Financial Spreadsheet 40169 | 201125amcopy Of Annexure B Paap Material Findings Progress 20

Partial file snippet.

Sheet 1: AR PAAP

2019/2020 POST AUDIT ACTION PLAN

Finding number
Detailed finding
Cause
Management Corrective Action
Progress
Implementation date
Responsible Official
Verification date

PROPERTY, PLANT AND EQUIPMENT (PPE) & ASSET MANAGEMENT

Ex 127 Comm 54 - PPE - Not all disclosure requirements of GRAP 17 par 87 adhered to
The following disclosure requirements were not met with regards to the GRAP 17 paragraph 87:

1) GRAP 17.87(b):
Project: Initial date of completion:
Dinokana Bulk Water Supply Augmentation Phase 2 Oct-14
Groot Marico WWTP Jul-16

The above projects are significantly behind time of completing the project. Delays are therefore experienced, as the project is taking longer to complete than initially expected. No GRAP 17.87(b) paragraph has been included in the 2018/19 financial statements on the reasons for any delays experienced in completing the project.

2) GRAP 17.87(c):

Project: Additional detail:
Zeerust Waste Water Treatment Plant Phase 2 Inspected the dates of payments made on the project since inception, and confirmed that no payments were made on the project since 20 June 2016, until January 2018. Confirmed therefore that delays were experienced of a year and a half. Inspected the 2018/19 AFS and confirmed that no disclosures were made with regards to GRAP 17 paragraph 87(c).
Dinokana Bulk Water Supply Augmentation Phase 2 Inspected the dates of payments made on the project since inception, and confirmed that no payments were made on the project since 30 June 2015, until 30 June 2019. As the project is included within the WIP register as an in progress project, the disclosure requirements of GRAP 17 paragraph 87(c) is therefore necessary. Inspected the 2018/19 AFS and confirmed however that no such disclosures were made.
Improper controls have been implemented with regards to disclosure checklists to ensure that all necessary disclosure requirements for PPE have been met.

1. A frequent review of the contract, commitments and WIP register will be done in order to identify contracts which are deemed to be taken longer than initially planned and these will be appropriately flagged in these registers (i.e first point of entry will be the extentions and variation orders);

2. A frequent review of the contract, commitments and WIP register will be done in order to identify contracts which have been halted and these will be appropriately flagged in these registers (i.e through enquiry with Technical Services and review of expenditure to-date);

3. The disclosure pertaining to the projects as identified per the above process will be done in the AFS in accordance with GRAP 17;

4. AFS to be reviewed, also through the disclosure checklist, against the relevant registers and supporting documents/schedules to ensure that the disclosure and presentation are in accordance with GRAP.
Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.
28-Jul-20
1. EMS
2. Maine
3. BTO
11-Aug-20

Ex 99 Comm 50 - PPE: Differences on WIP project payments as at 30 June 2017
The following differences were noted between the invoices inspected of payments made to WIP projects, and the amount of WIP capitalised on the project as at 30 June 2017 (opening balance of the 2017/18 financial period):

Project name - Amount recognised as WIP as at 30 June 2017 - Recalculated amount of WIP to be recognised as at 30 June 2017 - Difference:
a) Zeerust Waste Water Treatment Plant Phase 2 - R19 658 766,29 - R16 341 146,30 - R(3 317 620,00)
b) Selosesha Water Supply - R3 288 047,28 - R3 176 390,51 - R(111 656,77)
c) Mayaeyane Water Supply - R3 341 662,10 - R3 172 794,51 - R(168 867,59)
d) Groot Marico WWTP - R14 537 938,62 - R17 717 614,10 - R3 179 675,48 - R(418 468,87)
Improper record-keeping of payments made on projects.
Improper reconciliation controls have been implemented to ensure that WIP payments are accurately valued.
1. WIP Registers to be reconstructed/updated and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence):
(a) Perform 100% WIP verification and determine the values of the WIP;
(b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at final;
(c) Reconcile the WIP register with payments as per the GL, contract and commitment register and update the register;
(d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made.
Compilation of the following information needed in terms of completed projects:
i. Bill of material/quantities
ii. As-built drawings
iii. Completion certificate
(e) Create complete files for WIP projects including all the relevant supporting documentation;
(g) Update the assets and WIP disclosure in the AFS (interim and final)
1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.
28-Jul-20
1. EMS
2. Maine
3. BTO
11-Aug-20

Ex 149 Comm 61 - PPE - differences in WIP payments as at 30 June 2017
The following differences were noted between the invoices inspected of payments made to WIP projects, and the amount of WIP capitalised on the project as at 30 June 2017 (opening balance of the 2017/18 financial period):

Project name - Amount recognised as WIP as at 30 June 2017 - Recalculated amount of WIP to be recognised as at 30 June 2017 - Difference:
a) Setlagole Water Supply - 14 701 529,69 - R13 566 489,32 - R1 135 040,37
b) Springbokpan water supply - 1 111 571,61 - R 856 379,20 - R 255 192,41
c) Top Village water supply - 7 599 519,77 - 7 696 786,75 - 97 266,98

Improper record-keeping of payments made on projects.
Improper reconciliation controls have been implemented to ensure that WIP payments are accurately valued.
1. WIP Registers to be reconstructed/updated and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence):
(a) Perform 100% WIP verification and determine the values of the WIP;
(b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at final;
(c) Reconcile the WIP register with payments as per the GL, contract and commitment register and update the register;
(d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made.
Compilation of the following information needed in terms of completed projects:
i. Bill of material/quantities
ii. As-built drawings
iii. Completion certificate
(e) Create complete files for WIP projects including all the relevant supporting documentation;
(g) Update the assets and WIP disclosure in the AFS (interim and final)
1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.
28-Jul-20
1. EMS
2. Maine
3. BTO
11-Aug-20

Ex 152 Comm 61 - PPE - Differences in WIP additions for 2018 on projects
The following differences were noted between the amounts recognised as WIP additions for the 2017/18 financial period, and the project's actual payments and invoices:

Project name - Amount recognised as WIP addition for 2018 - Amount recalculated based on supplier's invoices - Difference
a) Setlagole Water Supply - 24 083 532,02 - 25 118 978,99 1 035 446,90
b) Ditloung water supply - 3 073 832,07 - 2 852 321,40 - 221 510,67
c) Sasane Water Supply - 3 554 200,37 - 3 492 432,75 - 61 767,62
d) Tlhabologang Bulk Sanitation - 1 427 691,75 - 1 438 122,68 - 10 430,93
e) Zeerust Waste Water Treatment Plant Phase 2 - 2 482 130,18 - 5 799 750,18 - 3 317 620,00
d) Groot Marico WWTP - 21 710 153,50 - 19 440 255,48 -2 269 898,02
Management did not correctly reconcile and disclose the amounts of WIP additions as per the 2017/18 financial period
1. WIP Registers to be reconstructed/updated and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence):
(a) Perform 100% WIP verification and determine the values of the WIP;
(b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at final;
(c) Reconcile the WIP register with payments as per the GL, contract and commitment register and update the register;
(d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made.
Compilation of the following information needed in terms of completed projects:
i. Bill of material/quantities
ii. As-built drawings
iii. Completion certificate
(e) Create complete files for WIP projects including all the relevant supporting documentation;
(g) Update the assets and WIP disclosure in the AFS (interim and final)
1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.
28-Jul-20
1. EMS
2. Maine
3. BTO
11-Aug-20

Ex 154 Comm 67 - PPE: Not all completed projects as per the APR taken into account in WIP transfers for 2017/18
The following projects were reported on as completed during the 2017/18 financial year as per the 2017/18 APR, but they were not transferred out of WIP during the 2017/18 financial period. They were only transferred out of WIP during the 2018/19 financial period. These project's completion certificates are also dated as completed during the 2017/18 financial period:

Project name - Amount that should have been transferred during 2018:
Selosesha - 7 875 363,13
Moshana - 16 084 482,09
Makgogoane - 11 794 638,71
Tlhabologang (outfall sewer) - 39 811 787,44
Setlagole - 38 785 061,78
- 114 351 333,15
Management did not implement proper controls regarding the review of the fixed asset register.

1. Fixed Asset and WIP Registers to be revisited and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence):
(a) Perform 100% physical assets and WIP verification and determine the values of the assets and WIP;
(b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at interim and final;
(c) Reconcile the WIP register with the FAR and commitment register and update the register with completed projects to be transferred to the FAR;
(d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made.
Compilation of the following information needed in terms of completed projects:
i. Bill of material/quantities
ii. As-built drawings
iii. Completion certificate
(e) Unbundle the completed projects into the necessary components using the above stated information on a continuous basis (i.e monthly review of transactions pertaining to WIP projects for capitalization and unbundling once the project is completed).
(f) Create complete files for WIP projects including all the relevant supporting documentation;
(g) Update the assets and WIP disclosure in the AFS (interim and final)
1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.
28-Jul-20
1. EMS
2. Maine
3. BTO
11-Aug-20

Ex 156 Comm 61 - PPE - Difference between amounts transferred from WIP and amount added to completed assets
The following difference was noted between the amount recognised as transfers from WIP for the 2018 financial period, and the amount recognised as additions to assets from completed projects for the 2018 financial period:

Amount of 2018 transfers out of WIP as per WIP register - 162 886 658,75
Amount of 2018 additions of assets as per the FAR and AFS - 116 483 653,00
Difference - 46 403 005,75
Improper controls implemented to reconcile transactions on the FAR
1. Fixed Asset and WIP Registers to be revisited and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence):
(a) Perform 100% physical assets and WIP verification and determine the values of the assets and WIP;
(b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at interim and final;
(c) Reconcile the WIP register with the FAR and commitment register and update the register with completed projects to be transferred to the FAR;
(d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made.
Compilation of the following information needed in terms of completed projects:
i. Bill of material/quantities
ii. As-built drawings
iii. Completion certificate
(e) Unbundle the completed projects into the necessary components using the above stated information on a continuous basis (i.e monthly review of transactions pertaining to WIP projects for capitalization and unbundling once the project is completed).
(f) Create complete files for WIP projects including all the relevant supporting documentation;
(g) Update the assets and WIP disclosure in the AFS (interim and final)
1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.
28-Jul-20
1. EMS
2. Maine
3. BTO
11-Aug-20

Ex 164 Comm 65 - PPE: Difference between 2019 WIP transfers and 2019 additions per the FAR
The following differences were noted between the amount of transfers out of WIP to completed assets for the 2019 financial year, and the amount recognised as additions from projects in the fixed asset register for the 2019 financial year:

Amount of 2019 transfers out of WIP as per WIP register - 256 112 309,26
Amount of 2019 additions of assets as per the FAR and AFS - 233 017 200,79
Difference - 23 095 108,47
Improper controls implemented with regards to the reconciliation of the fixed asset register.
1. Fixed Asset and WIP Registers to be revisited and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence):
(a) Perform 100% physical assets and WIP verification and determine the values of the assets and WIP;
(b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at interim and final;
(c) Reconcile the WIP register with the FAR and commitment register and update the register with completed projects to be transferred to the FAR;
(d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made.
Compilation of the following information needed in terms of completed projects:
i. Bill of material/quantities
ii. As-built drawings
iii. Completion certificate
(e) Unbundle the completed projects into the necessary components using the above stated information on a continuous basis (i.e monthly review of transactions pertaining to WIP projects for capitalization and unbundling once the project is completed).
(f) Create complete files for WIP projects including all the relevant supporting documentation;
(g) Update the assets and WIP disclosure in the AFS (interim and final)
1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.
28-Jul-20
1. EMS
2. Maine
3. BTO
11-Aug-20

VAT

2017-18 Qualification - Findings relating to the 2017-18 financial year.
No detailed finding in the current financial year
No detailed finding in the current financial year
1. Reconciliations will be performed for the, 2017-18 and 2018-19 financial years between the VAT201s/Statement of Accounts from SARS and GL (Cash Book) to ensure accurate and complete VAT balances;

2. A listing of invoice not paid at the end of the financial year(s) will be compiled and the VAT relating thereto journalised as VAT accrued;

3. The necessary adjustment arising from the prior financial periods will be done on the GL (comparatives);

4. Prior period error note will be compiled on the Interim AFS together with the supporting schedule and submitted to the CFO;

5. The Interim and Final AFS will be independently reviewed to ensure compliance with GRAP.
Refer to DEC Submission - VAT Recons.

The GL amount of R20. 9million was incorrect as it included VAT on prepayments on mobile VIP toilets of R7.1 million for Izwelethu Cemforce. Therefore the correct VAT receivable amount is R13,8million which was reconciled per the attached reconciliation. The balance per the VAT 201 is R20.9million whereas the GL amount is R13,6 million, therefore a difference of R7.3million exists which has been supported by the attached reconciliation.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

CASH & CASH EQUIVALENTS

Ex 235 Comm 82 - Scope limitation: Prior period error: Cash and cash equivalent
The following information requested in request for information number 57 dated 10/09/2019 was not submitted for audit:
Cash and cash equivalent:
>A schedule of workings
>supporting documents
>approved journals

There is a lack of proper record keeping by management.
1. Manageement will review all RFI's not submitted in the previous audit cycle and submit to the AGSA in order for them to obtain reasonable assurance on prior year balances before commencing with the current audit cycle.

2. Information relating to the reconciling items will be sorted and kept;

3. Monthly reconciliations are being performed and these will be submitted to the AG together with the support for any adjustments made/reconciling items.
Supporting documents for reconciling items are are put into 2019/20 Audit File

29-Jul-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

Ex 302 Comm 103 - Cash and cash equivalent: Difference between the AFS and bank statement
During the audit of cash and cash equivalent we noted that there is a difference between the amount as per the bank statement and the amount disclosed in the AFS

The auditor takes note of management response and removed the investment account from the calculation however after taking reconciling items as stated below it resulted in cash and cash equivalent being overstated by: R130 712,40
Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy
Inadequate review of the Annual Financial Statements before submission for audit.
1. Bank reconciliations will be done on a monthly basis with the relevant support for reconciling items.

2. Management will obtain a list of all bank accounts registered in the name of the municipality and send out bank confirmations at year-end and reconcile these to the municipal records/GL.

3. Prepare a Cash and Cash Equivalent Note to be disclosed in the AFS after the necessary reconciliations have been performed and signed off by the CFO.

4. All journals processed will be reviewed by the CFO with the help of consaltants that have been appointed by the municipality.
Refer to DEC Submission - Cash and Cash equivalents

Management still disagrees with the finding. The difference between the bank statements and amount disclosed in the AFS is reconciling items on the primary account. Momentum investment should not be included in cash and cash equivalent as it is disclosed as separately as other financial assets on the AFS.

Managements has identified the difference as follows:
Balance as per Bank Statement - R302 188 581
Less: Reconciling items - R2 021 794
Balance after reconciling items - R300 166 787
Amount as per signed AFS - R300 182 935
Difference - R16 148

Further support has been included in the audit file under the cash and cash equivalents folder.
29-Jul-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

INVENTORY

Ex 35 Comm 17 - Inventory - differences between AFS and registers
The following differences were noted on the amount recognised and disclosed for inventory in the 2018/2019 Annual Financial Statements and the supporting inventory registers:

Amounts as per the inventory register: Amounts as per the 2018/2019 AFS: Difference:
Maintenance 11 523 983,94 12 376 830,00 852 846,06
Consumable's 852 840,14 1 483 400,00 630 559,86

Total inventory 12 415 269,41 13 898 675,00 1 483 405,59
Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy.
Inadequate review of the Annual Financial Statements before submission for audit.

1.Conduct a comprehensive inventory count and ensuring that all the stock count rules are followed, specifically ensuring that the team comprises of a counter and a verifier to ensure accurate quantities.

2. Prepare a reconciliation of the stock count sheets with the stock as per the system and ensure that the system values are accurate;

3. Revisit the prior year stock register and reperform the reconciliations to identify descrepancies and do the necessary adjustements;

Ex 151 Comm 66 - Inventories - misstatement of VIP toilets recognised in Inventory
During the audit of transfers & subsidies it was noted that the municipality reported R72 359 539 as the total amount relating to completed toilets that had been handed over to the beneficiaries. On Finding number 88 that was issued on Comm 48 we indicated that this amount was incorrectly disclosed as transfers and subsidies and management requested an adjustment to disclose this amount as expenditure.
Through discussions with management it was noted that managed relied on the happy letters to determine the number of toilets completed at year-end. As discussed with management, happy letter cannot be used to determine the expenditure incurred at year-end as the construction of some toilets would have been completed at year-end but the hand-over process not yet taken place. Per inspection of the MGI expenditure reconciliation we noted the following expenditure that was incurred for the 2018/19 financial year relating to the Rural Sanitation Project:
Project title Current FY - Total Actual Expenditure on MIG funds in the 2018/19 FY
Ditsobotla Rural Sanitation Programme R46 756 386,98
Mafikeng Rural Sanitation Programme R80 845 309,71
Ramotshere Moiloa LM Rural Sanitation R5 558 022,69
Tswaing Rural Sanitation Programme R0,00
Total cost R133 159 719,38
The amount disclosed for transfers and subsidies is therefore incorrect. Management need to do a reconciliation of the expenditure incurred for the rural sanitation project as follows:
1. Completed toilets and handed over to beneficiaries = expensed
2. Completed but not yet handed over to the beneficiaries = Inventory
The request for adjustment in Comm 48 will therefore not be granted as it is based on incorrect amount.

Management has subsequently corrected the transfers and subsidies amounts accurately. The finding is therefore resolved for the fact that the VIP toilets amounts were previously recognised within transfers and subsidies. The finding now remains within Inventory line item, as management has taken the amounts previously recognised within Transfers and Subsidies to Inventories. The amount recognised within Inventories for VIP toilets is still however misstated, as the adjustment for correcting Inventories was disallowed as was previously communicated with management on this matter.
The updated misstatement for Inventories is as follows:

Balance of VIP toilets which should be recognised within Inventory: 128 770 801,91
Balance of VIP toilets currently within Inventory: 72 359 539,00
Misstatement 56 411 262,91
Financial statements were not properly reviewed and agreed to supporting documents before being submitted for audit.
1. Disclose the completed and handed over toilets in expenditure (transfers) and the not yet handed over projects as inventory;

2. Make the necessary adjustments in the comparatives;

3. Compile a clearly referenced POE/audit file for the prior period adjustements with sufficient and appropriate evidence; and also ensure that such information safely kept in the records management office;
The amount recognised within Inventories for VIP toilets has bee corrected in the AFS.

