REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE FINANCIAL STATEMENTS OF VOTE 27

DEPARTMENT OF ENVIRONMENTAL AFFAIRS AND TOURISM FOR THE YEA ENDED 31 MARCH 2006

1. AUDIT ASSIGNMENT

The financial statements as set out on pages 42 to 78 for the year ended 31 March 2006, 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). The fixed asset opening balances have not been audited because of the timing of guidance from National Treasury to the departments relating to the treatment, valuation and disclosure of fixed assets. These financial statements are the responsibility of the accounting officer. My responsibility is to express an opinion on these financial statements, based on my audit.

2. SCOPE

The audit was conducted in accordance with the International Standards on Auditing read with General Notice 544 of 2006, issued in Government Gazette no. 28723 of 10 April 2006 and <7eneral Notice 808 of 2006, issued in Government Gazette no. 28954 of 23 June 2006. 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

· evaluating the overall financial statement presentation.

I believe that the audit provides a reasonable basis for my opinion.

3. BASIS OF ACCOUNTING

The department's policy is to prepare financial statements on the modified cash basis of accounting determined by the National Treasury, as described in note 1.1 to the financial statements.

4. AUDIT OPINION

In my opinion, the financial statements present fairly, in all material respects, the financial position of the Department of Environmental Affairs and Tourism at 31 March 2006 and the results of its operations and cash flows for the year then ended, in accordance with the modified cash basis of accounting as prescribed by National Treasury of South Africa, as described in note 1.1 to the financial statements, and in the manner required by the Public Finance Management Act.

5. EMPHASIS OF MATTER

Without qualifying the audit opinion, attention is drawn to the following matters:

5.1 Irregular expenditure

Payments, which in essence are transfer payments were made to public entities of the Department and other third parties. These payments, which amounted to R81,6 million, are included under goods and services instead of being shown as part of transfer payments. The correct allocation of the amount would result in the budget for transfer payments being exceeded by the same amount and as no virement approval by National Treasury in terms of Treasury Regulation 6.3.1 (a) and (b) was obtained, the amount of R81,6 million represents irregular expenditure and is disclosed in note 24 of the financial statements.

5.2 LOGIS fixed asset register

Section 38(1 )(a) of the Public Finance Management Act, 1999 (Act No. 1 of 1999) requires that the accounting officer of a department must ensure that the department has and maintains effective, efficient and transparent systems of financial and risk management and internal control.

Additions and disposals, which were included in the disclosure per annexure 4, did not appear on the register. Although the LOGIS fixed asset register of the Department indicated major improvements on the quality of the data as compared to the prior year, some refinement and re-evaluating of the information in the register is required to prevent similar instances.

5.3 Non-compllance with the National Environmental Management Act, Act No 107 of 1998 (NEMA)

The National Environmental Management Act, Act No. 107 of 1998 states in section 11 that every national department listed in schedule 1 as exercising functions which may affect the environment and every province must prepare an environmental implementation plan within one year of the promulgation of The Act and at least every four years thereafter. The same applies to national departments listed in schedule 2 as exercising functions involving the management of the environment. The Act allows the Minister to extend the submissions for a period not exceeding twelve months.

The submission of the inaugural plans was done at differing times, and 8 subsequent plans for departments and 7 for provincial governments were not submitted within the four year period as prescribed. The due dates for the remaining plans for 5 departments and 1 provincial government affected by the provisions of The Act have not been reached.

The Department indicated that arrangements to set a uniform submission date for all outstanding plans from departments and provinces are currently underway.

5.4 Information systems audit

A follow-up information systems audit of the general controls surrounding the information technology environment indicated that an information technology strategic plan to be used as a basis for the expansion and upgrading of computer systems and equipment had not been prepared. Management has indicated that this is receiving attention.

5.5 Performance Information

The performance information required in terms of section 40(3)(a) of the Public Finance Management Act, 2003 (Act No. 56 of 2003) disclosed on pages 15 to 29 was not submitted to me as required. I was not able to perform the audit procedures necessary to express my opinion as required by section 20(2)(c) of the Public Audit Act, 2004 (Act No. 25 of 2004).

5.6 Submission of annual financial statements

The annual financial statements of the department were submitted on 31 May 2006 as required by section 40(1 )(c) of the PFMA. Due to a significant audit finding the statements were amended, re-dated and re-submitted to the Auditor-General on 22 August 2006.

6. APPRECIATION

The assistance rendered by the staff of the Department of Environmental Affairs and Tourism during the audit is sincerely appreciated.

DEL Zondo for Auditor-General Pretoria

24 August 2006

AUDITOR-GENERAL