Tenth Report of Standing Committee on Public Accounts: Business and Arts South Africa, dated 8 June 2005:

Tenth Report of Standing Committee on Public Accounts: Business and Arts South Africa, dated 8 June 2005:

1. INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the Business and Arts South Africa for the year ended 31 March 2004, tabled in Parliament on 03 September 2004 and referred to it, reports as follows:

2. AUDIT OPINION

The Committee commends the Board and the Executive of the Business and Arts South Africa for the unqualified audit opinion expressed by the independent auditors, Grant Thornton, and trusts that future audit opinions will be equally unqualified.

3. CONCLUSION

The Committee is of the view that no further interaction with the accounting authority of Business and Arts South Africa is necessary for the financial year under review.

The Committee therefore awaits the next Annual Report.

Report to be considered.

2. Eleventh Report of Standing Committee on Public Accounts: William Humphreys Art Gallery, dated 8 June 2005:

1. INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the William Humphreys Art Gallery for the year ended 31 March 2004, tabled in Parliament on 31 August 2004 and referred to it, reports as follows:

2. AUDIT OPINION

The Committee commends the Council of the William Humphreys Art Gallery for the unqualified audit opinion expressed by the Auditor General and trusts that future audit opinions will be equally unqualified.

3. CONCLUSION

The Committee is of the view that no further interaction with the accounting authority of William Humphreys Art Gallery is necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Auditor-General.

Report to be considered.

3. Twelfth Report of Standing Committee on Public Accounts: Council for Medical Schemes, dated 8 June 2005:

INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the Council for Medical Schemes for the year ended 31 March 2004, tabled in Parliament on 29 September 2004 and referred to it, reports as follows:

AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by the Auditor General and trusts that future audit opinions shall be equally unqualified.

EMPHASIS OF MATTER

The Committee notes the incidence of non-compliance with the Public Finance Management Act regulations and expects the situation to be rectified by the next audit.

CONCLUSION

The Committee is of the view that no further interaction with the Council of
Medical Schemes would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Auditor-General.

Report to be considered.

4. Thirteenth Report of Standing Committee on Public Accounts: Engelenburg House Art Collection, dated 8 June 2005:

1. INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the Engelenburg House Art Collection for the year ended 31 March 2004, tabled in Parliament on 21 September 2004 and referred to it, reports as follows:

2. AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by the Auditor General and trusts that future audit opinions shall be equally unqualified.

3. CONCLUSION

The Committee is of the view that no further interaction with the Engelenburg House Art Collection would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Auditor-General.

Report to be considered.

5. Fourteenth Report of Standing Committee on Public Accounts: Statistics South Africa, dated 8 June 2005:

A. Introduction

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor General on the Financial Statements of Statistics South Africa for the year ended 31 March 2004, tabled in Parliament on 28 September 2004 and referred to it reports as follows:

Expenditure procured in contravention of tender procedures (par 3.1, page 96)

The Auditor-General reported that STATS SA had once again not complied with procurement regulations during the year under review. State Tender Board regulations were not complied with in the procurement of services amounting to R3,3 million from the same supplier that services amounting to R16,1 million had been procured irregularly in the previous financial year (2002/03)

The Committee recommends that the Accounting Officer immediately takes all appropriate steps to ensure that, in future –
all matters of procurement within STATS SA are compliant with all regulatory requirements, including State Tender Board Regulations and Regulations in terms of the Framework for Supply Chain Management; and
Disciplinary enquiries take place, as required by the PFMA, in all instances where negligence or wrongdoing may have taken place in order to cultivate a culture of compliance and discipline in line with Government’s Batho Pele concept.

Regarding the three amounts of irregular expenditure in question (R16,1 million; R3.3 million, and R9 million), the Committee further recommends that the Accounting Officer reports –

whether investigations in terms of sections 84 and 44 of the Public Finance Management Act had taken place, and if not, why not; and if so, what the outcomes of the investigations were, and
why the notes to the financial statements did not disclose, as required, detail regarding disciplinary actions taken in the case of irregular expenditure, or in the case of fruitless and wasteful expenditure.

Unreconciled advances written off (par 3.2, page 96)

The Auditor General reported that an amount of R1.3m was written off without any steps first having been taken to recover it.

The Committee, therefore, recommends that the Accounting Officer ensures that:

At all times, he carries out his responsibility of ensuring that before any debt is written off, he ensures that evidence exists that all reasonable steps have been taken to recover the debt in question, and that is it in fact irrecoverable;
Finalise the investigation on the reasons for R1.3m and report to Parliament, sixty days after this report has been adopted by Parliament; and
Take disciplinary action against officials responsible for poor control and financial administration.

Asset Registers (par. 3.3, page 97)

Auditor General reported that separate registers are kept for office equipment, computers and related equipment. The computer assets and related equipment of R13.1m could not be verified.

