Nineteenth
Report of the Standing Committee on Public Accounts on the Africa Institute of
The Standing Committee on Public Accounts (SCOPA)
heard and considered evidence on the Annual Report and the Report of the Auditor-General
on the financial statements of Africa Institute of Southern Africa (AISA), for
the year ended 31 March 2007.
The Committee noted the disclaimer audit opinion expressed by the
Auditor-General. The Committee raised concerns specifically on the following
matters and reports as follows:
Governance arrangements
The
Committee noted the following internal control weaknesses:
1.1 the services of internal auditors were terminated with the result that AISA
operated for 17 months without this function, and for the current year under
review no internal audits were performed;
1.2 the Accounting Authority has not conducted regular risk assessments as
required by Treasury Regulations and the universal corporate governance
principles;
1.3 the Fraud Prevention Plan was incomplete;
1.4 key vacant executive positions were
filled by incumbents in an acting
role, this coupled with the lack of an approved organisational chart,
led to staff being uncertain about their responsibilities and roles in the decision-making
structure and
1.5 AISA does not have a comprehensive set of approved financial policies and
procedures.
The Committee recommends that the Accounting Authority ensures that:
management implements appropriate asset register policies and procedures to
ensure that the register is regularly updated for accuracy and completeness;
control mechanisms are put in place to ensure that the internal audit functions
are appropriately in line with corporate governance principles and
management must comply with internal control policies and monitor the
implementation thereof.
The Accounting Authority provides the Committee with the action plan indicating
procedures to be taken by management to address the above issues within 60 days
after the adoption of this report by the National Assembly.
Capacity or people-related issues
The Committee noted that:
non-compliance with GAAP and International Accounting Standards were
identified;
a number of significant material audit adjustments and disclosure changes were
made due to lack of financial skills and
AISA experienced high attrition of senior management staff. The entire top three tiers of management
resigned during the year under review, giving rise to a severe leadership
vacuum. Most senior management positions
were not filled and were occupied by employees in acting capacities.
The Committee recommends that the Accounting Authority ensures that:
management develops and implements adequate monitoring controls to ensure
that financial statements submitted for auditing purposes comply with
prescribed accounting frameworks; and
all vacant posts, especially those in the financial environment are filled
urgently and a progress report be submitted to Parliament on a quarterly basis.
System-related matters
The Committee noted that:
3.1 The performance information was not timeously presented for audit purposes due to inadequate policies and
procedures that did not facilitate accurate recording and reporting of
performance information.
3.2 Lack of origination, retention, safeguarding and supporting documentation
resulted in instances where balances and transactions could not be
substantiated.
The Committee recommends that the Accounting Authority ensures that:
policies and procedures are developed and implemented according to the
required standards.
compliance to Treasury Regulations is adhered to as required in the revenue
cycle.
Report to be considered
Twentieth Report of the Standing
Committee on Public Accounts on the Mine Health and Safety Council, dated 10
June 2008
The Standing Committee on Public Accounts (SCOPA) heard and
considered evidence on the Annual Report and the Report of the Auditor-General
on the financial statements of the Mine Health and Safety
Council for the year ended 31 March
2007.
The Committee noted the qualified audit opinion expressed by the
Auditor-General. However, the Committee
raised its concerns on the following matters and therefore reports as follows:
Capacity or people-related issues (vacancies in key positions and lack of
relevant skills)
The Committee noted the following issues highlighted in the audit report:
1.1 the suspension of the Chief Financial Officer (CFO);
1.2 the appointment of an employee in an acting capacity as CFO who was not in
possession of the relevant skills and qualifications, thus losing institutional knowledge of the
finance function;
1.3 that in the absence of a suitably qualified CFO, the finance department was
not able to discharge of its functions. This is exacerbated by a lack of
appropriate accounting skills in the organization.
The Committee recommends that the Accounting Authority:
establishes and reviews reasons for the high staff turnover and that it
develops and implements strategies to eliminate this problem, especially
regarding key staff positions;
ensures that the organization attracts and retains the best candidates,
especially for specialist positions;
puts in place internal control measures, including the employment of competent
and qualified people;
ensures that finance staff are appropriately skilled and trained enabling them
to account for transactions and balances on the required basis of accounting
and enabling them to maintain an adequate fixed asset register and
ensures that processes are streamlined to facilitate staff understanding their
responsibilities and that compliance with legislation is monitored at a senior
level.
