28 April 2006 Putting matters into perspective on the financial statements Issues raised in the April 26, 2006 edition of The Star on the financial statements of the City of Johannesburg contained inaccuracies and exaggerations. We wish to set the record straight on this matter. Since 2003, Joburg has submitted its group annual financial statements on time as required by section 126(1)(b) of the Municipal Finance Management Act 53 of 2003. Council produces annual financial statements and the Auditor General (AG) generates an audit report. It is therefore incorrect to say that Joburg failed to submit an audited report. An audited report is actually drawn from financial statements submitted for auditing and followed by an opinion expressed by the Auditor General. The city has been consistent in submitting its reports on time over the years. The AG has in the past issued disclaimers on the financial statements based on the incompleteness of revenue as well as weaknesses in the control environment of some of the City's companies. As recent as 29 March 2006, the City was upfront on this matter and stated that it did not expect a clean audit report until such time that it satisfied the requirements of the AG. On the financial statement of the year ending 30 June 2004, there was no reference made to expenditure in that audit report. The lack of support documentation only related to old balances and not money spent during the financial year ending 30 June 2004. The balances referred to consumer debtors with credit balances and unallocated receipts. According to the AG's report, consumer debtors with credit balances totaling R464, 5m could not be verified. This amount was not owed to the City. The leave pay accrual of R184, 9m was based on the balance of the leave days as reflected on the payroll system. The AG established that the leave recorded in the payroll system did not always agree with details on the leave forms and leave forms did not always support the recorded leave. As a result, he could not verify the accuracy of the leave pay accrual. The City was however in a process of rectifying this matter and as at 30 June 2005 this was reduced to R28, 2m for the provision of leave pay. With respect to housing rentals, the statement is true except that no mention is made of the 98% provision for doubtful debts against this balance, which only leaves a balance of R8, 5m. Joburg has spent hundreds of thousands of rands on a publicity campaign informing residents of its intention to implement a credit control policy that was approved by Council in August 2004. The AG has repeatedly commended the City of Joburg for setting an admirable standard in its financial statements as well as making significant progress in trying to address audit issues. The City also holds media regular briefings on the audited financial statements to allow journalists the opportunity to accurately understand the AG's report. It is unfortunate that there was no attempt to verify the report which appeared in The Star on 26 April 2006, with the City of Johannesburg before publication. Ends Issued by: Virgil James Spokesperson Communications Telephone: 011 407 7226 Fax: 011 403 3494 Cell: 082 467 9228 E-mail: virgilj@joburg.org.za