Joburg's qualified audit raises eyebrows
Question marks over the financial statements of the City of Johannesburg, for the second year running, could attract the attention of rating agencies.
City manager Trevor Fowler said yesterday the city's financial statements for the 12-month period to June last year received a qualified opinion from the auditor-general.
In other words, the auditor-general was not satisfied with the information provided. Qualifications related to revenue from property rates and service charges, as well as consumer debtors and leave accrual.
The report was tabled in a city council meeting yesterday.
A downgrade of the municipality's credit status or a negative change in outlook could raise the cost of the city's interest bill - which would have negative consequences not only for ratepayers but for all residents.
In June last year, after the previous qualified outcome, Moody's Investors Service senior analyst Francesco Soldi said: "Moody's considers auditors' qualification in its analysis of metropolitan municipalities. However, these do not have an immediate and direct impact on ratings per se as our ratings consider a multitude of factors, including, for Johannesburg, its robust economy and satisfactory financials."
In December 2009 Moody's downgraded the city's credit rating from Aa2.za to Aa3.za.
In November last year the agency changed the outlook from stable to negative - an automatic revision triggered by the same action on South Africa's sovereign rating that was not city specific.
Fowler told journalists ahead of the meeting: "The new city administration has taken proactive steps to strengthen internal control mechanisms, enhance revenue management and improve the consistency of the data and records."
Parks Tau, a former finance member of the mayoral committee, took over as mayor from Amos Masondo eight months ago. And Fowler became city manager in October.
Apart from the qualifications, the auditor-general's report says, under the heading "significant uncertainties", that the municipality is the defendant in various lawsuits, and no provision has been made "for any liability that may result".
It highlights unauthorised expenditure of R48.5 million and irregular expenditure of R397.7m "as a result of non-compliance with supply chain management regulations". And it notes "material" electricity distribution losses of R1.2 billion.
The city has been without a chief financial officer for many months. Lungelwa Sonqishe has been occupying the position in an acting capacity since the departure of former chief financial officer Mankodi Moitse and the city has seconded Quentin Green from advisory firm KPMG to help address its problems.
In response to a question, Fowler said the city was interviewing candidates for the job and hoped to make an announcement in few months.
He said the city would achieve a clean audit by 2014 - the date targeted by the Department of Co-operative Governance and Traditional Affairs.
Business Report
Posted at 08:54AM Jan 27, 2012 by Editor in Market | Comments[0]