Governance arrangements
The audit report highlighted that the entity:
2.1 lacked a proper control environment;
2.2 lacked the appropriate number of employees;
2.3tasks were not appropriately aligned with compliance responsibilities;
2.4 lacked knowledge of the PFMA and all applicable regulations;
2.5 failed to establish an appropriate formal code of conduct for employees and other policies addressing
acceptable operational practices.
The Committee recommends that the Accounting Authority ensures that:
management has a proactive approach to risk managing and that reported
items are addressed as a matter of urgency;
adequate supervisory controls ensures that policies and procedures are adhered
to and
the code of conduct is appropriately amended to deal with matters of
non-compliance.
Conclusion
The Committee recommends that the Accounting Authority furnish it with a
progress report covering all the above-mentioned issues within 60 days of the
adoption of this report by the National Assembly.
Report to be considered
Twenty First Report of the Standing
Committee on Public Accounts on the Annual Report and the report of the Auditor-General
on the financial statements of Boxing South Africa for the financial year
ending 31 March 2007, dated 10 June 2008
The Standing Committee on Public Accounts (SCOPA) heard and
considered evidence on the Annual Report and the Report of the Auditor-General
on the financial statements of Boxing South Africa for the financial year
ending 31 March 2007.
For the 2006/07 financial year an unqualified audit opinion was expressed by
the Auditor-General on the financial statements of Boxing South Africa. The
Committee raised concerns on the following matters and reports as follows:
Capacity or people-related issues
The Auditor-General identified the following shortcomings with regard to
capacity or people related issues:
1.1 a high vacancy rate;
1.2 insufficient segregation of duties;
1.3 inadequate supervision and reviewing and
1.4 the General Manager had been on suspension since 19 May 2006.
The Committee recommends that the Accounting Officer ensures that:
all vacant positions are filled to ensure that there is enough capacity for the
entity to deliver on its mandate;
the entity complies with the sections of Treasury Regulations and PFMA which
governs the segregation of duties;
there is proper supervision and reviewing of processes in the entity and
a progress report on the suspension of the General Manager be submitted to
Parliament within 30 days after the adoption of this report by the National
Assembly.
Governance Issues
The Auditor-General identified the following shortcomings with regard to governance
issues:
21. the audit committee was not
fully operational during the year under review and was due for restructuring in
the following financial year,
there
was no risk strategy and assessment plan in place,
2.3 non compliance with laws and regulations.
The Committee therefore recommends that the Accounting Officer ensures that:
a the restructuring of the audit
committee are finalised and fully operational;
b risk assessment and fraud
prevention plans are in line with Treasury Regulations and
c performance information is
submitted in line with the requirements of the PFMA.
Systems related issues
lack of independent reviews by management caused shortcomings in internal
controls;
insufficient
processes to safeguard financial documentation and assets;
insufficient
policies and procedures for all the entity’s activities.
The Committee recommends that the Accounting Officer ensures that:
a Policies
and procedures are developed and approved to ensure adequate control.
b The department complies with
all applicable laws and regulations.
Report to be considered.
Twenty Second Report of the Standing
Committee on Public Accounts on the Annual Report and the report of the
Auditor-General on the financial statements of the Department of Sport and
Recreation South Africa for the financial year ending 31 March 2007, dated 10
June 2008.
The Standing Committee on Public Accounts (SCOPA) heard and
considered evidence on the Annual Report and the report of the Auditor-General
on the financial statements of the Department of Sports and Recreation South
Africa for the financial year ending 31 March 2007.
For the 2006/07 financial year a qualified audit opinion was expressed by the
Auditor-General on the financial statements of the Department of Sports and
Recreation SA. The committee raised
concerns on the following matters and reports as follows:
Asset management
1.1 Capital assets
The following deficiencies, amongst others, were reported by the
Auditor-General:
(I) Assets of R1 735 770 from the
former South African Sports Commission and various other assets did not appear
on the LOGIS asset register;
(ii) The physical existence of
assets with a value of R691 710 could not be verified;
(iii) Capital assets of R800 362
were incorrectly classified as services on LOGIS asset register.
The Committee recommends that the Accounting Officer ensures that a proper
asset register is maintained and that periodic asset counts and follow-up on
any discrepancies are performed.
1.2 Intangible assets
The closing balance as per the LOGIS asset register of R128 731 did not
correspond with the closing balance of R501 000 as per note 27 of the financial
statements. Various intangible assets were acquired during the year, and those
were not reflected in the financial statements.
The Committee recommends that:
The department establishes controls to ensure that all intangible assets are
recorded and disclosed and
reconciliations are performed to verify data completeness.
