ATC150618: Eighth Report of The Committee on Public Accounts on the Report of the Auditor General on the annual report and financial statements of the Property Management Trading Entity for the 2013/14 financial year, dated 20 May 2015.

Public Accounts (SCOPA)

Eighth Report of The Committee on Public Accounts on the Report of the Auditor General on the annual report and financial statements of the Property Management Trading Entity for the 2013/14 financial year, dated 20 May 2015.
 

1.Introduction

The Committee heard evidence on and considered the contents of the Annual Report and the Report of the Auditor-General on the 2013/14 financial statements of the Property Management Trading Entity. The Committee noted the qualified audit opinion, highlighted areas which require the urgent attention of the Accounting Officer, and reports as follows:

 

2.Irregular expenditure

The Auditor-General identified the following:

 

1. The entity did not have adequate systems for identifying and recognising all irregular expenditure. The completeness of irregular expenditure relating to the current year stated at R34 417 205 000 (2013-14: Restated at R3 848 600 000)

1. The entity revisited previous years’ expenditure during the year under review to identify irregular expenditure previously undisclosed. A significant portion of the irregular expenditure therefore relates to previous financial years
2. Non-compliance with supply chain management prescripts, largely due to poor procurement planning

 

The Committee recommends that the Accounting Officer ensures that:

a.     The project to implement a system that enables continuous financial reporting in line with the requirements of GAAP is prioritised and finalised as a matter of urgency;

b.    The deviations are monitored, investigated and discussed at top management level, and appropriate disciplinary action is taken against officials who are responsible for unjustifiable deviations; and

c.   Supply chain management policies are updated and circulars to this effect issued, and monitoring controls are strengthened to ensure adherence.

 

3.Operating leases

The Auditor-General reported that:

a.   The entity use of a manual spread sheet to maintain all leasing data and weaknesses were identified in the leasing contract environment, where the data on the manual spread sheet did not in all instances reconcile to details per actual lease agreements; and  

b.   Inaccurate information was captured on the Property Management Information System (PMIS) when compared to lease agreements and the supporting schedules used to compile the financial statements.

 

The Committee recommends that the Accounting Officer ensures that:

 

1. Adequately skilled personnel with the necessary GAAP knowledge and experience are employed, and that the current staff members are trained to ensure correct application of GAAP principles;
2. The financial statements and supporting schedules are reviewed in line with the GAAP and that all deficiencies are resolved before they are submitted for audit; and
3. There is a move from a manual to an accurate electronic system.

 

4.Accruals

The Auditor-General identified the following:

1. Inadequate systems to identify and record outstanding payments for goods and services received but not yet paid at year end and to assist in identifying all services rendered not yet paid;
2. The entity did not have systems in place, accruals could be understated; and
3. There were no consequences and recovery of monies from responsible officers.

 

The Committee recommends that the Accounting Officer ensures that the procurement and implementation of the accrual accounting information system be finalised.

 

5.Investigations

The Auditor-General reported on investigations relating to:

1. Numerous internal allegations, mainly relating to transgressions with respect to supply chain management, potential fraud and financial misconduct, are being investigated on an ongoing basis; and
2. The alleged abuse of urgent and emergency procurement as well the utilisation of sole suppliers. The investigation aims to establish whether there was collusion between officials and service providers and to determine any reckless spending of funds. The investigation was still on going at the reporting date.

 

The Committee notes the reported investigations, urges the Accounting Officer to expedite the finalisation of the investigation process and reports to parliament within 30 days after the investigation is completed. In an event that there are transgressions, the Accounting Officer must take corrective measures necessary to recover all and any monies found to have been irregularly expended and remedial action be taken.

 

6.Conclusion

The Committee recommends that the Executive Authority submits a progress report on the implementation of all the above recommendations to the National Assembly within 60 days of the adoption of this report by the House. It is further recommended that the Accounting Officer must ensure the following:

 

1. The Committee is furnished with the report on investigations on lease commitments within the department as soon as it becomes available; and
2. The Accounting Officer submits quarterly reports on all the above-mentioned recommendations.

 

The Committee is concerned that on a number of findings by the Auditor General it was the Accounting Officer who directly failed to fulfil certain responsibilities. The Committee views this in a serious light and calls for more stringent executive oversight action in this regard.

 

Report to be considered