The expenditure amount has been allocate dto the correct expenditure vote and the prior period error has been updated accordingly with relevant support
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 217 Comm 80 - Scope limitation prior period error: Inventory
The following prior period adjustment was made on inventory however an inventory list that agree to the adjusted amount was not provided.
Previously reported R17 403 618
Prior year adjustment R2 747 922
restated balance R 14 655 696
There is a lack of proper record keeping by management
1. Revisit the prior year stock register and reperform the reconciliations to identify descrepancies and do the necessary adjustements;

2. Compile a clearly referenced POE/audit file for the prior period adjustements with sufficient and appropriate evidence; and also ensure that such information safely kept in the records management office;
Prior Periods errors disclosed per AFS line item
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 287 Comm 98 - Journals: Inventory - Information not submitted for audit
During the audit of journals relating to expenditure, it was noted that the below mentioned information/journals relating to RFI 73 that was issued on the 13 September 2019 and due on the 17th September 2019 were not received for audit.

Initially communication of audit findings number 37 dated 18 September 2019 due on the 20th September 2019 was issued and the conclusion was as follows:

Number Date Reference Description Credit Debit
67 2018/11/07 correction of incorrect entry ADJUSTMENTS 7 500,00
2018/11/07 correction of incorrect entry ADJUSTMENTS 7 500,00
68 2018/12/06 correction of incorrect entry ADJUSTMENTS 15 000,00
2018/12/06 correction of incorrect entry ADJUSTMENTS 15 000,00
70 2018/12/29 correction of incorrect entry ADJUSTMENTS 30 000,00
2018/12/29 correction of incorrect entry ADJUSTMENTS 30 000,00
71 2019/06/30 JNL00216 Inventory write down 1 506 363,02
2019/06/30 JNL00216 Inventory write down 90 269,73
2019/06/30 JNL00216 Inventory write down 24 284,82
2019/06/30 JNL00216 Inventory write down 1 620 917,57
1 673 417,57 1 673 417,57

"Management comment noted. However, the finding is not entirely resolved as the supporting documents for the below mentioned journals were not submitted for audit. The finding will be evaluated together with other uncorrected misstatements in the summary of uncorrected misstatements (SUM) and reported in the management report and its impact for the audit report to be evaluated".

Subsequently, the municipality we granted the permission to resubmit the outstanding journals. However, the above mentioned journals no supporting documentation was submitted.

It should be noted that no further information will be accepted relating to the above journals as the finding is closed. Management can however submit their response indicating why these documents could not be provided.
There is a lack of proper record keeping by management.
Management did not ensure that for all journals passed on the systems, they are supported by sufficient and appropriate audit evidence.

This results in a Projected limitation of R5 309 837.82
Financial and performance management
Management did not 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
1. Revisit the prior year stock register and reperform the reconciliations to identify descrepancies and do the necessary adjustements;

Of the journals selected, support for R1 620 917,57 has been attached hereto. The journal relates to a write down of inventory that has been damaged and rendered useless as per opened police case number 279/10/2018.

This finding is not applicable for the current year audit as the comparative is 2018/19.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 175 Comm 69: Inventory - Correction of error amount recognised not agreeing to list
The following differences were noted between the amount recognised as prior year error corrected for inventory in note 44 of the 2018/19 AFS, and the list provided for audit purposes:

Amount of correction of error as per AFS: 2 747 922
Amount of correction of error as per PoE listing: 1 942 234
Difference: 805 688

Improper reconciliations of the amounts recognised in the AFS regarding AFS, and the lists for inventory.
1. Revisit the prior year stock register and reperform the reconciliations to identify descrepancies and do the necessary adjustements;

3. Management to ensure that a review of AFS (with emphasis on prior period errors) is done alongside the supporting documentation in order to ensure that amounts are transferred to the AFS at accurate figures.
This finding is not applicable for the current year audit as the comparative is 2018/19.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

ACCOUNTS RECEIVABLES

Ex 313 Comm 109 - WSIG Overstatement of capital expenditure and understatement of Receivables
During the audit of WSIG, we have identified that Sedibeng water charges the municipality for total amount inclusive of VAT for work done by contractors, however the municipality is unable to claim Input VAT as Sedibeng does not charge Output VAT to the municipality

As a result, the municipality capitalise the total contractor amount inclusive of vat, this result in overstatement of Expenditure and understatement of Receivable as the municipality is unable to claim input vat.
Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy.
Lack of review of the Annual Financial Statements before submission for audit.
1. Management to revisit and review invoices from Sedibeng Water and reclassify the Input VAT portion from the actual capital expenditure to the Input VAT account.

2. Sedibeng Water to be made aware of the SARS VAT requirements for implenting agents on behalf of principals that are VAT vendors as SARS views the sales/ purchases to be done by the principal. This excersice will ensure that the implementation of Sec 54 of the VAT Act is correctly applied and thus Sedibeng Water will then have to pay the municipality the Input VAT claimed over to the municipality.

3. Retrospective adjustment on the VAT and affected capital assets will then be made on the AFS and the relevant comparatives.
1. Management revisited and reviewed invoices from Sedibeng Water and reclassified the Input VAT portion from the actual capital expenditure to the Input VAT account.
2. Sedibeng Water was made aware of the SARS VAT requirements for implenting agents on behalf of principals that are VAT vendors as SARS views the sales/ purchases to be done by the principal. This excersice has ensured that the implementation of Sec 54 of the VAT Act is correctly applied and thus Sedibeng Water will then have to pay the municipality the Input VAT claimed over to the municipality.
3. Retrospective adjustment on the VAT and affected capital assets was made on the AFS and the relevant comparatives. Refer to VAT audit file
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

ACCOUNTS PAYABLES

Ex 282 Comm 101 - Journals: Scope limitation: Payables
The following information requested in RFI 73 dated:13 September 2019 was not provided for audit. Issue 79 was raised with regard to the outstanding information which was communicated in communication of audit findings no. 37 however the information was not submitted with the responses provided by management. The municipality was given a second opportunity to submit the information after the communication of audit findings was due however the information mentioned below was still not submitted. This finding is to inform management of information no additional information will be accepted subsequent to this issue, only management responses will be accepted.

Per the General Ledger
No Date Ref Description Debit Credit
48
2018/07/01 NN Correction of opening balance Payables from exchange transaction 1 721 008,29
2018/07/01 NN Correction of opening balance Auditors remuneration 1 721 008,29
24
2019/06/30 SS Reversal of June 2018 invoice in the 2019 period Payables from exchange transaction 42 191,95
2019/06/30 SS Reversal of June 2018 invoice in the 2019 period Payables from exchange transaction 42 191,95
25

2019/06/30 30/06/2019 Correcting payables to Grant Payables from exchange transaction 1 073 387,00
2019/06/30 30/06/2019 Correcting payables to Grant Government grant & subsidies 1 073 387,00
2019/06/30 30/06/2019 Correction of Incorrect Entry Government grant & subsidies 1 073 387,00
2019/06/30 30/06/2019 Correction of Incorrect Entry Payables from exchange transaction 1 073 387,00
27
2019/06/30 30/06/2019 Correcting payables to Grant Payables from exchange transaction 1 073 387,00
2019/06/30 30/06/2019 Correction of Incorrect Entry Government grant & subsidies 1 073 387,00
29
2019/06/30 30/06/2019 Correcting payables to Grant Payables from exchange transaction 1 073 387,00
2019/06/30 30/06/2019 Correcting payables to Grant Payables from exchange transaction 1 073 387,00
32
2019/02/01 MEPF 201901 MEPF Payables from exchange transaction 2 865 539,92
2019/05/22 MEPF REVERSAL OF INCORRECT ENTRY Payables from exchange transaction 2 865 539,92
33
2019/02/01 MGF 191 REVERSAL Payables from exchange transaction 1 140 840,06
2019/05/22 MGF REVERSAL OF INCORRECT ENTRY Payables from exchange transaction 1 140 840,06
Total 10063128,2

No Date Ref Description Debit Credit
6
2019/06/30 SS Correction of consumer deposit refunded 9710 - Trade and Other Payable Exchange Transaction Consumer deposits 7 536,00
2019/06/30 SS Reversal of incorrectly recognised refunds for the current year 4710 - Operational Cost [Expenditure] Repairs and maintenance 7 536,00

There is a lack of proper record keeping by management.
1. The entire population for payables pertaining to the 2018-19 financial year will be revisited for review and ensure that the balance is accurate and supported;

2. All the supporting documentation, including working schedules, will be sorted and kept on file;

3. Adjust the comparative figure (2018-19 financial year) where necessary;

4. Compile a clearly referenced POE/audit file for the prior period adjustments with sufficient and appropriate evidence; and also ensure that such information safely kept in the records management office;

6. Information to be communicated timeosly with AGSA, register of RFIs and CoAFs to be kept and reconciled on a frequent basis with that of the AGSA to ensure that all information has been attended to and provided to the AGSA and that all findings have been adequately responded to by management.
Refer to DEC Submission - Payables Issue 282
R1 721 008 - this journal was processed to reverse the 2017/18 audit fees incorrectly raised as an accrual.
R42 191 - the journal relates to the reversal of the Konica Minolta invoice recognised in the incorrect financial year (June 2018 invoice incorrectly recorded in 2018/19).
R1 073 387 - the journals processed were due to the grant being incorrectly recognised as payables instead of unspent conditional grants. The correction took the amounts out of payables and recorded these in the unspent liability account thereafter the next journal was passed to recognise the revenue.
R2 865 539,92 - the journal relates to pension entries that were duplicated. An initial entry of R4 404 761 was passed to recognise pensions then individual pension fund entries were posted and therefore became duplicated transactions.
R1 140 840,06 - the journal relates to pension entries that were duplicated. An initial entry of R4 404 761 was passed to recognise pensions then individual pension fund entries were posted and therefore became duplicated transactions.
R7 536 - This journal relates to consumer deposit refunds for two individuals which were recorded incorrectly recorded under repairs and maintenance.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 234 Comm 82 - Scope limitation: Prior period error: Payables from exchange
The following information was not submitted for audit as requested in RFI 57 dated 10/09/2019:

Restated Amount per 2019 AFS Amount per 2018 AFS Difference (Period Error) Information not submitted
Trade payables R110 106 002,00 R81 939 045,00 R28 166 957,00 Supporting documents for the sample selected as listed in annexure A and approved journal for the corrections made
Trade payables R0,00 R4 233 399,00 -R4 233 399,00 A schedule / list of transactions making up the adjustment, supporting documents, approved journals for the adjustment made
Retention fees R17 322 148,00 R19 092 569,00 -R1 770 421,00 Supporting documents for the sample selected as listed in annexure B and approved journal for the corrections made
Leave Provision R25 225 143,00 R33 678 921,00 -R8 453 778,00 Supporting documents for the sample selected as listed in annexure C and approved journal for the corrections made
Suspense Control Account R3 165 424,00 R1 431 441,00 R1 733 983,00 A schedule / list of transactions making up the adjustment, supporting documents, approved journals for the adjustment made
Third Party Control Account R0,00 R1 815 084,00 -R1 815 084,00 A schedule / list of transactions making up the adjustment, supporting documents, approved journals for the adjustment made
Bonus Accrual R8 437 812,00 R7 485 132,00 R952 680,00 Supporting documents for the sample selected as listed in annexure D and approved journal for the corrections made
Grants Payable R2 000 000,00 R0,00 R2 000 000,00 A schedule / list of transactions making up the adjustment, supporting documents, approved journals for the adjustment made
Other Creditors R0,00 R68 477,00 -R68 477,00 A schedule / list of transactions making up the adjustment, supporting documents, approved journals for the adjustment made
Unknown Deposits R0,00 R11 018,00 -R11 018,00 A schedule / list of transactions making up the adjustment, supporting documents, approved journals for the adjustment made
Payable from exchange transactions R166 256 529,00 R149 755 086,00 R16 501 443,00 0

Annexure C (Leave)

No Printed on: 2017/07/27 17:02:15 for Current Period 2017/07/31 Employee Surname
(input cell) Employee Name
(input cell) New Value of leave provision as at 30 June 2018
1 100098 Bereng Seonyatseng 76 411,85
2 100153 Njovu Dumisani 58 378,13
3 100160 Appolos Asaaf 78 412,09
4 100188 Bantsijang Lebogang 17 868,33
5 100189 Cindi Nokuzola 5 951,68
6 100207 Ngwane Zolile 42 027,57
7 100277 Phetjana Thabo 47 099,47
8 100298 Boikanyo Motsamai 104 261,98
9 100665 Voko Fikile 63 275,75
10 101613 Leteane Kedumetse 44 684,90
11 101618 March-Matsose SM 80 447,62
12 101625 Serope Lesego 17 855,55
13 101664 Mphehlo Jessica 42 173,86
14 101680 Tsiepe Kgomotso 17 438,15
15 101760 Sebokolodi Thapelo 28 630,78
16 102070 Zinyoka Tsietsi 29 985,71
17 102072 Beans Aubrey 30 569,70
18 102074 Setlhabi Mothusi 33 394,27
19 102141 Nhamane Kgotlaetsile 29 449,99
20 102194 Seane Otshabeng 58 170,54

Annexure D (bonus)

No. Employee Code Surname Full Names Recalculated Bonus
1 100001 Tsetse Boitumelo 15 078,63
2 100018 Africa Thandiwe 15 078,63
3 100030 Mothibi Bonolo 15 078,63
4 100032 Kole Lindiwe 10 656,67
5 100038 Morwe Tebogo 10 141,59
6 100049 Matladi Mathebula 19 409,79
7 100050 Mothupi Koti 15 078,63
8 100055 Moabi Joseph 19 409,79
9 100062 Selogelo Didimalang 21 430,11
10 100067 Ditsele Oupa 21 430,11
11 100074 Medupe Ruth 19 409,79
12 100078 Hoffman Nomhle 15 078,63
13 100089 Sefawanyane Betty 10 656,67
14 100095 Bahetanye Moatlhodi 17 934,44
15 100097 Gause Ramosweu 19 409,79
16 100106 Seketema Kgosiemang 6 793,65
17 100113 Ramogapi Simon 15 078,63
18 100119 Lesabe Poroti 15 078,63
19 100123 Mogomotsi Solomon 15 078,63
20 100125 Mocuminyana Godisang 15 078,63

Annexure B(Retention)

Status Ref: Project Name Retention 2018

Completed NMMDM_WIP_18_002 Gamotlatla Water Supply 1 305 188,60
Completed NMMDM_WIP_18_005 Setlagole Bulk Water Supply 998 045,51
WIP NMMDM_WIP_18_008 Ottosdal BWS & Reticulation Phase 2 2 880 003,32
WIP NMMDM_WIP_18_009 Meetekaar Water Supply 577 821,04
Completed NMMDM_WIP_18_010 Springbokpan Water Supply 596 731,94
Completed NMMDM_WIP_18_018 Matile 1 Water Supply 117 055,52
WIP NMMDM_WIP_18_023 Madibogo Water Supply 474 529,00
WIP NMMDM_WIP_18_024 Groot-Marico Waste Water Treatment 244 975,65
WIP NMMDM_WIP_18_025 Mogosane water supply 1 161 724,57
Completed NMMDM_WIP_18_027 Moshawane Water Supply Upgrading 546 946,04
WIP NMMDM_WIP_18_028 Moletsamongwe Water Supply 827 679,20
Sedibeng NMMDM_WIP_18_039 Mafikeng South Bulk Water Supply 1 311 063,32
Sedibeng NMMDM_WIP_18_044 Dinokana Bulk Water Supply Augmentation Phase 2 2 106 747,13
Completed NMMDM_18_014 Tlhabologang / Coligny Bulk Sanitation & Main Outfall Sewer (WWTP) - Volume B 1 648 084,15
Completed NMMDM_18_008 Makgokwane water supply 465 548,13
Completed NMMDM_18_012 Moshana Bulk Water Supply 685 179,98
Completed NMMDM_18_013 Ditloung Water Supply 180 665,72
Completed NMMDM_18_018 Mayaeyane Water Supply 385 417,98
Completed NMMDM_18_017 Selosesha Water Supply 320 046,62
Completed NMMDM_18_019 Sasane Water Supply 221 796,08
Completed NMMDM_18_003 Delareyville Sewerage Treatment Plant Phase 2 266 898,67

Annexure A (Trade payable)

Supplier Code New Balance Old Balance Difference
AUD001 - 1 777 381,70 - 56 373,41 - 1 721 008,29
JSM001 - 24 000,00 - - 24 000,00
KONI001 - 42 191,91 - - 42 191,91
MANY001 - 404 091,70 - - 404 091,70
MAXP001 - 1 380 973,57 - 202 027,52 - 1 178 946,05
MOGO019 - 328 309,90 - - 328 309,90
MOLI001 - 19 200,00 - - 19 200,00
MOTH021 - 16 560,00 - - 16 560,00
MOTS031 - 16 560,00 - - 16 560,00
NOEK001 - 202 232,67 - - 202 232,67
NTSA003 - 174 942,78 - - 174 942,78
SEBE004 - 16 188,76 - - 16 188,76
SEDI004 - 42 810 172,81 - 3 116 634,60 - 39 693 538,21
SELE013 - 74 202,56 - - 74 202,56
SHER001 - 44 720,99 - - 44 720,99
TELK001 - 324 250,02 0,00 - 324 250,02
TIRI001 - 137 545,62 - 286 654,34 149 108,72
TSHE017 - 1 754 198,18 - 1 261 367,15 - 492 831,03
TSHI018 - 18 899,92 - - 18 899,92
YOVU001 - 856 578,89 - 1 002 187,79 145 608,90

There is a lack of proper record keeping by management.
1. The entire population for payables pertaining to the 2018-19 and 2017-18 financial years will be revisited for review and ensure that the balance is accurate and supported;

2. All the supporting documentation, including working schedules, will be sorted and kept on file;

3. Adjust the comparative figure (2018-19 financial year) where necessary;

The entire population for payables pertaining to the 2018-19 financial years has been revisited and restated according to support. Please refer to the payables audit file for any prior period adjustments.

28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 233 Comm 82 - Scope limitation: Prior period error: Consumer deposit
The following information as requested in request for information no.57 dated 10/09/2019 was not submitted for audit:
Consumer deposit:
>Schedule detailing the breakdown of the adjustment made of R 1754417
> Approved journals
>Supporting documents for the adjustment made.