2. Staff related issues
2.1 Performance bonuses
The Department of Sports and Recreation paid bonuses amounting to R1 066
682 to all staff on level 12 and below for the year under review without
performance reviews. This was done contrary to what was prescribed by the
Department of Public Service and Administration.
The Committee recommends that:
The above amount is regarded as irregular expenditure as it was made contrary
to the requirements of the Public Service Regulations.
Performance bonuses should only be paid when staff has been assessed based on performance
contracts signed, and in accordance with policy.
2.2 Transitional allowances paid
The department paid transitional allowances amounting to R1 807 377,
contrary to Public Service and Administration regulations.
The Committee recommends that the above amount is regarded as irregular
expenditure as it was made contrary to the requirements of the Public Service
Regulations.
3. Receivables for departmental
revenue
An amount of R810 608 relating to royalties which should have been
transferred from the former South African Sports Commission did not include all
the outstanding amounts as obtained from the entity which administers the
royalties.
The Committee recommends that the Accounting Officer ensures that:
A final decision regarding the handling of royalties are made between the
executive authority, the accounting authority and National Treasury as a matter
of urgency
South African
4. Goods and Services: Special
Services
An amount of R2 412 074 was paid as allowances to athletes, per category,
in preparation for the Olympic Games 2008.
The payment of these athletes was administered by TuksSport (Pty) Ltd. No verification for validity and accuracy of
these payments could be performed as no details of athletes were attached to
the invoice.
The Committee recommends that:
All relevant approvals and valid supporting documentation are obtained before
any payments are made.
The department should consider paying the athletes itself and not outsource
this function to save some costs.
The department follow-up on this matter and report back to Parliament within 60
days after the adoption of this report by the National Assembly.
Material non-compliance with applicable legislation
Division of Revenue Act, 2006 (Act No. 2 of 2006);
5.1 Mass participation
(i)
insufficient monitoring and reporting;
(ii) programme implementation agreements were not available or not signed by
Sports Recreation South Africa and
(iii) business
plans not timely approved.
(B) 2010 FIFA world cup soccer
(i) monthly
reports not submitted to National Treasury;
(ii) approved
business plans from host cities not submitted and
(iii) detailed stadium development plans were not completed or attached to
signed contracts
The Committee recommends that:
the department ensures compliance with DoRA to address all the above
shortcomings and report back to Parliament within 60 days after the adoption of
this report by National Assembly.
6. Supply chain management
The department did not comply with the tender process as stipulated in the
Supply Chain Management Circular no.9 of 2005/06 as issued by National
Treasury, and thus non compliance with section 38(1) (a) of the PFMA.
The Committee therefore recommends that:
procedures for proper planning and monitoring of tender activities are
implemented by the department and
officials should comply with policies and procedures.
7. Leases, accruals and commitments
The Committee noted with concern that the department does not have the
necessary control systems/policies and procedures in place to facilitate
accurate reporting of the above.
The Committee therefore recommends that:
Comprehensive policies and procedures be developed and implemented as a matter
of urgency.
8. Information systems audit
An information systems audit revealed that due process was not followed
when users are created or removed or when user rights are amended; and that
password control settings on BAS were inadequate.
The Committee therefore recommends:
that the above shortcomings be addressed as a matter of urgency as it could
compromise data integrity.
9. Internal control
The Committee furthermore noted with concern the internal control
shortcomings and root causes reported on in paragraph 19 of the AG’s report.
These include amongst others:
A lack of policies and procedures;
No on-the-job training;
No approved delegations and job descriptions;
No performance evaluations and
Insufficient safeguarding of assets.
The Committee therefore recommends:
That a detailed action plan, indicating proper timeframes, are compiled to address the control
shortcomings in the AG’s report and be submitted to SCOPA within 60 after the
adoption of this report by the National Assembly.
10. Conclusion
The Committee is concerned with the absence of approved policies and
procedures that should guide the day- to- day activities of the department.
Report to be considered.
Twenty Third Report of the Standing
Committee on Public Accounts on the Annual Report and the report of the
Auditor-General on the financial statements of Independent Electoral
Commission for the Financial Year ending
31 March 2007, dated 10 June 2008.
The Standing Committee on Public Accounts (SCOPA) heard and
considered evidence on the Annual Report and the financial statements of the
Independent Electoral Commission (IEC) for the financial year ending 31 March
2007.
The Committee reports as follows:
For 2006/07 an unqualified audit opinion was expressed for the IEC. However, the Committee requests the
Accounting Officer to assure Parliament that:
the Commission’s current IT infrastructure is ready and capacitated to provide
a stable platform to support the next national and provincial elections in
2009; and voter education will be done in a visible and concerted manner.
