MALADMINISTRATION AND ACCOUNTABLE GOVERNANCE
The South African Local Government Association (SALGA) this week tabled its 2005/06 annual report. The report was late, in large part, because SALGA’s audit opinion for the last financial year was particularly horrific, and took much longer than normal to complete.
For those not in the know, SALGA is an organisation formed in terms of five pieces of legislation: the Constitution, the Organised Local Government Act, the Intergovernmental Relations Framework Act, and the provisions of the Municipal Systems Act and the Municipal Finance Management Act.
Its mandate can be summarised as follows:
• To represent, promote and protect the interests of local government;
• To act as an employer body representing all municipal members and, by agreement, associate members;
• To affiliate with and participate in the affairs of regional, continental and international organisations, that will serve the best interests of its members;
• To lobby and advocate for member municipalities;
• To act as a resource for knowledge and information to municipalities; and
• To develop and support the capacity of member municipalities
To be able to appreciate just how disastrous SALGA’s finances were, consider the following:
In a previous story on this site we set out what the Public Service Commission had to say about the number of qualifications national departments were receiving from the Auditor-General. The 2007 State of the Public Service Report names and shamed the worst performers in this regard:
“The most significant number of qualifications (78%) is in respect of only 5 departments namely Correctional Services (21 issues), Home Affairs (13 issues), Defence (10 issues), Independent Complaints Directorate (8 issues) and Water Affairs and Forestry (7 issues)”.
Everyone knows Home Affairs and Correctional Services are disaster zones and their ongoing financial (mis)management receives huge coverage in the press. SALGA is easily on a par, perhaps worse.
SALGA received a disclaimer of audit opinion from the A-G. That’s worse than a qualification. If the A-G qualifies an element of an organisation’s financial statements – say ‘Salaries and Wages’ – it means that element has a specific, unquantifiable problem and the A-G cannot completely approve that department’s finances overall – he can only say that, with the exception of that qualified problem, everything is in order. Obviously the more elements that are qualified, the more problematic the department’s financial administration is.
If things are really bad – like they are at SALGA – and the qualifications are so comprehensive and so numerous, a point will arrive where the A-G is simply unable to determine the overall state of that organisation’s finances. In that instance, the A-G will issue a disclaimer of opinion, which basically means exactly that: things are so bad, no proper opinion can be expressed.
SALGA’s A-G’s report got 11 points of qualification and 10 matters emphasised, the details of which are simply too much to set out here. Suffice to say, there were numerous fundamental problems. The 11 points of qualification were:
1. Opening balances and correction of prior year errors (the previous year’s statements were materially misstated and the restated figures could not be verified because documentation was lacking)
2. Property plant and equipment (the value of assets could not be verified because of fundamental accounting problems, and could be materially misstated)
3. Cash and bank (numerous statements and accounts could not be reconciled)
4. Accounts receivable and
| Posted on 25/5/2007
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