There is a lack of proper record keeping by management.
1. The entire population for consumer deposits pertaining to the 2018-19 and 2017-18 financial years will be revisited for review and ensure that the balance is accurate and supported;

2. All the supporting documentation, including working schedules, will be sorted and kept on file;

3. Adjust the comparative figure (2018-19 financial year) where necessary;

Ex 222 Comm 80 - Retention fees: Difference between amount per retention register and recalculated amount
The following differences were noted during the recalculation of the retentions amounts payable at year end. Refer or excel spreadsheet.
Project description Contractor Contract amount Payment date Invoice payments Recalculated Retention Retention Earned Retention Paid Recalculated Retention Balance as at
30 June 2019 Balance as at
30 June 2019 per retention register Difference
Meetekaar Water Supply Selelane R30 250 179,42 15 640 226,21 1 241 669,96 R1 241 669,96 R0,00 R1 241 669,96 R1 276 572,62 -R34 902,66
May 2018 Certificate No 1 1 835 867,76 33 525,91
June 2018 certificate No 2 2 006 648,23 54 403,52
June 2018 certificate No 3 2 151 342,11 454 908,05
July 2018 Certificate No 4 2 159 320,03 206 338,18
August 2018 Certificate No 5 5 037 241,82 279 086,60
September 2018 Certificate No 6 690 351,23 66 700,60
November 2018 Certificate No 7 1 081 842,02 104 525,80
December 2018 Certificate No 8 677 613,01 42 181,30
Springbokpan Water Supply PLS Construction R41 368 766,42 22 946 772,45 2 136 135,01 R2 136 135,01 -R814 587,09 R1 321 547,92 R814 589,09 R506 958,83
Certificate No1 1 424 897,20 68 821,00
Certificate No2 1 887 554,65 199 468,54
Certificate No3 5 062 404,78 328 442,42
Certificate No4 4 434 868,92 449 970,53
Certificate No5 3 200 401,21 321 720,33
Certificate No6 2 425 157,66 243 879,97
Certificate No7 2 021 452,05 195 309,38
Certificate No8 1 553 260,82 328 522,84
Certificate No9 936 775,16 -
Sannieshof/Agisanang Bulk Water Supply HT Pelatona R53 585 434,36 8 192 485,15 761 544,46 R761 544,46 R0,00 R761 544,46 R791 544,46 -R30 000,00
Certificate No1 1 348 959,20 -
Certificate No2 1 290 725,80 225 042,03
Certificate No3 2 284 386,96 220 713,72
Certificate No4 1 266 091,90 122 327,72
Certificate No5 2 002 321,29 193 460,99
Matile 1 Water Supply Excellence Business Academy JV R4 659 711,54 2 836 290,71 269 055,07 R269 055,07 R136 229,42 R132 825,65 R117 055,52 R15 770,13
Certificate No1 989 048,91 107 505,32
Certificate No2 419 681,06 45 617,51
Certificate No3 568 747,97 67 522,62
Certificate No4 445 368,55 48 409,62
Certificate No5 256 780,39 -
Certificate No6 156 663,83 -
Matile 2 Water Supply Selenane R15 716 242,58 8 723 048,54 841 922,87 R841 922,87 R0,00 R841 922,87 R880 724,25 -R38 801,38
Certificate No1 1 051 883,15 101 631,22
Certificate No2 2 110 941,13 203 071,91
Certificate No3 677 722,91 65 480,47
Certificate No4 1 697 045,37 163 965,74
Certificate No5 1 527 280,94 147 563,38
Certificate No6 1 658 175,04 160 210,15
Schoongezight Water Supply Entle Project R9 855 526,05 6 606 703,67 638 328,86 R638 328,86 R0,00 R638 328,86 R617 341,56 R20 987,30
Certificate No1 516 410,95 49 894,78
Certificate No2 1 826 881,37 176 510,28
Certificate No3 848 233,57 81 954,93
Certificate No4 1 195 904,73 115 546,35
Certificate No5 1 321 596,38 127 690,47
Certificate No6 617 986,55 59 708,85
Certificate No7 279 690,12 27 023,20
Moshawane Water Supply Upgrading Kwena Mokone/Padime JV R7 897 977,98 9 938 533,76 1 092 036,91 R1 092 036,91 R0,00 R1 092 036,91 R16 606,36 R1 075 430,55
Certificate No1 4 810 342,52 210 979,94
Certificate No2 R620 464,78 R60 474,15
Certificate No3 R1 300 922,86 R126 795,60
Certificate No4 R1 165 828,01 R113 628,46
Certificate No5 R1 221 014,51 R0,00
Certificate No6 R171 875,82 R16 606,36
Certificate No7 R648 085,26 R563 552,40
Moletsamongwe Water Supply Mabaza Construction R11 914 399,75 R8 810 673,82 R927 665,79 R927 665,79 R0,00 R927 665,79 R861 254,94 R66 410,85
Certificate No1 R582 564,78 R113 363,04
Certificate No2 R844 026,45 R90 236,21
Certificate No3 R1 041 735,66 R101 533,69
Certificate No4 R1 813 444,56 R189 344,88
Certificate No5 R2 229 904,06 R0,00
Certificate No6 R1 535 880,26 R0,00
Certificate No7 R444 432,78 R402 397,12
Certificate No8 R318 685,27 R30 790,85
Mafikeng rural Sanitation Izwelethu Cemforce R115 859 509,30 R169 991 077,47 R9 164 447,81 R9 164 447,81 R0,00 R9 164 447,81 R9 218 447,80 -R53 999,99
Certificate No1 R21 845 768,00 R0,00
Certificate No2 R747 102,26 R202 850,46
Certificate No3 R74 737 086,00 R1 171 118,45
Certificate No4 R7 327 383,50 R1 140 403,71
Certificate No5 R6 368 511,56 R1 080 568,96
Certificate No6 R21 506 594,59 R520 643,93
Certificate No7 R2 643 741,73 R325 122,87
Certificate No8 R19 820 163,02 R2 554 597,35
Certificate No9 R4 229 779,37 R758 039,48
Certificate No10 R5 465 933,94 R704 280,30
Certificate No11 R5 299 013,50 R706 822,30
Mafikeng South Bulk Water Supply Sydwel Shabangu Projects R21 801 237,68 R12 238 597,62 R3 131 142,92 R3 131 142,92 R0,00 R3 131 142,92 R1 311 063,32 R1 820 079,60
Certificate No1
Certificate No2 R818 378,64 R190 984,00
Certificate No3 R1 219 036,32 R316 796,00
Certificate No4 529237,44 368378,6
Certificate No5 R308 682,36 R398 464,60
Certificate No6 R1 896 022,00 R545 454,40
Certificate No7 R5 078 816,74 R607 817,00
Certificate No8 R2 388 424,12 R703 248,32
Dinokana Bulk Water Supply Augmentation Phase 2 Beyond Build Construction R25 257 064,38 R19 115 153,13 R3 261 267,19 R3 261 267,19 R0,00 R3 261 267,19 R2 106 747,13 R1 154 520.06
Certificate No1 R3 371 560,20 R224 976,03
Certificate No2 R2 144 128,12 R438 203,54
Certificate No3 R1 709 721,95 R374 939,02
Certificate No4 R5 015 588,58 R716 316,60
Certificate No5 R6 874 154,28 R1 506 832,00
Makgokwane water supply Tshenolo Resources R16 774 762,28 R19 397 915,97 R1 416 390,52 R1 416 390,52 R0,00 R1 416 390,52 R465 548,13 R950 842,39
October 2017 Certicate No9 R604 305,24 R58 899,14
2017 Certificate No1 - 08 R8 986 636,31 R875 890,48
Certificate No10 R1 413 571,79 R64 694,36
Certificate No11 R118 536,25 R5 425,00
Certificate No12 R1 065 010,43 R48 741,90
Certificate No13 R1 180 747,09 R58 195,07
Certificate No14 R864 097,65 R59 939,61
Certificate No15 R5 165 011,21 R244 604,96
Delareyville Sewerage Treatment Plant Phase 2 MATLO PROJECTS R6 340 979,78 R6 059 211,25 R450 510,57 R450 510,57 R156 498,25 R294 012,32 R266 898,67 R27 113,65
Certificate No1 R1 294 895,65 R126 208,15
Certificate No2 R2 538 732,82 R247 439,85
Certificate No3 R788 609,95 R76 862,57
Certificate No4 R1 436 972,83 R0,00
R24 224 803,18 R18 744 393,85 R9 693 903,59

Management did not reconcile the retention fees as per the payment certificates to get to the balance of retention fees at year end. Instead they just took the balance reflected on the last payment certificate received from the supplier before year end.
1. Perform a reconciliation of the retention register to the supporting documentation (payment certificates) and GL will be done to ensure that retention fees are correctly accounted for.

2. Perform a reconciliation of the retention register to the contract register and commitment to ensure that all contracted services has been included.

3. Disclosed retention fee amount in the AFS to be adjusted accordingly after the above has been carried out, where necessary.

4. Review the AFS and related notes prior to submission.
Inspection of all retention amounts per payment certificates to ensure correct amounts were charged on each payment certificate was done.

Reconciliation of the retention register to the supporting documentation (payment certificates) and GL was perfopayables supporting documentation included in the audit file.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 213 Comm 80 - Payables: Understatement of payables to Local Municipalities
Based on the audit work done for payable, it was noted that only the following has been disclosed relating to allocation to local municipalities in the notes to the financial statements:

14. Payable from exchange transactions
2018/19 2017/18
Grant payable - Ratlou local Municipality 5 000 000,00 2 000 000,00

28. Transfers and subsidies
Transfers to Local Municipalities 15 000 000,00 10 000 000,00

The following differences were noted between allocation as per the division of revenue and the amount disclosed in the financial statements:

Breakdown of equitable share for district municipalities authorised for services Amount accounted for in the AFS of the Municipality
Category Municipality Water Sanitation Transfers Payable
2018/19 R'(000) 2018/19 R'(000) 2018/19 R'(000)
B NW381 Ratlou 34 906,00 26 648,00 3 000,00 5 000,00
B NW382 Tswaing 37 538,00 28 657,00 3 000,00
B NW383 Mafikeng 98 277,00 75 027,00 3 000,00
B NW384 Ditsobotla 52 821,00 40 325,00 3 000,00
B NW385 Ramotshere Moiloa 50 975,00 38 916,00 3 000,00
C DC38 Ngaka Modiri Molema District Municipality - -
Totals 274 517,00 209 573,00 15 000,00 5 000,00

Therefore, differences between the allocation as per DoRA and the amounts accounted for in the financial statements is R464 090 000 as the municipality has not disclosed any other payable for the amount to the local municipalities for both the prior year and current year.

Even if this money is not physically transferred to the LM, the municipality should provide evidence that, that money was used to benefit that LM with regards to water and sanitation.
Management did not adequately review the financial statements.
This will result in a material scope limitation on payables as we cannot determine the amount that the District Municipality should disclose as a payable relating to provision of the water services by the local municipalities on behalf of the district municipality as nothing was submitted in relation to this payable.

Management did not adequately review the financial statements.
1. Management to review the DoRA allocations and payables requirements and ensure that payables to Local Municipalities balance is updated accordingly (2018-19 and 2019-20).

2. Management to further review the AFS and ensure that AFS submitted are supported by reliable evidence and that all account balance have been accurately presented and valued in the AFS.
Review of the DoRA allocations and payables requirements has been performed.

Management requires auditors to consider that the amount transferred to local municipalities is as per budget that has been approved by District council which constitutes of councillors who also sit on the local municipality councils. The council has approved R15 000 000 budget for Transfers to local municipality which gives rights and obligation that make the district liable for this amount only.

Management further reiterates that there is nowhere in the DORA indicating that the District municipality must transfer these allocations to the local municipalities.

As the Water Service Authority the district municipality is responsible for water and sanitation services across the district. Local municipalities benefit in the form of the allocation through expenditure on water infrastructure project and provision of water services which are classified under other expenditure line items such as Contracted services.

28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 160 Comm 66 - Payables: Understatement of payables relating to Sedibeng invoices
The following invoices relating to the water supply project of magogwe ward that have not yet been paid were not included in trade payables for the year ended 2018/19 therefore resulting to understatement of payables amounting to R 11 521 370.43.

IN000110988 2019/06/28 R 1 685 606.27
IN000111091 2019/06/30 R 5 738 789.60
IN000111092 2019/06/30 R 286 177.50
IN000110983 2019/06/28 R 3 592 174.11
IN000110987 2019/06/28 R 218 622.95
Total R 11 521 370.43

Financial statements were not properly reviewed against supporting documents before being submitted for audit.
1. Perform monthly reconciliations between supplier statements and supplier subsystem balances to ensure that balances are accurate and complete and investigate any discrepancies identified.

2. Perform payments after year review whereby all the payments after year will be reviewed against the supporting documentation to ensure that the invoice and delivery of goods or services belong to the correct financial year;

3. Compile a separate listing and audit file for payments after year review for services/goods received but not yet paid and disclose in the AFS.
Based on the information the auditors received from Sedibeng the agreement reached with DWS for payment of the retention fees was only reached after year-end, thus at year end a payable should have been disclosed.

Amounts to be raised as payables within the comparative figures in the 2019/20 AFS, however will be reversed in the current year as the amount is not payable by NMMDM
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 269 Comm 93 - Prior period: Misstatements identified: Payables-Rention
During the audit of prior period error relating to payable: retention the following was identified:

The prior year retention register was reconciled with the restated amount register to indicate the adjusted amount, however the difference between the list does not agree to the adjusted amount. The list indicates an adjustment of R 6 854 557,89 and the adjustment per the AFS is R 1 770 421,00 which results in a difference of R5 084 136,89.
Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy
Inadequate review of the Annual Financial Statements before submission for audit.
1. Perform a reconciliation of the retention register to the supporting documentation (payment certificates) and GL will be done to ensure that retention fees are correctly accounted for.

2. Perform a reconciliation of the retention register to the contract register and commitment to ensure that all contracted services has been included.

3. Disclosed retention fee amount in the AFS to be adjusted accordingly after the above has been carried out, where necessary.

4. Review the AFS and related notes prior to submission.
Due to the misstatement in 2018, management had to revisit the total population of projects that include retention. Management identified that there were errors in the 2018 retention register. This resulted in a prior period error of R1770 420.67. Refer to payables audit file for support.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

OPERATING EXPENDITURE

Ex 239 Comm 89 - Prior period error: Information relating to RFI 148 not submitted for audit
The following information relating to request for information number 148 for general expenditure 2017/18 was not submitted for audit as requested.
The RFI was requested on the 13th November 2019 and due on the 15th November 2019:
Annexure
Please provide us with the approved journals (where necessary) and the payment vouchers for the below mentioned transactions relating to general expenditure for 2017/18 financial year.

Accounting fees - 2018/06/30 - 30/06/2018 - Reversal of Incorrect entry - R786 946,61
There is a lack of proper record keeping by management.
1. Revisit the prior year AFS, GL and supporting document pertaining to the adjustments made and transactions/journals in question and reperform the reconciliations to identify descrepancies and do the necessary adjustments;

Ex 330 Comm 115 - Consulting fees incorrectly classified as accounting fees
During the audit of expenditure, we noted that consulting fees was incorrectly classified as accounting fees:

Date Invoice number Description Supplier name Amount per GL
2019/06/20 NMMDM 1 Preparation of AFS: May 2019 Triple M Advisory (PTY)LTD R 1 324 800,00
2019/06/28 NMMDM0102 Preparation of AFS Eave Solutions JV MNB R 1 488 000,00
2019/06/28 INV414 Assisting With AFS Maine Management & Chartered Accountant R 430 434,78
2019/06/28 NMMDM0103 AFS PREPARATIONS Eave Solutions JV MNB R 1 019 617,39

Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy
Inadequate review of the Annual Financial Statements before submission for audit.

1. Perform a detailed analysis and review of the expenditure accounts as per the GL (2018-19 and 2019-20) to identify the possible missclassifications;

2. Obtain the supporting documents for the transactions which are possibly missclassified and review the support to determinne the descriptions and nature of the services/goods;

3. Classify/reclassify the transaction as identified in the correct accounts as per the support's description and nature of goods/services;

30-Jun-20
1. BTO
2. Maine
3. CFO
14-Jul-20

Ex 329 Comm 115 - WIP incorrectly classified as consulting fees
During the audit of expenditure, we noted that the following transactions were incorrectly classified as consulting fees:

No Date Invoice number Description Supplier name Amount per GL
18 2019/06/28 1066 Spatial Development Framework (SDF) 2019 Izwelwthu CEMFORCE CC R 262 500,00
19 2018/12/14 1495/2016 2018/11/29 Sunrise Wholesales Electrical//NMMDM Sunrise Electrical Wholesalers R 2 195 602,24

Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy
Inadequate review of the Annual Financial Statements before submission for audit.

1. Perform a detailed analysis and review of the expenditure accounts as per the GL (2018-19 and 2019-20) to identify the possible missclassifications;

2. Obtain the supporting documents for the transactions which are possibly missclassified and review the support to determinne the descriptions and nature of the services/goods;

3. Classify/reclassify the transaction as identified in the correct accounts as per the support's description and nature of goods/services;

15-Jul-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

Ex 328 Comm 115 - Accounting fees incorrectly classified as consulting fees
During the audit of expenditure, we noted that the following accounting and professional fees were incorrectly classified as consulting fees:

Date Invoice number Description Supplier name Amount per GL
2019/06/07 11614 VAT RECOVERY Maximum Profit Recovery PTY LTD R 796 741,24

Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy
Inadequate review of the Annual Financial Statements before submission for audit

1. Perform a detailed analysis and review of the expenditure accounts as per the GL (2018-19 and 2019-20) to identify the possible missclassifications;

2. Obtain the supporting documents for the transactions which are possibly missclassified and review the support to determinne the descriptions and nature of the services/goods;

3. Classify/reclassify the transaction as identified in the correct accounts as per the support's description and nature of goods/services;

15-Jul-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

Ex 317 Comm 111 - General Expenditure: Overstatement of general expenditure and understatement of Prepaid expenditure
During the audit of General Expenditure-Membership fees, we have identified that Salga Membership fees invoice no 13586 for the 2019/2020 financial year for an amount of R3 409 493 paid on the 30/04/2019 has been recorded as General expenditure -Membership fees in the 2018/19 financial year. As this relates to the next financial year this amount should have been recorded as a pre-payment and only expensed in the next financial year.
Improper record-keeping of payments made on projects.
Improper reconciliation controls have been implemented to ensure that WIP payments are accurately valued.

1. The membership fees transaction in question will be reviewed against the invoice and the comparatives adjusted accordingly to record and disclose the pre-payment;

2. Detailed cut off tests will be done on the GL accounts to ensure that transactions are recorded in the correct financial year (in conjunction with bank reconciliations);

4. Management to ensure that a review of AFS (with emphasis on prior period errors) is done alongside the supporting documentation in order to ensure that amounts are transferred to the AFS at accurate figures.
1. An analysis of the entire GL expenditure accounts was performed for the transaction ending December 2019, and the mapping has been changed in order to correctly classify all the expenditure accounts in the AFS.

28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 312 Comm 109 - Repairs and maintenance: Internal stock consumption value not quantified
During the audit of repairs and maintenance we noted that stock consumption as indicated below is recorded under repairs and maintenance, however the value of the stock issued is not indicated in the internal stock issue report provided by management only the quantity is indicated and the reports are not signed by any official of the municipality indicating the preparer and the reviewer. based on the above accuracy and validity of the stock consumption recorded under repairs could not be confirmed.

