Parliament's financial statements 2004: hearing

Public Accounts (SCOPA)

01 March 2005
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

1 March 2005

Mr F Beukman (NNP)

Documents handed out:
Parliament Annual Report 2004 with Auditor General’s Report (not yet tabled in Parliament)
Parliament Budget Allocations (not yet approved for release)

The Committee held a hearing on the Auditor General’s 2004 Report on Parliament’s financial statements for that year. Questions were asked on the following matters: receivables and payables, inventory section, donor funds, party and constituency costs and committee underspending. The Standing Committee was assured that the weaknesses in internal control at Parliament were being attended to and that no other fraudulent payments had been detected other than the Travelgate payments. Shortfalls in internal financial controls at Parliament were caused by a lack of skilled employees. However a training programme aimed at developing existing employees was in place with a view to forming an internal audit unit. Currently Parliament relied on outside institutions to conduct internal audits. The hearing was also told that R49 million of Parliament’s budget was allocated for staff compensation. Only 4% of the budget was committed to committees which the Committee contended was "the bedrock of Parliament’s business".

The Committee questioned the Secretary of Parliament, Mr Zingile Dingani, about matters raised in the Auditor General’s 2004 Report on Parliament’s financial statements of that year:

Receivables and payables
Mr Trent (DA) required an explanation on the current procedure of purchasing goods and services at Parliament. He asked if there were any fraudulent payments made by Parliament.

Mr Dingani answered that Parliament was part of the public service and as such goods were only paid for once delivery took place. In addition a process of quality control was being implemented to strengthen internal controls. The Travelgate scandal was the only matter being investigated and was sub judice. Progress would be reported on to the Committee in due course.

Mr Trent reiterated if there were any fraudulent payments other than the Travelgate matter.

The Secretary assured Members that no other fraudulent payments had been detected except for the Travelgate matter.

Mr Trent asked if any remedial steps were being taken to correct financial systems.

The Secretary answered that weaknesses in internal control were worsened by a lack of skilled employees. He said that systems in use were not regularly updated. The Master Systems Plan would be implemented soon. It was hoped that this system would remedy the weaknesses in internal controls at Parliament. Parliament was currently using the Manqoba system which required customisation.

The Auditor General commented that customisation was a very costly exercise .The Committee also heard that this system was initially designed to assist municipalities.

The Secretary was emphatic that the current system should merely be seen as a stopgap measure. However he admitted that there were suspense accounts which were breeding grounds for corruption and fraud.

Mr Trent asked whether the debt owed to Parliament was recoverable and wanted to know how effective debt monitoring was.

The Chief Financial Officer, Mr Harry Charlton, replied that no losses were suffered except in cases where the state attorneys failed to locate debtors within the prescribed time period. The Secretary again reassured Members that the Master Service Plan due to be implemented would deal with such issues.

Ms L Mashiane (ANC) asked if there were timeframes to address the weaknesses in the internal control at Parliament.

The Secretary replied that since July 2004, efforts had been made to correct weaknesses pertaining to internal controls. Since then the CFO had assembled a forum of financial officers. Its purpose was to formulate best practice in internal and external controls.

Ms Mashiane asked what quality control measures were in place at Parliament.

The Secretary answered that senior managers were made to sign performance contracts. Therefore quality control would be measured based on these contracts. In addition a strategic plan for managers had been compiled. These measures were designed to ensure effective quality control at the level of management.

Ms Mabe asked if there were any steps taken against defaulters owing monies to Parliament.

The Secretary replied that the old financial management system did not have a debtors ledger. Therefore it became difficult for Parliament to track down defaulters. The recruitment of skilled managers could also assist in maintaining best management practice.

Mr Trent asked whether there were attempts by the treasury to develop its own internal auditors.

It was acknowledged that Parliament did not have permanent auditors and no internal audit unit.

Mr Wang wanted to know why the laptops allocated to staff were listed separately under expenditure in the Annual Report.

The CFO replied that from an accounting perspective such amounts were listed separately as they were Members’ contributions and not expenditure.

Mr Trent contended that where interest could not be charged on irrecoverable debts, it amounted to losses incurred. This contention was made in the light of earlier comments that no losses had been incurred.

The Secretary replied that there were cases where recovery was possible and where it was not.

Staff matters

Ms Mabe (ANC) wanted know when the Manqoba system would be is updated.

The Secretary replied that the process of updating the system was done through written manuals. Therefore the writing of manuals was a continuous process that required customisation. The Secretary reiterated his remark that the Manqoba system was an interim measure. He acknowledged that mistakes were committed during the process of implementing the current system.

Ms Mabe raised concern regarding R7.7 million that could not be traced on the cashbook. The R7.7 million related to third party payments made by Parliament for staff.

The CFO replied that the Manqoba system was only introduced in July 2004 and that amount was unaccounted for in the books. However the documents on such transactions were submitted to the Office of the Auditor General.

Ms Mabe was concerned that there were no records of employees taking leave. She lamented that such a situation could open Parliament to claims unsupported by proof. Consequently employees could claim leave allowances that were not verified.

The CFO replied that the employee benefits system was paper based. No records were kept since no leave forms existed. Mr Mbalula added that this situation was rectified in July 2004.

Ms Mabe asked why staff members were paid medical aid allowances when no verification process was in place.

Mr Mbalula explained that only allowances in respect of contract workers were not verified. Verification of such allowances was done for full time employees. Subsequently verification of payment of such allowances was being applied to all employees.

Ms Mabe also pointed out that overtime payments were made without keeping proper records. In addition no approval was given for such employees to work overtime.

