1. First Report of Standing Committee on Public Accounts: South African
Local Government Association (SALGA), dated 25 October 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 South African Local Government Association
(SALGA) for the financial year ending 31 March 2005 RP136/2005, as well as the
Performance Audit done in May 2006 by the Auditor General, reports as follows:
Non-compliance with laws and regulations
(page 69, par. 5.1, 2004/05 AR)
The following non-compliance areas relating to the PFMA and Treasury
Regulations occurred during 2004/05 financial year:
A building was purchased without obtaining approval of the Executive as
required by section 54(2)(d) of the PFMA. This transaction was subsequently
cancelled. An amount of R3.2 million paid in respect of commission must still
be recovered;
The Annual Report of SALGA did not contain information on performance against
predetermined objectives as required by section 55(2)(a) of the PFMA;
Three bank accounts with a total of R15 729 000 and movements in these accounts
were not accounted for. No approval from National Treasury could be submitted
for the opening of bank accounts or evidence that National Treasury had been
informed of the existing bank accounts as required by Treasury Regulation
31.2.1;
No approved risk management strategy and fraud prevention plan existed as
required by Treasury Regulation 27.2.1
The Committee recommends that:
A progress report be submitted to Parliament within 60 days after the adoption
of this report by Parliament on the recovery of the R3.2 million paid in
respect of commission;
SALGA put in place proper monitoring controls to ensure compliance with laws
and regulations; and
SALGA also ensure that there is skilled and capacitated staff to assist it in
complying with laws and regulations.
Internal controls (page 64, par. 3.1,
2004/05 AR)
The system of internal control did not function effectively for the year
under review to ensure that all revenue and expenditure, assets and liabilities
have been recorded accurately and completely.
The Committee recommends that SALGA:
Comply with section 51(1)(a) of the PFMA, which states that a public entity
must have effective, efficient and transparent systems of financial management,
risk management and internal control.
Inappropriate accounting transactions
Expenditure (page 64, par. 3.3)
The following shortcomings were identified:
Supporting documentation for expenditure to the amount of R888 818 could not be
submitted to the Auditor-General for audit purposes; and
Orders to the value of R923 074 were not authorised as required by the internal
control policy
The Committee recommends that SALGA:
put in place measures and systems to ensure that transactions and account
balances are properly classified and recorded correctly;
comply with its own internal control policies as well as the requirements of
National Treasury on delegation of authority.
Report back to Parliament within 60 days after this report has been adopted by
Parliament.
Performance audit (page 6, performance
audit report)
The following shortcomings were identified by the performance audit done by the
Auditor-General:
SALGA did not ensure that its business plans had measurable objectives with
proper monitoring and evaluation of identified key actions;
SALGA’s outstanding membership levies amounted to R135,8 million as at 30 June
2005; and
Record keeping of financial transactions was not adequate to produce meaningful
financial management information, and monthly debtors and bank reconciliations
were not prepared.
The Committee recommends that SALGA:
Ensure that management of functions is guided by properly formulated policies
and procedures
Have systems or management information in place to properly monitor and manage
debtors and other financially related matters
Puts in place structured measures to ensure that financial management
information is produced on a regular basis
Human Resources
The
following problems were identified with regards to the human resource component
of SALGA:
There was no comprehensive human resource strategy;
Due to a
large number of vacancies, sufficient staff were not available to ensure that
objectives of the business plan are met; and
None of the
30 employees selected in a sample had signed performance contracts.
The Committee
recommends that SALGA:
Ensures that
a comprehensive human resource strategy exists;
Increases the
capacity of the finance unit and ensures that vacancies are filled; and
Have a proper
performance management system and ensure that all staff have performance
contracts
Report to be
considered.
2. Second Report
of Standing Committee on Public
Accounts:
Department of Correctional Services
(DCS), dated 25 October 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 Department of Correctional Services (DCS)
for the financial year ending 31 March 2005 RP136/2005, reports as follows:
Internal Controls (page 83, par. 5.4,
2004/05 AR)
The Auditor-General has reported on a number of internal control measures some
of which have been reported in the past four years for example:
Insufficient data capturing and monitoring of assets,
Insufficient verification of supporting documentation and no supporting
documentation on file for new appointed staff,
Lack of independent reviews on leave administration;
The Committee finds it unacceptable to have the same problems reported on, for
four consecutive years and the Department is unable to solve those problems.
