1. Sixty-Seventh Report of Standing Committee on Public Accounts: Public Entities, dated 24 May 2006:
The Standing Committee on Public Accounts having considered information on national Public Entities accountable to Parliament in terms of the PFMA, obtained during its review of:
(a) the annual reports;
(b) the public hearing; and
(c) the General Report of the Auditor-General on Audit Outcomes for the 2004/05 financial year, report as follows:
Remuneration issues SCOPA is concerned about the apparent lack of uniform norms and standards relating to remuneration in general (salary levels), and specifically with respect to all bonus payments paid by Public Entities. It appears that Public Entities do not have uniform guidelines in this regard. In addition, it is not clear what latitude the Accounting Authorities (Boards, Councils, etc) have in determining remuneration limits.
2. Recommendation In the light of the above concerns, the Committee requests that the Auditor-General considers a systematic approach to auditing and reporting on the nature and extent of the aforementioned issue.
The Committee also requests that the National Treasury, where appropriate and in consultation with the Department of Public Enterprises, review the adequacy of all guidelines with regard to remuneration issues, as well as the application of required best practice models.
Finally, clarity is needed on whether the best practice model is applied, as required in terms of the King 2 Report on corporate governance
Report to be considered.
2. Sixty-Eighth Report of Standing Committee on Public Accounts: Government Departments, dated 24 May 2006:
The Standing Committee on Public Accounts having considered information on national Government Departments accountable to Parliament in terms of the PFMA, obtained during its review of:
(a) the annual reports;
(b) the public hearing; and
(c) the General Report of the Auditor-General on Audit Outcomes for the 2004/05 financial year, report as follows:
Filling of funded posts (Government Departments) SCOPA is concerned about the inability of Government Departments to fill personnel vacancies for which funds are available. In many instances positions remain vacant for the entire financial year, despite funds having been voted for by Parliament, in accordance with the budget submissions made by the various entities and approved by Treasury. SCOPA is concern about the failure to fill the posts timely.
Recommendation In the light of the above concerns, the Committee requests that the Auditor-General considers a systematic approach to auditing and reporting on the nature and extent of the aforementioned issue. The Committee request the Auditor General to consider bringing a comprehensive report on the failure of filling of funded post by Departments.
The Committee also requests that the National Treasury, where appropriate and in consultation with the Department of Public Service and Administration, review the adequacy of all guidelines with regard to remuneration issues, as well as the application of required best practice models in order to review the policy on the filling of funded posts and in this review takes cognizance of the timeframes required in filling the vacancies.
Report to be considered.
3. Sixty-Ninth Report of Standing Committee on Public Accounts: Unauthorized Expenditure: Government Communications and Information Systems, dated 24 May 2006:
The Standing Committee on Public Accounts (SCOPA) having heard and considered evidence on the Report of the Auditor-General on financial statements of Vote 29 – Government Communication and Information Systems (GCIS) for the year ended 31 March 1997 herein proposed the following:
1. Background and Findings
The issue of unauthorized expenditure incurred by the Government Communication and Information Systems during the year ended 31 March 1997 is long standing and the Committee is of the view that it needs to be resolved. The following is the background to the case:
In 1997, the department authorized a payment of R2 918 400 million to the Quality Press (PTY) limited for the translation and printing of the first part of the Government’s mid-term report.
The payment was found by the Standing Committee on Public Accounts (SCOPA) to be an unauthorized expenditure in terms of section 33 (1)(d) of the Exchequer Act, 1975, which was in force at the time. The transaction was also found to be in contravention of the State Tender Board Act because the department failed to follow Tender Board procedures when the services were rendered.
Despite the Tender Board disapproval, the department went ahead with the invitation of Tenders and it subsequently invited three service providers and reportedly proceeded to accept a quotation from the Quality Press worth R2 918 400 million which was more than double the lowest quotation from the Government Printing Works.
After deliberating on the findings of the Auditor-General’s Report (RP176/1997) and other available evidence thereof, the Standing Committee on Public Accounts in its resolution recommended that the unauthorized expenditure not be authorized by Parliament.
Legal action, as required by the Exchequer Act of1975, was therefore taken against Mr. Kotane (as an Accounting Officer) in an effort to recover the money.
