance of internal controls and expected standards of conduct. The control
environment is the foundation for all other components of internal control and
provides discipline, process and structure. A risk assessment should be conducted
to establish what control activities (policies and procedures) are required to ensure
achievement of the control objectives. The availability of accurate and complete
Table 33: Assessment of the key drivers of internal control

Objectives impacted on
Internal control driver
Financial reporting (misstatements in financial statements)
50
Service delivery planning and reporting
Compliance with laws and regulations
Leadership
4%
29%
68%
4%
21%
75%
0%
32%
68%
Effective leadership culture
7%
29%
64%
7%
21%
71%
4%
32%
64%
Oversight responsibility
0%
18%
82%
4%
11%
86%
0%
21%
79%
HR management
4%
29%
68%
4%
21%
75%
0%
36%
64%
Policies and procedures
0%
36%
64%
4%
25%
71%
0%
29%
71%
Action plans
4%
32%
64%
4%
25%
71%
0%
32%
68%
IT governance
7%
25%
68%
7%
25%
68%
4%
32%
64%
Financial and performance management
4%
25%
71%
4%
18%
79%
0%
21%
79%
Proper record keeping
4%
18%
79%
4%
11%
86%
0%
21%
79%
Processing and reconciling controls
4%
29%
68%
4%
21%
75%
0%
25%
75%
Reporting
0%
18%
82%
4%
7%
89%
0%
18%
82%
Compliance
4%
25%
71%
4%
18%
79%
0%
18%
82%
IT systems controls
7%
29%
64%
7%
25%
68%
4%
29%
68%
Governance
0%
18%
82%
4%
18%
79%
0%
25%
75%
Risk management
0%
25%
75%
4%
25%
71%
0%
29%
71%
Internal audit
0%
14%
86%
4%
14%
82%
0%
18%
82%
Audit committee
0%
18%
82%
4%
18%
79%
0%
25%
75%
No significant deficiency
Deficiencies in the process of being addressed
Intervention required
4.1.2 Movement in implementation of key drivers and recommendations for improvement

The following table summarises the movement from the prior year and outlines specific ways in which the drivers of internal controls can be improved.
Table 34: Summarised recommendations for improvement of key drivers
Leadership element
Provide effective leadership based on a culture of honesty, ethical business

practices and good governance, protecting and enhancing the best interests
of the entity
Exercise oversight responsibility regarding financial and performance reporting and compliance and related internal controls
Implement effective HR management to ensure that adequate and sufficiently skilled resources are in place and that performance is monitored
Movement since last audit
Summarised comments
It is important that the mayor should play an active oversight role in ensuring that the key elements of good internal control and governance are adhered to. Notwithstanding the
commitment that we received from the mayors during the door-to-door visits that were conducted in the province, the mayors did not perform the oversight that was discussed and agreed
upon. During these visits the role and responsibilities between the mayor, the municipal manager and the chief financial officer were cleared and there was no uncertainty regarding what
role the mayor will have to play to ensure that the municipalities move to better audit outcomes.
The need for competent and skilled staff to support the CFO and the municipal manager was identified as a priority to improve on the prior year audit outcomes and the production of
timeous and quality financial and performance information. Thus the leadership needs to take active steps in ensuring that adequately skilled staff are recruited and appointed. The
contracting of independent consultants to assist auditees to compile financial statementa have not contributed to the improvement of audit outcomes. Consultants are often appointed close
to year-end the and controls to produce accurate and complete financial recorde during the year (which the financial statements are based on) are not in place. No transfer of skills take
place when consultants are appointed. Future improvement in audit outcomes will depend on stability at senior management level and continued direction provided by the leadership.
Where IT systems are not adequate, the leadership has not established an IT governance framework due to a lack of skills in the IT section and did not prioritise action plans or the
implementation of the action plans to address the deficiencies. Performance information structures and systems need to be integrated within existing management processes and systems to
improve audit outcomes. Furthermore, municipalities and municipal entities need to develop and implement a strategic IT plan that supports business requirements.
The leadership needs to be involved in the financial management and performance management and set the tone at the top to create an environment conducive to good financial
management and service delivery; thereby improving the audit outcomes. The audit outcomes indicate that the leadership tone on human resource capacity and the monitoring of action
plans is crucial.
Establish and communicate policies and procedures to enable and support

understanding and execution of internal control objectives, processes, and
responsibilities
Develop and monitor the implementation of action plans to address internal

control deficiencies
Establish an IT governance framework that supports and enables the business, delivers value and improves performance
51
Financial and performance management element

Implement proper record keeping in a timely manner to ensure that
complete, relevant and accurate information is accessible and available to
support financial and performance reporting
Implement controls over daily and monthly processing and reconciling of

transactions
Prepare regular, accurate and complete financial and performance reports

