REPORT OF
THE AUDITOR-GENERAL TO PARLIAMENT ON THE FINANCIAL
STATEMENTS
OF VOTE 2-PARLIAMENT FOR THE YEAR ENDED
1. AUDIT
ASSIGNMENT
The
financial statements as set out on pages 49 to 107, for the year ended 31 March
2005, have been audited in terms of section 188 of the Constitution of the
Republic of South Africa, 1996 (Act No. 108 of 1996), read with sections 4 and
20 of the Public Audit Act, 2004 (Act No. 25 of 2004). These financial
statements, the maintenance of effective control measures and compliance with
relevant laws and regulations are the responsibility of the accounting officer.
My responsibility is to express an opinion on these financial statements, based
on the audit.
2. NATURE
AND SCOPE
The audit
was conducted in accordance with Statements of South African Auditing
Standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance that the financial statements are free of material
misstatement. An audit includes:
• Examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements,
• Assessing
the accounting principles used and significant estimates made by management,
and
• Evaluating
the overall financial statement presentation.
Furthermore,
an audit includes an examination, on a test basis, of evidence supporting
compliance in all material respects with the relevant laws and regulations
which came to my attention and are applicable to financial matters.
The audit
was completed in accordance with Auditor-General Directive No. 1 of 2005. I believe
that the audit provides a reasonable basis for my opinion.
3.
QUALIFICATION
Payables
With
reference to paragraph 2.8 of the 2003/04 audit report, the correctness of the
leave balances that were transferred from PERSAL system to Manqoba
Information Technology System could still not be verified since the information
could not be submitted for audit purposes. Due to the aforementioned as well as
the lack of controls to ensure the correctness of captured leave data and the
completeness of leave submitted, the reasonableness of the provision for leave,
which amounts to R9 423 620, could not be verified.
4. QUALIFIED
AUDIT OPINION
In my
opinion, except for the effect on the financial statements of the matter
referred to in paragraph 3, the financial statements fairly present, in all
material respects, the financial position of Parliament at 31 March 2005 and
the results of its operations and cash flows for the year then ended, in
accordance with prescribed accounting practice and in the manner required by
the Constitution, 1996 (Act 108 of 1996).
5. EMPHASIS
OF MATTER
Without
further qualifying the audit opinion expressed above, attention is drawn to the
following matters:
5.1
Transfers and subsidies
For the year
under review no formal policy surrounding transfers and subsidies was
implemented, no control mechanism was in place to obtain written assurances
that the respective political parties implemented effective, efficient and
transparent financial management and internal control systems, in respect of
transfer payments amounting to R73 693 507.
5.2
Parliamentary shop
Notwithstanding
various shortcomings highlighted in paragraph 5.1 of the 2003/04 audit report
the following was again noted:
(a) The financial statements submitted for audit purposes indicated a loss of
R240 411 for the financial year.
(b) A stock list as at
(c) The report issued in respect of an investigation done by the finance office
also highlighted the fact that there was doubt over the accuracy of the sales,
stock and purchase figures. Various sales invoices were not allocated to sales
and not all the sales invoices could be submitted.
5.3
Weaknesses in internal control
During the
audit various internal control weaknesses were identified and reported in the
management letter and informal queries that were issued during the audit. As a
result of the issues mentioned in the informal queries it is evident that
various internal and external audit findings in respect of previous audits did
not receive the necessary attention or corrective actions were not taken. There
is no policy or system in place to follow-up internal and external audit
findings to ensure that corrective steps are taken timeously.
The internal control weaknesses identified included, inter alia,
the following:
(a) Policies and Procedures
(i) During the year under review draft policies
regarding assets, debt and donor funding were compiled but were not approved
except, for the last-mentioned policy which was approved during March 2005.
(ii) Process flows and procedure manuals did not make reference to the
applicable laws,
regulations and policies and it could therefore not be
ascertained whether there are in line
with relevant laws and regulations.
(b) Stock
No specific control measures were in place to ensure that all stock purchases
were updated on the stock master file after receipt of the inventory items.
Proof of regular reconciliations between the inventory control account in the
general ledger and inventory master file (stock list) could also not be
submitted for audit purposes. Furthermore, the Manqoba
inventory system did not make provision to flag duplications in requisition
numbers. Due to the above, uncertainty exists relating to the accuracy of the
stock amounting to R487 000. Notwithstanding paragraph 5.4(7) of the previous
audit report, reconciliations were still not performed between the stock usage
and meals served. Furthermore, stock shrinkages were not monitored for the
period under review.
