ATC129418: Report on Auditor-General on the 2010/11 Financial Statements of the Department of Correctional Services, dated 18 April 2012

Public Accounts (SCOPA)

DEPERTMENT OF CORRECTIONAL SERVICES

FOURTH REPORT OF THE COMMITTEE ON PUBLIC ACCOUNTS ON THE REPORT OF THE AUDITOR-GENERAL ON THE 2010/11 FINANCIAL STATEMENTS OF THE DEPARTMENT OF CORRECTIONAL SERVICES , DATED 18 APRIL 2012

 

The Committee on Public Accounts (the Committee) heard evidence on and considered the content of the Annual Report and the Report of the Auditor-General (A-G) on the 2010/11 financial statements of the Department of Correctional Services. The Committee noted the qualified audit opinion, highlighted areas which required the attention of the Accounting Authority, and reports as follows:

 

1. Movable tangible capital assets

 

The Auditor-General identified the following:

 

a) In terms of Chapter 9 of the Departmental Reporting Framework guide non-cash additions represent the fair value of all assets received in kind or donated (non-cash items) from sources outside government during the 2010-11 financial year, and items transferred from another government department without payment. Furthermore, this guide states that the disposals indicate the cost amount as reflected in the asset register for all assets transferred to another government department or donated to another entity outside government.

b) Included in disclosure notes 30.2 and 30.3 to the financial statements, non-cash additions stated at R306.9 million and disposals stated at R290.5 million, were materially overstated by internal transfers of movable tangible capital assets between departmental stores. This is as the result of the accounting system (Logis) used by the department being unable to account separately for internal transfers.

 

The Committee recommends that the Accounting Officer ensures that:

 

a) The Department develops and implements a monitoring strategy that will address matters related to proper counting, verification, recording and documentation of assets as provided for in Section 10.1.1 of the Treasury Regulations.

b) There is continuous performance monitoring and reconciliation between basic accounting system (BAS) & LOGIS systems to ensure that all assets are captured.

c) All regions submit documentation supporting the transactions on the asset register.

 

2. Material losses

 

The Auditor-General identified the following:

 

The Department incurred material losses of R3 387 000.This was as a result of significant losses in state vehicles amounting to R2 922 000, claims amounting to R218 000 as well as from other sources amounting to R247 000.

 

The Committee recommends that the Accounting Authority ensures that:

 

a) Proper disciplinary measures be taken against officials who negligently use state vehicles; and

b) Theft and accidents of state vehicles are addressed as a matter of urgency so as to avoid losses.

 

3. Material underspending of the budget

 

The Auditor-General drew attention to the following:

 

a) As disclosed in the appropriation statement, the department materially underspent its total budget (vote). As at 31 March 2011, the underspending amounted to R728 622 000. The underspending was mainly due to the following:

· Compensation of employees: Savings as a result of lower than anticipated expenditure due to the appointments that did not materialise before the financial year-end as well as vacancies resulting from natural attrition.

· Goods and services: The net underspending was mainly due to the late finalisation of the State Information Technology Agency (SITA) service level agreements for the information technology projects for the financial year, which ultimately resulted in the delayed finalisation of payments.

· Buildings and other fixed structures: The net underspending was mainly due to lower than anticipated expenditure that arose from the slow progress and, as reported by the Department , poor workmanship by the Department of Public Works (DPW) contractors, delays in DPW tender process and appointment of contractors as well as a delay in the approval of a site valuation.

 

The Committee recommends that the Accounting Officer ensures that:

 

The Service Level Agreement (SLA) is signed and adhered to by all parties, and penalties should be applied for work not performed as stipulated in the SLA .

 

4. Expenditure management

 

The Auditor- General drew attention to the following:

 

a) In certain cases expenditure was incurred without the approval of a delegated official as per the requirements of section 44 of the Public Financial Management (PFMA) Act and Treasury Regulations (TR) 8.2.1 and 8.2.2.

b) Payment due to creditors were not always settled within 30 days from the receipt of an invoice as per the requirements of section 38(1)(f) of the PFMA and TR 8.2.3.

 

The Committee recommends that Accounting Authority ensures that:

 

a) Reports reflecting payments after 30 days from receipt of invoices are drawn and distributed to all the regions on a monthly basis;

b) All suppliers for payments of R1 million and above are verified on safety web (persal and BAS) ;and

c) Supporting documents are also checked after payments have been approved on safety web.

 

5. Unauthorised expenditure

 

The Auditor-General drew attention to the following:

 

As disclosed in note 9 to the financial statements, unauthorised expenditure of R483 million was incurred by the department as a result of implementing Public Service Co-ordinating Bargaining Council (PSCBC) Resolution No. 1 of 2007 on the improvement in salaries and other conditions of service for the 2007-08 to 2010-11 financial years.

 

The Committee recommends that the Accounting Officer ensures that:

 

The Department properly budgets for its salary increments and other conditions of service in line with Section 27 of the PFMA.

 

6. Conclusion

 

The Committee has noted the recurring qualification on assets since the 2005/06 financial year, and it is for this reason that it calls for progress report within 30 days from the Department to outline the steps taken to correct this situation.

 

The Committee further recommends that the Executive Authority should submit a progress report on all the recommendations to the National Assembly within 60 days after the adoption of this report by the House.

 

The Committee further recommends that the Accounting Authority submit quarterly reports on all the above-mentioned recommendations.

 

 

Report to be considered