that are supported and evidenced by reliable information
52
Review and monitor compliance with applicable laws and regulations
Pertinent information should be identified and captured in a form and time frame to support effective financial and performance reporting, which reduces instances of material amendments
resulting from the audit. Adherence to basic financial controls throughout the financial year, i.e. daily processing of transactions, monthly reconciliation of accounts and the continuous review
thereof, needs to be actively monitored by management in order to improve audit outcomes.
Documents supporting the financial statements and other information should be readily available, without any significant delay, when requested throughout the audit process. There were
municipalities and municipal entities that were not able to supply documentation that supports the information in the financial statements or the report on predetermined objectives due to
an inadequate archive system.
Basic reporting disciplines, such as proper record keeping, regular processing of transactions and reconciliations, preparation of monthly reporting, and controls over compliance with fiduciary
responsibilities, also require leadership attention. Monthly monitoring of these key controls will enhance the level of accountability to executive authorities and improve the quality of
reporting on financial and service delivery information.
The quality of the financial statements submitted for auditing is still not adequate based on the increase in the material misstatements identified and corrected. The municipalities and
municipal entities did not have competent individuals who understand the financial reporting framework and performance management requirements to perform proper reviews prior to the
submission of the financial statements. This is the main reason for the appointment of consultants. The pervasive material misstatements identified by auditors were mainly the result of a
lack of supervision and review of monthly reports used in the preparation of the financial statements by the leadership, particularly the chief financial officers. Furthermore, it is critical for the
leadership to ensure that the required skills are transferred to staff where consultants are appointed.
Findings on predetermined objectives and the design and implementation of formal controls over IT systems are concerning. Targets set by municipalities are not always clear and
measurable and supporting documentation to substantiate the outcomes cannot always be submitted. IT systems to report on predetermined objectives are generally not in place. The IT
environment, with specific reference to controls regarding access control and protection of information which are not in place, is also of concern. Furthermore, manual or automated controls
were not always adequately designed to ensure that the transactions did occur, were authorised, and were completely and accurately processed to ensure compliance with all applicable laws
and regulations.
Design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information
Governance
The leadership needs to ensure that comprehensive risk assessments are performed that cover all critical areas to improve audit outcomes.
Implement appropriate risk management activities to ensure that regular

risk assessments, including consideration of IT risks and fraud prevention,
are conducted and that a risk strategy to address the risks is developed and
monitored
There is a need to adequately resource the internal audit function to ensure that it operates effectively by identifying internal control deficiencies in a timely manner and by recommending
and monitoring corrective action.
While audit committees have in general been appointed and are meeting, there is scope for improving the interaction of the mayor and the municipal manager with a view to providing
feedback on the identification of risk areas and an assessment of the effectiveness of the control environment.
To improve audit outcomes it is critical that audit committees and internal audit units function effectively by reviewing the financial statements submitted for audit purposes, and ensuring
that measures have been implemented to correct previous year audit findings by monitoring the action plans to correct audit findings.
Ensure that there is an adequately resourced and functioning internal audit

unit that identifies internal control deficiencies and recommends corrective
action effectively
Ensure that the audit committee promotes accountability and service delivery
through evaluating and monitoring responses to risks and providing oversight
over the effectiveness of the internal control environment including financial
and performance reporting and compliance with laws and regulations
Overall progress
No significant
made
overall change
overall regression
53
4.2 Effective human resource management as a specific driver of

audit outcomes
Effective HR management is a key driver of all three facets of audit outcomes.
In this context, HR management is deemed effective if adequate and sufficiently
skilled resources are in place and their performance and productivity are managed.
Auditees often identify a lack of capacity as the root cause of audit outcomes,
which prompted the AGSA to specifically focus on HR management.
Inadequate HR management negatively impacts on internal control and is one of
the root causes of the following matters outlined in this report.
Material misstatements in the financial statements presented for audit
purposes (whether or not these have been corrected as a results of the
audit)
Findings on PDOs
Findings on compliance with laws and regulations.
Figure 22: Summary of HR management weaknesses
Competencies of key personnel
100%
Performance management
Management of vacancies
92%
64%
54
The assessment of the drivers of internal control at the time of the audit, as analysed
in paragraphs 2.2.6, 2.3.4 and 2.4.6, identified HR management as the area
where significant attention is still required for audit outcomes to improve.
The AGSAs assessment of HR management focused on the following areas:
HR planning and organisation management of vacancies appointment
processes performance management acting positions management of leave,
overtime and suspensions
The following figure depicts the three weakest areas of HR management at auditees
which should be improved to positively affect audit outcomes.
Auditees' ability to address vacancies with competent and skilled staff remains a
major concern. The overall vacancy rate at the nine municipalities and two entities
is approximately 21% (2009-10: 23%). The vacancy rate at senior manager level
is approximately 31% (2009-10: 24%). The officials that are appointed also do
not always have the appropriate skills and knowledge specifically relating to the
preparation of financial statements in terms of GRAP standards. This is mainly due to
the inherent difficulty to source, appoint and retain skilled individuals in the province
(especially in rural areas) and municipalities that do not do proper HR planning,
including not regularly updating or approving organisational structures.
4.3 Information technology (IT) management as a specific driver of

audit outcomes
4.3.1 Overview of IT systems management
This section gives an overview of the adequacy and effectiveness of IT controls
relating to the IT environment on which financial and management systems reside.
Municipalities rely on IT systems to perform their statutory financial management,
reporting and administrative functions. The information processed and stored on
IT systems is vital to the accuracy and reliability of the financial and performance
information used by management for planning, monitoring and reporting.
Eight audited municipalities in the province utilise four different financial systems and
two different payroll systems. These range from off-the-shelf packages (computer
packages bought) as well as customised systems (computer packages bought and
modified).
The management and support of these financial and payroll systems are depicted in
the figure below:
Municipalities
Municipalities and municipal entities do not have a formal IT structure in place and entities such
as the South African Local Government Association (SALGA) and Cooperative Governance and
Traditional Affairs (COGTA) are not playing any role to provide assistance from an IT perspective.
4.3.2 Summary of overall IT weaknesses

