To understand the unqualified audit outcome Theewaterskloof municipality received from the auditor general, for the 2022/23 financial year the “hierarchy” of the types of opinions which the auditor general can express, must be understood.
There are four types of opinions, i.e an Unqualified audit, a Qualified audit, an Adverse audit opinion and Disclaimer audit opinion.
When there are no material misstatements in the financial statements of a municipality, no material deviations in reporting on performance objectives, and full compliance with legislation the municipality will receive a clean audit outcome.
Financially unqualified audit opinions are issued if the municipality’s financial statements are free of material misstatements and when the comments of the Auditor General only refers to reporting on predetermined objectives and if there are minor deviations from relevant legislation.
Qualified audit opinions are issued when there are material misstatements in the municipal financial statements and when insufficient evidence exists to rule out, material misstatements and flaws in the financial statements.
Adverse audit opinions are issued when a municipality’s financial statements contain material misstatements that are not confined to specific amounts and when a substantial portion of the financial statements contains misstatements.
When a municipality cannot provide sufficient evidence, in the form of documentation, on which the Auditor General can base an opinion a disclaimer will be issued.
Theewaterskloof municipality received an unqualified audit opinion which indicates that the Auditor General is of the opinion that the organisation practised good financial controls and that the financial statements, submitted to the Auditor General, showed no traces of material misstatements. The Auditor General’s comments only referred to minor deviations from predetermined objectives and relevant legislation.
After receiving the municipal statements and after the audit of these documents, the Auditor General expressed the opinion that the municipality submitted quality, verifiable and clean financial statements. The Auditor General did not find any misstatements.
Recently, the Auditor General’s findings and opinion of Theewaterskloof municipality have been questioned by the very same people who praises the absolute integrity of the Auditor General when the opinions of DA-controlled municipalities are released. However, when the Auditor General praises Theewaterskloof municipality, they insinuate flaws in the audit process.
In the report the Auditor General mentioned that supplementary schedules were not audited and that it was regarded as additional information. This means the municipality provided the Auditor general with more information than was expected and that the Auditor General trusted the information to the extent that it did not have to be audited. A similar statement was made regarding compliance with the MFMA.
The only concern the Auditor General expressed relates to tender processes. In 2022 the Coalition found an organisation that did not have directors since 2017. This is the legacy the DA left to the municipality with. As there were no Directors there was no functional Bid Adjudication Committee. Without a BAC the tender process was handicapped.
Six months before the 2022/23 financial year commenced the Coalition had to focus on the completion of infrastructure projects which basically imploded under DA-rule. It was imperative to improve the performances of projects and the focus was not on appointing Directors. The focus was to upheld and improve service delivery.
To accelerate the delivery on projects the Coalition had to restore an almost dysfunctional administration. Recruiting employees fit for purpose and finalising the organisational structure took months and this contributed to the issues raised by the Auditor General.
The Coalition, through no mistake of itself, had to continue with deviations as the BAC was not yet established as there was no time to employ directors and keep service delivery on acceptable levels.
Under these circumstances the municipality did well to obtain an unqualified audit.