FINANCIAL STATEMENTS FOR THE YEAR JULY 2000 TO JUNE 2001

Attention: News Editors

20 November 2002

The City of Johannesburg is pleased to announce that it now has audited financial statements for the financial year ending June 2001 for the Council, including its core administration and its municipal entities.

The financial statements and the audit opinions will be presented to the Council of the City of Johannesburg at its November meeting.

Preparing the financial statements for 2000/2001 has been especially complex because of the unique circumstances of the City.

Introduction of the new system of Local Government in December 2000, the City along with other local governments had to make institutional and structural changes.

At the same time, the City had embarked on an extensive restructuring by the creation of municipal entities as part of an initiative to improve service delivery and the financial position of the City.

In terms of the preparations for the financial statements, these complexities presented themselves in:
The need to aggregate portions of seven previous Councils into a single entity;
The need also to disaggregate into the 12 municipal entities and core administration; and,
The fact that the municipal entities use commercial accounting principles, while the core administration remains on a municipal accounting basis.

We are proud to say that, although it has been a difficult and complex process, the City has been a pioneer in the establishment of municipal entities.

We are also proud to say that despite the difficulties experienced and the many stumbling blocks in the process, the City of Johannesburg has in fact made groundbreaking strides in establishing sound financial principles and practices.

There were several financial highlights in the year to June 2001:
The city did achieve an operating surplus of some R48 million for the period under review:
The surplus for 1 July 2000 to 30 June 2001 amounted to approximately R129 million for the full financial year
Capital expenditure was R632 million, more than double the figure for the previous two financial years
The financial year ended with positive cash balances of R24 million, compared to approximately R300 000 the previous year.
External investments as at 30 June 2001 amounted to R1 228,7 million as compared to the R529,2 million as at 30 June 2000.
Several municipal entities did better than expected in the first six months, including the Civic Theatre.

For the first time the City has been able to clearly identify non-recoverable debtors, some even dating back to the apartheid era, and bring these into account.

This has resulted in a direct charge to the City's appropriation account of R1.9 billion, and is the reason that the City shows a closing deficit of R1.45 billion.

The above are indicators of progress upon which the city will build for the future.

The Office of the Auditor-General of Gauteng presented their report on the financial year 2000/2001 to the multi-party Audit Committee of the City of Johannesburg on 18 October.

This report will, together with the Financial Statements, be presented to Council at its 21 November meeting.

The A/G report does reflect three significant areas of improvement over previous financial years:

Previous A/G reports indicated concern that inadequate provision had been made for doubtful debt. This has now been rectified.

In previous reports it was noted that no provision had been made for various unfunded liabilities.

In the financial year concerned, the City made a start to funding these liabilities by putting aside R41.2 million.

Previously there was a qualification in that the payroll was not reconciled to the general ledger. This has now been rectified, at least on an overall basis.

The AG's report qualified with a disclaimer points to four main areas of concern:
Fixed assets register
The Revenue Split
Unfunded liabilities
General ledger reconciliation

These are areas of work that the City has been painfully aware of for the last few years. The audit disclaimer is a consequence of long standing weaknesses in management and controls in the precursors(?) of the City of Johannesburg, exacerbated by the complex changes that the transition to democracy has brought.

The City has recognised that the fragmentation that has characterised Johannesburg for the last four decades will remain apparent for some time to come.

It is, however, the progress made in fundamentally addressing this reality for the long term that is new and exciting. The establishment of the new institutional framework has permitted the recruitment of high calibre leadership and management for the City and its municipal entities.

Already some of the qualifications of the AG's report for 2000/2001 have been rectified by the city, like the establishment of the Disaster Recovery and Business Continuity Plan.

In addition, the City has embarked on a programme called 'Operation Clean-Audit report' which aims to have an unqualified Audit Report delivered by the Auditor-General in the year 2005.

The plan addresses the weaknesses in the financial systems directly and has identified the following broad areas for major improvements:
Fixed Assets
Revenue and Debtors
Unfunded Liabilities
General Ledger Reconciliations
Documenting Procedures, providing training and management of compliance
Job analysis and tasking of individuals to be completed by Feb 2003

Considerable progress has already been made in all of these areas, including the appointment of personnel, documenting procedures and the management of daily checks and balances.

Revenue in particular has identified 46 critical projects of which 11 have been completed and 14 major ones, including the billing data clean up are underway.

While none of these projects can expect results overnight because of their complex, multifaceted nature, the City is confident that the foundations have been laid for us to systematically ensure that 2005 yields an unqualified audit report.

Enquiries: Tasneem Carrim
082 467 9227
tasneemc@joburg.org.za

Nthatisi Modingoane
Media Liaison Officer
CITY OF JOHANNESBURG
Tel: (011) 407 7354
Fax: 403 3494
Cell: 082 467 9228
E-mail: nthatisem@joburg.org.za

For more information about this wonderful City of ours, please visit our website : www.joburg.org.za