2011-06-29: City is addressing issues raised in auditor general's report​

AFTER nearly six months of additional auditing work, the Auditor General of the Republic of South Africa, has concluded the audit process for the City of Johannesburg for the year 2009/10. The City Manager of the city of Johannesburg received the report on Monday and will table this audit report at a Council meeting on the 30 June 2011, where the political oversight process will begin.

While the final determination of the city's books by the AG, as been as expressed in the report states that:

"In my opinion, except for the effects of the matters described in the Basis for qualified opinion paragraph, the consolidated financial statements present fairly, in all material respects, the financial position of the City of Johannesburg Metropolitan Municipality as at 30 June 2010 and its financial performance and its cash flows for the year then ended are prepared, in all material respects, in accordance with GRAP and in the manner required by the MFMA".

The City Manager said "We are deeply disappointed by this negative finding that is effectively a regression for the previous three years where our financial were unqualified in all respects. We have started the remedial work to ensure that all deficiencies pointed out by the AG are addressed immediately to ensure there is no recurrence of these shortcomings"  

The Auditor General has qualified our financials on the basis of two key issues:

The method of accrual of revenue that was raised at the end of the financial year in respect of rates and trading services had not been done in a satisfactory manner.
The resultant statement of the consumer debtors was, in the view of the AG, therefore uncertain due to the accounting treatment of the above accruals.
The aforesaid matters result directly from the conversion of the city's revenue management systems across the financial year in which 87% of the city's revenue finalized in the old system and the new system handled the balance of 13%. At the same time the system-interface between the two systems did not work as expected in respect of the migration process, resulting on some billing inaccuracies.

In the main, the AG found that city's financials were therefore in a good state from which he could make the aforesaid opinion. The total assets of the city grew by more than R3billion from the prior year. While the city's liabilities were reduced substantially after the successful redemption of the Municipal Bond CoJ1 to the sum of R1billion and further all commercial paper was redeemed… leaving the city with a positive bank balance in excess of R2.6billion

In respect of the total revenue for the year, there was a growth from R20billion to R25billion on account of bulk tariff purchases, inflationary adjustment and revenue management and others.

Prior to the AG's latest report the City has received unqualified audit reports for three successive years, starting in 2006, despite the negative impact of the global economic crisis on Johannesburg's revenues and expenditures.

Johannesburg is the only City in the country that has consolidated the accounts of its core administration with that of its agencies or Municipal Owned Entities. The implication of this is that the City has to meet higher accounting standards that cover the entire spectrum of its activities.

The City's string of unqualified audit reports in the past resulted from the establishment of the Operation Clean Audit Report, with dedicated resources to identify high-risk areas such as revenue and procurement as well as an independent Group Auditing Committee consisting of private sector professionals.

All issues raised by the Auditor General in his report on Johannesburg for 2009/10 financial year are receiving priority attention by the entire senior management of the city, says the City Manager.

The qualifications contained in the AG's report refer predominantly to the billing issues and the accuracy of customer information in the new consolidated billing system.

Mr Dlamini says he is confident that the City will be able to address and correct those issues to the satisfaction expressed by the Auditor General and as part of the city's commitment to improve the quality of service provided to residents and the business sector.

The City will put in place a number of interventions to address the outstanding billing issues. These include:

Management turnaround and interventions to sort out the billing, revenue and customer management challenges;
Effective stabilization of the billing system and input parameters such as meter readings etc)
Turnaround of the City's call centre to ensure that staff attending to queries do so courteously, professionally and effectively;
A greater commitment to resolve queries from the public more effectively; from the 65 000 queries recorded in February 2011, 59 000 have been resolved. In the past six months, a significant reduction in the number of queries relating to invoice accuracy.
Improving revenue collections levels.
Mr Dlamini says the billing system and call centres environment will become more responsive to the needs of residents. The City also wants to work together with communities and stakeholders to find solutions to unresolved issues.

"We are very disappointed by this outcome and thus taking the qualifications raised by the Auditor General very seriously – and we will work hard to ensure they are resolved for the ensuing audit process." says Mr Dlamini.

For further enquiries please call:
Gabu Tugwana
Director
Communications
City of Johannesburg
Tel: 011 407 7322
Cel: 082 4955673