GL Transaction date Transaction description per GL Amount per GL
2018/07/11 Internal Stock Consumption 60 000,00
2019/03/31 Internal Stock Consumption 300 000,00
2019/02/28 Internal Stock Consumption 254 400,00

Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy
1. The stock custodians/store managers to prepare monthly reports based on the sotck issue and GRV documentation (with stock values) and submit these to BTO office for review;

2. BTO office to reconcile the stock issues and GRVs with the GL on a monthly basis and such reconciliation singed by both the preparer and reviewer;
1. Stock issued and used (reports) have not yet been validated to ensure that values are included and correctly recorded in the GL.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 306 Comm 105 - Journals: scope limitation: bulk purchases
The following information requested in RFI 73 dated:13 September 2019 was not provided for audit. Issue 79 was raised with regard to the outstanding information which was communicated in communication of audit findings no. 37 however the information was not submitted with the responses provided by management. The municipality was given a second opportunity to submit the information after the communication of audit findings was due however the information mentioned below was still not submitted. This finding is to inform management of information not submitted and no additional information will be accepted subsequent to this issue, only management responses will be accepted.

23 2019/06/30 30/06/2019 Reverse of journal back to Bulk Purchases Bulk Purchases 1 562 760,00
2019/06/30 30/06/2019 Reverse of journal back to Bulk Purchases Repairs and maintenance 1 562 760,00

There is a lack of proper record keeping by management.
1. Sort and file the support for the journal in question for audit by the AGSA pertaining to prior year findings.

2. Information to be communicated and submitted timeosly to AGSA, register of RFIs and CoAFs to be kept and reconciled on a frequent basis with that of the AGSA to ensure that all information has been attended to and provided to the AGSA and that all findings have been adequately responded to by management.

3. A separate file will be kept at the CFO's office pertaining to the routine and non-routine (mostly year end journals) together with the supporting evidence.

1. Information relating to journal and the related support is yet to be reviewed and resubmitted to AG.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 294 Comm 100 - Journals: Repairs and maintenance 2017/18 Invoice incorrectly reversed from 2018/19 year and scope limitation
1.During the audit of journals we noted that invoice no 000003429 dated 30/06/2018 (2017/18) relating to bulk purchases was incorrectly reversed from the 2018/19 year as detailed below:

No Date Ref Description Debit Credit Account Amount per the support Diff
40 2019/06/30 PR Reversal of incorrect entry 1 169 251,03 Expenditure: repairs R1344 638 (175 386,97)
2019/06/30 PR Reversal of incorrect entry 1 169 251,03

Upon reversal of the 2017/18-year invoice incorrectly recorded in the 2019 year invoice no 000003429 dated 30/06/2018 2018 invoice was incorrectly taken out from 2019 records as an amount excluding VAT was taken as amount inclusive and VAT. Instead of DR payable with R1 344 638, CR Bulk purchases with R 1 169 251.03 and CR VAT with R175 388 the journal below was processed:
Dr payable R1 169 251.03
CR VAT R152 511
CR Bulk purchases R1 016 740

Then the above journal was corrected as follows:

Dr bulk purchases R1 016 740
CR Repairs and maintenance R 1 016 740

and the correct reversal was later done as follows:
DR payable R1 344 638
CR Bulk purchases R1 169 251 .03
CR VAT R175 388
based on the above

Repairs is incorrectly credited with R1 016 740(understated)
VAT is incorrectly credited with R152 511 (understated)
Payable incorrectly debited with R1 169 251.03(understated)

2.Supporting documents for the following journals was not submitted:
No Date Ref Description Debit Credit
7 2019/06/30 30/06/2019 Capitalisation of Expenditure. Repairs and maintenance 6 528 435,00
2019/06/30 30/06/2019 Capitalisation of Expenditure. Repairs and maintenance 6 528 435,00

44 2019/06/30 SS Correction of Electricity for boreholes expenditure recorded in repairs Repairs and maintenance 1 040 839,68
2019/06/30 SS Correction of Electricity for boreholes expenditure recorded in repairs Electricity 1 040 839,68

1.Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy
Inadequate review of the Annual Financial Statements before submission for audit.
2.There is a lack of proper record keeping by management.

1. The journal in question will be reviewed and adjustment will done on the comparatives where necessary on the affectec line items.

28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 196 Comm 74 - Water distribution losses: Limitation on auditing the water distribution losses
Per inspection of Afs note 44, there is no disclosure for a prior period error and on note 42 nothing is disclosed to indicate why the comparative amount had changed.
The afs are not adequately reviewed to ensure that they are complete and accurate
1. Prepare and review the AFS and ensure that AFS submitted are supported by reliable evidence and prior period error notes are complete and adequately disclosed.

2. Prepare working paper for all the prior period error with supporting calculations and evidence.
The AFS have been updated to ensure that chnages relating to any prior period errors have supporting listings. Refer to the prior period audit file.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 169 Comm 76 - Contracted services: Insufficient appropriate to support the kilometres claimed for water tinkering
Background
In the beginning of 2017/18 financial year, municipality entered into a contract with Ziggy Investment CC tender number NMMDM 16/17/03 IDM for "Hire of trucks for draught relief, water and sanitation services for a period of two years on as and when required basis".

The scope of work was to provide the municipality with trucks for the delivery of portable water to Polypropylene of varying sizes ranging from 2500 litres to 20000 litres placed throughout the District.

As per the inspection of the special conditions of the contract the following were noted in terms of the payment:
"3. Payment
3.3 Kilometres will be calculated from the hydrant not from the site of the contractor"

During the audit of contracted services, we could not confirm the kilometres claimed for water tinkering as per the log sheets. The log sheets for kilometres claimed were not clear as to which areas in the villages where Ziggy Investment CC went to deliver water. Therefore, we could not confirm the start point location and the end point location to verify whether the kilometres claimed are accurate.

Furthermore, it was noted that different kilometres were claimed for water delivered in the same villages.

Below are some examples where there are different kilometres claimed for delivery of water at the same villages:
Municipality: Mahikeng Local Municipality
Invoice number: ZT0145
Water tinkering in Mafikeng villages
Date Work description/ villages KM Reading beginning KM Reading End Km Claimed
2018/08/07 Seweding/Dibate/Koikoi/Magogo/Tsetse 247707 247887 180
2018/08/08 Seweding/Dibate/Koikoi/Magogo/Tsetse 247887 248067 180
2018/08/09 Seweding/Dibate/Koikoi/Magogo/Tsetse 248067 248307 240
2018/08/10 Seweding/Dibate/Koikoi/Magogo/Tsetse 248307 248487 180
2018/08/13 Seweding/Dibate/Koikoi/Magogo/Tsetse 248487 248687 200
2018/08/14 Seweding/Dibate/Koikoi/Magogo/Tsetse 248687 248887 200
2018/08/15 Seweding/Dibate/Koikoi/Magogo/Tsetse 248887 249107 220
2018/08/16 Seweding/Dibate/Koikoi/Magogo/Tsetse 249107 249347 240
2018/08/17 Seweding/Dibate/Koikoi/Magogo/Tsetse 249347 249567 220

The municipality does not confirm the kilometres claimed in the log sheets provided by Ziggy Investments CC before processing payments.
1. The job cards for water tankering were revised for implementation from December 2019. The job card is deemed to be clear and have sufficient fields to determine the Kms travelled and the areas where the water is delivered.

2. The job cards to be reviewed on a monthly basis by Technical Department prior to payment of invoices to ensure that the Kms and areas information is accurate and valid. The review to focus on, but not limited to:
(a) Kilometers claimed;
(b) Litres of water delivered;
(c) Exact villages;
(d) Confirmations by the receiver of water;
This information should be confirmed for accuracy and validity;

3. Expenditure for water tankering per the GL will be reconciled with the actual performance achieved for the month/quarter to ensure completeness thereof.
1. The job cards has been revised. Refer to attachment <Ex 223 Comm 85>

Reconciliations of expenditure and information contained in the job cards is yet to be done.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 115 Comm 52 - Water tinkering- Inadequate processes in place to confirm delivery of services relating to water tinkering and inadequate contract management
No detailed audit findig in the managemnt report

1. Management to improve processes of water delivery confirmation by having a representative being on location to confirm the following:
- the amount of water (in litres) that is being delivered
- the location of where the water is being delivered to ensure the correct distance is being claimed

2. The representative and the delivery person alongside a representative of the village of where the water is being delivered will sign the job card detailing the location and quantity of water being delivered

3. The job cards to be reviewed on a monthly basis by Technical Department prior to payment of invoices to ensure that the Kms and areas information is accurate and valid. The review to focus on, but not limited to:
(a) Kilometers claimed;
(b) Litres of water delivered;
(c) Exact villages;
(d) Confirmations by the receiver of water;
This information should be confirmed for accuracy and validity;

4. Expenditure for water tankering per the GL will be reconciled with the actual performance achieved for the month/quarter to ensure completeness thereof.
1. The job cards has been revised. Refer to attachment <Ex 223 Comm 85>

Reconciliations of expenditure and information contained in the job cards is yet to be done.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 130 Comm 57 - Contracted services: No sufficient appropriate audit evidence that services
Inadequate supporting documents have been provided to determine if the municipality actually received the water tinkering services. During the testing of contracted services relating to water tinkering we spoke to the site inspector who indicated that the control that the municipality has in place to ensure that water deliveries by the service provider takes place is to have any community member sign the delivery sheet as proof that water was actually delivered. The municipality does not have any designated people from municipality on site to verify these deliveries.
As part of the audit to test the water tinkering expense of R 13 296 505 disclosed in note 24 for contracted services we performed the following:
See below tables with details:
We contacted a sample of villagers per the delivery sheets to confirm if water was actually delivered and out of a sample of 29, more than 90% of the contact details on the delivery sheets were invalid numbers. Some of the numbers were duplicated and some of the numbers were incomplete.
The following issues were identified from the villagers who actually responded
• Villagers are buying water from the supplier’s trucks
• Water was last delivered in 2018 for some villages
• It seems like the daily schedule forms are falsely completed – some of the people who supposedly completed the schedule do not reside in the villages.
amount claimed per invoice to the supporting documents for the amount claimed.
Recipient at the villages Village Capacity Contact details Response from the recipients
Date:01 August 2018
Tshepo Mebe Lomanyaneng 10 000 litres 073 991 2488 Voicemail
Tshepiso Majemantsho 10 000 litres 082 997 4300 Number does not exist
Sofy Medupe Lomanyaneng 10 000 litres 062 244 3663 Voicemail
Anele Tasa Majematsho 10 000 litres 082 997 4300 Number does not exist
Thabo Akompe Lomanyaneng 10 000 litres 062 520 6932 Voicemail

Recipient at the villages Village Capacity Contact details Response from the recipients
Date:02 August 2018
Tiny Mopelwa Lomanyaneng 10 000 litres 083 736 3924 Supplier is selling water to the residents
Tshidi Majemantsho 10 000 litres 078 552 9414 Delivered once a month
Mmepelo Setlopo 10 000 litres 072 779 4782 Voicemail
Sebati M Majematsho 10 000 litres 072 774 192 Number was incomplete
Tokiwa Mosenki Setlopo 10 000 litres 0745074070 Doesn’t reside in Setlopo. Resides in Mapetla

Receipient at the villages Village Capacity Contact details Response from the recipients
Date:06 August 2018
Kefilwe Majemantsho 10 000 litres 082 766 1719 Voicemail
Josephe Rampo Tsobwane 10 000 litres 076 606 1824 Voicemail
Tebogo Diphoko Lekung 10 000 litres 083 370 4229 Last delivered in April 2019
Pref Romkuka Majemantsho 10 000 litres 078 204 8785 Doesn’t reside in Majemantsho, resides in Tigane Kleksdorp
Modise Majemantsho 10 000 litres 076 324 758 Incomplete number
S Matairi Majemantsho 10 000 litres 083 359 9246 Voicemail

Municipality: Mahikeng Local Municipality
Invoice number: ZT0151
Water tankerings

Receipient at the villages Village Capacity Contact details Response from the recipients
Date:07 February 2019
V Tau Majemantsho 10 000 litres 076 600 2469 Last delivered in 2018
Sechaba L Majemantsho 10 000 litres 062 662 0011 Doesn’t reside in Majemantsho, resides in Polokwane
David Ghwayi Moathlodi 5 000 litres 084 462 2325 Voicemail
P Setlhare Signal Hill 2 500 litres 063 149 9013 Voicemail
Bonolo Monaneng Signal Hill 2 500 litres 076 252 5399 Voicemail

Municipality: Ramotshere Moilwa Local Municipality
Invoice number: ZT0151
Water tankerings

Receipient at the villages Village Capacity Contact details Response from the recipients
Date:24 February 2019
Kgaugelo Wuni Willow park 10 000 litres 076 600 2469 Last delivered in July 2018
Rabokama Kedisalatso Willow park 5 000 litres 062 662 0011 Doesn’t reside in Majemantsho, resides in Polokwane
Annah Moopi Willow park 10 000 litres 084 462 2325 Voicemail

Municipality: Mahiken Local Municipality
Invoice number: ZT0152
Water tankerings

Receipient at the villages Village Capacity Contact details Response from the recipients
Date:08 March 2019
Keitumetse Tloung 10 000 litres 067 100 553 Number incomplete
Dimokotso Phothi Mocoseng 10 000 litres 084 669 0140 Number doesn’t exist
Papi Dikube Lomanyaneng 10 000 litres 076 155 2878 Delivered once a month
James Molehe Majemantsho 2 500 litres 078 182 3247 Voicemail
Johannes Mootehi Tloung 10 000 litres 074 909 0111 Voicemail

The municipality does not confirm delivery of water and sanitation services. No one follows up by calling the villagers to confirm whether the service was rendered or not
1. Management to improve processes of water delivery confirmation by having a representative being on location to confirm the following:
- the amount of water (in litres) that is being delivered
- the location of where the water is being delivered to ensure the correct distance is being claimed

Reconciliations of expenditure and information contained in the job cards is yet to be done.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

Ex 215 Comm 81 - Prior period error: Information relating to adjustments on repairs and maintenance not submitted for audit
During the audit of prior period errors, it was noted that municipality made the following adjustments relating to the repairs and maintenance between the prior year audited financial statements and the corresponding amount in the 2018/19 financial year as follows:

Component PY audited AFS CY Comparatives Difference Prior correction note
Repairs and maintenance - 11 212 637,00 - 10 031 980,00 1 180 657,00 1 180 657,00

However, supporting documents relating to the below adjustments were not submitted for audit as per the RFI 57:

Account No As previously stated Adjustments Reclassified from inventory write down Reclassification from consumables Restated balance
O1544-1/IE00651/F0041/X116/R04 34/001/IN 598 210,57 - 275 725,16 322 485,41
O2537-1/IE00651/F0041/X146/R04 34/001/IN 4 668 396,69 5 091 233,96 9 759 630,65
D0001/IZ00012/F0002/X049/R0433/001/FIN ( - -7 262 873,21 -531 268,14 - 7 794 141,35
O0001/IE00534/F0041/X146/R0434/001/WS (M 1 000 489,80 1 000 489,80
5 266 607,26 -2 447 364,41 -531 268,14 1 000 489,80 3 288 464,51

There is a lack of proper record keeping and the non-submission of documents requested by the auditor.
1. Sort and file the support for the journal in question for audit by the AGSA pertaining to prior year findings.

3. A separate file will be kept at the CFO's office pertaining to the routine and non-routine (mostly year end journals) together with the supporting evidence.

1. The finding relates to amounts reported in the statement of financial performance in 2017/18 and therefore is no longer applicable.
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

COMMITMENTS

Ex 71 Comm 35 - Commitment register includes negative amounts
During the inspection of the commitment register we noted that there are commitments that are disclosed with a negative balance. The payments made on these commitments exceeded the original contract value
The contract amount and payments made on contracts may have been incorrectly captured on the commitment register.

1. Compile the commitments register and update on a monthly basis based on the contract register;
(a) Management to also thoroughly review the payments to be made on such contracts against the contract value to ensure that payments are still within the contract value or the variation order.

2. Agree all the contracts identified, variation orders, extentions, payments made and retention fees to the actual contracts and payment vouchers respectively to ensure that amounts are accurate and valid;

3. Reconcile the commitment register with the WIP Register, the approved procurement plan, the IDP (projects as planned in the IDP) and the general ledger to ensure that the register is complete and all projects are included as necessary;
Note - The contract register will be reconciled with the tender register to ensure that all and most recent contracts are also included.

4. Compile a clearly referenced POE/audit file for the contract register with sufficient and appropriate evidence (contracts and payment vouchers/certificates); and also ensure that such information safely kept in the records management office;

5. Update and monitor the register on a frequent basis in conjunction with the contract register to ensure that the register stays up to date with relevant transactions;

6. Senior management to review the register after compilation as a control to ensure that the register is complete and transactions are valid and accurate.
1. Commitment Register has been reviewed and no negative amounts were noted.
15-Jul-20
1. Maine
2. BDO/MMM
3. CFO
30-Jul-20

Ex 121 Comm 74 - Commitments: Contract awarded but not included in the Commitment register

The following contract was identified in the contract register but it was not recorded or included in the Commitment register

Inadequate review of financial statements and related registers before submission for audit

5. Update and monitor the register on a frequent basis in conjunction with the contract register to ensure that the register stays up to date with relevant transactions;

Ex 161 Comm 105 - Current year commitment: Difference between auditor’s calculation and the register
The following differences were noted between the commitment register and the auditor’s recalculation on various project's commitments.
Lack of proper record keeping to ensure that information used to compile this register is accurate, relevant and complete.

5. Update and monitor the register on a frequent basis in conjunction with the contract register to ensure that the register stays up to date with relevant transactions;

6. Senior management to review the register after compilation as a control to ensure that the register is complete and transactions are valid and accurate.
The commitments register has been updated to include all suppliers, supporting documents have been included in the audit file.
15-Jul-20
1. Maine
2. BDO/MMM
3. CFO
14-Aug-20

Ex 203 Comm 75 - Commitments: Prior year adjustment not included in the notes to the financial statements

During the detail testing of commitments, it was noted that the prior year (2017/18) audited amount on commitment was adjusted in the corresponding current year (2018/19) amount and no adjustment was disclosed in annual financial statements note 31-commitments nor in note 44-prior- year adjustments
Lack of internal controls to ensure financial information is prepared, reviewed and reconciled for accuracy
1. A separate working paper and audit file will be prepared and kept for prior period errors;

2. The working paper and audit file will be reviewed thoroughly by the relevant parties/senior officials to ensure completeness thereof prior to disclosure in the AFS.
The commitments register has been updated to include all suppliers. Any adjustments made are supported by listings that agree to the correcting amount. Supporting documents have been included in the audit file.
15-Jul-20
1. Maine
2. BDO/MMM
3. CFO
14-Aug-20

Ex 208 Comm 78 - Commitments - Commitments are misstated as amounts disclosed as current year payments do not agree to supporting documents

During the audit of commitments, we noted that the current year expenditure as disclosed in the commitments register do not agree to the payment certificates. The following differences were noted:

Current year payments are understated resulting in a possible overstatement of commitments by R39 239 264,36

5. Update and monitor the register on a frequent basis in conjunction with the contract register to ensure that the register stays up to date with relevant transactions;

6. Senior management to review the register after compilation as a control to ensure that the register is complete and transactions are valid and accurate.
1. The commitments register has been reveiwed for accuracy and the all the related contract payment vouchers have been reviewed to ensure that all the payments have been taken into account.
15-Jul-20
1. Maine
2. BDO/MMM
3. CFO
14-Aug-20

Ex 210 Comm 78 - Commitments: Project not included in commitments register and we also could not confirm the contract amount. We could therefore not confirm the commitment amount.