The Committee therefore urges the Department to:
Ensure that all its assets are bar-coded by the year end 2006 / 2007 and
managed properly;
Put processes and procedures in place to
ensure completeness of the files of the newly appointed staff;
Develop clear
policies and procedure manuals to ensure that management reviews take place;
and
Ensure that
regions report on compliance with the “Compliance Improvement Plan” it has
embarked on. Management must perform high level reviews on these submitted
reports on the “Compliance Improvement Plans”.
Ensure that
all control weaknesses highlighted by the Auditor-General are addressed as a
matter of urgency.
Medical Expenditure (page’s 81, per 3.1 and
84 par 5.7.2, 2004/05 AR)
Due to the lack of a proper management
framework, monitoring and reconciliation for the verification of medical aid
expenditure prior to payment, the Auditor-General was unable to verify the
validity, accuracy and completeness of medical expenditure. This matter has
been reported on for the past four years and has been one of the reasons the
Auditor-General qualified the report of the Department of Correctional
Services.
The Committee
recommends that the:
Senior
Management of the Department takes responsibility and ensures that independent
reviews are performed on a monthly basis to confirm the correctness of the
expense.
Senior Management
should also ensure that they review the correctness / accuracy of the
membership records of current and continuation members.
Receivables (page 82, par. 3.3, 2004/05AR)
During the audit of receivables, amounting to R63, 7 million, the
following was identified:
Insufficient
follow-up of staff debt and incomplete disclosure of possible irrecoverable
debt;
No
supporting documentation could be provided for audit purposes and external
confirmations differed vastly from amounts disclosed.
The Committee
Recommends that:
a) Regular
follow-up should be performed on staff debt and long outstanding debt should be
considered with regard to recoverability thereof at year-end;
b) Overall
management control by head office as well as regions should be enforced by
independent high level reviews by senior management; and
c) A proper
system should be implemented to ensure complete and accurate documentation to
provide the necessary evidence that follow-ups were performed on a regular
basis for all types of staff debt including Judge White’s debt as well as
interdepartmental debt. The department should furthermore enhance the internal
controls to ensure proper administration of interdepartmental debt.
4. General
Control Accounts (page 83, par. 5.1, 2004/05
AR)
The
Department converted from the financial management system to the basic
accounting systems (BAS) in September 2004. Control accounts that should
preferably have zero balances at month and year-end, were not cleared prior to
the conversion.
The Committee
recommends that:
Control
accounts should be monitored and cleared on a monthly basis;
There should
be evidence of reviews performed by senior management at both head office and
regional level. Sufficient evidence will constitute a report reviewed and signed
by management; and
Also, the 34%
vacancy rate in the financial management is addressed as a matter of urgency.
Surplus funds
With
reference to page 92 of the 2004/05 annual report, the Department did not spend
an amount of R155.9 million, which on page 105, the Department claims was due
to the late implementation of the functionality with the change-over to the BAS
during the year.
The Committee
finds this unacceptable and recommends that the Department should manage the
budget they requested properly and ensure that staff is trained properly to do
so.
Information Systems Audit (page 84, par. 5.5,
2004/05 AR)
An audit of the network security was
completed in April 2005. The systems were found to be inadequately protected
and contained a number of weaknesses that could seriously compromise the system
of internal control and data integrity. This was due to lack of standardised
security procedures.
The Committee
therefore, recommends that a policy framework that governs the management of
the information systems network environment should be implemented and the
significant control weaknesses identified be rectified.
Report to be
considered.
3. Third Report of Standing Committee on Public Accounts: Marine Living Resources Fund, dated 15 November 2006:
Introduction
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 Marine Living Resources Fund (MLRF) for the
financial years ended 31 March 2002 to 2005, reports as follows:
1. Non- Compliance with PFMA
The
Committee notes that the MRLF has not timeously tabled its Annual Report for
three consecutive years, thus contravening the requirements of the PFMA.
The three
relevant Annual Reports, although much belated, have since been tabled.
The Committee
recommends that:
the
management of the Fund and the Department take appropriate steps to comply and
table its Annual Report in future in Parliament within six months after year-end
as required by sections 55(1)(d) and 65(1)(a) of the PFMA.
