The Expanded Public Works Programme and its shortfalls was an issue which members felt the Department needed to address. The Office of the Auditor-General agreed and said it considered the EPWP as high risk but was nevertheless willing to look into the issue. The Chairperson also asked the Office of the Auditor-General to look into making it a requirement that government departments use graded establishments. It agreed to take the issue on board.
The Committee considered and adopted its Budgetary Review and Recommendations Report.
Ms Whitford undertook the presentation which was predominantly in a graphical and diagrammatical format. The audit outcomes 2010/11 were presented. Different colours were used to describe what was taking place. Green meant the situation was okay. Yellow represented that action was being taken and red meant that an intervention or action was needed. There was a general regression in the national picture. On predetermined objectives for 2010/11 there was an improvement by departments and entities. However for the NDT which was a new department there were no figures on predetermined objectives. The NDT had complied with laws and regulations. Members were shown movement in audit outcomes from 2009/10. The red arrow in the diagram denoted a regression by SA Tourism. The yellow coloured blocks showed the neutrality of the NDT. On material misstatements in financial statements, the NDT was denoted green with no misstatements. SA Tourism had misstatements but these were all corrected. Regarding the NDT and its public entities there were no material findings on the annual performance report in terms of presentation, usefulness and reliability of the information for the entities in the portfolio. On compliance with laws and regulations SA Tourism was found lacking in its annual financial statements and annual report, the NDT was found wanting regarding transfers and conditional grants. SA Tourism had not identified as having unauthorised, irregular, or fruitless and wasteful expenditure. The NDT had no unauthorised expenditure. It had two instances of irregular expenditure. The one amounted to R33 000 where an employee had used a vehicle for non official purposes the other was R175 000 by its Expanded Public Works Programme regarding the training of a service provider. NDT had an amount of R28 000 for fruitless and wasteful expenditure.
The Office of the Auditor-General identified four focal points based on prior audits and risk assessment of departments and public entities. The first focal point was procurement where there was an increase in irregular expenditure on EPWP projects. The second focal point was human resource management where there were issues with leave administration, record keeping and the administration of performance agreements. The third focal point was predetermined objective reporting where there were concerns about credibility of reporting on achievement of targets. The fourth and last focal point was information technology management where there were issues of user access control and IT security continuity.
Members were given a summary of findings on supply chain management comparing the NDT to national outcomes. The NDT showed good controls for supply chain management. On Human Resource Management the NDT had problems with performance management, and the management of leave, overtime and suspensions. Progress made on the implementation of key controls was that both the NDT and its entities were trying to implement the changes that were recommended. The NDT had taken good action and just its financials needed more work. On areas of focus, national key role players needed to address audit outcomes on predetermined objectives, and commitments were being put in place. On IT control steps were being taken. Commitments were being put in place for financial management. Human resource management was good in general. Governance was also generally good.
Ms V Bam-Mugwanya (ANC) pointed out that the Office of the Auditor-General had given the National Department of Tourism a good report. She referred to slide 11 of the presentation and asked about the actions taken against persons responsible for unauthorised expenditure. How did the Committee know for sure that action had been taken? She wished to have clarity on the issue of procurement and also asked where the issue of political accountability came from. She stated that the audit report on the NDT seemed almost too good to be true.
Mr Msibi referred to slide 11 and spoke about the certainty that actions had been taken. After the AG’s Office reported its findings, more processes followed. One such process would be the referral to the Standing Committee on Public Accounts where there were cases of irregular expenditure. He referred to slide 17 and stated that the first block was relevant. The block dealt with what executive leadership was doing about the matters the AG’s Office had reported on. The slide showed that things were being done. The green shaded blocks represented that everything was okay, the yellow shaded blocks showed that there was an action plan and that something was being done. The red shaded area represented the AG’s Office stating that interventions were needed. The green and yellow blocks showed that management was responding in both the NDT and SA Tourism.