IT management of financial systems was evaluated at eight municipalities within the
province. Key areas in the management of IT where weaknesses were identified are
summarised in the following table:
Table 35: Summary of IT control weaknesses

Incidence of control weaknesses identified
Focus area
Municipalities
Outline of aspects audited

Number audited
Number with
finding
Percentage
IT governance
The structures, policies and processes through

which the auditee ensures that IT is in line with
the business requirements. Key focus was on the
management of service level agreements.
100%
Security
management
Controls that prevent unauthorised access to the

networks, operating systems and application
systems that generate and prepare financial
information.
75%
User access
management
Procedures through which the auditees ensure that

only valid, authorised users are allowed segregated
access to initiate and approve transactions on the
system.
100%
IT service
continuity
Processes of managing the availability of hardware,

system software, application software and data to
enable auditees to recover/establish information
system services in the event of a disaster. Key
focus was on the application backup process.
55
8
100%
4.3.3 Analysis of IT control weaknesses identified

During the review of the IT control environment the weaknesses were categorised
into three phases, namely the control design phase during which management
designs the IT controls to address the risk identified in the IT environment, the control
implementation phase during which the designed controls are implemented by
management and the control effectiveness phase, when the implemented controls
are continuously operating effectively over a period.
on
tro
le
Tc
Level 2
Management
to implement
design IT
controls
Eff
ec
tiv
eI
Implementation
Design
Level 1
Management
to design
IT
controls
The IT control weaknesses for the province were summarised as follows:

56
Table 36: Drivers of IT control weaknesses
effectiveness
nv
iro
nm
e
nt
Operating
Level 3
Management
to ensure
effectiveness
of controls
Control design: The majority of municipalities are still in the process of designing
key IT controls to ensure effective and efficient IT management within the
municipalities.
Control implementation: Although some of the municipalities have adequately
designed key controls, they are still experiencing difficulties in implementing these IT
controls effectively.
Control operating effectiveness: Municipalities have not implemented the controls
fully to test for operating effectiveness.
The drivers of the IT control weaknesses are categorised and depicted in the table
below.
25%
13%
29%
Figure 23: Status of management commitment implemented to address

IT weaknesses
Municipalities
IT governance
Table 37: Summary of significant IT weaknesses of the 2010-11 financial year

IT focus areas
Significant IT weaknesses
IT governance
There are no service level agreements between the municipalities and the vendors supporting their financial
systems. The IT spending amounted to approximately R20 million.
The monitoring of services rendered by service providers is not being performed by the municipalities.
100%
IT organisational structures do not exist.
Security
management
20%
User access
control
80%
Security management
IT security policy has not been documented and approved by management.

Security settings, e.g. passwords on operating systems were inadequate.
No person was assigned the responsibility for information security at the districts and their local municipalities
100%
User access
management
User account management procedures have not been formally documented and approved.
Key monitoring or reviews of user access profiles and review of administrators have not been performed.
IT service
continuity
Municipalities complete
100%
Municipalities in progress
Formal access requests have not been used to manage user accounts.
Municipalities not started
The above analysis only includes the five municipalities where IT was audited in
both 2009-10 and 2010-11 and shows that there has been some progress in
addressing the previous years weaknesses, although the majority of municipalities
did not fully address the commitments as per the previous years audits. However, at
all of the remaining municipalities and entities in the province significant intervention
is required to address IT control weaknesses.
IT service continuity
Backup and retention procedures have not been formally documented and approved by management.
Backups have not been monitored nor have they been periodically tested.
Backups are not kept or retained at an off-site facility.
4.3.5 Root causes and way forward for key role players
The following overall root causes exist:
Overreliance on IT consultants at small municipalities
Lack of IT skills and experience within municipalities
Lack of management commitment on IT matters
57
District
municipalities
58
Municipalities
Should play a role in local government information systems to ensure that

adequate IT policies and procedures are implemented..
Should follow up on progress made in addressing IT findings in conjunction
with its internal audit function.
Should ensure that IT governance forums are established and function well.
Should also play a more active role in the formulation of policies and
procedures for the local municipalities under their control.
Neighbouring municipalities should consider making use of each others
facilities for purposes of off-site backups and disaster recovery.
More standardisation should take place at the municipalities with regard to
the IT systems used and the vendors that support these systems.
Management should ensure that staff are up-skilled by consultants
performing services .
IT consultants should be monitored on a continuous basis to ensure
service delivery.
4.4 Role of audit committees in promoting clean administration

In terms of the MFMA an audit committee must be established by all auditees.
Audit committees must serve as an independent governance structure whose
function is to provide an oversight role in the systems of internal control, compliance
with legislation, risk management, and governance. In executing its duties, the
audit committee assists the accounting officer in the effective execution of his/her
responsibilities with the ultimate aim of achieving the organisations objectives. The
role of the audit committee worldwide is evolving and audit committees need to
look wider than their legally prescribed duties and focus on intent of legislation. In
the public sector this means that audit committees need a level of maturity in order
to serve the society as a whole.
Credible
information
Credible
information
Other users
Monitoring
Credible information
Reporting by
municipality/
municipal entity
Monitoring
Provincial
treasury
Should assist municipalities with the implementation of IT controls. This can

be done through the establishment of the local government IT council.
Executive
Credible
information
GITOC
The working group consisting of municipalities and the IT system vendors

should be re-established.
Oversight
Working group
on
municipalities
IT systems
Should play a more prominent role of oversight in ensuring the presence of IT

controls across municipalities.
IT environment with adequate controls to

mitigate risks over financial systems
SALGA
Figure 24: Role of audit committees in assessing and reporting on governance,

risk management and control at auditees
Legislature
Oversight
Audit committees ensuring

credibility of information and
monitoring implementation of
recommendations
Leadership
The responsibilities of the audit committee include providing assurance on the

credibility of various reports produced for purposes of oversight, decision-making
and accountability. Should the audit committee fail in executing this responsibility
effectively, vital decisions relating to funding, accountability and service delivery
will be based on information that may be inaccurate, incomplete and unreliable.
The figure below depicts the current status and effectiveness of audit committees in
the province.
Figure 25: Effectiveness of audit committees