2. Governance Arrangements
2.1 Harbour fees
The completeness of harbour fee debtors amounting to R2,84 million and
the related harbour fee income amounting to R4,95 million could not be verified
as revenue invoices were not sequentially numbered. In addition to the above,
harbour fee debtors amounting to R2,55 million relating to the prior financial
year were written off during the re-statement of opening balances without the
required delegated authority. These debts have not been included as harbour fee
debtors at 31 March 2005.
The Committee recommends that:
The management of the Fund implement adequate procedures and measures to
ensure that invoices are numbered and issued sequentially and raised in the
accounting records leaving a proper audit trail. Furthermore, the debtors
relating to the prior years should be re-raised and irrecoverable debtors
should be dealt with in terms of the relevant policy.
2.2 Levy on fish and sea products
The validity and completeness of levy debtors amounting to R11,95 million
and the related levy on fish revenue amounting to R60,65 million could not be
verified. In addition to the above, the levy on fish product debtors amounting
to R7,46 million relating to the prior year was written off during the
restatement of opening balances, without the required delegation of authority.
These debts have therefore not been included as trade receivables at 31 March
2005.
The Committee recommends that:
debtors should be raised as reflected in paragraph 1.2 of the accounting
policies of the Fund, namely "revenue relating to the levies on fish
products is recognised when the fish products are landed" ;
appropriate policies and procedures should be developed to ensure the accuracy
and completeness of the levying on fish products;
the debtors relating to the prior years should be re-raised and
irrecoverable debtors should be dealt with in terms of the relevant policy
The Committee noted the various levies on fish and sea
products as set out in the schedules under section 29 of the Sea Fisheries Act
of 1998 (Act 12 of 1988). It has also noted the enormous difference between the
various levies raised per ton in relation to the various commercial values per
ton, especially the abalone levy of R25 per kg compared to the market value in
excess of R1000 per kg for abalone.
The Committee recommends that a new and realistic market-value related levy
structure be determined and implemented as soon as possible, so as to ensure better
value for money to the taxpayer.
Application fees for fish and sea products
The Committee noted the complicated structure of application fees for fish and
sea products, which complexity might deter potential applicants and affect
potential revenue.
The Committee recommends that the application system, including fees, be
simplified, so as to allow as many as possible applicants ensuring more value
for money to the taxpayer.
2.4 Value Added Tax (VAT)
The Committee noted that the validity and completeness of the VAT
claimable, amounting to R4,18 million (included in note 6, trade receivables),
could not be verified.
The Committee noted that the Fund has been deregistered for VAT purposes with
effect from 1 September 2005 and recommends that the VAT balances be
investigated and the necessary corrections made in the light of the
deregistration for VAT by SARS.
2.5 Debtors management
The Committee noted that general controls of accounts receivable were found to
be inadequate.
The Committee recommends that the Fund:
implement a proper integrated debtors management system with the
implementation of the new accounting system and
also develop appropriate policies and procedures to eliminate the shortcomings
as highlighted by the Auditor-General in this regard.
2.6 Opening balances
The audit opinion relating to the financial statements of the previous
financial year was disclaimed due to various limitations in scope that could
not be resolved. The validity and accuracy of the prior year’s account balances
could not be confirmed.
The Committee recommends that:
Control measures be implemented to ensure the completeness and accuracy of
account balances at year end.
3. Skills and capacity
3.1 Weaknesses in internal controls
Various weaknesses relating to the financial administration as well as
non-compliance with applicable laws and regulations were identified and
reported to the accounting officer, by the Auditor-General.
The Committee recommends that:
appropriate corrective actions be taken to address the individual
weaknesses as identified in the management letter of the Auditor-General;
the internal control weaknesses be addressed as referred to by the
Auditor-General on pages 30, 50, 73 and 93 of the 2002-05 annual report, and
the Fund must perform a skills audit and ensure that proper skills are employed
to manage the Fund and ensure that it is delivering on its mandate.
The Committee recommends that the entity furnish it
with a detailed report within 90 days after the adoption of this report by
Parliament.