Mr Mbalula responded that a register existed but was submitted late to the Office of the Auditor General.

Ms A Yiatses, Auditor-General’s Office, noted that this had not been received.

Ms Mabe noted that motor vehicle allowances were not reflected on the budget from 31 January until March 2004. The allowances in question were for senior managers at the Finance Department.

The Secretary replied that this omission was difficult to justify, as motor vehicle allowances were part of the salary package normally reflected in the annual budget.

Ms Mabe asked if Parliament had begun a recruitment drive to beef up skilled staff.

The Deputy Secretary replied that the recruitment was already underway and certain interviews had been concluded on 25 February. Only 11 staff members were identified who needed re-training and development. In addition the staff was being sent to a college which offered specific training to financial employees. The Secretary observed that such re-training of staff was not intended as a ploy to lay off certain employees.

The Secretary lamented that Parliament was experiencing high levels of absenteeism. The cause of absenteeism was associated with unpleasant working conditions at Parliament. In the past, issues of leave and absenteeism were not properly recorded. This meant that anyone could take leave and be absent at will.

A Member asked if this lack of staff morale was caused by low remuneration.

The Secretary rejected this idea and contended that employees at Parliament were well remunerated.

Inventory section

Mr Wang (ID) wanted clarity on issues of service delivery and actual performance.

The Secretary conceded that the system of managing inventory assets at Parliament was flawed. He cited an example of a shop at Parliament where goods sold were relatively expensive. The CFO explained that a new system of inventory was being implemented in 2005.

Mr Wang cited the issue of Parliament’s switchboard that was not working properly. There were widespread complaints regarding the efficiency of the switchboard especially after hours.

The Secretary told the hearing that a Call Centre would be established at the beginning of this financial year. In addition the transfer of kitchen staff at Parliament also required attention. He again admitted that there was a lack of integration in the asset management system of Parliament. A case in point was the existence of two websites for the National Assembly and NCOP respectively. However there was a marked increase in the use of the Internet by MPs.

Ms T Tobias (ANC) welcomed the improvements on Parliament’s website.

Mr V Smith (ANC) expressed concern regarding the sale of parliamentary assets. He said that some assets should be donated to museums that were struggling to get items. In addition he asked how the value of these assets was determined prior to auction.

The Secretary explained that a list of all assets had been drawn up and placed for inspection at Parliament. Therefore Members were afforded an opportunity to inspect these assets before the auction. After the inspection goods were then auctioned in Somerset West. A record of all assets sold at the auction was kept.

Donor funds
Mr F Beukman wanted to know how donor funds were recorded by Parliament. He noted that certain donor funds were not reflected in full on the financial statements.

The CFO replied that only the cash portion and value of services were not included in the financial statements. Furthermore certain donor programmes were problematic from an accounting perspective. With regard to the European Union Support Programme, Parliament never received cash in its books. Parliament was required to obtain approval for certain services. Therefore certain donor funds were not recorded properly when they were received by Parliament.

Mr Beukman asked if there was a dedicated financial officer and a register for donor funding at Parliament. The Secretary said there was a dedicated officer who was accountable to the Secretary’s office. Further there were banking accounts and financial statement kept at Parliament. In addition a steering committee had been established to deal specifically with donor funds.

Party and constituency costs

A committee member noted that since 1994, no Member of Parliament had received motor vehicle finance. He contended that car finance allocated to former MPs should be recovered from the individuals concerned.

The Secretary replied that these matters had been handed over to the State Attorneys’ office. Members were reassured that none of the debts were written off, despite prescription.

The hearing was also told that R49 million of Parliament’s budget was allocated for staff compensation. Only 4% of the budget was committed to committees.

The questioner contended that committees were the core business of Parliament and found the allocations unjustified. He wanted to know the basis on which the budget allocations were determined. The committees were the bedrock of Parliament’s business. He observed that Parliament was a service institution and had a large administrative staff and that the budget had to reflect the vision and mission recently adopted by Parliament.

The Secretary expressed regret that committees were underspending their budgets. He argued that Parliament had to look at other areas of need in the light of underspending. Given competing interests at Parliament, the need arose for a balancing act. He encouraged committee chairpersons, secretaries and clerks to work closely to ensure the budgets were spent.

It was indicated that previously there was a R7 million deficit, but now Parliament was underspending about 10% of its budget. He argued that Parliament’s financial committee was not doing enough to address this problem. He contended that such rollover from the budget could be diverted to other areas of need.

Ms Tobias asked who was monitoring the use of financial resources in committees. The Secretary answered that the chairpersons together with their researchers and clerks must ensure proper administration of committees. It was suggested that guidance must be given to committees on spending their budget.

A Member observed that there were fewer committee meetings in 2004 given the election campaign. He argued that this could have resulted in less spending by committees.

Ms Mabe asked if the R20 million spent on different airlines used by MPs could not be reduced. She argued that MPs could use a single airline that was more affordable.

The Secretary replied that Members did not want to be restricted to a single airline and travel agent. Members were assured that the issue of air travel was being given serious consideration.

Mr Mangwanishe (ANC) asked whether there was a risk management committee that could minimise the chances of fraud and corruption.

The Deputy Secretary replied that such a committee had been established by Parliament.

The Auditor General, Mr Fakie, remarked that Parliament must determine whether choosing the current financial system was the correct decision. He warned that such a system required customisation that was costly. Training and development of sound policies and procedures were critical at Parliament

The Secretary again stressed that the Master System Plan was replacing the Manqoba System.

The meeting was adjourned.



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