The audit outcome of the City of Tshwane has improved from adverse in 2022 to qualified in 2023. Although a qualified audit outcome is still negative, it represents a significant improvement in governance. In short, what we are doing is working. And if we continue in this direction, our next audit will at least be unqualified.
At the outset we knew that an unqualified or clean audit would not be possible straight after the 2022 adverse finding. As I made clear in the State of the City Address in 2023, the adverse findings were simply too extensive to turn around in a single auditing cycle. The 2022 Auditor-General opinion was based on adverse findings in three areas in particular cashflow, trade payables and assets. I explained that while we could redress the findings related to cashflow and creditors, assets would take longer. This is exactly what we have achieved.
It is clear that the measures we have put in place to respond to the Auditor-General’s findings are working. This includes far more rigorous oversight by the Mayoral Committee on rebuilding systems and controls in order to improve financial performance and to deliver value for taxpayers’ money. The City Manager also made the right call, on the advice of the Audit and Performance Committee, to seek permission to submit the City’s financial statements somewhat later. This enabled the necessary quality control to be done. In future, we will ensure that any such decisions are also clearly and timeously communicated to the Johannesburg Stock Exchange.
I want to thank our new Chief Financial Officer, Gareth Mnisi, for the improvement in our responsiveness to the Auditor-General. It is clear that without his work, an improved audit outcome would not have been possible. His task is to ensure that the City from now on does not need additional time to submit credible financial statements to the Auditor-General. Our next goal is to obtain at least an unqualified audit in the current financial year, which ends in June 2024.
To be clear, the different audit outcomes mean the following, listed from good to bad:
- Clean or unqualified opinion with no findings. This is the gold standard and which we ultimately strive to achieve in the long term. It requires the production of quality financial statements that are free of material misstatements, quality performance reports that are useful and reliable, and compliance with legislation.
- An unqualified opinion with findings is indicative of quality financial statements, but there is a struggle to produce quality performance reports and proper compliance with key legislation. After this audit, this is our next most immediate goal.
- A qualified opinion means the financial statements contained material misstatements that were not correct before the financial statements were published. There were also challenges related to the quality of performance reporting and compliance with legislation. This is what the City has now achieved.
- An adverse opinion with findings indicates that the financial statements included so many material misstatements that there was significant disagreement with the Auditor-General on the amounts and disclosures in the financial statements. This is what the City received in the last audit cycle.
- A disclaimer of opinion with findings means that the Auditor-General cannot express an opinion on the credibility of the financial statements. Effectively, there was not enough evidence to support the amounts and disclosures.
An improvement in the form of a qualified opinion is a hopeful start to fully restoring the financial controls that we need in our administration. However, more will and must be done, as we remain committed to building a capital city that works for all its people.
The full audit report will be released for public participation after it has served as part of the city’s annual report which will come to Council in due course. During this meeting it will be presented formally by the Auditor-General and engaged on by councillors.
Cllr Cilliers Brink
EXECUTIVE MAYOR OF TSHWANE
Media enquiries: Sipho Stuurman
(siphost@tshwane.gov.za)