The Committee recommends that the Accounting Officer urgently ensures that:

Responsibility for a complete and accurate asset register is vested in a single senior manager at STATS SA who can be held responsible for the asset register in future;
Appropriate measures are taken to ensure that the head of asset management will receive the support from all division heads to ensure a speedy and effective rectification of the weaknesses, e.g. including in the performance contracts of all line managers asset management as an area of responsibility; and that the R13.1m computer assets are verified; and
A proper plan with clear target dates is provided to the Minister, in terms of which the Accounting Officer can be held accountable for the rectification of this matter.

Tax Payments (par 5.1, page 97)

The Committee is concerned that the Auditor-General could not verify the validity and accuracy of payments to enumerators and related tax and levies due to late submission of the reconciliations and supporting documents.

The Committee recommends that in future the Accounting Officer ensures that the necessary reconciliations are done, and supporting documents are submitted timeously.

5. Delegation of Authority (par 5.2.1, page 97)

The Auditor-General reported that delegation of authority to budget managers was inadequate and very broad.

The Committee recommends that the Accounting Officer:

Comply with Treasury Regulation 15.12.1 and assign authority in writing to approve warrant vouchers, cheques or electronic payments;
Delegates authority in terms of other best practices, e.g. specifying the levels of approval per post and correct rank, indicating whether authority can be delegated further, and regularly reviewing the delegations.

6. Internal Audit recommendations

The Committee is not satisfied with the delay in the implementation of internal audit recommendations.
The Committee therefore recommends that the Accounting Officer ensures that:

All outstanding internal audit recommendations are implemented as a matter of urgency; and
Quarterly reports are submitted to the Minister on progress being made by management in response to internal and external audit findings (including a report by the Audit Committee on the adequacy of the focus areas of internal audit).

The Committee further recommends that the required risk management strategy – not available during the year under review – is immediately finalised and submitted to the Auditor-General for auditing purposes.

Vacancies

The Accounting Officer confirmed that the Deputy Director-General (Population Statistics) has been suspended for a period of two years and that other critical positions are still not filled due to scarcity of skills.

The Committee recommends that the Accounting Officer ensures that he -

Takes all the necessary steps to ensure that STATS SA has the required senior management capacity in order to deliver on its important mandate;
Reports progress regarding the filling of all critical top management positions to the Minister on a regular basis; and
(c) The suspension of the DDG is addressed and finalised as a matter of urgency.

General

The Committee recommends that all issues raised above are addressed in future strategic and business planning of STATS SA.

The Committee further recommends that Parliament be provided with a progress report made on the matters raised above.

Report to be considered.

6. Fifteenth Report of Standing Committee on Public Accounts: Municipal Demarcation Board, dated 8 June 2005:

Introduction

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor General on the Financial Statements of the Municipal Demarcation Board for the year ended 31 March 2004, tabled in Parliament on 29 September 2004 and referred to it reports as follows:

FINANCIAL MANAGEMENT (page 103, 4.1, 2003/04 annual report)

The Auditor General reported that policies and procedures as implemented by management were not fully adhered to.

The Committee recommends that:

The Audit Committee should review whether the implementation of the control measures has occurred.

The MDB should report to this committee that all deficiencies have been resolved.

MDB should acknowledge non-compliance and deal with the root causes of weak financial management and compliance with regulations and procedures.

MDB should ensure that there are compensating controls to take care of operational segregation, e.g public participation and maps.

DONOR FUNDING (page 103, 4.3, 2003/04 annual report)

It was reported that MDB did not keep accurate records of the spending of the Danish donor funds received as required by the Donor Funding Agreement.

The Committee recommends that:

The MDB implements control measures to ensure that the terms of the donor funding agreement are complied with.

The Audit Committee should review the compliance with the donor funding agreement.

BUDGET PROCESS / GOING CONCERN (page 103, 4.4, 2003/04 annual report)

It was reported that the following factors indicate that the going concern ability of the MDB appears to be at risk:

The accumulated surpluses at the end of 2003/04 are not considered sufficient to address the going concern problem faced by the MDB.

The Committee recommends that:

The MDB and National Treasury should resolve the funding issues, and progress on this should be reported to this Committee.

The MDB does not have an effective system of monitoring its expenditure against the allocated budget.
The Committee recommends that:

The MDB should implement adequate measures to monitor the budget, the implementation of which will be followed up by the AG’s Office;

MDB should ensure that they put in place sustainable measures with regard to their budgeting processes; and

MDB to write to SCOPA with regard to when sustainable control measures will be put in place.

COMPUTERISED GENERAL CONTROLS (page 103, 4.1, 2003/04)

The Auditor-General identified that there was a lack of password controls at the Board.

The Committee recommends that:

(a) The MDB should satisfy the Committee that it will ensure that all its policies and procedures in regard to its computerised system have been implemented, especially with regards to implementing the necessary password controls to safeguard IT system.

GENERAL

(a) The Committee recommends that the Portfolio Committee on the Department of Provincial and Local Government should follow up on the role of DPLG in supporting the MDB; and

(b) Within 60 days after this report has been adopted by Parliament, MDB should supply the Committee with actual amounts and rates of the consultants.

Report to be considered.