3.2 Accounting system
At the hearing, the Director-General informed the Committee that an accounting
system amounting to R3.2 million was bought during 2002 and due to several
problems experienced; was discontinued on 30 November 2004. As a result, the
consulting company was sued. Currently, the Fund has procured another
accounting system to the value of R5.2 million, which will be implemented from
1 April 2007.
In the light of the above, the Committee recommends that within 60 days after the adoption of this report by
Parliament, the Fund
submit to Parliament a progress report on the legal proceedings taken against
the consulting company; and
get advice from National Treasury with regard to the implementation of the new
accounting system, to ensure that value for money is received and that the
policies are aligned.
Performance measurement and Reporting
The Committee noted with concern that the Fund has not disclosed or reported on
the achievement of objectives it set for itself.
The Committee therefore recommends that the Fund liaises with National Treasury
on the Performance Reporting Framework and ensure that it complies in future.
Abalone industry
The
Committee noted the many problems and costs for MLRF and other role players
regarding the managing and policing of the abalone industry, as well as the
ineffective handling of confiscated abalone.
The Committee
recommends that the Auditor-General do a cost benefit- audit of the abalone
industry relating to amongst others the:
tonnage
harvested
tonnage
locally sold
tonnage and
real value of exports
rand value
are returned to SA
how much tax
SARS receive from abalone industry
how much is
spent by SAPS to police the industry
how much is
spent by DEAT to manage the industry,
how much is
spent by Justice to enforce the law,
how much is
spent by Defence to protect the industry and
any other
amounts spent on this industry
The Committee recommends that the Auditor-General
furnish it with a detailed report after the adoption of this report by
Parliament.
Future of Marine Living Resources Fund
The
Committee noted that:
the fund is
being administered by delegated employees of the Department of Environmental
Affairs and Tourism, on a seconded basis;
the fund
cannot operate on its own financially without an annual government grant,
it does not have a Board that exercises
oversight ; and
the Director
General was of the opinion that the fund as a public entity as opposed to a
trading account should be looked at and reviewed.
The Committee
recommends that the MLRF, in light of the above, be reincorporated into the
DEAT so as to have proper accounting authority in promoting proper management
of this important industry.
6. Closing recommendation
The Committee
recommends that the Minister of Department of Environmental Affairs and Tourism
report back to the House on all the above–mentioned issues and recommendations
within 90 days the adoption of this report by Parliament.
Report to be
considered.
4. Fourth Report of the Standing Committee On Public Accounts: The
Sheltered Employment Factory, dated 15 November 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 Sheltered Employment Factory (SEF) for the year ended 31
March 2005, reports as follows:
Governance (page 140 of the Annual Report)
The Committee
noted that there was no appropriate oversight or governance structures in place
at the SEF during the year under review. The Committee also took note of the
acknowledgement by the Accounting Officer about the SEF being in disarray.
The Committee recommends that:
1.1 Monitoring controls in
relation to summarised management accounts and reports, regular onsite visits
and inspections, and follow-up on the findings contained in internal and
external audit reports be implemented immediately.
1.2 The Portfolio Committee on
Labour, possibly in consultation with the National Treasury, clarify the
appropriate governance and accountability framework for the SEF and ensure it
is put in place.
Non compliance (page 138, AR)
The Committee noted that the audit report highlighted various instances of
non-compliance with laws and regulations.
The Committee recommends that:
2.1 The system of accounting for
assets should be reviewed to include controls that ensure the integrity of
reported information.
2.2 Controls are implemented to
prevent or detect conflicts of interest. All agreements with contractors,
consultants and service providers should be reviewed for compliance with
applicable legislation and regulations. Unauthorised and irregular payments
made to them, or undue benefits that had accrued to them in the past, should be
identified and recovered where legally possible.
Internal controls (page 139, AR)
The audit report highlighted various shortcomings in the internal control
system.
The Committee therefore recommends that the Accounting Officer immediately:
3.1 Consider instituting a
serious management intervention at SEF, including frequent internal audit
reviews encompassing detailed risk assessments;
3.2 Develop a policies and
procedure manual that are specific to the operations of SEF;
3.3 Ensure that the audit
committee, at least on a quarterly basis, review and report on the adequacy of
management actions in response to internal and external audit findings, and
also frequently be updated by the Management Committee on the internal controls
and activities of the SEF;
3.4 Review the skills and
competencies of staff at SEF should be carried out to determine the extent of
the competency gaps, and take action to address these gaps;
3.5 Implement a
computer or network system between the factories to improve management control
and the production of useful management information;
3.6 Ensure key staff members are
knowledgeable about all relevant prescripts, laws and regulations, particularly
the financial management (PFMA, Treasury Regulations) and BEE related
legislation or other prescripts.