(c) Risk Management
Although a fraud prevention plan existed, the plan was
not effectively implemented during the financial year under review and no fraud
register could be submitted for audit purposes.
(d) General
(i) No specific controls were implemented to identify
related parties and transactions. Sufficient appropriate audit evidence could
not be obtained regarding the identification and disclosure by management of
related parties and transactions that are material to the financial statements.
(ii) No service level agreement exists with the supplier of the Manqoba system in respect of maintenance, upgrades, back-up
services and security.
5.4 Previous audit reports
(a) Tax RSA account Reference is made to paragraph 4.1.2 of the 2001/02 audit
report [followed up as per par. 5.5(1) of the 2003/04 audit report], where it
was reported that detail could not be provided in respect of the finalization of
the 1997 tax reconciliation and the amount of R468 555 paid in this respect.
During the follow-up of this matter it was found that a tax reconciliation
performed during the year under review in respect of the 1997 year indicated
that there was actually an overpayment in respect of the 1997 tax year.
Parliament is in the process of claiming the amount back from SARS.
(b) Parliamentary Association
With reference to page 51, paragraph 4.2.4 of the 2002/03 audit report
[followed up as per par. 5.5(3) of the 2003/04 audit report], information regarding the future use of the availability
arrangements in respect of the Parliamentary Association could still not be
obtained. It was noted in the memo dated
(c) Legislation
Information regarding the progress made on the finalisation
and implementation of Parliament’s own legislation to manage Parliament’s
finances, which is currently known as the “Financial Administration of Parliament
and the Provincial Legislatures Bill” and Parliament’s own “Treasury
Regulations” that were discussed in the Standing Committee on Public Accounts
hearing on the 2001/02 audit report [reported in par. 5.5(2) of the 2003/04
audit report], could still not be submitted.
(d) Fixed statutory amount
In accordance with section 8(2) of the Remuneration of Public Office Bearers
Act, 1998 (Act No. 20 of 1998) the amount of the contribution to be made to the
pension fund by the national government, of which a Member of the National
Assembly or a permanent delegate is a Member, shall be determined by the Minister
of Finance. With reference to paragraph 5.3.2 of the previous audit report, authorisation by the Minister of Finance, in accordance
with the abovementioned Act, could still not be submitted for the 17% employer’s
contribution made by Parliament in respect of pension.
5.5 Matters
of public interest
(a) Fraudulent travel warrants
The irregularities that were discovered with regard to
the billings made to Parliament by travel agents inrespect
of Members’ travel were followed up during the audit. The total value of
payments made to the respective travel agents during the period of trading from
January 1998 to July 2003 amounted to approximately R96 million of which
approximately R61 million (63 per cent) was tested. The forensic audit that was
conducted into this matter indicated that the loss suffered by Parliament in
this regard amounted to R17,2 million for the period
tested, ranging from December 2001 to July 2003. Parliament has commenced with
the necessary processes to recover the money. An amount of R387 000 has already
been recovered by Parliament after year end.
(b) Implementation of a new financial system
During the audit it was found that Parliament is in
the process of replacing the current Manqoba
financial system with an Enterprise Resource Planning (ERP) solution. The Manqoba financial system was implemented at Parliament
during the latter part of 2003 at a cost of approximately R12 million. The
process of developing a Master Systems Plan (MSP) for Parliament has commenced
during July 2004 and the requirement for obtaining offers for the
implementation of the MSP and procurement of an ERP solution was waived in
February 2005. A decision was made to discontinue the Manqoba
financial system and replace it with the new system. Following the waiver of
the tender requirements, the contract has been awarded during April 2005 to a
supplier for the supply of an Enterprise Resource Planning System solution; creation
of the database; and performance of the services to Parliament.
5.6
Information systems audit of the general controls surrounding the computerised information system environment
A follow-up
audit was performed in respect of the general controls review surrounding the computerized
information system environment. Fifteen of the 22 recommendations made in the
previous year have already been implemented. However, certain weaknesses were
identified that still existed for the financial year under review, as detailed
below:
• An IT
committee was not in operation;
• Operators manuals
were not formally documented and approved,
• No
disaster recovery plan was in place; and .
• There were
no policies and procedures in place to ensure user account management.
6.
APPRECIATION
The
assistance rendered by the staff of Parliament during the audit is sincerely
appreciated.
Auditor-General
AUDITOR-GENERAL