7. Sixteenth Report of Standing Committee on Public Accounts: National Housing Finance Corporation Limited, dated 8 June 2005:

1. INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Independent Auditors on the Financial Statements of the National Housing Finance Corporation for the year ended 31 March 2004, tabled in Parliament on 30 September 2004 and referred to it, reports as follows:

2. AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by Ernst & Young and trusts that future audit opinions shall be equally unqualified.

3. CONCLUSION

The Committee is of the view that no further interaction with National Housing Finance Corporation Limited would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report.

Report to be considered.

8. Seventeenth Report of Standing Committee on Public Accounts: National Urban Reconstruction and Housing Agency, dated 8 June 2005:

1. INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the National Urban Reconstruction and Housing Agency for the year ended 31 March 2004, tabled in Parliament on 30 September 2004 and referred to it, reports as follows:

2. AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by the independent auditors Fisher Hoffman and trusts that future audit opinions shall be equally unqualified.

3. CONCLUSION

The Committee is of the view that no further interaction with the National Urban Reconstruction and Housing Agency would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report.

Report to be considered.

9. Eighteenth Report of Standing Committee on Public Accounts: Public Service Commission, dated 8 June 2005:

1. INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the Public Service Commission for the year ended 31 March 2004, tabled in Parliament on 21 September 2004 and referred to it, reports as follows:

2. AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by the Auditor-General, and trusts that future audit opinions shall be equally unqualified.

3. CONCLUSION

The Committee is of the view that no further interaction with the Public Service Commission would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Auditor-General.

Report to be considered.

10. Nineteenth Report of Standing Committee on Public Accounts: The Social Housing Foundation, dated 8 June 2005:

1. INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of The Social Housing Foundation for the year ended 31 March 2004, tabled in Parliament on 30 September 2004 and referred to it, reports as follows:

2. AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by Price WaterHouseCoopers and trusts that future audit opinions shall be equally unqualified.

3. CONCLUSION

The Committee is of the view that no further interaction with The Social Housing Foundation would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report.

Report to be considered.

11. Twentieth Report of Standing Committee on Public Accounts: Special Investigating Unit , dated 8 June 2005:

1. I NTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the Special Investigating Unit for the year ended 31 March 2004, tabled in Parliament on 30 September 2004 and referred to it, reports as follows:

2. AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by Price WaterHouseCoopers and trusts that future audit opinion shall be equally unqualified.

3. CONCLUSION

The Committee is of the view that no further interaction with Special Investigating Unit would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report.

Report to be considered.

12. Twenty-First Report of Standing Committee on Public Accounts: Thubelisha Homes, dated 8 June 2005:

1. INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of Thubelisha Homes for the year ended 31 March 2004, tabled in Parliament on 30 September 2004 and referred to it, reports as follows:

2. AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by Deloitte & Touché and trusts that future audit opinions shall be equally unqualified.

3. CONCLUSION

The Committee is of the view that no further interaction with Thubelisha Homes would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report.

Report to be considered.

13. Twenty-Second Report of Standing Committee on Public Accounts: Parliament of the Republic of South Africa, dated 8 June 2005:

A. Introduction

The Standing Committee on Public Accounts, having considered the Annual report and the Report of the Auditor General on the Financial Statements of Parliament for the ended 31 March 2004, tabled in Parliament on 4 November 2005 and referred to it, reports as follows:

Expenditure (par 3.2, page 71)

During the period under review there were insufficient controls over payment vouchers. The Auditor-General had found that no supporting documentation for payments amounting to R3 050 068 could be submitted for auditing purposes.

The Committee recommends that the Accounting Officer urgently ensures that:

(a) All procedure manuals are updated to ensure clarity regarding the supporting documentation required for all items of expenditure, and that staff who do not comply with the requirements be dealt with in terms of the applicable disciplinary code;
(b) Managers authorising payments do so only in cases where the required supporting documentation exists; and
(c) The inadequacies regarding the filing system are addressed without delay.

Receivables and Payables (par 3.5 & 3.6, page 72)

The Auditor General reported that a complete debtors age analysis could not be submitted for audit purposes and the recoverability of the debtors could thus not be determined. An approved debt control policy did not exist during the period under review. Also, the creditor's reconciliation revealed an overstatement of R6 726 706; and proof of the validity of, or services rendered in respect of payments amounting to R4 624 213 could not be submitted for auditing purposes. The Committee found this to be unacceptable and recommend that Parliament should submit documentation timeously.

The Committee therefore recommends that the Accounting Officer ensures that:

(a) Debtors are properly administered and managed in accordance with an approved debt control policy, including ensuring that a debtors age analysis is available as required, and that all irrecoverable debtors are written off in terms of the applicable policies and procedures;
(b) Payables are disclosed in the financial statements in terms of the applicable accounting policy;
(c) Creditors' reconciliations are reviewed and authorised;
(d) Use of suspense account is discouraged; and
(e) The financial management skills audit is finalised and recommendations implemented as a matter of urgency.