Auditees assessed (100%)
91%
Audit committee in place
55%
Compliant with legislation
Impact on audit outcome
Interaction with executive
9%
18%
45%
82%
27%
73%
Yes
No
59
The main concern regarding the audit committees effectiveness is that most districts
municipalities use shared committees to serve the local municipalities. Local
municipalities feel that they do not get the required assistance from these shared
committees as in most cases the shared committee does not have sufficient capacity
to serve all municipalities in the district to the full extend required. Audit committees
continued view to only comply to the letter of the law and not to expand their role is
still a problem. If these committees that expand the scope of their work, specifically
also with regard to review of financial statements and quarterly reporting on service
delivery, they can have a much bigger impact.
4.5 Assessment of monitoring and oversight by key role players at the time of the audit
Between February 2012 and the date of this report, the AGSA has engaged provincial role players on all nine specific focus areas where their contributions to improve
audit outcomes could be further enhanced. An assessment of the monitoring capacity and effectiveness of the role players in relation to these focus areas at the time of the
audit is depicted in the following table.
Table 38: Assessment of monitoring capacity of key provincial role players to address audit outcomes at the time of the audit
Assessment of impact of provincial role-player plans and initiatives on current year audit outcomes
Areas of focus and where support/intervention was required
Role players
Supply chain
management
Predetermined
objectives
Financial management
Turnaround plans
IT Controls
Human resource
management
Use of consultants
Municipalities under
administration
Governance structures
Premier
60
Oversight Accountability
MEC Finance
MEC Local government
Provincial Treasury
Provincial DCOG
Portfolio committee on
finance
Speaker
MPAC
Accounting officers, Accounting authorities, CFOs and senior officials
Administrative accountability
No significant identified impact on 201011 outcomes
Some impact on 2010-11 outcomes
Not within mandate or direct sphere of influence of role-player
?
?
61
62
SECTION 5: COMMITMENTS TO IMPROVE AUDIT OUTCOMES AND OTHER MATTERS REQUIRING

ATTENTION FROM THE LEADERSHIP AND ROLE PLAYERS
This general report concludes by providing details of commitments received from the provincial leadership and other role players in response to the 2010-11 audit
outcomes. The AGSAs continuing initiatives to encourage clean administration are summarised and other important current and emerging matters relating to local
government in the province are outlined.
5.1 Commitments subsequent to the audit by key role players to address audit outcomes
Responses and commitments emanating from the February and March 2012 interactions and roadshows in the province are outlined below
Governance
structures
Municipalities
under
adminstration
Use of consultants
HR management
IT controls
Turnaround plans
Financial
management
Predetermined
objectives
Outline of role player commitment/ proposed action plans
Supply chain
management
Focus areas targeted by commitments and action plans
Progress made on prior year

commitment
Table 39: Commitments and actions by the provincial executive leadership and oversight
Provincial political leadership (Premier, MEC Local Government and MEC Finance)
1
Municipalities to prioritise the significant human resources deficiencies, particularly vacancies
All municipalities to assess capacity of CFOs to perform to expectations of role
Training all staff and new councillors, specifically on their oversight role in so far as it pertains to finance and infrastructure
SALGA to research training needs at municipal and provincial level
Engage with the University of the North West to design specific programmes aimed at capacitating councillors
Support the Speaker with the programmes aimed at capacitating municipal speakers to be more effective in advancing municipal oversight
Ensure the involvement of provincial government in the appointment process of municipal managers and CFOs
Monitor performance management of senior managers within municipalities
63
Coordinated provincial oversight

9
Provincial Speakers Forum to be established to monitor oversight role of councils and the Legislature
10
MPACs to be established and trained to perform an effective oversight role
11
Auditor-General to have regular interaction with the Portfolio Committees on Finance and Local Government
Post-audit commitment/
initiative (new)
Commitment/ initiative from prior year
In progress
Intervention required
64
Good
Progress made on prior year

commitment
Governance
structures
Municipalities
under
adminstration
Use of consultants
HR management
IT controls
Turnaround plans
Financial
management
Supply chain
management
Outline of role player commitment/ proposed action plans
Predetermined
objectives
Focus areas targeted by commitments and action plans
5.2 AGSA initiatives to encourage clean administration
Figure 26: Auditees with concerns related to ongoing funding of operations
The initiatives taken by the AGSA to encourage clean administration include the
following:

The AGSA provincial leadership has interacted regularly with the provincial
leadership, including the premier, speaker and the executive committee
(Exco).
Quarterly visits to mayors to review and give feedback on implementation
of key controls and commitments made to address prior year findings.
Regular interactions between the management of municipalities and
municipal entities and senior managers and managers of the AGSA to
make recommendations and assess action plans.
The AGSA assisted with the training of newly appointed councillors in June
2011 and training of new MPAC members in August 2011.
5.3 Other current and emerging matters that require attention