Ms M Njobe (COPE) stated that it was a pity that the AG’s Report had been presented after the NDT had briefed the Committee on its Annual Report 2010/11. It would have been useful to the Committee if the AG’s Report could have been presented before the NDT briefing. She emphasised that something seriously needed to be done about the Expanded Public Works Programme (EPWP). It was generally problematic. She asked the AG’s Office to advise members on what could be done. She referred to slide 15 and asked for clarity on what the downward facing red arrow meant relating to financial and performance management. She also asked for clarity on slide 6, specifically the column which showed regression.
Mr Msibi noted that the AG’s Office had identified the EPWP as high risk. One of the weaknesses of the EPWP was lack of controls. The NDT had to implement better controls. The AG’s Office would continue to look into the EPWP.
Ms Whitford referred to slide 6 and stated that the regression was by SA Tourism. The NDT had good controls in place and was performing well. She agreed that more work on the EPWP would be done. The issue was about sustainability.
Mr Msibi, referring to slide 15, explained that leadership, financial and performance management and lastly governance were drivers for clean audit outcomes. If all three drivers were in place there would be no negative financial system in any department.
Ms C Zikalala (IFP) stated that the AG’s Office and the NDT should have appeared simultaneously before the Committee. She referred to slide 11 where mention was made of an NDT employee misusing a NDT vehicle and that steps had been taken against the employee. The AG’s Office was asked to elaborate. She also asked for clarity on the interventions which were continually mentioned in the presentation.
The Chairperson stated that SA Tourism had issues with leadership and governance. He asked the AG’s Office to speak about SA Tourism’s internal audit and audit committee. He asked how the AG’s Office found the internal control mechanisms of SA Tourism to be. He pointed out that there was a problem which SA Tourism had not picked up on for an entire year.
Ms Whitford stated that the internal audit component in SA Tourism was small and comprised of two to three individuals. She noted that it was thus difficult to address functions. The Director General of the NDT had concerns about SA Tourism’s audit committee and wished for a NDT official or more specifically the Chief Operating Officer of the NDT to sit on SA Tourism’s audit committee. The reasoning was to improve the channel of communication between the NDT and SA Tourism. If any concerns were picked up in the audit committee by the NDT, it could be communicated to SA Tourism.
The Chairperson stated that the Committee would follow up. He noted that there was a directive from Cabinet that graded establishments should be used by government departments. The concern was whether government departments were heeding the call by Cabinet. It would seem that many government departments did not use graded establishments. He asked whether it would not be useful to have a transversal audit of use of graded establishments by government. President Zuma had emphasised that tourism should be a primary driver for job creation. He wished the AG’s Office to look into the issue of the use of graded establishments by government departments. Did the AG’s Office have the required resources and capacity to look into the issue?
Mr Msibi agreed to look into the use of graded establishments by government departments. He would speak to his colleagues who did specialised audits.
The Chairperson stated that it was just a suggestion by the Committee.
Ms Bam-Mugwanya reiterated the point that the AG’s presentation should have been before the NDT Annual Report briefing. It would have allowed the Committee the opportunity to ask the NDT directly to speak about matters of concern.
The Chairperson stated that the Committee had had a heated session with SA Tourism when it presented its Annual Report the previous week. The financial officer of SA Tourism had not been present at the meeting. The Committee had to be content with the Board of SA Tourism taking responsibility for its shortfalls.
Ms Njobe asked for the opinion of the AG’s Office of the NDT and SA Tourism when compared to other departments. She asked the presenters to respond in their own words.
Mr Msibi stated that the AG’s Office had looked at contracts that had been running for many years. Various other things had also been looked at. Specific attention had been paid to supply chain drivers. He noted that it was encouraging that the NDT had no findings in supply chain management. The NDT was doing okay when compared to the national picture. Sixty five percent of departments had findings. On material mistakes most departments, including tourism and its entities, had findings.
The Chairperson referred to the Audit Report on page 137, section 10 of the SA Tourism Annual Report 2010/11 and read out a statement on compliance with laws and regulations: The accounting authority submitted financial statements for auditing that were not prepared in all material aspects in accordance with generally recognised accounting practice as required by section 55(1)(b) of the PFMA. Material misstatements identified during the audit were subsequently corrected in the financial statements.