The following projects were not disclosed in the commitments register. Further management did not provide us with the appoint letters/ MOA in order for us to confirm the contract amount. we were therefore unable to determine the commitment as at 30/06/2018 and 30/06/2019
Management did not correctly reconcile the payments on the projects against supporting documents
There is a limitation on auditing commitments

5. Update and monitor the register on a frequent basis in conjunction with the contract register to ensure that the register stays up to date with relevant transactions;

Ex 211 Comm 78 - Commitments: Completed projects incorrectly disclosed as commitments

The following projects marked as complete on the WIP register were incorrectly disclosed as commitments

Management did not correctly reconcile the payments on the projects against supporting documents
Commitments are overstated by R12 357 062,82
1. Compile the commitments register and update on a monthly basis based on the contract register;
(a) Management to also thoroughly review the payments to be made on such contracts against the contract value to ensure that payments are still within the contract value or the variation order.

5. Update and monitor the register on a frequent basis in conjunction with the contract register to ensure that the register stays up to date with relevant transactions;

Ex 280 Comm 103 - Commitments: Limitation on auditing commitments from projects being implemented by Sedibeng

The municipality has projects that are being implemented by SW which were still ongoing at year end. The projects were however not disclosed in the commitments register. The municipality could not provide the appointment letters or contracts for the contractors executing these projects for us to determine the contract values that was requested in RFI 158. We therefore could not calculate what the commitment amounts should have been at year end. Below is a schedule of current year payments on these projects
The municipality did not keep the record of projects they are being implemented by SW on behalf of the municipality
1. Obtain the relevant contracts from Sedibeng Water (perhaps obtain their contract register as well) and include in the contract register.

2. Compile the commitments register and update on a monthly basis based on the contract register;
(a) Management to also thoroughly review the payments to be made on such contracts against the contract value to ensure that payments are still within the contract value or the variation order.

3. Agree all the Sedibeng Water contracts implemented on behald of NMMDM identified, variation orders, extentions, payments made and retention fees to the actual contracts and payment vouchers respectively to ensure that amounts are accurate and valid;

4. Reconcile the commitment register with the WIP Register, the approved procurement plan, the IDP (projects as planned in the IDP) and the general ledger to ensure that the register is complete and all projects are included as necessary;

5. Compile a clearly referenced POE/audit file for the contract register with sufficient and appropriate evidence (contracts and payment vouchers/certificates); and also ensure that such information safely kept in the records management office;
The commitments register has been updated to include all suppliers, supporting documents have been included in the audit file.
15-Jul-20
1. Maine
2. BDO/MMM
3. CFO
14-Aug-20

Ex 285 Comm 98 - Commitments: Understatement of commitments
The following commitment was omitted from the commitments register

Project Contract amount year to date expenditure
Upgrading of Water Supply in Ward 19: Glowing Sunset Trading 38 -Sedibeng Implementing agent R13 314 573 R11 316 926
Management did not ensure that all commitments were disclosed.

1. Obtain the relevant contracts from Sedibeng Water (perhaps obtain their contract register as well) and include in the contract register.

5. Compile a clearly referenced POE/audit file for the contract register with sufficient and appropriate evidence (contracts and payment vouchers/certificates); and also ensure that such information safely kept in the records management office.
The commitments register has been updated to include all suppliers, supporting documents have been included in the audit file.
15-Jul-20
1. Maine
2. BDO/MMM
3. CFO
14-Aug-20

CASH FLOW STATEMENT

Ex 202 Comm 97 - Cash flow statement differences in recalculation
The following differences were noted between the municipality's disclosed cash flow statement, and the recalculated cash flow statement:

2019 ANNUAL FINANCIAL STATEMENTS

CASH FLOW FROM OPERATING ACTIVITIES AFS 2019 Recalculated Difference
Receipts
Sales of goods and services 1 891 567,00 2 417 549,00 525 982,00
Grants 1 152 312 946,00 1 155 140 000,00 2 827 054,00
Interest income 22 308 966,00 22 308 966,00 -
Donation received - - -
1 176 513 479,00 1 179 866 515,00 3 353 036,00
Payments
Employee costs (318 319 255,00) (316 599 656,00) 1 719 599,00
Suppliers (417 275 068,00) (406 107 693,00) 11 167 375,00
Finance cost (4 492 000,00) - 4 492 000,00
Total payments (740 086 323,00) (722 707 349,00) 17 378 974,00
Net cash flows from operating activities 436 427 156,00 457 159 166,00 20 732 010,00

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (237 470 130,00) (341 159 275,00) (103 689 145,00)
Proceeds from the sale of Property, plant and equipment (356 497,00) - 356 497,00
Acquisition of financial assets (20 048,00) (20 048,00) -
Net cash flows from investing activities (237 846 675,00) (341 179 323,00) (103 332 648,00)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 198 580 481,00 115 979 843,00 (82 600 638,00)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 101 716 227,00 101 716 227,00 -
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 300 296 708,00 217 696 070,00 (82 600 638,00)

2019 ANNUAL FINANCIAL STATEMENTS

CASH FLOW FROM OPERATING ACTIVITIES AFS 2018 Recalculated Difference
Receipts
Sales of goods and services 2 252 824,00 200 912,00 (2 051 912,00)
Grants 817 525 286,00 20 106 406,00 (797 418 880,00)
Interest income 11 233 629,00 - (11 233 629,00)
Donation received 8 000,00 - (8 000,00)
831 019 739,00 20 307 318,00 (810 712 421,00)
Payments
Employee costs (320 657 226,00) 2 670 777,00 323 328 003,00
Suppliers (298 829 525,00) 110 106 002,00 408 935 527,00
Finance cost (5 725 297,00) - 5 725 297,00
Total payments (625 212 048,00) 112 776 779,00 737 988 827,00
Net cash flows from operating activities 205 807 691,00 133 084 097,00 (72 723 594,00)

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (116 483 653,00) (1 593 474,00) 114 890 179,00
Proceeds from the sale of Property, plan and equipment - - -
Acquisition of financial assets - - -
Net cash flows from investing activities (116 483 653,00) (1 593 474,00) 114 890 179,00

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 87 892 719,00 87 892 719,00 -
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 13 823 500,00 13 823 500,00 -
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 300 266 239,00 101 716 219,00 -

Improper controls over the review of the AFS to the supporting schedules.
Impact
The cash flow statement is materially misstated.

1. A detailed and appropriate working paper for the cash flow statement will be compiled and updated together with the AFS;

2. All the figure disclosed in the cash flow statement will be referenced to the notes which will then be referenced to the working paper with accurate and valid supporting schedules and workings;

3. Prior period adjustments will be made based on the compiled workings and the AFS adjusted accordingly;

4. Management will review the working paper and the AFS prior to sumission for audit to ensure that the figures disclosed accurate and valid.
1. Detailed working paper for the cash flow statement has been populated yet.
29-Jul-20
1. Maine
2. BDO/MMM
3. CFO
28-Aug-20

RESERVES

134. ISS.97-Ex 97 Comm 47 - Limitation on auditing the accumulated surplus balance
We were unable to audit the accumulated surplus of R4 858 189 370 as disclosed in the statement of changes in net assets due to the following:

1. The statement of changes in net assets disclose an amount of R2 903 709 556 disclosed as opening balance as previously reported but it is not clear which financial year this amount relates to. The accumulated surplus balance in the 2016-17 audited AFS was R2 894 016 400.

2.There is an amount of R1 494 889 938 disclosed as "correction of errors" however it is not clear which financial year these errors relate to and what makes up this balance as nothing was disclosed in relation to these adjustments.

3. 2018-19 disclosure note 44 (prior year adjustments) indicate prior year adjustments of R194 084 048 against 2017-18 accumulated surplus but these are not reflected as adjustments against the prior year balance of accumulated surplus in the statement of changes in net assets.
Financial statements were not properly reviewed before being submitted for audit
1. A detailed and appropriate working paper for the statement of changes in net assets will be compiled and updated together with the AFS;

2. All the figure disclosed in the statement will be referenced to the working paper with accurate and valid supporting schedules and workings;

3. Prior period adjustments will be made based on the compiled workings and the AFS adjusted accordingly;

4. Management will review the working paper and the AFS prior to sumission for audit to ensure that the figures disclosed accurate and valid.
1. The working has been populated for the 2019/20 AFS and corresponding figure.
29-Jul-20
1. Maine
2. BDO/MMM
3. CFO
28-Aug-20

CONTINGENT LIABILITIES

Ex 183 Comm 74 - Contingent liabilities: Incomplete disclosure

During the testing of contingent liabilities, it was discovered that certain claims per the attorney’s confirmations were not included in the afs disclosure note 32-contingencies as per the below table
Parties Case Number Description of matter Amount per attorneys confirmation Attorneys Remarks
Kgomo attorneys

MAQS Construction and Plant Hire CC/NMMDM
Case No: 1302/2017 MAQS Construction, represented by their liquidators instituted action against the municipality for payment of R23 238 195.88 emanating from contract entered into between the parties. R23 238 195.88 Matter still pending
NMMDM vs Keitumetse Moroka and others Loss of benefits R172 962.50 paid Matter still pending negotiations.
NMMDM vs Public Protector Review application R450 000 Matter pending, awaiting date and to file supplementary affidavit
NMMDM vs Motshabi and others Vehicle allowance R279 837.12 outstanding Court attended on the 17/07/2019 and judgement was reserved.
Motshabi and Associates

Izandla Development Engineers We were instructed to apply to the High Court for cancellation of the contract due to poor performance. R120 000 We consulted with the project manager and requested further documents.

We have not been provided with the relevant documents and we assume the municipality is no longer proceeding with the matter.
Bagale Consulting (PTY)LTD Bagale instituted a civil claim for unpaid and outstanding invoices for work done for an amount of R261 887.13 R150 000 We have defended the matter and the plaintiff made an offer of withdrawing the action against the municipality to which was communicated to the client for instruction.
We are awaiting the instruction from the municipality on whether to allow the plaintiff to withdraw the action and each party to pay its costs.
Khethayo Constructions Joint Venture Claim by the municipality for failing by the company to construct and install toilets and constructing waste collectors in the amount of R5 498 433.80 R500 000 Pleadings have been closed, both parties have discovered and the matter is set down for a pre-trial conference on the 11th November 2019.
Smit Standton

Mvula Trust Suit of Central District Municipality(counter claim) 1 625 927.99 File was archived on 21 November 2017.
Semaushu Attorneys
WSSA Bigen Africa JV and NMMDM Alleged claim against the Municipality for services rendered R117 059,06 and R358 576,67 respectively. 3 702 855,73 The matter is still ongoing and it is at pleading stage.

Information is not communicated internally in order to make necessary adjustments timeously. Management does not obtain all litigations for the contingencies from their legal representatives.
1. All the cases per the litigation register will reviewed in conjuction with the lawyers to ensure that these are valid cases which require disclosures.

2. Legal confirmation will be issued to the lawyers pertaining to the current cases and update the litigation register with the confirmed cases.

3. Update the AFS with the updated litigation register to ensure that all the cases has been disclosed.

4. Information to be communicated timeosly with AGSA, register of RFIs and CoAFs to be kept and reconciled on a frequent basis with that of the AGSA to ensure that all information has been attended to and provided to the AGSA and that all findings have been adequately responded to by management.
1. Litigation register has been reviewed and updated accordingly.

All litigations which have not been settled have been included in the Litigation register.
29-Jun-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

Ex 254 Comm 90 - Contingencies: Disclosure not as per GRAP 19 requirements
The following litigation has not been disclosed as per GRAP 19 requirements

Contingent Liabilities
1) Distant Star Trading 55 R190 000
Claim is for payment due for services rendered. The matter is still ongoing and it is at pleading stage.

2) Bagorosi Civil projects
In August 2014, Bagorosi Civil projects instituted a claim against the municipality for unpaid outstanding invoices. The matter is pending.

3) Florida Nshwe R24 514
Accident claim against municipality; allegedly caused by one of the employees of the municipality. Matter is currently at pleading stage.

4) Shomolekae Tebogo R8 850
Claim is for damages suffered to the complainant’s vehicle due to potholes.

5) Johannes Delport R28 171
Claim is for damages sustained on motor vehicle due to potholes. Parties are currently at pleading stage.

6) Quantibuild (Pty) Ltd R527 648
Claim against municipality is for outstanding payment for retentions and suspension of work, and labour unrest.

7) Pelken CC R938 858
Ngaka Modiri Molema District Municipality received a notice requesting an appointment of an Arbitrator in order to facilitate alternative dispute resolution mechanism in this matter regarding the alleged outstanding interest from the capital amount for the farm that was purchased by the municipality from Mr Derik Pelser.

8) Sharon's Maintenance and Electrical R2 227 898
Sharon’s Maintenance and Electrical was appointed by the Ratlou Local Municipality (RLM) for the Upgrading of Bulk Water Supply – Logageng. The RLM and the Municipality entered into a Memorandum of Understanding for the project and had budgeted R10 329. Sharon's Maintenance and Electrical has now approached the Ngaka Modiri Molema District Municipality for the payment of the outstanding amount. Ngaka Modiri Molema District Municipality had paid the budgeted amount.

9) Geldenhyus R201 341 200
Claim against municipality is for water services rendered and not paid for.

10) Khethwayo Construction CC R2 275 959
Khethwayo Construction CC instituted the claim against the municipality for outstanding payment for services rendered.

Contingent Assets

1) Naphtronics (Pty) Ltd R15 075 406
This was an application to set aside the appointment of Naphtronics on the basis that the procedure used to appoint them did not comply with the SCM of the municipality. The order setting aside the contract was granted. Naphtronics have applied for leave to appeal

Management did not adequately review the disclosure note for contingencies in the AFS, to ensure that the contingencies are properly disclosed

1. All the cases per the litigation register will reviewed in conjuction with the lawyers to ensure that these are valid cases which require disclosures and discloses as such in terms of GRAP 19 paragraphs 101 and 106;

2. Detailed review of the disclosure will be done to ensure that all the cases as per the register and confirmations are properly and sufficiently disclosed according to GRAP 19.
1. Litigation register has been reviewed and updated accordingly.

All litigations which have not been settled have been included in the Litigation register.

29-Jun-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

Ex 284 Comm 97 - Incomplete Contingent Liabilities
Through discussions with management, the supplier CivilKox Trading Enterprise has instituted a claim against the municipality for unpaid invoices for construction work done at Ditsobotla fire station.

Invoice no NMMDM/003 Total amount incl.vat R2 019 394,25, dated 03/04/2019
Invoice no NMMDM/002 total amount incl vat R 2 364 829,00, dated 03/04/2019
Invoice no NMMDM/001 total amount incl vat R 2 379 153,35, dated 03/04/2019

Management is disputing the claim indicating that there is no appointment letter or SLA between the municipality and the contractor. Management indicated that though the contractor did some work it is not work the claim amount. The municipality should therefore disclose a contingent liability in this regard.
Management did not adequately review all the claims instituted against the municipality at year end.

1. All the cases per the litigation register will reviewed in conjuction with the lawyers to ensure that these are valid cases which require disclosures.

2. Legal confirmation will be issued to the lawyers pertaining to the current cases and update the litigation register with the confirmed cases.

3. Update the AFS with the updated litigation register to ensure that all the cases has been disclosed.
1. Litigation register has been reviewed and updated accordingly.
All litigations which have not been settled have been included in the Litigation register.
29-Jun-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

Ex 322 Comm 113 - Contingent liabilities: Claim amount not disclosed
During the audit of Contingent liabilities, we have identified that litigation instituted against the municipality by Bagorosi Civil projects has been disclosed in the AFS. However, no claim amount was disclosed.
The claim amount as per the legal confirmation is R3 387 950.21
Management failure to properly review the Annual financial statement.
1. All the cases per the litigation register will reviewed in conjuction with the lawyers to ensure that these are valid cases which require disclosures.

2. Legal confirmation will be issued to the lawyers pertaining to the current cases and update the litigation register with the confirmed cases.

3. Update the AFS with the updated litigation register to ensure that all the cases has been disclosed.
1. Litigation register has been reviewed and updated accordingly.

All litigations which have not been settled have been included in the Litigation register.
29-Jun-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

CONTINGENT ASSETS

10. ISS.184-Ex 184 Comm 74 - Contingencies: understatement of contingent assets
During the audit of contingent assets, the following differences were discovered:

Naphtronics - Disclosed amount - R15 075 406 - confirmed lawyer amount - R500 000 - Difference - R14 575 406
Information not communicated and followed up properly internally in order to make necessary adjustments timeously and keep accurate/updated documentation.
1. All the cases per the litigation register will reviewed in conjuction with the lawyers to ensure that these are valid cases which require disclosures.

2. Legal confirmation will be issued to the lawyers pertaining to the current cases and update the litigation register with the confirmed cases.

3. Update the AFS with the updated litigation register to ensure that all the cases has been disclosed.
1. Litigation register has been reviewed and updated accordingly.

All litigations which have not been settled have been included in the Litigation register.
29-Jun-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

11. ISS.249-Ex 249 Comm 88 - Overstatement of Contingent assets
As per the inspection of the legal representative (M.E Tlou Attorneys) of the municipality, the company (Fire & Emergency Vehicles (Pty) Ltd) has been fully liquidated and recommend the debt be written off.

Fire & Emergency Vehicles (Pty) Ltd- For an amount of R 1 476 278.50

Fire and Emergency Vehicle Pty (Ltd) was appointed during or about February 2010 to Supply Fire and Emergency vehicles and equipment to the NMMDM. As a consequence, the NMMDM effected payment to the tune of R 1 476 278.50. Fire and Emergency Vehicle Pty (Ltd) failed to deliver one of the five Fire and Emergency Vehicles that were pre-paid for. The Municipal Manger tried to negotiate for the delivery of the Fire and Emergency vehicle but to no avail. The Municipal Manager terminated the agreement between the NMMDM and Fire and Emergency Vehicles Pty (Ltd) that was entered into during or about February 2010. Fire and Emergency Vehicles fully liquidated and we are now awaiting liquidator’s cost estimate.

As per the inspection of the legal representative (M.E Tlou Attorneys) of the municipality, the company (Fire & Emergency Vehicles (Pty) Ltd) has been fully liquidated and recommend the debt be written off.
Management failure to assess the developments of the contingent asset at year end to ensure that the contingent asset is appropriately reflected in the financial statement
1. All the cases per the litigation register will reviewed in conjuction with the lawyers to ensure that these are valid cases which require disclosures.

