Fifteenth Report of the Standing Committee on Public Accounts, dated 25 February 2003:

The Standing Committee on Public Accounts, having considered the Annual Report, including the Report of the Auditor-General on the Financial Statements, of the Construction Sector Education and Training Authority [CETA] for the year ended 31 March 2002 [RP 136-02], tabled in Parliament on 30 August 2002 and referred to it, reports as follows:

1. Audit opinion
The Committee commends the management for the unqualified audit opinion expressed by the Auditor-General, and trusts that future audit opinions will be equally unqualified.

2. Emphasis of Matter
The Committee notes that the Auditor-General has cited various issues under "Emphasis of Matter" which need the urgent attention of management. The Committee comments on these issues in paragraphs 4 to 10 below.

3. Tabling of Annual Report
The Committee commends the management of CETA for having timeously tabled its Annual Report in Parliament, thereby complying with section 65(1)(a) of the Public Finance Management Act.

4. Recovery of levy payable by employers
The Committee notes that:
* Any levy which remains unpaid on the last day of payment thereof, may be recovered by instituting action in a magistrate's court.
* CETA or its collecting agents must obtain approval from the Minister of Labour to follow up the outstanding levies, but that such approval has not been received.
* CETA cannot collect current levies, except in terms of a determination issued by the Minister.

The Committee is concerned that there are a large number of outstanding levies which have not been followed up by CETA, and that this could result in losses to CETA if no effective debt recovery procedures are in place.

The Committee recommends that this matter be accorded the urgent attention it deserves, and welcomes the indication that additional information will be compiled by the staff of CETA, after consultation with the Auditor-General's Office, for presentation to Parliament.

5. Accumulated surplus funds
The Committee notes that:
* Surplus funds from operations for the period under review exceeded R4,5 million.
* Written approval should be obtained from National Treasury to retain the said surplus funds.
* Application for the above has been made, but CETA has not received a response yet.

The Committee recommends that CETA indicate to it whether they have received approval from National Treasury, and if not, why not.

6. Transfer of assets and liabilities
The Committee notes with concern that the transfer of assets amounting to more than R5,8 million and liabilities in excess of R4,2 million, belonging to the now abolished Building Industry Training Board (BITB) and the Building Industry Training Scheme (BITS), has not been finalised.

As this matter increases managerial and financial risk, the Committee recommends that the matter be finalised as a matter of urgency and that the Auditor-General report thereon in his next report.

7. VAT liability
The Committee notes that:
* An amount in excess of R1,38 million under current liabilities in the balance sheet represented grant levies when they were committed to projects.
* There is uncertainty on whether VAT should be paid when the liability is raised or when project claims are paid.
* As a result of this uncertainty, the timely payment of VAT could not be properly managed.
* A response from SARS to clarify the matter is still being awaited.

The Committee recommends that management resolve all the above issues raised by the Auditor-General, and that the Auditor-General report thereon in his next report.

8. Risk assessment
The Committee notes with concern that CETA did not conduct a full risk assessment for the year under review, as required by the PFMA and the Treasury Regulations of 2001.

The Committee notes that this non-compliance impacted negatively on the completion of a fraud prevention plan.

Having noted that the outsourced internal audit function had begun facilitating a risk assessment subsequent to the end of the financial year, the Committee recommends that the Auditor-General report thereon in his next report on CETA.

9. Audit Committee
The Committee notes that the composition and functioning of the Audit Committee was in accordance with the PFMA, but that it was not fully operational for the year under review, as it was only established during the year.

The Committee recommends that the Auditor-General report thereon in his next report.

10. Internal audit
The Committee notes that the internal audit function will only be fully operational during the next financial year, as it was established during the year under review.

The Committee recommends that the Auditor-General report thereon in his next report.

11. Conclusion
Having noted that some issues of special concern are being addressed, and as the report is unqualified, the Committee is of the view that a hearing on CETA for the year under review is not necessary.

Report to be considered.