When SA Tourism was questioned about it, the response had been that the statement should not have been included in the Annual Report. He wished the AG’s Office to confirm whether it was in fact the case.
Mr Msibi stated that the SA Tourism Annual Report 2010/11 was correct as it was and had been signed off. The content of the Report should remain as it was.
Ms Njobe wished to double check whether the statement as was reflected in the Report was correct.
Mr Msibi once again confirmed that the statement reflected in the Report was correct.
The Chairperson thanked the AG’s Office for the presentation and commended the work of its entire staff.
Budgetary Review and Recommendations Report (BBRRR)
The Chairperson stated that the financial statements for the 1 April 2011 to 30 September 2011 should be included in the Report. He noted that the Report before the Committee was only a draft. The Report needed to be finalised by the end of the week. The Chairperson, the committee researcher and the committee secretary had drafted it after following Parliament’s guidelines. If Members felt the need to add to the Draft Report, additions should be forwarded to the Committee Secretary. He proceeded to take Members through the Draft Report. The Committee effected technical changes to the Draft Report where needed. The Draft Report was adopted as amended.
The meeting was adjourned.
Report of Auditor-General to Parliament on South African Tourism for year ended 31 March 2011
REPORT ON THE FINANCIAL STATEMENTS
1. I have audited the accompanying financial statements of South African Tourism, which comprise the statement of financial position as at 31 March 2011, and the statement of financial performance, statement of changes in net assets and cash-flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 131 to 179.
Accounting authority’s responsibility for the financial statements
2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with South African Standards of Generally Recognised Accounting Practice (GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No 1 of 1999) (PFMA) and the Tourism Act, 1993 (Act No 72 of 1993) and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
3. As required by section 188 of the Constitution of the Republic of South Africa, 1996 (Act No 108 of 1996) and section 4 of the Public Audit Act of South Africa, 2004 (Act No 25 of 2004) (PAA), my responsibility is to express an opinion on these financial statements based on my audit.
4. I conducted my audit in accordance with International Standards on Auditing and General Notice 1111 of 2010 issued in Government Gazette 33872 of 15 December 2010. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the separate financial statements are free from material misstatement.
5. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of he risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
6. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
In my opinion, the financial statements present fairly, in all material respects, the financial position of South African Tourism as at 31 March 2011, and its financial performance and cash flows for the year then ended in accordance with South African Standards of Generally Recognised Accounting Practice and in the manner required by the PFMA.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
8. In accordance with the Public Audit Act and in terms of General notice 1111 of 2010, issued in Government Gazette 33872 of 15 December 2010, I include below my findings on the annual performance report as set out on pages 136 to 137 and material non-compliance with laws and regulations applicable to the public entity.
9. There were no material findings on the annual performance report concerning the presentation, usefulness and reliability of the information.
COMPLIANCE WITH LAWS AND REGULATIONS Annual financial statements
10. The accounting authority submitted financial statements for auditing that were not prepared in all material aspects in accordance with generally recognised accounting practice as required by section 55(1)(b) of the PFMA. Material misstatements identified during the audit were subsequently corrected in the financial statements.
11. In accordance with the PAA and in terms of General notice 1111 of 2010, issued in Government Gazette 33872 of 15 December 2010, I considered internal control relevant to my audit, but not for the purpose of expressing an opinion on the effectiveness of internal control. The matters reported below are limited to the significant deficiencies that resulted in the findings on compliance with laws and regulations included in this report.
12. The oversight responsibility was identified as a key root cause in the internal control deficiencies relating to the accuracy of the financial statements submitted for audit purposes. The reconciliations for significant control accounts were not followed up and reviewed throughout the year.
Financial and performance management
13. The required control objectives over the accuracy and completeness of the annual financial statements submitted for audit purposes were not functioning as intended. Manual reconciliations had to be implemented for certain control accounts which contributed to material adjustments to the financial statements.