2. Legal confirmation will be issued to the lawyers pertaining to the current cases and update the litigation register with the confirmed cases.

3. Update the AFS with the updated litigation register to ensure that all the cases has been disclosed.
1. Litigation register has been reviewed and updated accordingly.

All litigations which have not been settled have been included in the Litigation register.
29-Jun-20
1. Maine
2. BDO/MMM
3. CFO
29-Jul-20

UIFW

Ex 214 Comm 81 - Irregular Expenditure: Transactions recorded in incorrect period
The following payments made by municipality and classified as irregular expenditure, are not included in the appropriate financial year either due to payments relating 2020/19 or 2018/17 being included under the current financial year ended 2019/18

No Supplier Services Details Rand Value (Excld VAT) Tender No (If applicable Over/
Understatement
1 KGOMO ATTORNEYS Legal Services Invoice dated 20 April 2018 for services rendered during the period of 2017/18 R213 073,31 N/A Overstatement 2018/19
Understatement 2017/18
2 Ultimate Dynamic Udumo Aqusition of Bio-Remediation and Chlorination products Invoice dated 02 July 2019 however the services were rendered for period 27 June 2018 R933 380,00 N/A Overstatement 2018/19
Understatement 2017/18
3 MAQS REPAIRS TRADING ENTERPRISE COMMITMENT TO RESOLVE WATER CRISIS AT MOKGOLA VILLAGE Invoice dated 29 June 2018 and services were delivered durng the 2017/18 year R173 869,57 N/A Overstatement 2018/19
Understatement 2017/18
4 HIGH POINT TRADING 609 Repairs of Water Engines Overhaul Invoice dated 27 June 2018 and services were delivered durng the 2017/18 year R173 704,93 N/A Overstatement 2018/19
Understatement 2017/18
5 M.E TLOU ATTORNEYS LEGAL ADVISORS Invoice dated 05 April 2018 and services were delivered durng the 2017/18 year R76 993,05 N/A Overstatement 2018/19
Understatement 2017/18
6 MOSIRE TSIANE ATTORNEYS Legal Services Invoice is dated 29 May 2018 R587 687,20 N/A Overstatement 2018/19
Understatement 2017/18
7 PILLAR STONE TRD Procurement of promotional materials of municipal health services Invoice dated 13 August 2019 however services were rendered under the 2019/20 year, thus overstatement of 2018/19 year R127 324,55 NMMDM/037/18/19/MHS overstatement 2018/19
Inadequate review procedures

1. Reconstruction of the Irregular Expenditure register for the following financial years:
i. 2018/19
ii. 2017/18
with reference to the transactions in question and ensure that all the payments for the respective years has been reviewed against support;
The reconstraction will be based on the following:
(a) Completeness, Accuracy and Validity:
i. Reconciliation of the Contract Register and Requests for Quotations Register (RFQs) to the cashbook, for the respective financial years, to ensure that the registers accurately all include the payments made to all suppliers/service providers which the municipality contracted and paid in the repective financial year.
ii. Reconciliation of the irregular expenditure register with the contract register to ensure that all the contracts identified has been appropriately reviewed for identification of irregular expenditure;

2. Adjust the comparative figure dating back to 2017-18 financial year with the updated register;

3. Compile a clearly referenced POE/audit file for the prior period adjustments with sufficient and appropriate evidence; and also ensure that such information safely kept in the records management office;

4. Management to ensure that a review of AFS (with emphasis on prior period errors) is done alongside the supporting documentation in order to ensure that amounts are transferred to the AFS at accurate figures.
1. The process for identification of Irregular Expenditure was performed, all payments have been reviewed for both financial years ensuring the completeness of the Irregular expenditure disclosed on the AFS
1-Jul-20
1. EAVE/MNB
2. DBO/MMM
3. BTO
31-Jul-20

Ex 216 Comm 81 - Irregular Expenditure current year: Multiple Matters Occurrence

Irregular expenditure for the current year ended 2019/18 have multiple matters relating to VAT related disclosures, see below table for detailed explanation:

No Supplier Details explanation Rand Value of Irregular Expenditure Rand Value of Fruitless and Wasteful Expenditure VAT TOTAL
1 JAN MARTHINUS NYSSCHEN / GAORANOLWE INVESTEMENTS The legal attorneys of Gaoranolwe Investments collected the settlement agreement amounts of R32 608 623,82 on behalf of Gaoranolwe Investments. These amounts were placed in the attorneys Trust and not in their personal bank account.

An amount of R29 108 623,82 is supposed to be inclusive of VAT at 14% and thus municipality did not separate the value from the consideration received

The municipality also included the amount of the interest R3 500 000 as irregular whilst it actually is fruitless and wasteful expenditure.

In conclusion first is the non-disclosure of VAT resulting in the overstating of irregular expenditure register with the VAT amount

Second is the overstatement of irregular expenditure register with the interest expense amount of R3 500 000 R29 108 623,82 R3 500 000,00 R3 574 743,28 R36 183 367,10
2 Mahlangu(N.G.)Attorneys/ Azranite Investments Monies were collected on behalf of the client Azranite Investments
VAT amount of 14% of R533 595,16 was not disclosed and thus overstating irregular expenditure by R65 529,23 R533 595,16 R0,00 R65 529,23 R599 124,39
3
Aliangy enterprise Supplier charged VAT however there is no evidence supplier is a VAT Vendor

The projected misstatement will be assessed under the relevant components (Input Vat) R46 200,00 R0,00 R6 930,00 R53 130,00
TOTAL R29 688 418,98 R3 500 000,00 R3 640 272,51 R36 835 621,49
TOTAL PROJECTED MISSTATEMENT R29 941 626,55

Inadequate review processes to ensure compliance with laws and regulations and accurate record keeping

1. The 2019-20 register will be compiled as follows:
(a) Obtain the contract register to ensure that all current contracts are identified;
(b) Obtain all the bank statements to ensure all payments are taken into account in the review (bank reconciliations will also be used to identify some of the transactions for cut-off purposes);
(c) List all the irregular expenditure identified by AG and ensure that they are taken into account:
i. Review transactions based on the compiled compliance checklist in order to identify irregular expenditure;
ii. Prepare a working paper referenced to the relevant and complete supporting documents supporting the identified transactions;
iii. Update the irregular expenditure register with all the identified transactions while ensuring that these accurate and exclude VAT accordingly and disclose in the AFS;
1. The process for identification of Irregular Expenditure was performed, all payments have been reviewed for both financial years ensuring the completeness of the Irregular expenditure disclosed on the AFS
1-Jul-20
1. EAVE/MNB
2. DBO/MMM
3. BTO
31-Jul-20

Ex 226 Comm 96 - Irregular Expenditure: Completeness (Understated)
Prior years - completeness
It should be noted that issues that were raised by the AGSA in prior year ended 2017/18 financial year, were followed up in current year to ensure completeness of disclosure. The following contracts were not disclosed:
Year ended 2017/18 Year ended 2018/19
No Description of transaction/ Supplier Name Amount ('R) Included on Irregular Expenditure Schedule submitted at 30 June 2019 for the period 30 June 2018 Municipality incurred expenditure in the current year 2018/19 (Yes/No) Amount incurred in current year
(R.) Included on Irregular Expenditure Schedule at 30 June 2019
1 TOKOLLO DEBT RELIEF 2 140,81 No N/A R0,00 N/A
2 HANNATJIE VAN DER MERWE 30 926,25 No N/A R0,00 N/A
3 NMMDM 11/12/27 PMU
Glowing sunset trading (Review with PMU regarding over payment) (Lerato)
Blydeville outfall sewer upgrading 31 179 348,95 No Yes R4 240,00 NO
4 NMMDM 07/08/05 PMU 24(A)
Mbako Projects Trading cc (Lester)
Selosesha Water Supply and Mayaeyane 13 142 283,76 Yes Yes R14 840,00 YES
5 WEB REDESIGN: REYAKOPELE TRD 149 R196 750,00 No No R0,00 N/A
6 PRINTING OF ANNUAL REPORT: MASTER PEST CONTROL R195 000,00 No No R0,00 N/A
TOTAL R44 746 449,77 TOTAL R19 080,00

Inadequate implementation of review and reconciliation procedures resulting in the incomplete disclosure of irregular expenditure
1. The 2019-20 register will be compiled as follows:
(a) Obtain the contract register to ensure that all current contracts are identified;
(b) Obtain all the bank statements to ensure all payments are taken into account in the review (bank reconciliations will also be used to identify some of the transactions for cut-off purposes);
(c) List all the irregular expenditure identified by AG and ensure that they are taken into account:
i. Review transactions based on the compiled compliance checklist in order to identify irregular expenditure;
ii. Prepare a working paper referenced to the relevant and complete supporting documents supporting the identified transactions;
iii. Update the irregular expenditure register with all the identified transactions while ensuring that these accurate and exclude VAT accordingly and disclose in the AFS;

1. The process for identification of Irregular Expenditure was performed, all payments have been reviewed for both financial years ensuring the completeness of the Irregular expenditure disclosed on the AFS
1-Jul-20
1. EAVE/MNB
2. DBO/MMM
3. BTO
31-Jul-20

Ex 244 Comm 94 - Irregular Expenditure: Expenditure relating to employees outside the approved staff establishment is understated
The following employees were appointed outside the approved organisational structure but were not included in the calculation of irregular expenditure disclosed.

No Name Surname Year ended Position Amounts
1 Lehlogonolo Mokoena 2014 Manager: Office of the CFO R392 836,79
2015 Manager: Office of the CFO R419 510,00
2016 Manager: Office of the CFO R448 876,00
2017 Manager: Office of the CFO R475 809,00
2018 Manager: Office of the CFO R510 828,00
2019 Manager: Office of the CFO R364 390,64
TOTAL R2 612 250,43
2 Maruping Stemmer 2012 Manager: Disaster Management R343 536,00
2013 Manager: Disaster Management R365 868,00
TOTAL R709 404,00
TOTAL Irregular R3 321 654,43
Cause
Due to non-disclosure and reconciliation of employees outside the organizational structure
1. The working paper pertaining to the employees outside of the structure will be revisited and such employees will be confirmed to be employed outside the structure;

2. All terminations will also be taken into account for the excercise and the calculations based on the CTC;

3. Irregular expenditure register will be updated with the details and disclosed accordingly in the AFS;

4. Compile a clearly referenced POE/audit file for the prior period adjustements with sufficient and appropriate evidence; and also ensure that such information safely kept in the records management office;
1. The process for identification of Irregular Expenditure was performed, all payments have been reviewed for both financial years ensuring the completeness of the Irregular expenditure disclosed on the AFS
1-Jul-20
1. EAVE/MNB
2. DBO/MMM
3. BTO
31-Jul-20

Ex 245 Comm 94 - Irregular expenditure: Opening Balances incorrectly disclosed
. During the testing of comparative amounts related to Irregular Expenditure for 2018/19,

it was noted that the adjustments per note 44 (prior year adjustments) do not agree to the restated amounts per note 39(Irregular expenditure) and the difference amounted to the value of R369 529 663

Amounts per
2018/19 AFS (Comparative) Amounts per
2017/18 AFS Difference Note 44 - Prior Year adjustment Difference
R2 321 638 968 R1 171 401 865 R1 50 237 103 R766 965 285 -R383 271 818

2. Further RFI 57 was issued to management on 10 September 2019 were we requested supporting documents for all adjustments in note 44 and to date no information for irregular expenditure adjustments was submitted.
Insufficient reconciliation and review procedures and implementation of procedures of balances disclosed from one year to the next on the financial statements
There is a limitation in auditing the following restated amounts for irregular expenditure

Correction of error -R182 176 014,00
Less -R6 255 952,00
Restated Amount R6 255 952,00

Add Prior year corrections -R461 128 616,00
Correction of error R869 138 937,00

Irregular Expenditure - Current Year R113 197 537,00
Correction of error

Irregular Exp identified in CY relating to PY
Correction of error R102 401 465,00

R32 895 822
-R32 895 822
Absence of sufficient disclosure on the notes to financial statements in terms of changes in balances of disclosures from one year to the next

1. The irregular expenditure register for the prior year and the related disclosures will be revisited as follows:
(a) Obtain the contract register to ensure that all current contracts are identified;
(b) Obtain all the bank statements to ensure all payments are taken into account in the review (bank reconciliations will also be used to identify some of the transactions for cut-off purposes);
(c) List all the irregular expenditure identified by AG and ensure that they are taken into account:
i. Review transactions based on the compiled compliance checklist in order to identify irregular expenditure;

3. Adjust the comparative amounts based on the udpated register and prepare the necessary disclosure in the AFS;
1. The process for identification of Irregular Expenditure was performed, all payments have been reviewed for both financial years ensuring the completeness of the Irregular expenditure disclosed on the AFS
1-Jul-20
1. EAVE/MNB
2. DBO/MMM
3. BTO
31-Jul-20

Ex 305 Comm 105 - Understatement of irregular expenditure (completeness current and prior years)

In the prior year during the audit of SCM there were contracts that were identified as irregular and management had not disclosed the expenditure on these contracts as irregular. In the current financial year, we followed up on these contracts to ensure completeness of irregular expenditure disclosure. The following contracts were however not disclosed:

Year ended 2017/18

No Description of transaction/ Supplier Name Amount ('R) Included on Irregular Expenditure Schedule 30 June 2018
1 Expression of Interest: List of Professional Service Providers for PMU Projects: Mowana Consultants R1 355 191,35 No - not disclosed in register
2 Camelsa Consulting Group (Pty) Ltd R2 187 739,52 No - not disclosed in register
3 MOSIRE TSIANE ATTORNEYS R680 304,34 No - not disclosed in register
4 MOTSHABI & MODIBOA ATTORNEYS R2 032 659,55 No - not disclosed in register
5 Ratlou Rural Sanitation : Glowing sunset trading R3 347 568,50 No - not disclosed in register
6 Service, repairs & overhaul of motor vehicles, earth moving and road construction equipment owned by NMMDM: TIRISANO MMOGO TRADING & Enterprise R3 618 655,98 No - not disclosed in register
7 Service, repairs & overhaul of motor vehicles, earth moving and road construction equipment owned by NMMDM: Yovuza Properties Projects R3 232 813,17 No - not disclosed in register
8 Provision of 24 hours security services at offices, waste water treatment plants and reservoirs within NMMDM for a period of (03) three years: Tshireletso Professional Services (Lehlohonolo) R21 990 651,16 No - not disclosed in register
9 Supply and delivery of water material : Itu and Rea Projects R559 524,91 No - not disclosed in register
10 Supply of water material, repairs and maintenance of an all water and sanitation facilities: Civilkox Trading Enterprise R0,00 No - not disclosed in register
No - not disclosed in register
TOTAL R39 005 108,48
Year ended 2018/19

No Description of transaction/ Supplier Name Total Amounts incurred in current year
(R.) Included on Irregular Expenditure Schedule at
30 June 2019
1 Camelsa Consulting Group (Pty) Ltd R2 108 613,61 No - not disclosed in register
2 BAGOROSI (PTY)LTD R108 405,86 No - not disclosed in register
3 Service, repairs & overhaul of motor vehicles, earth moving and road construction equipment owned by NMMDM: TIRISANO MMOGO TRADING & Enterprise R460 386,09 No - not disclosed in register
4 Service, repairs & overhaul of motor vehicles, earth moving and road construction equipment owned by NMMDM: Yovuza Properties Projects R7 389 097,55 No - not disclosed in register
5 Provision of 24 hours security services at offices, waste water treatment plants and reservoirs within NMMDM for a period of (03) three years: Tshireletso Professional Services (Lehlohonolo) R34 261 862,10 No - not disclosed in register
6 Supply of water material, repairs and maintenance of an all water and sanitation facilities: Civilkox Trading Enterprise R15 344 317,33 No - not disclosed in register
TOTAL R59 672 682,54
Inadequate implementation of review and reconciliation procedures resulting in the incomplete disclosure of irregular expenditure
1. Reconstruction of the Irregular Expenditure register for the following financial years:
i. 2018/19
ii. 2017/18
with reference to the transactions in question and ensure that all the payments for the respective years has been reviewed against support;
The reconstraction will be based on the following:
(a) Completeness, Accuracy and Validity:
i. Reconciliation of the Contract Register and Requests for Quotations Register (RFQs) to the cashbook, for the respective financial years, to ensure that the registers accurately all include the payments made to all suppliers/service providers which the municipality contracted and paid in the repective financial year.
ii. Reconciliation of the irregular expenditure register with the contract register to ensure that all the contracts identified has been appropriately reviewed for identification of irregular expenditure;

2. Adjust the comparative figure dating back to 2017-18 financial year with the updated register;

4. Management to ensure that a review of AFS (with emphasis on prior period errors) is done alongside the supporting documentation in order to ensure that amounts are transferred to the AFS at accurate figures.
1. The process for identification of Irregular Expenditure was performed, all payments have been reviewed for both financial years ensuring the completeness of the Irregular expenditure disclosed on the AFS
1-Jul-20
1. EAVE/MNB
2. DBO/MMM
3. BTO
31-Jul-20

Ex 258 Comm 102 - Unauthorized Expenditure: Current year - Understated

During the audit of unauthorised expenditure it was noted that the following instances were not accurately disclosed as the actual unauthorised expenditure disclosed was less or in other instances more than the actual unauthorised expenditure as per auditor’s recalculation. Thus understatement of unauthorised expenditure for the period year ended 30 June 2019.