5.3.1 Financial sustainability of auditees
Many municipalities and even municipal entities are experiencing difficulties in
maintaining a financially sustainable position. These include matters such as debt
collection, payment of creditors, ability to fund operations, and the maintenance
of infrastructure. Detailed below are some matters which are highlighted for
consideration in this regard. Reporting on this concern will be expanded on further
in the general report of 2011-12.
2010-11
2009-10
Number of auditees with financial sustainability concerns

Municipalities
2010-11
Number of auditees with
financial recovery plans
Municipal entities
2010-11
Number of municipalities placed
under administration (Section
139 of MFMA)
Funding of operations
Concerns regarding the ability to fund ongoing operations or being financially
sustainable were identified at three (27%) auditees [(2009-10: 6 (32%)]. The
following figure and table depict the extent of such concerns in the province and the
main reasons for such concerns.
65
constructively.
Table 40: Reasons for funding and financial sustainability concerns at auditees
Auditee
High reliance on grants/ Serious challenges

Current
No cash for Debt
Significant
Own revenue generated not being experienced
liabilities
unspent collection
financial
suffient to cover operating in the recovery of
exceed
grants problems
challenges
costs
consumer debtors
current assets
Municipalities
Table 41: Material losses incurred and impairment of assets

Auditees
Reason(s)
Municipalities
1
Naledi Local
Municipality
26 812 830 Impairment of receivables (bad debts)
Madibeng Local
Municipality
Greater Taung Local

Municipality
Naledi
Ventersdorp
Material
impairment of
assets (R000)
Material losses
(R000)
Municipal entities
Dr KKDM Economic Agency
Total
66
None of the municipalities and entities that submitted financial statements on time
is currently under administration in terms of section 139 of the MFMA. Currently,
there are numerous municipalities who are in significant financial trouble, however,
most of them have not submitted financial statements and are therefore not analysed
in this report. The financial trouble they are experiencing coincides with the poor
financial management at these municipalities that resulted in them not submitting
financial statements on time. Poor debt collection problems (more detail in section
5.3.2), poor financial management and high reliance on grants are the main
reason for the municipalities current liabilities exceeding the current assets. Had
these municipalities been private institutions (without major financial assistance from
other spheres of government) they would not have been able to continue to operate.
5.3.2 Material losses incurred and material impairment of assets
The details of material losses and asset impairments as disclosed in the financial
statements of auditees for the year ended 30 June 2011 are depicted below. This
non-cash expenditure often gives rise to unauthorised expenditure. While these
types of losses are not planned they do occur in the normal course of business,
and should therefore be taken into consideration in the development of the budget;
however, reasonable care should be taken to minimise them and to manage them
1 285 275
- Irrecoverable debts written off
Ratlou Local
Municipality
Maquassi Hills Local

Municipality
Ventersdorp Local
Municipality
631 257
440 489 529

7 City of Matlosana
Dr Kenneth Kaunda
District
Total
184 536 Impairment of receivables (bad debts)
442 406 061
405 709 201
All the material losses relate to irrecoverable debts written off by the municipality.
The highest instance was at City of Matlosana. Of further concern at Matlosana
was that the write-off was qualified because the correct procedures were not
followed to write off the debt. All the material impairment of assets was impairment
of receivables (provision for bad debts); this is necessitated by poor debt collection
practices at the municipalities. The impairment of receivables was also qualified
at most municipalities for either the impairment not being complete or not done in
terms of the requirements of the GRAP requirements.
Number of municipalities
5
5.3.3 Material underspending of votes and/or conditional grants

Five municipalities (45%) [(2009-10: 3 (16%))] under-spent their votes and/or
conditional grants for the year ended 30 June 2011, as depicted in the following
figure. This underspending, which is not an economic saving, is an indicator of
poor financial management and often results in the non-performance on service
delivery, and the neglect of other functions such as maintenance of infrastructure.
Figure 27: Material under-spending of votes or conditional grants
Rand value
2010-11
2009-10
It is of concern that, in an environment where most municipalities do not have

adequate funding, those with adequate funding has materially underspent. This has
adversely impacted on services delivery at the department where it was identified.
5.3.4 Changes expected in the 2011-12 financial year
R247 million
R173 million
The following matters are expected to have an impact transversally across local
government on the 2011-12 financial year and measures should be implemented
to ensure that these do not negatively impact on audit outcomes in the province:
Accounting matters
2010-11
2009-10
The current standards of GRAP have been in a process of being fully implemented
over a period of years and to this end transitional provisions for full adherence
were developed. In the current financial year the transitional provisions for mediumcapacity municipalities came to an end. The transitional provisions for low-capacity
municipalities expire in the 2011-12 financial year with the effect that all currently
applicable standards of GRAP will be fully applicable for the year-end financial
statements. There will be no additional GRAP standards applicable for the
67
2011-12 year.
Developments in SCM legislation
The revised Preferential Procurement Regulations came into effect on 7 December
2011. The most significant changes were the introduction of B-BBEE certificates
and the requirement for evaluation of functionality. Municipalities and municipal
entities should ensure that their policies and procedures are in compliance with these
regulations to avoid any regression in terms of compliance findings.
Municipal regulations at minimum competency level
68
Minimum competency regulations were issued on 15 June 2007. As per regulations