In March 2001, the High Court in Pretoria granted a default judgment against Mr. Kotane ordering him to repay an amount of R1 698 400 million, which is the difference between amount paid to Quality Press and the quotation from the Government Printing Works.
Mr. Kotane tried unsuccessfully to appeal against the judgment.
On the third report of the Standing Committee on Public Accounts dated 12 September 2001, the Committee made a recommendation that the balance of R1.220 000 million of the total unauthorized expenditure be authorized by Parliament as the Department obtained value despite the fact that the Tender Board procedures had not been followed.
2. Legal opinion
After several investigations by the State Legal Team, the State Attorney declared in a letter dated 11 March 2004 that it became difficult, if not impossible, for them to execute the judgment because no property in the name of Mr. Kotane could be traced that can satisfy the judgment.
The State Attorney also stated that Mr. Kotane was not a director nor was he a shareholder of any company.
This means that Mr. Kotane did not and still does not have any realizable assets, which would enable the State’s Legal Team to recover the losses incurred as a result of Mr. Kotane’s disregard for Tender Board procedures. This therefore prompted the State Legal Team into concluding that it was unable to recover the debt owed by Mr. Kotane.
After a request by SCOPA to Parliamentary legal advisors to consider the legality of withdrawing the first resolution by Parliament regarding the Kotane issue, the Parliamentary Legal team, concluded that SCOPA is free to amend, where necessary its previous resolution.
3. Recommendations
In light of the evidence provided by the State Legal team, conclusions reached by the Parliamentary Legal advisors and unsuccessful efforts by the GCIS to recover monies from Mr. Kotane, SCOPA recommends that the amount of R1 698 400 million owed by Mr. Kotane be written off. This will include writing off the debt from the GCIS books.
The high Court Judgment against Mr. Kotane should, however, continue to apply until such time that the 30 year period lapses.
The writing off of this debt should also be done in terms of Treasury Regulation 11.4.1 which states that the Accounting Officer can only write-off debts owed to the State if he or she is satisfied that:
All reasonable steps have been taken to recover the debt and the debt is irrecoverable
Treasury regulation 11.4.3 also states that all debts written off should be disclosed in the annual financial statements, indicating the policy in terms of which the debt was written off.
Parliament will then monitor and oversee strict implementation of Treasury Regulation 11.4.3 by the GCIS.
Report to be considered.
4. Seventieth Report of Standing Committee on Public Accounts: Department of Agriculture Unauthorized Expenditure, dated 20 June 2006:
The Committee noted the unauthorized expenditure amounting to R136 000, 00 incurred during 1998/99 and R527 000, 00 incurred during 1999/00 financial years. The expenditure was incurred as follows:
R136 000, 00 was incurred for the introduction of English course. Procurement prescripts were not followed; and
R527 000, 00 incurred for organizing of workshops in provinces to plan a national irrigation. Provinces extended a number of workshops from 27 to 65 without consulting the department. Provinces claimed expenses from the department.
There was no loss to the state and the responsible individual was reprimanded.
Recommendation
In light of the above, the Committee recommends that Parliament approves the amount of R663 000, 00 relating to 1998 to 2000 financial years.
Report to be considered.
5. Seventy-First Report of Standing Committee on Public Accounts: Department of Communication: dated 24 May 2006:
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 Department of Communication for the year ended 31 March 2005, tabled in Parliament 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 will be equally unqualified.
GENERAL MATTERS:
The Committee further noted that there was lack of capacity and skills in the internal audit function and the asset register was not updated in terms of Section 38(1)(d) of the PFMA.
The Committee is concerned as lack of capacity in the internal audit functionis becoming problematic throughout the government departments and the departments seem not to be paying much attention to this. RECOMMENDATION
The Committee recommends that the department report to Parliament within 60 days after the adoption of this report by Parliament on:
How the issue of internal audit will be addressed as well as plans in place to build the capacity as required by Treasury Regulations; and
steps taken to resolve the issue of asset register.
CONCLUSION
The Committee is of the view that, except for the aspects highlighted above; no further interaction with the Department of Communication would be necessary for the financial year under review.
Report to be considered.