Conclusion
The Committee congratulates the IEC for an unqualified report from the
auditors, and hopes this will be maintained.
Report to be considered.
Twenty Fourth Report of the Standing
Committee on Public Accounts on the Annual Report and the report of the
Auditor-General on the financial statements of the South African Management
Development Institute (SAMDI) for the financial year ending 31 March 2007,
dated 10 June 2008.
The Standing Committee on Public Accounts (SCOPA) heard and
considered evidence on the Annual Report and the report of the Auditor-General
on the financial statements of the South African Management Development
Institute (SAMDI) for the financial y ear ending 31 March 2007.
The Committee notes that for the 2006-07 financial year, the Auditor-General
expressed an unqualified audit opinion for SAMDI, on both the Vote and the
Training Trading Account. The Committee raised a number of concerns and reports
as follows:
1. Main vote
1.1 Systems-related matters
1.1.1 Monitoring of internal controls
The Auditor-General reported that there was inadequate monitoring of
controls to ensure proper recording and disclosure of fixed assets. This resulted in material corrections being
made to the financial statements submitted for auditing purposes.
In terms of Treasury Regulation 10.1 and section 38(1) (d) of the Public
Finance Management Act, the Accounting Officer of a department must take full
responsibility and ensure that a proper control system exists for the recording
and safeguarding of assets.
The Committee recommends that the Accounting Officer ensures that:
the fixed asset register is updated timeously;
a proper filing system is developed to record all purchases and disposals of
fixed assets and
reconciliations between the different systems are performed on a monthly basis.
2. Training Trading Account
2.1 Systems-related matters
2.1.1 Internal control activities
The Auditor-General reported that there were inadequate systems and
procedures to properly account for revenue and receivables, ensure timeous
collection of debtors, and to ensure compliance with Generally Accepted
Accounting Practices (GAAP). This resulted in material corrections being made
to the financial statements submitted for auditing purposes.
The Committee recommends that the Accounting Officer ensures that:
Controls are implemented or improved to ensure that all receipts are
allocated in a timely manner.
Debtors with credit balances are followed up timeously and.
Controls are implemented to ensure that revenue is split in accordance with the
requirements of IAS 39.
3. Monitoring
The Auditor-General reported that there was inadequate monitoring of
controls to ensure the completeness of payables and commitments at financial
year-end.
SCOPA recommends that the Accounting Officer ensures that there is adequate
monitoring of controls by management.
SCOPA further recommends that the entity provides the Committee with a
progress report on the abovementioned issues within 60 days of the adoption of
this report by the National Assembly.
Report to be considered.
Twenty Fifth Report of the Standing Committee on Public Accounts on the Annual
Report and the report of the Auditor-General on the financial statements of the
Government Printing Works for the financial year ending 31 March 2007, dated 10
June 2008.
The Standing Committee on Public Accounts (SCOPA) heard and considered
evidence on the annual report and the report of the Auditor-General on the
financial statements of the Government Printing Works for the financial year
ending 31 March 2007.
The Committee notes that for the 2006/07 financial year an adverse audit opinion
was expressed by the Auditor-General on the financial statements of the
Government Printing Works (GPW). The Committee reports as follows:
Receivables
The Auditor-General reported that receivables were not initially recognised
at fair value and were subsequently not measured at amortised cost as
required. Estimations indicated that
debtors were understated by R3, 245 million, income overstated by R15, 573
million and interest received understated by R18, 818 million.
The Committee recommends that the Accounting Officer ensures that:
corrective measures that are effective and efficient are implemented by
management to ensure that monies due to GPW are collected on time and
appropriate policies and procedures are put in place with respect to the activities
of GPW and that compliance is ensured.
2. Inventory – Work in progress
(WIP)
The Auditor-General reported that:
work in progress to the amount of R19, 093 million could not be verified, and
no reliance could be placed on the WIP report due to inconsistencies that
existed.
The Committee recommends that:
a) reconciliation must be performed
between the Cost Record Report and the WIP report,
b) proper supporting documentation must
be in place for each WIP
3. Payables
The Auditor-General reported that goods received, control account included
long-outstanding amounts of R1, 690 million for prior years and R5, 380 for
current year. These amounts might be
overstatements of payables.
The Committee therefore recommends that:
this issue is addressed as a matter of urgency; and
monthly reconciliation is done and reviewed by senior managers.