Internal Control (par 5.4, page 75)

The Auditor General reported that various internal and external audit findings in respect of previous audits had not received the necessary attention from management. There was also no policy or system in place to follow-up internal and external audit findings to ensure that corrective steps are taken, with the result that weaknesses are not rectified timeously or not at all.

The Committee therefore recommends that the Accounting Officer:

(a) Urgently implement an effective system in terms of which all internal and external audit findings and recommendations are responded to by management and corrective actions assessed.

Third party payments and employee benefits and compensation (par 3.3, page 71;par 3.8, page 73 and par 5.2, page 74)

The Auditor-General reported concern regarding the following aspects:

The occurrence of third party payments that could not be traced;
Leave entitlement of employees and leave paid out on resignation;
The correctness of medical aid allowances paid to various staff members since no proof was submitted that the employees belong to a medical aid scheme as well as tarriffs in respect of employer and employees' contribution; and
General problems regarding the implementation of the Manqoba management information system.

The Committee recommends that the Accounting Officer ensures that:-

A proper audit trail exists for all payments in order to verify payments to the cash book and relevant bank statements; and furthermore, the Committee finds it unacceptable that third party payments amounting to "R7m" could not be supplied timeously for auditing.
All the necessary steps are taken to ensure that leave is managed properly, inter alia ensuring that –
the backlog of leave forms should be captured on books of account as a matter of urgency;
monthly verification of leave taken versus leave captured be completed by the division managers; and
Records are updated in respect of medical allowances according to the employee contracts,
Correct contributions are paid by employer and employee; and
(e) Urgently rectify mistakes flowing from the implemenation of the Manqoba system.

Loans granted to former members of Parliament (note 11, page 89)

In the notes to the annual financial statements on page 89, an amount of R87 000 is disclosed as loans to former Members of Parliament for the purposes of acquiring motor vehicles.

(a) The Committee therefore recommends that the accounting officer ensures that an investigation is done to determine the possibility of recovering the loans to the former Members of Parliament and a report, in this regard, is submitted to Parliament sixty days after this report is adopted by Parliament.

Donor funding (par 3.1, page 71)

The Committee is concerned that the Auditor General could not confirm the validity and completeness of donor funding received by Parliament from various local and foreign donors during the year under review.

The Committee recommends that the Accounting Officer ensures that:

(a) The financial statements of Parliament disclose all donations received;
(b) A proper audit trail exist for the purposes of the internal and external auditors;
(c) A formal policy that governs donor funding and financial accountability is implemented as a matter of urgency;
(d) All donations received are approved by the Presiding Officers of Parliament in terms of their controlling and supervisory functions provided for in section 3 of the Public Finance Management Act and other applicable legislation.

Inventories and Parliamentary Shop (par. 3.7, page 72; 5.1, page 73 )

Notwithstanding various shortcomings reported on by the Auditor-General in the previous management letters, these were again noted in the year under review.

The Committee recommends that the Accounting Officer ensures that:

(a) Issues raised by the Auditor General in management letters are addressed;
(b) The necessary financial management policies and procedures, as well as a proper system, are implemented to control inventories; and
(c) Stock-taking and the financial progress of the shop are monitored and, in regard to the above, a report is submitted to Parliament sixty days after this report is adopted by Parliament.

Report to be considered.

14. Twenty-Third Report of Standing Committee on Public Accounts: National Department of Health, dated 8 June 2005:

1. Introduction

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor General on the Financial Statements of the National Department of Health for the year ended 31 March 2004, tabled in Parliament on 6 October 2004 and referred to it, reports as follows:

A. MAIN VOTE

Transfer payments and Conditional Grants to provinces (par 3, page 61-62)

During the year under review, transfer payments to various provincial departments constituted 91.4% (approximately R7 billion) of the Department of Health' expenditure. The report of the Auditor General revealed fundamental deficiencies and non-compliance with the provisions of the Division of Revenue Act, as well as instances of inadequate monitoring of conditional grants.

The Committee recommends that the Accounting Officer immediately:

(a) Takes all appropriate steps to comply with the requirements of the Division of Revenue Act relating to transfer payments in particular those sections that deal with underspending and non-achievement of objectives;
(b) Ensures the development and implementation of a policy framework and clear guidelines for grant utilisation and accountability in the provinces;
(c) Carry out ongoing financial and operational monitoring, especially on-site monitoring; and
(d) Implements effective project management systems and processes within the Department for general monitoring, as well as to ensure an early warning system to timeously identify and address problem areas.

Inadequate monitoring of conditional grants (par. 5.1, page 62)

It was reported that no distinction was made between equitable share funding and conditional grant funding in the financial management systems of the benefiting provinces.

The Committee recommends that the Accounting Officer immediately facilitate the implementation of effective management systems that will clearly separate grant funds from equitable share funds, so as to ensure that funds are utilised for the purposes defined in the business plans and the DORA framework.

Transfer payments to Non-Governmental Organisations (NGO's) (par 5.3, page 62)

The Auditor-General reported that an amount of R110 million was transferred to NGO's. However, there was non-compliance with the provisions of the PFMA and the Treasury Regulations as well as the conditions of funding agreements with the department. The Department transferred funds without obtaining assurance from the NGOs that they had implemented effective, efficient and transparent financial management systems.