Operational Unauthorised Expenditure Comments
VOTE DESCRIPTION Operational UE
Nominal - Management Calculations Unauthorised as per Auditors recalculation Difference
Vote 1 - Executive & Council N/A N/A N/A N/A- Did not exceed vote
Vote 2 -Municipal Manager N/A N/A N/A N/A- Did not exceed vote
Vote 3 - Budget and Treasury N/A N/A N/A N/A- Did not exceed vote
Vote 4 - Corporate services support N/A N/A N/A N/A- Did not exceed vote
Vote 5 - Planning & development N/A N/A N/A N/A- Did not exceed vote
Vote 6 - Community services N/A N/A N/A N/A- Did not exceed vote
Vote 7 - District infrastructure maintenance and development R126 013 303,40 -R9 431 168,58 R116 582 134,82 Management overstated their Operational UE. The actual operational expenditure was less than the adjusted operational expenditure per budget vote.
However management inaccurately treated difference as UE
TOTAL OVERSTATEMENT OF OPERATIONAL Unauthorised EXPENDITURE R116 582 134,82
Capital Unauthorised Expenditure Comments
VOTE DESCRIPTION Capital UE Nominal -
Management Calculations Unauthorised as per
Auditors recalculation Difference
Vote 1 - Executive & Council R0,00 -R7 447,20 -R7 447,20 Understatement of capital UE
Vote 2 -Municipal Manager R0,00 R0,00 R0,00 N/A- Did not exceed vote
Vote 3 - Budget and Treasury -R198 000,00 -R4 444 098,00 -R4 246 098,00 Understatement of capital UE
Vote 4 - Corporate services support R2 241 119,31 R2 437 000,00 N/A N/A- Did not exceed vote
Vote 5 - Planning & development R120 000,00 R118 582,00 N/A N/A- Did not exceed vote
Vote 6 - Community services R0,00 R0,00 N/A N/A- Did not exceed vote
Vote 7 - District infrastructure maintenance and development R139 922 000,00 -R196 660 595,00 -R56 738 595,00 Understatement of capital UE
TOTAL UNDERSTATEMENT CAPITAL Unauthorised EXPENDITURE -R60 992 140,20

OVERALL TOTAL UNDERSTATEMENT OF Unauthorised EXPENDITURE 2018/19 R55 589 994,62
Inadequate preparation and review procedures for the accounting treatment and classification of the unauthorised expenditure

1. Revisit the unauthorised expenditure workings for the prior year and ensure that:
(a) correct figures per the approved budget and the compiled (supported) AFS are used;

2. Adjust the comparative figure dating back to 2017-18 financial year with the updated register;

4. Management to ensure that a review of AFS (with emphasis on prior period errors) is done alongside the supporting documentation in order to ensure that amounts are transferred to the AFS at accurate figures.
1. The process for identification of Unauthorised Expenditure was performed, all payments have been reviewed for both financial years ensuring the completeness of the Unauthorised expenditure disclosed on the AFS
1-Jul-20
1. EAVE/MNB
2. DBO/MMM
3. BTO
31-Jul-20

Ex 260 Comm 104 - Unauthorized Expenditure: Prior year 2017/18 misstatements
After the testing of unauthorized expenditure for the year ended 2017/18, the following misstatements were found as either overstated or understated in comparison to management calculation and disclosures:

Unauthorized Expenditure Operational Expenditure
as per Register submitted by Management Auditors recalculations
Operational UE Nominal Amount per

Approved budget annex Actual Amount
(R.) Unauthorized as per Auditors recalculation Overstatement / (understatement) Comments
Vote 1 - Executive & Council R12 935 072,72 R35 101 958,00 R22 166 886,28 R12 935 071,72 R12 935 072,72 Overstatement of UE as vote did not exceed actual expenditure
Vote 2 -Municipal Manager R2 181 107,58 R50 886 450,00 R27 109 913,42 R23 776 536,58 R2 181 107,58 Overstatement of UE as vote did not exceed actual expenditure
Vote 3 - Budget and Treasury -R34 983 935,65 R358 793 445,00 R400 441 300,65 -R41 647 855,65 -R6 663 920,00 Understatement of UE as actual expenditure exceeded vote
Vote 4 - Corporate services support R6 201 442,83 R76 172 449,00 R72 421 106,17 R3 751 342,83 R6 201 442,83 Overstatement of UE as vote did not exceed actual expenditure
Vote 5 - Planning & development R8 915 293,44 R28 082 431,00 R18 917 139,56 R9 165 291,44 R8 915 293,44 Overstatement of UE as vote did not exceed actual expenditure
Vote 6 - Community services -R9 830 364,86 R117 378 768,00 R120 817 845,86 -R3 439 077,86 R6 391 287,00 Overstatement of UE as actual expenditure was less than management calculation
Vote 7 - District infrastructure maintenance and development R18 599 339,08 R133 229 497,00 R101 998 290,18 R31 231 206,82 R18 599 339,08 Overstatement of UE as vote did not exceed actual expenditure
Unauthorized Expenditure - Capital Expenditure
as per Register submitted by Management Auditors recalculations
Description Operational UE Nominal Amount per

Approved budget annex Actual Amount
(R.) Unauthorized as per Auditors recalculation Overstatement / (understatement) Comments
Vote 1 - Executive & Council R0,00 R0,00 R0,00 R0,00 R0,00 N/A -No difference
Vote 2 -Municipal Manager R1 840 000,00 R1 840 000,00 R13 542,00 R1 826 458,00 R1 840 000,00 Overstatement of UE as vote did not exceed actual expenditure
Vote 3 - Budget and Treasury R0,00 R0,00 R1 502 730,95 -R1 502 730,95 -R1 502 730,95 Understatement of UE as actual expenditure exceeded vote
Vote 4 - Corporate services support R0,00 R0,00 R0,00 R0,00 R0,00 N/A -No difference
Vote 5 - Planning & development R0,00 R0,00 R9 094,02 -R9 094,02 -R9 094,02 Understatement of UE as actual expenditure exceeded vote
Vote 6 - Community services R0,00 R0,00 R0,00 R0,00 R0,00 N/A -No difference
Vote 7 - District infrastructure maintenance and development R0,00 R300 229 846,00 R114 958 284,87 R185 271 561,13 R0,00 N/A - Vote not exceeded
TOTAL OVERSTATEMENT OF UNAUTHORIZED EXPENDITURE YEAR ENDED 2017/18 R57 063 542,65

TOTAL UNDERSTATEMENT OF UNAUTHORIZED EXPENDITURE YEAR ENDED 2017/18 (R8 175 744,97)

Inadequate preparation and review procedures for the accounting treatment and classification of the unauthorised expenditure

1. Revisit the unauthorised expenditure workings for the prior year and ensure that:
(a) correct figures per the approved budget and the compiled (supported) AFS are used;

2. Adjust the comparative figure dating back to 2017-18 financial year with the updated register;

4. Management to ensure that a review of AFS (with emphasis on prior period errors) is done alongside the supporting documentation in order to ensure that amounts are transferred to the AFS at accurate figures.
1. The process for identification of Unauthorised Expenditure was performed, all payments have been reviewed for both financial years ensuring the completeness of the Unauthorised expenditure disclosed on the AFS
1-Jul-20
1. EAVE/MNB
2. DBO/MMM
3. BTO
31-Jul-20

Ex 304 Comm 104 - Unauthorized expenditure: Limitation of scope opening balances
During the testing of unauthorized expenditure for prior years, it was noted that the prior year’s register for unauthorized income was prepared by management using six votes whilst on the other supporting evidence submitted by management it was noted that the expenditure budgets were prepared using seven votes:

For all financial years ended 2011/12 to 2016//17 as following difference in vote number and descriptions

Vote descriptions and number per management register for UE 2016/17 Budget Year 2011/12 to 2016/17 as per B Schedule or Approved MTREF
Vote 1 - Executive & Council Vote 1 - Executive & Council
Vote 2 - Budget and Treasury Vote 2 - Municipal Manager
Vote 3 - Corporate services support Vote 3 - Budget and Treasury Office
Vote 4 - Planning & development Vote 4 - Corporate Services Support
Vote 5 - Community and social services Vote 5 - Growth and Economic Development
Vote 6 - Technical services Vote 6 - District Public Health and Safety
None Vote 7 - District Infrastructure Maintenance and Development
Due to inadequate preparation and review procedures by management in preparation of unauthorized expenditure

1. Revisit the unauthorised expenditure workings for the prior year and ensure that:
(a) correct figures per the approved budget and the compiled (supported) AFS are used;

2. Adjust the comparative figure dating back to 2017-18 financial year with the updated register;

4. Management to ensure that a review of AFS (with emphasis on prior period errors) is done alongside the supporting documentation in order to ensure that amounts are transferred to the AFS at accurate figures.
1.This finding is not applicable as the it does not affect the 2019/2020.
Furthermore, the process for identification of Unauthorised Expenditure was performed, all payments have been reviewed for both financial years ensuring the completeness of the Unauthorised expenditure disclosed on the AFS
1-Jul-20
1. EAVE/MNB
2. DBO/MMM
3. BTO
31-Jul-20

Ex 252 Comm 87 - Irregular Expenditure: Limitation of scope (employees outside organogram)

On 08 November 2019 a request for information (RFI (140) was sent to management requesting for calculations/schedules in relation to Employee Total Cost to Company (TCC) for employees whom were previously outside organizational structure. On 12 November 2019 after three working days, the information was still not submitted for audit purposes.
There are inadequate controls around submission of supporting documents in relation to assertions by management in terms of irregular expenditure.
1. The working paper pertaining to the employees outside of the structure will be revisited and such employees will be confirmed to be employed outside the structure;

2. All terminations will also be taken into account for the excercise and the calculations based on the CTC;

3. Irregular expenditure register will be updated with the details and disclosed accordingly in the AFS;

TRANSFER PAYMENTS

Ex 167 Comm 68 - Transfers and subsidies: Incorrect classification of loan to Tswaing
Transfer means “non-exchange” payments made by a municipality. A payment is non-exchange provided that the municipality does not receive anything directly in return for the transfer to the other party.
During the prior audit we identified that the municipality gave a loan of R2 000 000 to Tswaing Local Municipality and they paid R1 000 000 o Eskom on behalf of Tswaing LM. In the current year, Ngaka then incorrectly offset the R3 000 000 against transfers and subsidies as Tswaing had not yet paid back the money.
GRAP 1 paragraph 39 ad 40, offsetting of assets and liabilities, revenue and expenses is not allowed as they do not reflect the substance of the transaction or event.
The municipality should have disclosed the transaction as follows:
1. Loan and payment of electricity to Tswaing local municipality should have been disclosed as follows in the prior year.
Dr Receivable = R 3 000 000
Cr Bank = R 3 000 000

Per inspection of note 44 we noted that the municipality incorrectly debited prepayments with the R3 000 000 instead of debiting receivables. Receivables are therefore still understated by R3 000 000 and prepayments(comparative) are overstated by R3 000 000

2. Through inspection of the current year budget we noted that R3000 000 was approved to be transferred to Tswaing LM. However, per inspection of the payable listing no payable was raised in this regard. The following journal should have been processed:
Dr Transfers and Subsidies = R 3 000 000
Cr Payable = R 3 000 000
Management did not properly apply paragraph 39 and 40 of GRAP 1.
1. Perform a detailed analysis and review of the expenditure accounts (transfers) as per the GL (2018-19 and 2019-20) to identify the possible missclassifications;

2. Obtain the supporting documents for the transactions which are possibly missclassified and review the support to determinne the descriptions and nature of the services/goods (loans, etc);

3. Classify/reclassify the transaction as identified in the correct accounts as per the support's description and nature of goods/services;

5. Management to ensure that a review of AFS (with emphasis on prior period errors) is done alongside the supporting documentation in order to ensure that amounts are transferred to the AFS at accurate figures.
1. Analysis of expenditure accounts has started but not for transfers.
2. Supporting evidence was provided to AG and the finding partially resolved.
3. Reclassification was done on the Statement of Financial Position however the note has not yet been corrected as such.
4. Refer to <Ex.167-Comm.68> attached pertaining to the POE submitted to the Auditor General.
5. AFS for 2018/19 have been reviewed. The necessary adjustments on the 2019/20 comparatives have not yet been done and reviewed (Note 44 of the AFS yet to be adjusted).
28-Jul-20
1. Maine
2. BDO/MMM
3. CFO
11-Aug-20

PREDETERMINED PBJECTIVES

Ex 289 Comm 99 - AoPO - Reasons for non-performance inadequate: Measures not specific
1) KPI 9:
Inspected the APR and confirmed that the reason provided for under-performance is stated that the Ratlou fire station is not complying with fire brigade services act and therefore no campaign was conducted here. The measures to improve the performance stated in the APR however is that an alternative venue will be sourced where the campaigns will be conducted. This measure is however not addressing the main reason for under-performance and will only be a temporary fix to the issue, which is the fact that the fire station did not comply with laws and regulations. The measures stated are also general and vague, without being precise.

2) KPI 17:
Inspected the APR and confirmed that the reasons stated for under-performance is only addressing one challenge, however we have identified that multiple challenges exist for the different projects not being completed. The corrective measures therefore also only address the one challenge. The municipality should therefore indicate more challenges and measures.
Lack of oversight from by Management whilst preparing the Annual Report.
1. Upon submission of the quarterly performance reports, the reasons for non-performance will validated against supporting documentation validating such reasons and also the measures taken to mitigate or prevent reoccurrence of the non-performance.

This will be used as a buld up for the annual performance and these reasons will be validated again during the annual reporting.

2. Quarterly and annual performance reports to be reviewed prior to final submission to internal and external auditors.
1. Quarterly reports (mid-term) have been reviewed and supporting documents for reasons for non-achievements have also been valited. Refer to the mid-term report and related POE.
28-Jul-20
1. Various Managers
2. PMS
3. Maine M & CA
4. CFO
11-Aug-20

Ex 223 Comm 85 - AOPO: Reliability KPI 12 Understated number of kilolitres of water delivered through water tinkering
During the testing of KPI 12-Number of kilolitres of water delivered through water tinkering, we have identified that the following differences

1. Litres of water delivered as per the daily water tinkering schedules has not been recorded in the monthly water tinkering report and also has not been reported in the Annual performance report.

Litres of water as per the daily delivery schedule not recorded in the monthly report and in the APR

2. Litres of water delivered has been incorrectly calculated in the monthly report and in the APR
Lack of review of the POE `s to ensure that all the kilolitres of water delivered has been reported.
KPI 12 -Volume(quantity) of water delivered through tinkering
1. The job cards for water tankering were revised for implementation from December 2019. The job card is deemed to be clear and have sufficient fields to determine the Kms travelled and the areas where the water is delivered.

3. Expenditure for water tankering per the GL will be reconciled with the actual performance achieved for the month/quarter to ensure completeness thereof.

4. Quarterly and annual performance reports to be reviewed prior to final submission to internal and external auditors.
1. The job cards has been revised.
Furthermore, the quarterly reports (mid-term) have been reviewed and supporting documents for reasons for non-achievements have also been valited. Refer to the mid-term report and related POE.
28-Jul-20
1. Various Managers
2. PMS
3. Maine M & CA
4. CFO
11-Aug-20

Ex 77 Comm 45 - KPI 7 - target not consistent
The following differences were noted between the 2018/19 SDBIP and the 2018/19 APR for KPI 7:
Planned targets per SDBIP: Conduct 2 Community/School based Awareness campaigns by June 2019
Planned target per the APR: Conduct 4 Community/School based Awareness campaigns by June 2019

The target for KPI 7 as per the SDBIP therefore does not agree to the targets as per the APR for the 2018/19 financial year.
Lack of oversight from by Management whilst preparing the Annual Report.
1. Quarterly reports will be pre-populated with information from the SDBIP pertaining to the KPIs and Targets to ensure consistency throughout the period;

2. Quarterly and annual performance reports will be reviewed for consistency against the SDBIP to ensure that objectives, KPIs and Targets are consistent.

1. Quarterly reports (mid-term) have been reviewed and supporting documents for reasons for non-achievements have also been valited. Refer to the mid-term report and related POE. The quarterly reports (mid-term) have been reviewed for consistency.

Management was involved in the preparation of the 2019/2020 annual performance report. PMU manager prepared and signed the annual performance report then submitted it to the Municipal Manager who signed after review of the report, SDBIB and supporting POE

28-Jul-20
1. Various Managers
2. PMS
3. Maine M & CA
4. CFO
11-Aug-20

Ex 82 Comm 44 - Overstatement of achievement -KPI 16 Number of waste water treatment plant maintained by June 2019
KPI -16 Number of waste water treatment plant maintained by June 2019
As per inspection of the revised SDBIP for KPI 16 -Waste water treatment plants treated by June 2019, we have identified that the municipality did not budget for the planned maintenance of the five waste water treatment plants, therefore the planned target was not going to be achieved with no funds allocated.
We have further confirmed this through inspection of deviation memorandum to approve the payments for emergency expenditure incurred due to emergency treatment of the following waste water treatment plants
1. Mafikeng(Mmabatho) waste water treatment plant
2. Delareyville Waste water treatment plant
3.Zeerust waste water treatment plant
4.Litchenburg main sewer
5. Itsoseng Sewer pump station

We have further inspected the close out report and the related photos of the following waste water treatment plants and identified that the treatment of some plants was still on ongoing in the 2019/20 financial year end therefore not maintained as at 30 June 2019
1. Mahikeng close-out report dated 31 May 2018- 31 July 2019
Management failure to implement proper verification processes to ensure that what is reported is actual what is achieved.
Poor budget planning that is not aligned to the targets as per SDBIP
Monthly actitivites:
(i) Capturing of the number of capital projects completed will be done as per the submitted completion certificate in a monthly performance report as actual performance achieved and the completion certificate scanned and properly referenced to the actual performance recorded [before capturing, the official will inspect the TID to ensure that the correct source is obtained and filed].

(ii) After all the capturing for the month, the Manager/Senior in charge will verify the actual performance reported against the scanned completion certificate to confirm the captured performance's accuracy and validity. The Manager/Senior will again review the TID to ensure that the source documents attached are as per the Technical Indicator Descriptions.

(iii) Perform a reconciliation between the month's captured actual performance (completed projects) against the following:
a. WIP register to ensure that all the projects identified as complete in the register are correctly reflected in actual performance achieved for the month;
b. Retentions register to ensure that all the projects with released retentions are correctly reported as actual performance achieved for the month;
The reconciliations should be signed for and filed together with the support for actual performance as reported for the month.

Quarterly Activities:
(iv) Generate the quarterly performance report based on the SDBIP and perform the following:
a. Review the report's KPA, Directorate, Ojectives, KPIs and Targets (quarterly target for the specific quarter being reported) against the SDBIP to ensure that all of the above are consistent with the SDBIP;
b. Reconciles the actual performance reported with the supporting documents to ensure accuracy and validity;
c. Review the various months' reconciliations (WIP & Retention Register) and agree to the quarterly performance report to ensure completeness thereof; and
d. Documents the reasons for under/overachievement of the quarterly targets, where applicable, scan/attach the supporting documents as applicable and verifies the actual performance and the reasons on the system.
e. Document plans for remedial actions where underachievement was reported and clearly reference to any plans supporting the remedial actions.

(v) The Manager: PMS will review the quarterly report as follows:
a. Review the report's KPA, Directorate, Ojectives, KPIs and Targets (quarterly target for the specific quarter being reported) against the SDBIP to ensure that all of the above are consistent with the SDBIP;
b. Review the actual performance reported against the attached supporting documents, including the reconcilation, to ensure that it is valid, accurate and complete.
c. Reviews the reasons for over/underachievement against the attached supporting documents to ensure validity and accuracy;
d. Review the remedial action against the attached/referenced plans; and
e. Prepare a quarterly performance analysis report to submit together with the quarterly performance report to the office of the MM and Internal Audit.