3.7 The post of head of finance and
administration should immediately be filled with an appropriately qualified and
experienced person.
Special investigation (page 141, AR)
A special investigation, on the request of the DG, was instituted on 1
April 2005 to investigate alleged irregularities at SEF. The factory manager
was suspended pending the findings of the special investigation.
The Committee recommends that the special investigation and related internal
disciplinary processes against the suspended factory manager, other officials
and/or parties are expedited and finalised.
The progress report should be submitted to Parliament within 90 days after this
report has been adopted by Parliament.
5. Closing recommendation
The Committee
recommends that Department report back to Parliament on all the above–mentioned
issues and recommendations within 90 days after tabling of this report has been
adopted by Parliament.
Report to be considered.
5. Fifth Report of the
Standing Committee on Public Accounts: National
Skills Fund, dated 15 November 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 National Skills Fund ( the Fund) for the year ended 31 March
2005, reports as follows:
Structure and
accountability of the National Skills Fund (Reference: AG Report 2004/05 – Par
3.1)
The Department of Labour has not, made any progress on the appropriate
governance and accountability arrangements, and reporting procedures for the
Fund.
The Committee recommends that the Accounting Authority ensures that a proper
investigation be carried out regarding the governance and accountability
arrangements of the Fund;
No formal approved policy exists regarding specifying the terms of recovery of
the 2% administration costs.
The Committee recommends that the Accounting Authority ensures that policy is
developed and implemented to properly manage the administration costs.
Accounting processes
Commitments to be transferred
(Reference: AG Report 2004/05 – Par 3.2)
The Committee noted that contracted commitments to be transferred at year
end are disclosed as R779 034 000. The disclosed amounts were overstated by R6
934 000. An amount of R60 577 000 could not be verified.
The Committee noted with concern that the weaknesses identified are mainly
caused by inadequate management reviews of contracted commitments.
The Committee therefore recommends that the Accounting Authority ensure that:
Management reviews of contracted commitment take place regularly and properly;
and
Supporting documents are available in respect of all commitments or
transactions.
Bank and cash (Reference: AG Report
2004/05 – Par 3.3)
Bank and cash are reflected on the
approved annual financial statements of the Fund as an overdraft of R4,597
million (2003/04: R6,315m). This figure is a balancing figure, and could not be
verified by any supporting documentation. The Auditor-General was also not in a
position to perform additional audit procedures to confirm this amount. Proper
records of the financial affairs of the Fund were not maintained separately
from those of the DoL.
The Committee therefore recommends that the Accounting Officer ensure that a
separate bank account is open immediately.
2.3 Accounts payable and receivable
(Reference: AG Report 2004/05 – Par 3.4)
The Fund uses a policy whereby advances should be paid back in the same
year that they are granted. There was no movement in the accounts payable
(amounting to R3 091,000) and accounts receivable (amounting to R1 073,000)
between the current and prior year. No supporting documentation could be
provided to support these amounts
The Committee recommends that both accounts be properly managed, and that
outstanding advances be followed up regularly by management.
Funds not utilised – MANDAB (Reference:
AG Report 2002/03 – Par 5.1)
As at 31 March 2005, an amount of R41 605 181 transferred to the Fund for
training was not utilised. The Department of Labour has established a MANDAB
steering committee to approve projects and to determine criteria for the
disbursement of funds. Management indicated in January 2005 that these funds
have been allocated to various projects. A progress report provided by
management indicated that
R1 218 530 has been paid over for training projects.
The Committee recommends that:
3.1 the steering committee should
function more effectively and steps be taken to improve training and the use of
funds; and
action plans be implemented and
monitored more effectively.
Closing recommendation
The Committee recommends that :
the Audit Committee on a quarterly basis reviews each of the areas of concerns
referred to above, and report thereon in the next annual report and
the Minister report back to the House on the above issues within 90 days after
the tabling and acceptance of the Committee’s Report.
Report to be considered.