15 and 18, all municipalities must ensure that their staff comply with the competency
requirements with effect from 1 January 2013. This means that the requirements
are not yet applicable for the financial year 2011-2012 (financial period ending
30 June 2012). However, municipalities will need to start aligning their recruitment
policies to the regulations and putting measures in place to ensure that they comply
with the requirements by 1 January 2013.
?
?
69
70
GLOSSARY OF KEY TERMINOLOGY USED IN THE REPORT

Accounts payable/accruals/liabilities
Money owed by the entity to those who have supplied goods and services. .
Accounts receivable (debtor)
Money owed to the entity by those who have received goods or services from the entity.
Adverse audit opinion The financial statements contain misstatements that are not confined to specific amounts or the misstatements represent a
substantial portion of the financial statements.
Asset
Any item belonging to the entity, which may constitute property, plant, cash or debtors.
Asset impairment
The reduction in value of an asset below its normal realisable value
Balance sheet
Summary of an entitys financial status, including assets, liabilities and equity.
Carrying value

Also referred to as book value or carrying value; the cost of a plant asset less the accumulated depreciation since the asset
was acquired and less any impairments.
Cash flow
The flow of monies from operations: incoming funds are revenue and outgoing funds are expenses.
Commitment (financial)

This represents the cost of goods and services to be received in the next year in respect of which the entity has already
entered into an agreement to purchase.
Comparative figures
The figures recorded in the previous year which correspond to the figures for the same item in the current year
Consolidated financial statements

Financial statements that reflect the combined financial position and results of a municipality and those of municipal entities
under its control.
Contingent liability
A potential liability, the amount of which will depend on a future event.
Current assets

Current assets comprise cash and other assets, such as inventory or debtors, which will be traded or consumed or converted
to cash in a period not exceeding 12 months. All other assets are classified as non-current and typically include property,
plant and equipment and long-term investments.
Disclaimer of audit opinion

There was insufficient appropriate evidence (documentation) on which the auditor could base an opinion concerning the
items reported in the financial statements. The lack of sufficient evidence is not confined to specific amounts or represents a
substantial portion of the information contained in the financial statements.
Financial and performance management Management of resources in order to achieve the financial and service delivery objectives of the municipality. This is one of

the three key overall drivers of internal control which should be addressed to improve audit outcomes.
71
Fruitless and wasteful expenditure

Expenditure that was made in vain and could have been avoided had reasonable care been exercised. This includes penal
ties and interest on late payments, as well as payments for services not utilised or goods not received.
General ledger
A record of all financial transactions undertaken by an entity.
Governance
In the context of this general report it refers to the governance structures (audit committees) and processes (internal audit

and risk management) as one of the three key overall drivers of internal control that should be addressed to improve audit
outcomes.
Information technology (IT)
Computer systems used for recording and reporting financial and non-financial transactions.
IT governance
The structures, policies and process whereby the auditee ensures that information technology is in line with the business
requirements.
72
IT service continuity

Processes of managing the availability of hardware, system software, application software and data to enable auditees to
recover/establish information system services in the event of a disaster.
IT security management

Controls preventing unauthorised access to the networks, operating systems and application systems that generate and
prepare financial information.
IT user access management

Procedures through which the auditees ensures that only valid, authorised users are allowed segregated access to initiate
and approve transactions on the system.
Internal control (key controls)

Internal control is the process designed and implemented by those charged with governance, management and other
personnel to provide reasonable assurance about the achievement of the auditees objectives with regard to the reliability
of financial reporting, effectiveness and efficiency of operations, and compliance with the applicable laws and regulations.
Internal controls consist of all the policies and procedures implemented by auditee management to assist in achieving the
orderly and efficient conduct of business, including adherence to policies, safeguarding of assets, prevention and detection
of fraud and error, the accuracy and completeness of the accounting records and the timely preparation of reliable financial
and service delivery information.
Inventory
Goods held for resale or for internal use.
Irregular expenditure
Expenditure incurred without complying with applicable laws and regulations.
Leadership

Local government leadership refers to both political (mayors and council) and administrative leaders (municipal manager
and senior managers). It is also one of the three key overall drivers of internal control that should be addressed to improve
audit outcomes.
Material finding

Audit findings on reporting on predetermined objectives or non-compliance with laws and regulations which are significant
enough in terms of value and/or nature that they would influence the understanding of the reported information.
Material misstatement

Misstatements which are significant enough to influence the opinions of users of the reported information. Materiality is
considered in terms of the rand value and/or the nature and cause of the misstatement.
Misstatement
Incorrect or omitted information in the financial statements or annual performance report.
Modified opinion
Qualified, adverse or disclaimer of opinion.
Payroll
A list of employees and their wages.
Pervasive findings

Findings that are not confined to specific items in the reported information or that represent a substantial proportion of the
reported information.
Property, plant and equipment

Includes land, buildings, leasehold improvements, equipment, furniture, fixtures, delivery trucks, vehicles, etc. that are
owned by the entity.
Qualified audit opinion

The financial statements contain material misstatements in specific amounts or there is insufficient evidence for the auditor to
conclude that specific amounts included in the financial statements are not materially misstated.
Reconciliation

The process of matching one set of data to another, i.e. the bank statement to the cheque register, the accounts payable
journal to the general ledger, etc.
Reporting against predetermined objectives (PDOs) Reporting by auditees on their actual service delivery achievements against their annual performance plans.
Residual value
The estimated scrap or salvage value at the end of the assets useful life.
Root causes

