The Office of the Auditor General brief the Committee on the Department of Social Development’s audit for the 2012/13 financial year, which was clean. The problems of 2012 had been addressed.
The improvement in the audit outcome of the portfolio was caused by the Department of Social Development addressing the non-compliance findings on procurement and expenditure management as well as the improvement made by the South African Social Security Agency (SASSA), as the agent of the department, in the compliance within the Social Assistance Act in respect of the social assistance grants. Furthermore, the disaster relief, refugee relief, social relief and state president funds addressed the non-compliance findings on the quality of submitted annual financial statements. For the first time in SASSA’s existence, the leadership of SASSA made a strategic decision not to make use of consultants in compiling the financial statements. SASSA was successful in compiling the financial statements, except for some disclosure notes that were materially adjusted during the audit process. This resulted in a material non-compliance finding on the financial statements. This adjustment, as well as the non-compliance finding on internal audit regarding their three-year rolling plan not being in place, led to a regression in the audit outcome from a clean audit outcome to unqualified with findings. The audit outcome for the National Development Agency remained unchanged.
Members asked about the Department’s decision not to use consultants to compile the financial statements and the engagement between the Office of the Auditor General and the Department.
Auditor-General South Africa (AGSA) briefing
Mr Musa Hlongwe, Business Executive, AGSA, said that most DSD funds go to social assistance, or which there are now 116m grant recipients, twice as many as there are taxpayers. The budget was .92% underspent.
Mr Theunis Eloff, Senior Manager, AGSA, informed Members that the Department had received a clean audit for the first time. The improvement had been caused by the Department addressing the non-compliance findings on procurement and expenditure management for the 2011-2012 financial year. The Department had two Schedule 3A public entities: the National Development Agency (NDA) and the South African Social Security Agency (SASSA) and four funds: the Disaster Relief Fund (DRF); the Social Relief Fund (SRF); the Refugee Relief Fund (RRF) and the State President Fund (SPF). Of those, SASSA had regressed: material adjustments had to be made to the annual financial statements and there was no three-year strategic rolling plan after the internal audit. SASSA’s audit report emphasised the status of the AllPay court case ruling for which AllPay had filed an appeal at the Constitutional Court.
The NDA received an unqualified audit with findings regarding expenditure management; procurement and contract management; annual financial statements (‘material adjustments’); and budget management. The DRF, RRF and the SPF received a clean audit opinion. Recommendations made in 2012 had been followed through.
More than 39% of the DSD’s planned targets were not met. Material audit adjustments, made in the annual performance report, were identified and adjusted. More than 31% of SASSA’s targets and 29% of the NDA’s targets were not met.
Regarding Supply Chain Management (SCM) within the NDA, the report noted that there was some deviation from policy and a lack of monitoring of compliance with SCM processes and recommended that management should review policies to align them with regulatory requirements and implement monitoring controls.
Payment of social grants was currently outsourced. During 2015/16, SASSA would start increasing its capacity in preparation for the takeover of this function. There were findings regarding information technology controls, such as password complexity shortcomings, shortcomings in user access controls and rights in the Department, SASSA and the NDA and the report recommended that management compile an action plan to address them. The report mentioned a need for intervention in the NDA’s oversight function regarding ‘adequate approved and communicated policies and procedures, implementation of action plan and appropriate IT governance frameworks’.
SASSA was in its second phase of reviewing beneficiaries of social pensions to remove non-qualifying individuals. SASSA is also investigating non-compliance with SCM which could result in ‘fraudulent action’ and ‘irregular expenditure’. A forensic investigation on the NDA’s procurement processes was conducted and the report approved by the board in April 2012.
A management report on the readiness of government institutions to report on their performance was issued.
On the Minister’s key commitments for 2012-13, standard operating procedures, such as accurate record keeping, reconciliation and monitoring of compliance with legislative requirements had been fully implemented, including the first phase of the grant re-registration process and steady progress had been made in ensuring that the internal audit section of SASSA was capacitated and the NDA’s action plan to implement National Treasury Framework.
No SCOPA resolutions were made.
The Chairperson thanked the presenters for their clear and interesting presentation and invited questions.
Ms E More (DA) asked if the Auditor-General approved of the fact that SASSA did not use consultants to compile financial statements for the first time,
Mr Eloff replied in the affirmative. He added that if there was a need, consultants should be used but it was hoped that after having used consultants, there would be a skills transfer.
Ms More sought clarity on the Auditor-General’s engagement with the Department.
Mr Eloff also explained that the Auditor-General’s office sometimes went back to Departments for two reasons: there was evidence of spending which was not linked to performance or there was a claim that objectives had been met but no evidence of spending. In both cases, a chain of evidence could often be provided.
The Chairperson again thanking the presenters and reminded the Committee of the following day’s meeting, when the Annual Report would be presented and discussed.
The meeting was adjourned,
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