6. Seventy-Second Report of Standing Committee on Public Accounts: Engelburg House Art Collection, dated 22 March 2006:
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 Engelburg House Art Collectionfor the year ended 31 March 2005, tabled in Parliament 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 will be equally unqualified.
3. CONCLUSION
The Committee is of the view that no further interaction with the Accounting Authority of the Engelburg House Art Collection is necessary for the financial year under review given the information so far.
7. Seventy-Third Report of Standing Committee on Public Accounts: Education Labour Relations Council, dated 22 March 2006:
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 Education Labour Relations Council for the year ended 31 March 2005, tabled in Parliament 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 will be equally unqualified.
3. CONCLUSION
The Committee is of the view that no further interaction with the Accounting Authority of the Education Labour Relations Council is necessary for the financial year under review.
8. Seventy-Fourth Report of Standing Committee on Public Accounts: Department of Transport, dated 6 August 2006:
The Standing Committee on Public Accounts (SCOPA), having heard and considered evidence in the Annual Report and the Report of the Auditor-General on the financial statements of the Department of Transport (DoT), reports as follows:
1. Contract for the production of credit card format drivers licenses (par 3.1, page 93).
The Committee noted the following:
On 27 July 1992, Cabinet approved the manufacturing of driving license cards by the private sector on a bureau basis;
The DoT, in conjunction with the service provider in question, opened two operating bank accounts at separate commercial banks in the name of the service provider;
There was no proper recording of transactions that took place and no disclosure in the financial statements of the DoT;
The DoT did not institute proper internal controls to ensure that invoices of the service provider were properly checked and authorised; and
The contract was extended for a further five years without the proper authorisation of the then Director-General, the Minister of Transport, and National Treasury.
In the light of the above, the Committee recommends that the Accounting Officer immediately:
a) Ensures that all transactions relevant to the contract for the production of credit card format drivers licences should be disclosed in the accounts and financial statements of a government institution;
b) Considers the conversion of the two bank accounts into a departmental trading account, or alternatively a trading account under the Road Traffic Management Corporation;
c) All surpluses be surrendered to the National Revenue Fund unless Treasury approval to the contrary is obtained;
d) The Committee be supplied with the cost benefit analysis in terms of value for money of this contract within 60 days after this report has been adopted by Parliament; and
e) The Committee condemns the fact that the drivers licence contract was renewed for a further five years without proper authorisation, though aware that National Treasury had post facto approved it. 2. Irregular, fruitless and wasteful expenditure 2.1 Fruitless and wasteful expenditure (par 5.2, page 94)
The Committee noted that interest amounting to R958 683 was paid to the service provider as a result of late payments. This amount was recorded as fruitless and wasteful expenditure in the financial statements.
SCOPA is concerned as the expenditure incurred is due to poor contract management and insufficient budget used to pay the contractor against the approved contract milestones.
The Committee recommends that the Accounting Authority ensures that:
Contracts are approved only after the availability of funds is confirmed;
Payments to service providers are made in terms of contractual agreements to avoid incuring fruitless expenditure; and
A report on the strategy and plan of action is in place to address the weaknesses highlighted during the hearing and is comunicated to Parliament, within 60 days after this report is adopted by Parliament. 2.2 Irregular expenditure (par 5.2, page 94)
The Committee further noted that during the current year the DoT incurred irregular expenditure amounting to R951 000 . The irregular expenditure was incurred as a result of non-compliance with certain procurement and other regulations.
The Committee expresses its profound disappointment at the failure to follow proper procurement procedures. The Committee recommends that the Accounting Officer ensures that:
Contracts are managed effeciently and effectively to prevent cash flow problems;
An adequate number of competent staff is assigned contract management responsibility;
Incidents of irregular expenditure are followed up regularly to obtain approval from National Treasury. Where no approval is obtained, the necessary steps are taken to recover the amount in terms of Treasury Regulation 12.7; and
Disciplinary steps are taken, in terms of the Public Finance Management Act, Section 38(1)(h).
3. Incompleteness of income from drivers licence registration fees (page 22 of the briefing note)
The Auditor-General highlighted that it was not possible to determine whether the three per cent of drivers licence registration fees due to DoT in terms of the National Road Traffic Act, 1996 as well as any outstanding fees from previous periods, had been received from all the DLTCs. The regulation was amended and it is no longer necessary for DLCs to pay over the three per cent of drivers licence registration fees.