Quarterly, Mid-term and Annual Reporting:
(vi) Internal Auditors will perform the following on the quarterly, annual and mid-term performance reports:
a. Review the report's KPA, Directorate, Ojectives, KPIs and Targets (quarterly target for the specific quarter being reported) against the SDBIP to ensure that all of the above are consistent with the SDBIP (consistency);
b. Review the actual performance reported against the attached supporting documents, including the reconciliation, to ensure that it is valid, accurate and complete;
c. Reviews the reasons for over/underachievement against the attached supporting documents to ensure validity and accuracy. The Manager: PMS will then validate the quarterly report on the system as final for communication and quarterly reporting;
d. Review the remedial action against the attached/referenced plans; and
e. Prepare Internal Audit Report to submit together with the quarterly performance report to the office of the MM.

[Update the Standard Operating Procedures with the above activities]
1. Quarterly reports have been reviewed (1st and 2nd quarter) for reliability. Refer to attachment <Ex 82 Comm 44> for the reviewed quarterly reports and POE.
28-Jul-20
1. Various Managers
2. PMS
3. Maine M & CA
4. CFO
11-Aug-20

Ex 83 Comm 44 - Overstatement of achievement: KPI 11-Number of Households connected with yard prepaid water meter and tap
KPI 11- Number of Households connected with yard prepaid water meter and tap

We have inspected the yard connection list for the 2018/19 financial year and identified that 213 of the yard connections none of the has been connected with the water meter, we further inspect the annual performance report and identified that 213 has been reported as partially achieved as water meters are not connected
The target is not achieved as the connection has not yet been completed.
Management failure to implement proper verification processes to ensure that what is reported is actual what is achieved.
Monthly actitivites:
(i) Capturing of the number of capital projects completed will be done as per the submitted completion certificate in a monthly performance report as actual performance achieved and the completion certificate scanned and properly referenced to the actual performance recorded [before capturing, the official will inspect the TID to ensure that the correct source is obtained and filed].

[Update the Standard Operating Procedures with the above activities]
KPI 11-Number of Households connected with yard prepaid water meter and tap; is no longer applicable as it was removed for the current reporting year (desired output achieved).
28-Jul-20
1. Various Managers
2. PMS
3. Maine M & CA
4. CFO
11-Aug-20

Ex 171 Comm 75: AOPO - Reliability KPI 12: Kilolitres of water delivered as per the job cards could not be verified
KPI 12 - Quantity of water delivered through tinkering
During the audit of KPI 12 Portfolio of evidence submitted we have identified the following discrepancies.

1. The following discrepancy was identified on the Daily tinkering schedule (POE) -for third quarter reporting

Daily tinkering schedule
Date - Truck registration number - Truck capacity
01/03/2019 JBD 169 NW 14 kl
04/03/2019 JBD 169 NW 18 kl

Further we have identified an internal control deficiency as there no evidence that management has reviewed the daily tinkering schedules and the monthly reports to confirm that the service has been received.
Management failure to properly monitor the service provided by the external service provider to ensure that the water has been provided to the communities.
1. The job cards for water tankering were revised for implementation from December 2019. The job card is deemed to be clear and have sufficient fields to determine the Kms travelled and the areas where the water is delivered.

3. Expenditure for water tankering per the GL will be reconciled with the actual performance achieved for the month/quarter to ensure completeness thereof.

4. Quarterly and annual performance reports to be reviewed prior to final submission to internal and external auditors.
1. The job cards has been revised. Refer to attachment <Ex 223 Comm 85>

The quarterly reports (3rd quarter) are still under review.
28-Jul-20
1. Various Managers
2. PMS
3. Maine M & CA
4. CFO
11-Aug-20

Ex 194 Comm 74 - AOPO: KPI 16 - Number of waste water treatment plant maintained by the 30 June 2019
During the audit of the predetermined objectives we have identified the following differences in KPI16-Waste water treatment plant maintained by 30 June 2019 where repairs of waste water treatment plant have been reported as maintenance.
1.Delareyville Waste water treatment plant- as per inspection of the close put report from CMS Water Engineering dated 10 /12/2018, the work done included emergency refurbishment of surface aerators and WAS, installation of new chlorination system delayer, which is a corrective work (repairs) and not preventative work(maintenance)
2.1 Lichtenburg main sewer plant- As per inspection of the closeout report dated 26/11/2018- from Katema investment, the main sewer was totally not functional and electrical equipment’s were stolen-, therefore work done relates to repairs and replacements and not the maintenance work
2.2 Bladeville satellite pump station 1 and 2 - as per the inspection of the close out report dated 26/11/2018 from Ketema investment, the pump station was vandalised nothing was left behind, new sewer pump was installed, the work done relates to installation of new assets and not maintenance work.
3.Itsoseng Sewer Pump Station-As per inspection of the close out report dated February 2019 from 4 KLM trading enterprise, the work done was for mechanical and electrical repairs of the Itsoseng sewer pump station, this is a corrective work done(repairs) and not preventative (maintenance)
Inadequate review of portfolio of evidence submitted for audit purpose.
1. Information relating to quarterly performance reports to be validated by PMS against the supporting documentation to ensure validity, accuracy and completeness thereof;

2. Control lists to be kept by the various departments and these reconciled with the reported performance to ensure completeness and accuracy of the information reported.
1. Quarterly reports have been reviewed (1st and 2nd quarter) for reliability. Refer to attachment <Ex 82 Comm 44> for the reviewed quarterly reports and POE.
28-Jul-20
1. Various Managers
2. PMS
3. Maine M & CA
4. CFO
11-Aug-20

Sheet 2: PPE

PROPERTY, PLANT AND EQUIPMENT (PPE) & ASSET MANAGEMENT

Finding number
Detailed finding
Cause
Management Corrective Action

Implementation date
Responsible Official
Verification date

Ex 127 Comm 54 - PPE - Not all disclosure requirements of GRAP 17 par 87 adhered to
The following disclosure requirements were not met with regards to the GRAP 17 paragraph 87:

1) GRAP 17.87(b):
Project: Initial date of completion:
Dinokana Bulk Water Supply Augmentation Phase 2 Oct-14
Groot Marico WWTP Jul-16

2) GRAP 17.87(c):

3. The disclosure pertaining to the projects as identified per the above process will be done in the AFS in accordance with GRAP 17;

4. AFS to be reviewed, also through the disclosure checklist, against the relevant registers and supporting documents/schedules to ensure that the disclosure and presentation are in accordance with GRAP.
1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.
28-Jul-20
1. EMS
2. Maine
3. BTO
11-Aug-20

Sheet 3: VAT

VAT

Finding number
Detailed finding
Cause
Management corrective action
Progress to date
Implementation date
Responsible Official
Verification date

2. A listing of invoice not paid at the end of the financial year(s) will be compiled and the VAT relating thereto journalised as VAT accrued;

3. The necessary adjustment arising from the prior financial periods will be done on the GL (comparatives);

4. Prior period error note will be compiled on the Interim AFS together with the supporting schedule and submitted to the CFO;

5. The Interim and Final AFS will be independently reviewed to ensure compliance with GRAP.
Refer to DEC Submission - VAT Recons.

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...Sheet ar paap post audit action plan finding number detailed cause management corrective progress implementation date responsible official verification property plant and equipment ppe amp asset ex comm not all disclosure requirements of grap par adhered to the following were met with regards paragraph b project initial completiondinokana bulk water supply augmentation phase octgroot marico wwtp jul above projects are significantly behind time completing delays therefore experienced as is taking longer complete than initially expected no has been included in financial statements on reasons for any c additional detailzeerust waste treatment inspected dates payments made since inception confirmed that june until january a year half afs disclosures dinokana within wip register an necessary however such improper controls have implemented checklists ensure frequent review contract commitments will be done order identify contracts which deemed taken planned these appropriately flagged regist...

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PROPERTY, PLANT AND EQUIPMENT (PPE) & ASSET MANAGEMENT
Finding number	Detailed finding	Cause	Management Corrective Action		Implementation date	Responsible Official	Verification date
Ex 127 Comm 54 - PPE - Not all disclosure requirements of GRAP 17 par 87 adhered to	The following disclosure requirements were not met with regards to the GRAP 17 paragraph 87: 1) GRAP 17.87(b): Project: Initial date of completion: Dinokana Bulk Water Supply Augmentation Phase 2 Oct-14 Groot Marico WWTP Jul-16 The above projects are significantly behind time of completing the project. Delays are therefore experienced, as the project is taking longer to complete than initially expected. No GRAP 17.87(b) paragraph has been included in the 2018/19 financial statements on the reasons for any delays experienced in completing the project. 2) GRAP 17.87(c): Project: Additional detail: Zeerust Waste Water Treatment Plant Phase 2 Inspected the dates of payments made on the project since inception, and confirmed that no payments were made on the project since 20 June 2016, until January 2018. Confirmed therefore that delays were experienced of a year and a half. Inspected the 2018/19 AFS and confirmed that no disclosures were made with regards to GRAP 17 paragraph 87(c). Dinokana Bulk Water Supply Augmentation Phase 2 Inspected the dates of payments made on the project since inception, and confirmed that no payments were made on the project since 30 June 2015, until 30 June 2019. As the project is included within the WIP register as an in progress project, the disclosure requirements of GRAP 17 paragraph 87(c) is therefore necessary. Inspected the 2018/19 AFS and confirmed however that no such disclosures were made.	Improper controls have been implemented with regards to disclosure checklists to ensure that all necessary disclosure requirements for PPE have been met.	1. A frequent review of the contract, commitments and WIP register will be done in order to identify contracts which are deemed to be taken longer than initially planned and these will be appropriately flagged in these registers (i.e first point of entry will be the extentions and variation orders); 2. A frequent review of the contract, commitments and WIP register will be done in order to identify contracts which have been halted and these will be appropriately flagged in these registers (i.e through enquiry with Technical Services and review of expenditure to-date); 3. The disclosure pertaining to the projects as identified per the above process will be done in the AFS in accordance with GRAP 17; 4. AFS to be reviewed, also through the disclosure checklist, against the relevant registers and supporting documents/schedules to ensure that the disclosure and presentation are in accordance with GRAP.	1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.	28-Jul-20	1. EMS 2. Maine 3. BTO	11-Aug-20
Ex 99 Comm 50 - PPE: Differences on WIP project payments as at 30 June 2017	The following differences were noted between the invoices inspected of payments made to WIP projects, and the amount of WIP capitalised on the project as at 30 June 2017 (opening balance of the 2017/18 financial period): Project name - Amount recognised as WIP as at 30 June 2017 - Recalculated amount of WIP to be recognised as at 30 June 2017 - Difference: a) Zeerust Waste Water Treatment Plant Phase 2 - R19 658 766,29 - R16 341 146,30 - R(3 317 620,00) b) Selosesha Water Supply - R3 288 047,28 - R3 176 390,51 - R(111 656,77) c) Mayaeyane Water Supply - R3 341 662,10 - R3 172 794,51 - R(168 867,59) d) Groot Marico WWTP - R14 537 938,62 - R17 717 614,10 - R3 179 675,48 - R(418 468,87)	Improper record-keeping of payments made on projects. Improper reconciliation controls have been implemented to ensure that WIP payments are accurately valued.	1. WIP Registers to be reconstructed/updated and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence): (a) Perform 100% WIP verification and determine the values of the WIP; (b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at final; (c) Reconcile the WIP register with payments as per the GL, contract and commitment register and update the register; (d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made. Compilation of the following information needed in terms of completed projects: i. Bill of material/quantities ii. As-built drawings iii. Completion certificate (e) Create complete files for WIP projects including all the relevant supporting documentation; (g) Update the assets and WIP disclosure in the AFS (interim and final)	1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.	28-Jul-20	1. EMS 2. Maine 3. BTO	11-Aug-20
Ex 149 Comm 61 - PPE - differences in WIP payments as at 30 June 2017	The following differences were noted between the invoices inspected of payments made to WIP projects, and the amount of WIP capitalised on the project as at 30 June 2017 (opening balance of the 2017/18 financial period): Project name - Amount recognised as WIP as at 30 June 2017 - Recalculated amount of WIP to be recognised as at 30 June 2017 - Difference: a) Setlagole Water Supply - 14 701 529,69 - R13 566 489,32 - R1 135 040,37 b) Springbokpan water supply - 1 111 571,61 - R 856 379,20 - R 255 192,41 c) Top Village water supply - 7 599 519,77 - 7 696 786,75 - 97 266,98	Improper record-keeping of payments made on projects. Improper reconciliation controls have been implemented to ensure that WIP payments are accurately valued.	1. WIP Registers to be reconstructed/updated and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence): (a) Perform 100% WIP verification and determine the values of the WIP; (b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at final; (c) Reconcile the WIP register with payments as per the GL, contract and commitment register and update the register; (d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made. Compilation of the following information needed in terms of completed projects: i. Bill of material/quantities ii. As-built drawings iii. Completion certificate (e) Create complete files for WIP projects including all the relevant supporting documentation; (g) Update the assets and WIP disclosure in the AFS (interim and final)	1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.	28-Jul-20	1. EMS 2. Maine 3. BTO	11-Aug-20
Ex 152 Comm 61 - PPE - Differences in WIP additions for 2018 on projects	The following differences were noted between the amounts recognised as WIP additions for the 2017/18 financial period, and the project's actual payments and invoices: Project name - Amount recognised as WIP addition for 2018 - Amount recalculated based on supplier's invoices - Difference a) Setlagole Water Supply - 24 083 532,02 - 25 118 978,99 1 035 446,90 b) Ditloung water supply - 3 073 832,07 - 2 852 321,40 - 221 510,67 c) Sasane Water Supply - 3 554 200,37 - 3 492 432,75 - 61 767,62 d) Tlhabologang Bulk Sanitation - 1 427 691,75 - 1 438 122,68 - 10 430,93 e) Zeerust Waste Water Treatment Plant Phase 2 - 2 482 130,18 - 5 799 750,18 - 3 317 620,00 d) Groot Marico WWTP - 21 710 153,50 - 19 440 255,48 -2 269 898,02	Management did not correctly reconcile and disclose the amounts of WIP additions as per the 2017/18 financial period	1. WIP Registers to be reconstructed/updated and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence): (a) Perform 100% WIP verification and determine the values of the WIP; (b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at final; (c) Reconcile the WIP register with payments as per the GL, contract and commitment register and update the register; (d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made. Compilation of the following information needed in terms of completed projects: i. Bill of material/quantities ii. As-built drawings iii. Completion certificate (e) Create complete files for WIP projects including all the relevant supporting documentation; (g) Update the assets and WIP disclosure in the AFS (interim and final)	1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.	28-Jul-20	1. EMS 2. Maine 3. BTO	11-Aug-20
Ex 154 Comm 67 - PPE: Not all completed projects as per the APR taken into account in WIP transfers for 2017/18	The following projects were reported on as completed during the 2017/18 financial year as per the 2017/18 APR, but they were not transferred out of WIP during the 2017/18 financial period. They were only transferred out of WIP during the 2018/19 financial period. These project's completion certificates are also dated as completed during the 2017/18 financial period: Project name - Amount that should have been transferred during 2018: Selosesha - 7 875 363,13 Moshana - 16 084 482,09 Makgogoane - 11 794 638,71 Tlhabologang (outfall sewer) - 39 811 787,44 Setlagole - 38 785 061,78 - 114 351 333,15	Management did not implement proper controls regarding the review of the fixed asset register.	1. Fixed Asset and WIP Registers to be revisited and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence): (a) Perform 100% physical assets and WIP verification and determine the values of the assets and WIP; (b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at interim and final; (c) Reconcile the WIP register with the FAR and commitment register and update the register with completed projects to be transferred to the FAR; (d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made. Compilation of the following information needed in terms of completed projects: i. Bill of material/quantities ii. As-built drawings iii. Completion certificate (e) Unbundle the completed projects into the necessary components using the above stated information on a continuous basis (i.e monthly review of transactions pertaining to WIP projects for capitalization and unbundling once the project is completed). (f) Create complete files for WIP projects including all the relevant supporting documentation; (g) Update the assets and WIP disclosure in the AFS (interim and final)	1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.	28-Jul-20	1. EMS 2. Maine 3. BTO	11-Aug-20
Ex 156 Comm 61 - PPE - Difference between amounts transferred from WIP and amount added to completed assets	The following difference was noted between the amount recognised as transfers from WIP for the 2018 financial period, and the amount recognised as additions to assets from completed projects for the 2018 financial period: Amount of 2018 transfers out of WIP as per WIP register - 162 886 658,75 Amount of 2018 additions of assets as per the FAR and AFS - 116 483 653,00 Difference - 46 403 005,75	Improper controls implemented to reconcile transactions on the FAR	1. Fixed Asset and WIP Registers to be revisited and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence): (a) Perform 100% physical assets and WIP verification and determine the values of the assets and WIP; (b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at interim and final; (c) Reconcile the WIP register with the FAR and commitment register and update the register with completed projects to be transferred to the FAR; (d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made. Compilation of the following information needed in terms of completed projects: i. Bill of material/quantities ii. As-built drawings iii. Completion certificate (e) Unbundle the completed projects into the necessary components using the above stated information on a continuous basis (i.e monthly review of transactions pertaining to WIP projects for capitalization and unbundling once the project is completed). (f) Create complete files for WIP projects including all the relevant supporting documentation; (g) Update the assets and WIP disclosure in the AFS (interim and final)	1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.	28-Jul-20	1. EMS 2. Maine 3. BTO	11-Aug-20
Ex 164 Comm 65 - PPE: Difference between 2019 WIP transfers and 2019 additions per the FAR	The following differences were noted between the amount of transfers out of WIP to completed assets for the 2019 financial year, and the amount recognised as additions from projects in the fixed asset register for the 2019 financial year: Amount of 2019 transfers out of WIP as per WIP register - 256 112 309,26 Amount of 2019 additions of assets as per the FAR and AFS - 233 017 200,79 Difference - 23 095 108,47	Improper controls implemented with regards to the reconciliation of the fixed asset register.	1. Fixed Asset and WIP Registers to be revisited and new values of the assets and WIP to be determined (Accuracy, Completeness and Validity/Existence): (a) Perform 100% physical assets and WIP verification and determine the values of the assets and WIP; (b) Reconstruct the WIP register based on all the payments vouchers and other supporting documents related to each WIP project to determine the carrying amount of WIP at interim and final; (c) Reconcile the WIP register with the FAR and commitment register and update the register with completed projects to be transferred to the FAR; (d) On a bi-monthly basis, confirm all WIP projects. Any completed projects will be identified when the last payment in terms of the project has been made. Compilation of the following information needed in terms of completed projects: i. Bill of material/quantities ii. As-built drawings iii. Completion certificate (e) Unbundle the completed projects into the necessary components using the above stated information on a continuous basis (i.e monthly review of transactions pertaining to WIP projects for capitalization and unbundling once the project is completed). (f) Create complete files for WIP projects including all the relevant supporting documentation; (g) Update the assets and WIP disclosure in the AFS (interim and final)	1. Fixed Assets Register has been revisited to determine the existence, completeness and valuation and allocation of assets for opening balances and current year balances.	28-Jul-20	1. EMS 2. Maine 3. BTO	11-Aug-20

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