The Committee recommends that the Accounting Officer:

(a) Complies with his legal obligation regarding transfer of funds by obtaining the assurances required by the PFMA in all instances where funds are transferred, or run the risk of being found guilty of financial misconduct;
(b) Immediately takes all appropriate steps in monitoring the performance and compliance with the grant conditions of NGOs;
(c) Facilitates a process to ensure that the Financial Year of NGO's coincide with the Department's financial year.

Fixed Assets (par 5.2, page 62)

The fixed asset register maintained on the logistical system is not integrated with the accounting system of the Department. Controls over the movement of assets were also reported to be inadequate.

The Committee therefore, recommends that the Accounting Officer urgently ensure that:

(a) A complete asset and inventory register is maintained in terms of best practice, and that it be verified and reviewed by a senior official on a regular basis; and

(b) Financial management policies and procedures are established or refined in order to enhance the custody and safekeeping of assets and inventory.

Vacancies and personnel turnover

The Committee recommends that the Portfolio Committee on Health:

(a) Monitors the progress with the filling of all vacancies, especially critical top management positions;
(b) Ensures that, overall, the issues raised by the Committee in this Report, are addressed in the Department’s next strategic plan, and are monitored for implementation.

South African National Aids Trust (SANAT)

In 2002 SANAT was established with a donation of R20 million. The Auditor-General reported that inadequate progress has been made regarding the objectives of the Trust as set out in the Deed of Trust, and that fruitless and wasteful expenditure of R571 114 had been incurred.

The Committee recommends that the Accounting Officer ensures that:

(a) Proper planning is done in order to achieve the objectives of the Trust, including the preparation of a budget as required by the PFMA six month prior to the year end.
(b) The membership to the Board of Trustees is finalised and that the Board is functional as a matter of urgency, and progress in this regard be provided to Parliament sixty days after this report has been adopted by Parliament; and
(c) Meeting of the Trustees three times a year is facilitated as required by par. 10.3 of the Deed of Trust.

Report to be considered.

15. Twenty-Fourth Report of Standing Committee on Public Accounts: National Home Builders Registration Council, dated 8 June 2005:

INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the National Home Builders Registration Council for the year ended 31 March 2004, tabled in Parliament on 29 October 2004 and referred to it, reports as follows:

AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by the Auditor General and trusts that future audit opinions shall be equally unqualified.

EMPHASIS OF MATTER

The Committee notes that the NHBRC has not adopted a formal guide and policy on the accounting methods and standards for the recognition of premium income and insurance/warrant liabilities and expect this situation to be rectified in accordance with South African Statements of Generally Accepted Accounting Practice, by the following audit.

The Committee further notes that the new Council was not yet appointed by 31 March 2004 in accordance with Section 4(1) of the Housing Consumers Protection Measures Act, 1998 and will monitor the situation in the following audit report.

CONCLUSION

The Committee is of the view that no further interaction with the National Home Builders Registration Council would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Auditor-General.

Report to be considered.

16. Twenty-Fifth Report of Standing Committee on Public Accounts: National Prosecuting Authority, dated 8 June 2005:

INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the National Prosecuting Authority for the year ended 31 March 2004, tabled in Parliament on 14 September 2004 and referred to it, reports as follows:

AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by Auditor General and trusts that future audit opinion shall be equally unqualified.

CONCLUSION

The Committee is of the view that no further interaction with National Prosecuting Authority would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Auditor-General.

Report to be considered.

17. Twenty-Sixth Report of Standing Committee on Public Accounts: The Presidency, dated 8 June 2005:

INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the Presidency for the year ended 31 March 2004, tabled in Parliament on 30 September 2004 and referred to it, reports as follows:

AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by the Auditor General and trusts that future audit opinions shall be equally unqualified.

EMPHASIS OF MATTER

The Committee notes the weakness identified by the Auditor-General with regard to inadequate policies to govern procedures relating to asset management. The Committee notes the progress made to bar code individual assets but urges the Department to reconcile the register by the following audit. The Committee expects the Department to comply with the provisions of the PFMA in this regard.

The Committee notes the weaknesses identified in the Information System audit and the indication that management is addressing the situation and will monitor the situation in the following audit.

CONCLUSION

The Committee is of the view that no further interaction with the Presidency would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Auditor-General.

Report to be considered.

18. Twenty-Seventh Report of Standing Committee on Public Accounts: Rural Housing Loan Fund, dated 8 June 2005:

INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the Rural Housing Loan Fund for the year ended 31 March 2004, tabled in Parliament on 30 September 2004 and referred to it, reports as follows:

AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by independent auditors Ernst and Young and trusts that future audit opinions shall be equally unqualified.

CONCLUSION

The Committee is of the view that no further interaction with the Rural Housing Loan Fund would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report.

Report to be considered.