The Committee recommends that outstanding amounts should be followed up (recovered) and reasons for variances should be given.
4. Internal control weaknesses (par 5.7, page 95)
The Committee noted that the Auditor-General has identified internal control weaknesses.
The Committee recommends that the Accounting Officer ensures that:
Staff comply with the policies and must, in relation to claims submit them within the prescribed timeframes;
Accounts are reconciled on a monthly basis and amounts are paid over to the Receiver of Revenue;
Debtors reconcilliation is performed monthly, and follow-up procedures are strictly enforced. Senior officials should monitor the recovery of long outstanding debts;
Debtors’ accounts with no movement are forwarded to the State Attorney for further action;
The supply chain management framework is followed in all instances thereby ensuring compliance with Treasury Regulations; and
A human resources plan is developed ;
all vacancies are filled within a reasonable time; and
Parliament is furnished with a progress report on all areas of weaknesses highlighted above within 60 days after this report is adopted by Parliament.
Report to be considered.
9. Seventy-Fifth Report of Standing Committee on Public Accounts: South African Rail Commuter Corporation, dated 6 August 2006:
The Standing Committee on Public Accounts (SCOPA), having heard and considered evidence in the Annual Report and the Report of the Auditor-General on the financial
statements of the South African Rail Commuter Corporation (Corporation) for the year ended 31 March 2005, reports as follows:
Fixed assets (page 21, par 3.1)
The Committee noted the following matters of concern:
The Corporation had not estimated the recoverable amount of its assets and the extent of any impairment loss that should have been expressed in the income statement. All the information and explanations considered necessary to satisfy the valuation of assets could not be obtained;
Inconsistencies regarding the depreciation of rolling stock were identified by the Auditor-General;
General overhaul costs were capitalised against the cost of assets without de-recognition of the original component that was replaced.
The Committee is concerned about the Corporation’s non-compliance with applicable accounting standards, especially seeing that there were visible indications of impairment losses on these assets.
In the light of the above, the Committee recommends that the Accounting Officer immediately:
Develops relevant policies to guide personnel with regard to the implementation of new accounting statements; and
Inform Parliament of the corrective actions taken to address the above-mentioned issues within 60 days after this report has been adopted by Parliament
Remuneration disclosure (page 22, par 5.2)
The report of the Auditor-General highlighted the fact that the remuneration of the Chief Executive Officer, Chief Financial Officer and Senior Management had not been disclosed in the annual financial statements as required by Treasury Regulations.
During the hearing the Corporation provided the Committee with the reasons for the non-disclosure. However, the Committee felt that the reasons were not acceptable as they gave rise to non-compliance with Treasury Regulations.
The Committee recommends that the Accounting Authority ensures that the Corporation:
Fully complies with laws and regulations.
Should seek prior approval from National Treasury in every instance where the Corporation require approval to deviate from regulations.
Non-compliance with legislation and regulations (page 22 of the briefing document)
The report highlighted various aspects of non-compliance with:
Treasury Regulations regarding investment policies; and
The South African Rail Commuter Corporation Financial Arrangement Act, 2000, regarding borrowing and issuing guarantees and security.
The Committee noted this with disappointment as the transactions the Corporation entered into constituted irregular expenditure.
The Committee recommends that the Accounting Authority urgently ensures that:
The Board of the Corporation reports the nature and reasons for entering into these transactions to National Treasury and the Minister of Transport;
Procedures must be in place to ensure that transactions mentioned in section 66 of the PFMA and SARCC Financial Arrangement Act are not entered into without complying with the requirements;
The Corporation ensures that its investment policy is in line with Treasury Regulations and that it makes provision for proper risk management policies;
All policies necessary are adopted and adhered to by all staff.
Weaknesses in the computer information technology environment (IT) –page 23
The Committee noted that there were a number of significant weaknesses that still existed in the IT general control environment.
The Committee recommends that a progress report be sent to Parliament, within 60 days after the tabling and acceptance of the Committee’s Report, on an action plan to adress weaknesses identified. Report to be considered.