The underlying causes or drivers of audit findings, i.e. why the problem occurred. Addressing the root cause helps ensure
that the actions address the real issue or opportunity, thus preventing or reducing the incidents of recurrence as opposed to
simply providing a one-time or short-term fix.
Supply chain management

Procurement by auditees of goods and services through a tender or quotation process and monitoring the quality and
timeliness of goods and services provided.
Transversal findings
Findings that are cross-cutting or occurring in a number of entities.
Unauthorised expenditure

Expenditure that was in excess of the amount budgeted or allocated by government to the entity or that was not incurred in
accordance with the purpose for which it was intended.
Useful lives

This is the period of time that it will be economically feasible to use an asset. Useful life is used in calculating depreciation
on an asset.
73
74
ANNEXURE 1: Audit outcomes, areas qualified and findings on predetermined objectives
Other non-compliance with related

legislation
Reported information not reliable

Information not submitted in time for
audit
No annual performance report
Reported information not useful
Presentation
Findings on
predetermined objectives
Unauthorised, irregular, and fruitless
and wasteful expenditure
Expenditure
Revenue
Other disclosure items
Liabilities
Capital and reserves
Current assets
Non-current assets
Audit outcome 2009-10
Predetermined objectives
Auditee
Financial statement
qualification areas
2009-10 Audit year
Number
2010-11 Audit year
District municipalities
1
Bojanala Platinum District
Financially unqualified with findings
Dr. Kenneth Kaunda District
Qualified
Qualified
Dr. Ruth S Mompati District
Audit not finalised at GR cut-off date
Ngaka Modiri Molema District
75
Local municipalities
5
Matlosana
Disclaimer
Disclaimer
Ditsobotla
Disclaimer
Greater Taung
Qualified
Qualified
Kagisano
Kgetleng River
Disclaimer
10
Lekwa-Teemane
Disclaimer
11
Madibeng
Disclaimer
Disclaimer
12
Mafikeng
Disclaimer
13
Mamusa
14
Maquassi Hills
Disclaimer
Disclaimer
15
Molopo
16
Moretele
ANNEXURE 1: Audit outcomes, areas qualified and findings on predetermined objectives
76
Ramotshere Moiloa
20
21
Other non-compliance with related

legislation
Reported information not reliable

Information not submitted in time for
audit
No annual performance report
Unauthorised, irregular, and fruitless

and wasteful expenditure
Revenue
Expenditure
Capital and reserves
Other disclosure items
Ratlou
Rustenburg
Qualified
22
Tlokwe
Qualified
23
Tswaing
Disclaimer
24
Ventersdorp
Disclaimer
Disclaimer
Qualified
Disclaimer
Disclaimer
Liabilities
Current assets
Non-current assets
Presentation
Naledi
19
Findings on
predetermined objectives
Reported information not useful
18
Moses Kotane
17
Auditee
Financial statement
qualification areas
2009-10 Audit year
Number
2010-11 Audit year
Municipal entities
25
26
Moretele Development Agency
27
Moses Kotane Development Agency
28
Rustenburg Water Services Trust
Qualified
Number
ANNEXURE 2: Five-year history of audit outcomes of all auditees
Auditee
1
Qualified
Qualified
Qualified
Qualified
Disclaimer
Audit not finalised at legislated date
Disclaimer
Qualified
Disclaimer
5
Matlosana
Disclaimer
Disclaimer
Disclaimer
Disclaimer
Disclaimer
Ditsobotla
Disclaimer
Disclaimer
Disclaimer
Disclaimer
Greater Taung
Qualified
Qualified
Disclaimer
Disclaimer
Disclaimer
Kagisano
Qualified
Disclaimer
Kgetleng River
Disclaimer
Disclaimer
Disclaimer
Disclaimer
10
Lekwa-Teemane
Disclaimer
Disclaimer
Disclaimer
Disclaimer
11
Madibeng
Disclaimer
Disclaimer
Disclaimer
Adverse
Adverse
12
Mafikeng
Disclaimer
Disclaimer
Disclaimer
Disclaimer
13
Mamusa
Disclaimer
14
Maquassi Hills
Disclaimer
Disclaimer
Disclaimer
Disclaimer
Disclaimer
15
Molopo
16
Moretele
Disclaimer
Disclaimer
Disclaimer
17
Moses Kotane
Disclaimer
18
Naledi
Disclaimer
Disclaimer
Adverse
Disclaimer
Disclaimer
19
Ramotshere Moiloa
Qualified
Qualified
Disclaimer
Disclaimer
20
Ratlou
Disclaimer
Disclaimer
21
Rustenburg
Qualified
Qualified
Qualified
Disclaimer
22
Tlokwe
Qualified
Disclaimer
Disclaimer
Adverse
23
Tswaing
Disclaimer
Disclaimer
Disclaimer
Disclaimer
24
Ventersdorp
Disclaimer
Disclaimer
Disclaimer
Disclaimer
Disclaimer
77
Number
ANNEXURE 2: Five-year history of audit outcomes of all auditees
Auditee
Municipal entities
25
Qualified
New municipal entity
26
27
Disclaimer
Qualified
28
Qualified
78
ANNEXURE 3: Assessment of auditees key controls at the time of the audit
Legend
Good
Leadership
Number
Auditee
Movement
Policies &
Effective Oversight
HR Manproceleadership responsiagement
dures
culture
bility
In Progress
Improved
h Unchanged n Regressed
Financial
Performance
Financial and performance