19. Twenty-Eight Report of Standing Committee on Public Accounts: South African Council for Educators, dated 8 June 2005:

INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of the South African Council for Educators for the year ended 31 March 2004, tabled in Parliament on 30 August 2004 and referred to it, reports as follows:

AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by the independent auditors PriceWaterhouseCoopers and trusts that future audit opinions shall be equally unqualified.

CONCLUSION

The Committee is of the view that no further interaction with the South African Council for Educators would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report.

Report to be considered.

20. Twenty-Ninth Report of Standing Committee on Public Accounts: Sport and Recreation South Africa, dated 8 June 2005:

INTRODUCTION

The Standing Committee on Public Accounts, having considered the Annual Report and the Report of the Auditor-General on the Financial Statements of Sport and Recreation South Africa for the year ended 31 March 2004, tabled in Parliament on 30 September 2004 and referred to it, reports as follows:

AUDIT OPINION

The Committee noted the unqualified audit opinion expressed by the Auditor-General, and trusts that future audit opinions shall be equally unqualified.

CONCLUSION

The Committee is of the view that no further interaction with Sport and Recreation South Africa would be necessary for the financial year under review.

The Committee therefore awaits the next Annual Report and the Report of the Auditor-General.

Report to be considered.

21. Thirtieth Report of Standing Committee on Public Accounts: Unemployment Insurance Fund, dated 8 June 2005:

Introduction

The Standing Committee on Public Accounts (SCOPA), having heard and considered evidence on the Annual Report and the Report of the Auditor-General on the financial statements of the Unemployment Insurance Fund (UIF) for the year ended 31 March 2004, reports as follows:

Structure and Governance

The Committee is very concerned about the fact that although the Unemployment Insurance Fund (Fund) is being listed as a Schedule 3A public entity in terms of the PFMA, the Accounting Officer of the Fund is the Director-General of the Department of Labour. The Fund has an Advisory Board with one of the Deputy Director-Generals being the Chairperson .

There is currently an arrangement between the Department of Labour (DoL) and the Fund where staff of the DoL provide services to the Fund in order to assist the Fund to carry out its functions. The DoL then invoices the Fund for the services that have been rendered by DoL staff.

The matter has been raised during previous hearings with no solution forthcoming from the Fund.

The Committee recommends that the Accounting Authority should ensure that:

(a) the reporting structures of the fund is reviewed and if necessary ammended to ensure unambiguous accountability of the Fund;
(b) a decision is reviewed whether the Fund should be a schedule 3A public entity or a division of the DoL; and
(c) SCOPA is updated with quarterly progess reports and timeframes (starting sixty days after the adoption of this report by Parliament) indicating the improvements on the structure of the Fund.

Debtors

The Committee took note of:

(a) the fact that there is no proper debtor system in place which ensures that the fund collects all revenue due from both SARS and non-SARS employers
(b) the Committee is also not satisfied with the progress of the project Siyaya.

The committee therefore recommends that:
(a) an adequate debtor system be put in place to control revenue; and
(b) SCOPA be provided with time frames, sixty days after the adoption of this report by Parliament, for the full implementation of the debtor system, as well as the key milestones of project Siyaya.

Material breakdown in internal control

3.1 Bank reconciliation

The Committee noted that bank reconciliations were not performed and reviewed on a weekly basis and that there were inadequate controls over paid cheques during the audit period.

The Committee recommends that the Accounting Authority should ensure that:
(a) bank reconciliation should be prepared in terms of Treasury Regulation 31.1.2(j);
(b) all reconciling items on the reconciliation should be followed up timeously; and
(c) systems, procedures, processes, training and awareness programmes are established to ensure efficient and effective banking and cash management.

3.2 Fixed assets

The Auditor-General was unable to verify the existence of movable fixed assets due to an incomplete and inaccurate fixed asset register.

The Committee finds the situation unacceptable as this matter has been reported for three successive years and to date the Fund has not rectified the position.

The Committee was informed during the hearing that the Fund has contracted the services from Siemens Business Services, which is a Public Private Partnership. The Committee is concerned that this contract does not cover all fixed assets.

The Committee recommends that the Accounting Authority ensures:
(a) the existence and maintenance of a complete and accurate fixed asset register;
(b) that proper controls over the management of all fixed assets are immediately implemented, monitored and that discrepancies identified are followed up timeously;
(c) that a progress report be submitted to the Committee by July 2005 with regards to the full implementation of the integrated fixed asset register; and
(d) that the Fund should implement mechanisms to monitor the adherence to internal controls and procedures.

3.3 General computer controls

Significant weaknesses in the general computer control environment were highlighted in the audit report with regard to programme change control, security administration and monitoring, and logical access security. The Committee further noted that the proposed action plan to address the weaknesses identified has not been implemented.

The Committee recommends that the Accounting Authority ensures:
(a) the implementation of an action plan with immediate effect;
(b) time frames for the implementation process are set and forwarded to SCOPA, sixty days after the adoption of this Report by Parliament;
(c) proper management and compliance monitoring take place with respect to contracts and service level agreements of all service providers; and
(d) an information system environment that complies with required standards is available.