4. Special
investigation
The Auditor-General reported that in the Accounting Officer’s report
reference is made to a forensic investigation that is still in progress. However, the Auditor-General reported that
the final report dated 26 October 2005 indicated an amount of R66, 492 million
which relates to fruitless and wasteful and/or irregular and/or unauthorised
expenditure. According to this report,
the amount could increase substantially. The report indicated that Government
Printing Works (GPW) officials do not follow applicable policies and procedures
and that GPW should consider taking appropriate disciplinary steps in those
instances.
This also relates to non-compliance with the PFMA section 38(1) (g), 38(1) (h)
(iii) and 40(3) (b).
The Committee recommends that the Accounting Officer ensures that:
applicable policies and procedures are observed at all times and
appropriate disciplinary actions are taken where applicable and a report in
this regard is submitted to Parliament within 60 days after the adoption of
this report by the National Assembly.
5. Non-compliance
with applicable legislation
The Auditor-General reported on the following shortcomings with regard to
compliance with applicable legislation:
the fraud prevention plan was not implemented and a risk assessment plan was
not approved, implemented and monitored as required by Treasury Regulation
3.2.1 and
the system of internal audit was not under the control and direction of the
Audit Committee as required by section 38(a) (ii) of the PFMA.
The Committee therefore recommends that the Accounting Officer ensures that:
policies and procedures are put in place;
compliance with applicable legislation is ensured and
there is an update on the debtor’s collection list.
6. Conclusion
The Committee is concerned with the adverse audit opinion expressed by the
Auditor-General and the fact that the GPW does not have appropriate policies,
procedures, techniques and mechanisms to smoothly run its activities.
Report to be considered.
Twenty Sixth Report of the Standing
Committee on Public Accounts on the Annual Report and the report of the
Auditor-General on the financial statements of the Department of Home Affairs
for the financial year ending 31 March 2007, dated 10 June 2008.
The Standing Committee on Public Accounts (SCOPA) heard and
considered evidence on the Annual Report and the report of the Auditor-General
on the financial statements of the Department of Home Affairs for the financial
year ending 31 March 2007.
The Committee notes that for the 2006/07 financial year a disclaimer of opinion
was expressed by the Auditor-General on the financial statements of the
Department of Home Affairs. The Committee reports as follows:
Cash and cash equivalents
The completeness and accuracy of cash and cash equivalents, departmental
revenue and expenditure could not be verified by the Auditor-General due to the
following:
1.1 not performing reconciliations
of key accounting processes or resolving long-outstanding items and
1.2 non-compliance with policies
and procedures.
The Committee recommends that the Accounting Officer ensures that:
reconciliation of suspense accounts is performed monthly and reviewed by senior
officials and
policies and procedures are developed and approved to ensure implementation of
adequate controls.
2. Payables
The accuracy and completeness of payables could not be verified by the
Auditor-General due to the following:
2.1 a repatriation deposits
suspense account which was not reconciled and
2.2 the inter-responsibility
suspense account which was not analysed and cleared as per Treasury Regulation
17.1.2.
The Committee recommends that the Accounting Officer ensures that:
there are approved monitoring controls over the review of reconciliations,
clearing of suspense accounts and that there are supporting documentation
there are approved policies and procedures to govern the activities of the
department
3. Capital Assets
The existence, accuracy and completeness of property, plant and equipment
could not be verified by the Auditor-General due to, amongst others, the
following shortcomings:
3.1 no assets register was present
for an audit for tangible capital assets to the value of R1 016, 149 million
and
3.2 management has been unable to
provide appropriate documentation to support the amount of R45, 939 million for transfers.
The Committee recommends that the Accounting Officer should:
compile a complete asset register and that this is reviewed by management;
ensure that its activities are based on approved policies and procedures to
ensure that officials implement adequate controls.
4. Departmental revenue and
receivables
Various shortcomings were identified in the controls over departmental
revenue, and included amongst others the following:
4.1 written policies and standard
operating procedures have not been formalised or developed to guide the
financial accounting processes and related controls over the revenue collected
and
4.2 there was inadequate monitoring
of controls over the reconciliations leading to revenue being incorrectly
recorded.
The Committee recommends that the department should ensure that effective and
efficient controls exist to ensure completeness and accuracy of the
departmental revenue, receivables and cash received by the department.
5. Conclusion
The Committee is concerned with the absence of approved policies and
procedures that should guide the day-to-day activities of the Department. The
Committee further recommends that an update report be submitted by the
Department within 30 days after the adoption of the report by the National
Assembly.