Action
plans
IT
governance
Movement
Proper
record
keeping
Processing and
Reporting
reconciling
controls
F P C F P C F P C F P C F P C F P C F P C F P C F P C F P
Intervention
Required
P Compliance
i
C
Governance
Compliance
IT
Systems
controls
Movement
Risk
management
Internal
audit
Audit
committee
F P C F P C F P C F P C F P C F P C F P C
1
n n n
n n n
h n h
n n n
n n n
n n n
i n i
i n i
i n i
n n n
n n n
n n n
5
Matlosana
n n n
n n n
n n n
Ditsobotla
n n n
n n n
n n n
Greater Taung
n h n
n h n
n h i
Kagisano
n n n
n n n
n n n
Kgetleng River
n n n
n n n
n n n
10
Lekwa-Teemane
n n n
n n n
n n n
11
Madibeng
n n n
n n n
n n n
12
Mafikeng
n n n
n n n
n n n
13
Mamusa
n n n
n n n
n n n
14
Maquassi Hills
n n n
n n n
n n n
79
ANNEXURE 3: Assessment of auditees key controls at the time of the audit
Legend
Good
Leadership
Number
Auditee
Movement
Policies &
Effective Oversight
HR Manproceleadership responsiagement
bility
dures
culture
Action
plans
IT
governance
Movement
Proper
record
keeping
Processing and
Reporting
reconciling
controls
C
h Unchanged n Regressed
Financial
Performance
P Compliance
i
C
Governance
Compliance
IT
Systems
controls
Movement
Risk
management
Internal
audit
Audit
committee
F P C F P C F P C F P C F P C F P C F P C
15
Molopo
n n n
n n n
n n n
16
Moretele
i i i
i i i
i i i
17
Moses Kotane
n n n
n n n
n n n
18
Naledi
n n n
n n n
n n n
19
Ramotshere Moiloa
n n n
n n n
n n n
20
Ratlou
i i n
i i i
i i i
21
Rustenburg
i i i
n n n
n n n
22
Tlokwe
n n n
n n n
n n n
23
Tswaing
n n n
n n n
n n n
24
Ventersdorp
n n n
n n n
n n n
Municipal entities
25
n n n
n n n
n n n
26
n i i
i n n
i n n
27
n n n
n n n
n n n
28
n n n
n n n
n n n
Intervention
Required
Improved
Financial and performance
F P C F P C F P C F P C F P C F P C F P C F P C F P C F P
80
In Progress
ANNEXURE 4: Auditees with key findings on supply chain management
Auditee
Limitation on
planned scope of audit of
awards
Awards to employees and

councillors or other state
officials
Awards to close family

members of employees and
councillors
Uncompetitive or unfair
procurement processes
Inadequate contract
management
Inadequate SCM controls
Matlosana
Greater Taung
Madibeng
Maquassi Hills
Naledi
Ratlou
Ventersdorp
Municipal entities
81
ANNEXURE 5: Auditees with findings related to compliance with laws and regulations
82
Matlosana
Greater Taung
Madibeng
Maquassi Hills
Naledi
Ratlou
Ventersdorp
Municipal mntities
HR management and compensation
Procurement and contract

management
Other
Transfer and conditional grants
Strategic planning and performance management
Revenue management
Internal audit
Financial misconduct
Expenditure management
Budgets
Audit committees
Asset management
Auditee
Annual financial statements,

performance report and annual
report
Areas of non-compliance

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SECTION 3: FINDINGS FROM THE AUDIT OF

SUPPLY CHAIN MANAGEMENT

Figure 21: Summary of findings on supply chain management

3.2 Limitations on planned scope of audit of awards

Table 24: Limitations experienced

Table 25: Awards to officials in the service of the auditee

133 476 625

Greater Taung Local Municipality

Madibeng Local Municipality

185 022 012

Maquassi Hills Local Municipality

Naledi Local Municipality

355 064 919

Officials in service of the auditee

Official Official was

Awards made to officials of other state

5 173 143 Other officials

46 950 Other officials

3.3 Awards to state officials

SCM Regulation 44 prohibits awards to persons or to entities owned/managed

* Number: indicates number of instances

3.4 Awards to close family members of state officials

3.5 Uncompetitive or unfair procurement processes

Awards to persons or to entities owned/managed by persons that are close family

Awards made to close family members

17 535 Other official

163 960 Other official

* Number: indicates number of instances

Table 27: Findings on uncompetitive or unfair procurement processes

Three price quotations not

Competitive bids not invited

Procurement from suppliers

Points incorrectly allocated/

Bids specifications not

Dr. Kenneth Kaunda District Municipality

Greater Taung Local Municipality

Maquassi Hills Local Municipality

Naledi Local Municipality

Ratlou Local Municipality

Ventersdorp Local Municipality

# No R-value for this finding

Further details on the legislation not complied with are as follows:

Table 29: Findings on contract management

Table 28: Findings on non-compliance with legislation

Three price quotations not obtained

Competitive bids not invited

Bids specifications not compiled by

3.6 Inadequate contract management

150 139 007

161 942 333

163 286 744

163 286 744

* Number: indicates number of instances

Further details on the findings are as follows:

Performance of contractors not monitored on a

Inadequate contract performance measures and

Contracts amended or extended - reasons not

No signed contract/not signed by delegated official

Payments made in excess of approved contract

3.7 Inadequate SCM controls

Table 32: Findings on SCM controls

Findings on deficiencies in fundamental SCM controls are summarised in the