Non-compliance with laws and regulations

The Committee is concerned about various issues of non-compliance highlighted in the audit report with regards to the PFMA, Treasury Regulations, the UIF Act and the Unemployment Insurance Contributions Act. However, it has not been informed of any disciplinary actions taken to address non-compliance issues.

The Committee recommends that the Accounting Authority urgently ensures that:

measures are implemented immediately to monitor the Fund’s compliance with all applicable laws and regulations;
corrective actions are taken where the fund has not fully complied with applicable laws and regulations;
a designated official is tasked to take responsibility for compliance and to facilitate effective corporate governance; and
SCOPA be informed forthwith of any disciplinary actions taken to address non-compliance issues.

Responses to previous hearing

The Committee noted that although improvements were made since the previous hearing in 2002, some significant issues were not addressed. This
raises doubts/ concern as to whether management is proactive and strategically focused to address the problems that resulted in the material break down in internal control.

The Committee recommends that the Accounting Authority should provide SCOPA and the Auditor-General, sixty days after the adoption of this Report by Parliament, with timeframes for the harmonisation of the database for Department of Labour, UIF and the Compensation Fund.

6. General: Departure from GAAP

It was noted that non-SARS contributions are accounted for on the cash basis.

The Committee recommends that a database of contributors and employers should be updated and maintained to ensure full compliance with GAAP.

Having considered the evidence and the opinion expressed by the Auditor-General in previous years reports; the Committee is of the view that the Minister should investigate the possibility of negligence and misconduct with a view of conducting disciplinary action if necessary. The committee further requests that the outcome of this investigation be reported back to SCOPA within 60 days of the adoption of the report by Parliament.

Report to be considered.

22. Thirty-First Report of Standing Committee on Public Accounts: Department of Defence, dated 8 June 2005:

Introduction

The Standing Committee on Public Accounts (SCOPA), having heard and considered evidence on the Annual Report and the Report of the Auditor-General on the financial statements of the Department of Defence (DoD) for the year ended 31 March 2004, reports as follows:

2. Contingent liabilities and leave - page 143, paragraph 3.1

The audit report highligted unavailability of detailed supporting reports for leave credits relating to a contingent leave liability of approximately R1,064 billion as well as inadequate internal controls in respect of the leave administration system. The Committee is very concerned as the matter was raised several times during previous hearings with no solution forthcoming from the DoD.

The Committee recommends that the Accounting Officer ensures that the following are in place:
A reliable system that gives the monetary value, correct amount of leave credits for each member in the SANDF and generates accurate, detailed management information;
Leave credits are disclosed in the financial statements as prescribed including the directive on leave of absence;
Proper adherence to all relevant rules, regulations and instructions of the internal control system.
Proper management controls, which include regular independent checking and reviewing of attendance and leave registers.

3. Physical and intangible asset movement schedules - page 144,
paragraph 3.2

The audit report reflected that due to un-integrated systems existing at the DoD, no amounts could be disclosed in the physical and intangible asset movement schedules as prescribed by the Treasury Regulation.

It was further noted that the DoD is not in a position to move to a modified accrual accounting system any time soon.

The Committee notes that notwithstanding the recurrance of these system failures, the DoD has yet to implement the necessary corrections.

The Committee recommends that the Accounting Officer:

Establishes a single logistical system that ensures accurate and complete disclosure; or
Upgrades the present logistical systems to make provision for accrual accounting; and
Indicates to the Committee time frames for implementation of a system that is integrated and able to report the financial information required.

4. Management of inventory, machinery and equipment page 144-
146, paragraph 5.1

The audit conducted on the management of inventory, machinery and
equipment revealed that the same weaknesses in internal controls as reported on in prior years still existed in all main processes of asset management. This matter could mainly be ascribed to the fact that management policies and procedures were not adequately followed.

The Committee finds it unacceptable that matters reported in prior years still remain unresolved.

The Committee recommends that:
Internal control procedures be revised and improved where necessary;

Vacancies should be filled with skilled personnel and relevant training should be given and the Portfolio Committee on Defence should monitor progress;

Disciplinary action be implemented where non-compliance with prescribed policies/ regulations occurred;

Storage facilities be upgraded;

The reporting structure within a general support basis, army support basis and joint support basis should be investigated and a practical/workable structure be considered that will give the officer commanding full responsibility over all the offices within his/her unit; and
Logistic systems be integrated.

4.2 The Committee further noted that the DoD made commitments to SCOPA during previous hearing regarding implementation of corrective measures in respect of excessive stock levels. These include amongst other things disposal plans to be put in place for each service.

The Committee recommends that disposal plans be finalised on time and that SCOPA be provided with the progress report within 60 days of adoption of the report by Parliament.

5. Purchases and payables (accruals) - page 144, paragraph 3.4

The audit report reflected an instance where information could not be generated from the accounting systems of the DoD resulting in the amount disclosed as accruals understated by an unknown amount.

The Committee is concerned about the DoD's slow progress in addressing the issue.

