First Report of Standing Committee on Public Accounts: Ingonyama Trust Board, dated 18 March 2006:

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 Ingonyama Trust Board (Board) for the financial years ending 31 March 2002/03 and 2003/04, tabled in Parliament and refered to it, reports as follows:

  1. Inadequate debtors system

The Committee noted that the Board’s debtor system was inadequate and therefore unable to properly maintain royalty and Permission to Occupy income records. For example, these records did not provide sufficient financial information on the completeness and accuracy of the R3 234 775 debtors’ figure in the annual financial statements. This matter was raised in subsequent annual reports from 1999 to date.

The Committee was informed during the hearing that debtors’ reconciliations will now be available for review by the auditors as the debtor system is now internally processed.

The Committee recommends that:

  1. Data integrity should be improved to enable the Board to provide sufficient information regarding the proper management of debtors;

  2. It be provided with time frames for the full implementation of the debtor system,

    3. within 30 days after the tabling of this resolution;

  3. Debtors’ reconciliations should be prepared in terms of Treasury Regulation

31.1.2(j); i.e. weekly

d) It be furnished with the progress report within 30 days after tabling of this

resolution regarding outstanding debtors which has been sent final reminders and against which legal action has been taken.

2. Accounts payable

The Committee is concerned about the lack of supporting documentation presented to substantiate surface restoration deposits amounting to R55 800,00.

The Committee recommends that the Accounting Authority should ensure that:

  1. Proper controls are in place for record keeping;

  2. All records are kept for a specific period before being archived as per National Treasury regulations; and

  3. It be provided with evidence that a thorough investigation has been undertaken in an effort to establish the source of this money, within 30 days after tabling of this report.

3. Provision

No provision was created in the financial statements for expenditure, estimated to be in the region of R22 million, and approved by the Board in respect of the Tribal Authorities.

The Committee recommends that in future, financial statements should reflect all relevant items as prescribed by South African Statements of Generally Recognised Accounting Practise (GRAP) in order to have a clear picture of the financial affairs of the Trust.

  1. Land holdings

The audit report highlighted some weaknesses in the Board’s land holdings records, for example:

The Committee recommends that the Board should:

  1. Establish accurate records of its land holdings

  2. Ensure that filing and safekeeping of title deeds meets acceptable standards;

  3. Obtain certified copies of all title deeds; and

  4. Furnish a progress report to Parliament based on the issues raised in this Report, within 30 days after tabling of this report.

    1. Cost of Board meetings

The Committee is also concerned about certain high attendance costs of Board meetings.

The Committee recommends that the Board should:

  1. Consider reducing costs incurred in respect of board meetings, as these seems to be excessive for a single day visit; and

  2. Furnish a progress report to Parliament based on the issue raised above.

  1. Arrear rates

The Committee noted with disappointment that the Board has been invoiced over a number of years for municipal rates in respect of land owned by the Board. The Committee further noted that an amount of R88 million has been disclosed in respect of arrear rates, but that it is not clear which portion belongs to the Province and which to the Board.

The Committee is of the view that the Board seems reluctant to exercise its power by forcing the municipalities in question to provide accurate information.

The Committee recommends that:

  1. The Board ensure that proper steps are taken by following up with the relevant ministry in order to identify the legal liability of property rates;

  2. The Board ensure that negotiations between municipalities and other stakeholders take place to resolve the arrear rates issue – the Board should facilitate this process;

  3. The Board ensure that title deeds of the land in question are available in order to establish ownership between the Board, the Province and the relevant municipalities;

  4. The Board ensure that time frames to resolve problems of arrear rates be provided to it within 30 days of the tabling of this Report; and

  5. The Auditor-General follow up these issues during the next financial year end audit and provide feedback to it on the progress.

7. Segregation of the accounting duties

Weaknesses were highlighted in the audit report with regard to separation of duties. The Committee is not aware of any improvements made to address these weaknesses identified.

The Committee finds the situation unacceptable, as this matter has been reported on for several years and to date the Board has not rectified the situation.

The Committee recommends that the necessary internal control measures be implemented immediately.

  1. Expired contracts

The Committee noted that the employment contracts for the employees/service providers of the Board could not be provided for audit purposes.

The Committee further noted with disappointment that the Board could not quantify the extent of the losses which resulted from illegal mining operations by mining contractors whose contracts had expired.

The Committee is still awaiting replies from the Board, promised during the hearing, with regards to expired contracts, for instance the extent of the losses incurred and number of contracts outstanding as well as the reasons why.

The Committee recommends that the Accounting Authority ensure that:

  1. Appropriate and suitable staff is employed for the positions as outlined in the auditor-General’s report;

  2. Proper controls over employment contracts and any other internal control weaknesses and non-compliance issues are implemented immediately, monitored and that any discrepancies identified should be timeously followed up.

The Committee was also informed during the hearing that the Board members contracts would expire at the end of June 2005.

The Committee recommends that the new Board is appointed in terms of the laid down procedures.

9. Internal Audit and Audit Committee

The report highlighted non-compliance with the PFMA and Treasury Regulations regarding the establishment of internal audit function and the Audit Committee.

The Committee was informed during the hearing that the Board is attending to these concerns. However, the Committee noted that the appointment of the Audit Committee will be discussed at the next board meeting, on 6 May 2005.

The Committee recommends that the Accounting Authority urgently ensure that:

  1. It be provided with the minutes of the meeting of the Board where the establishment and appointment of both the internal audit and the audit committee will be discussed, including the relevant timeframe(s); and

  2. The Corrective steps are taken where the Board has not fully complied with applicable laws and regulations and that the Committee be advised of such corrective steps taken within 30 days after tabling of this report.

10. Concluding comments

The core business of the Trust is to manage the land for the material benefit and social well-being of the individual members of the tribes. Although the Trust has a revenue distribution policy in place, it has experienced difficulties in distributing the monies accumulated. The Committee noted that none of the programmes of the Trust deals with the distribution of funds or assist communities to develop business plans or to invest these monies according to the core business of the Trust.

The Committee recommends that the Trust, in consultation with the traditional authorities and any other bodies involved, ensure that all the underlying reasons that led the Trust not to perform its duties, are resolved and that the Trust reports quarterly to SCOPA on progress made.

Finally, the Committee wishes to express its general disappointment at the performance of the Board and urges the incoming Board to undertake responsibilities with greater dedication and accountability.

Report to be considered.