The Committee recommends that the Accounting Officer ensures that:
An integrated system that will comply with the accrual accounting principles and disclosures is implemented; and
The current systems are upgraded/replaced or National Treasury has to revisit its requirements on disclosure within the limitations placed by the existing information systems.

6. Departmental income - page 144, paragraph 3.3

The committee is concerned about the completeness of income amounting to R266,342 million that could not be verified due to the inconsistent application of the internal controls applicable to income.

This has been a serious concern to the Committee as the situation worsened and the DoD implemented controls that are not functioning properly. The Committee is of the view that the DoD is not in a position to satisfy SCOPA that the matter will be corrected during the next financial year.

The Committee therefore recommends that the Accounting Officer ensures that:
Steps are taken to ensure that monies received are regularly reconciled and checked by senior personnel at unit level; and
Systems are reconfigured to ensure that income can be managed and controlled at unit level.

7. Irregularities and losses - page 144, paragraph 3.5

The Committee noted inconsistent application of policies and procedures resulting in losses and damages not reported to the finance division and that damage and loss registers at unit level were not updated regularly.

The Committee recommends that the Accounting Officer ensures that:
Losses are reported and the loss register is updated and reviewed on a regular basis;
Reconciliation is performed on a regular basis; and
Training in financial management for senior personnel at unit level is implemented.

8. Land and buildings - page 146, paragraph 5.2

The Committee is concerned about various instances that caused uncertainity over the completeness and accuracy of the DoD's facility register system. Reconciliations could not be performed with Public Works' asset register due to the incompatibility of the two systems. This matter was raised in the previous report.

The Committee recommends that the Accounting Officer ensures that :
A complete and accurate facility register is kept;
Proper maintenance of buildings are carried out by the Department of Public Works, over and above innovative ways of maintaining buildings by the Department itself;
Timeous investigations are carried out regarding the economic viability to either restore or demolish uninhabitable buildings and houses to reduce third party liability to an acceptable level;
The current land and buildings register inventory be submitted to SCOPA within 30 days of the adoption of this report by Parliament.
Provide SCOPA with a plan of action on how the Department will minimise possible health and safety risk which could result in the DoD becoming liable to third parties due to the uninhabitable status of buildings and houses

The Committee further recommends that:
a completed integrated land inventory be established in consultation with the Department of Public Works and Department of Land Affairs addressing problems causing the current incompatibilities between the registers of the various departments; and
the Committee be supplied with a progress report, within 90 days of the adoption of this Report by Parliament, on how the above problems are being addressed, and thereafter with a copy of the full reconciliation register.

Gift, donations and sponsorships - page146, paragraph 5.3

The Committee noted with concern shortcomings with regards to validity, accuracy and completeness of gifts received, donations and sponsorships made and received in kind.

The Committee recommends that internal control measures should be revised to ensure that all gifts, donations and sponsorships are reported and ultimately reflected correctly in the financial statements.

10. Personnel expenditure: Commuted overtime - page 146, paragraph 5.4

The Committee noted that internal controls with regards to overtime were not followed. In certain cases, the policies and procedures did not seem to be adequate to address all weaknesses in the system.

The Committee was also informed about the investigation that the DoD instituted with regards to issues raised in the audit report.

The Committee recommends that the Accounting Officer ensures:
Improved management of commuted overtime in order to achieve acceptable levels;
Updated implementation instructions and revised contracts for commuted overtime; and
Adherence by all managers and supervisors to the implementation manual to monitor commuted overtime constantly to prevent over-underpayments.

11. Information systems - page 147, paragraph 5.7

The Committee noted that the Auditor-General could not place reliance on the general controls surrounding Computer Aided Logistic Management Information Systems (CALMIS) this resulted in the activities of database administrators not being logged and monitored.

The Committee recommends that security management be improved by means of baseline security standards based on the security policy. It should be enforced through detailed, documented and monitored processes and procedures and must be reported back to SCOPA within 60 days of adoption of this report by Parliament.

Revenue and receivables (foreign aid in kind) - page 146, n
paragraph 5.5

The Committee is concerned that nothing has been done in the previous financial years to address the shortcomings in the system for recording and collation of foreign aid assistance received in kind.
The Committee finds the situation unacceptable, as the matter has been recurring for three consecutive years.

The Committee recommends that a progress report be submitted to SCOPA within 30 days of the adoption of this report by Parliament.

13. Rooivalk - page 49 & 81

The committee noted the time spent and cost thereof together with the number of Rooivalk aircraft manufactured and recommend that SCOPA be supplied with a cost benefit analysis of this project and how future operational cost been funded.

14. General

The Auditor-General should follow up on the following issues during the financial year ending 2004/05 audit and provide feedback to SCOPA:
All the aspects highlighted above including previous SCOPA recommendations on the DoD and SDA; and
Findings on the statutory mandate of National Conventional Arms Control Committee (NCACC) as reported on pages 146 -147, paragraph 5.6 of the audit report.

The Committee is of the view that the Department should adapt to systems that satisfy the Department’s needs in consultation with National Treasury.

Report to be considered.