Hearing on Parliament; Presentation on New Format on Status Report; Adoption of India Report; Adoption of Business Plan; Consult

Public Accounts (SCOPA)

14 March 2003
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

14 March 2003

: Mr F Beukman (NNP)

Relevant documents
Draft Report on Visit to India
Presentation on Draft New Form of Status Report
Background Document to Hearing on Parliamentary Services (Appendix 1)
Auditor-General's Report on South African Parliament 2001/2002( Appendix 2)

Members raised several concerns during the hearing on Parliamentary Services. Issue included: the confusion and legal vacuum caused by the uncertainty as to whether the PFMA applied to Parliament as well and whether there were any plans to resolve this confusion. Clarity was sought on Parliament's key priorities with regard to the budgetary process, the progress made with regard to Parliament's Risk Management and Fraud Prevention Plan and the major risk areas for Parliament. The current practice of outsourcing the auditing of Parliament and the impression created that Members were carrying the brunt of the catering costs when staff were severely subsidised because the budget for catering of R12m was far too high was discussed.

The Parliamentary Service was asked to explain whether a new law or policy will be put in place to deal with all the issues relating to the funding of political parties, whether the donor requirements for the auditing of Parliamentary projects have been obtained and the purposes for which these funds have been earmarked, the R17,4m in unauthorised expenditure and whether this is in fact unauthorised expenditure and the problem currently created by the lack of legislative guidelines with regard to the use of unauthorised expenditure.

The Committee proposed certain amendments to the India Report, received a presentation on the new format of the Status Report and considered the letter received from Mr Cassiem regarding the trips.

Parliamentary Service
Mr Sindiso Mfenyana, Secretary to Parliament, referred Members to the Background Document to the Hearing (see document) which contained the key areas mentioned in the Letter of Invitation from the Committee. The Auditor-General (AG) delivered an unqualified audit of Parliamentary Service, which the management was quite proud of.

Ms P Mothoagae (ANC) stated that Mr B Kannemeyer (ANC) would deal with Financial Management, Legislative Framework and Legal Compliance, she would deal with Budget Priorities and Process and Compliance and Internal Control Environment would be dealt with by Ms N Hlangwana (ANC). Catering and Accounts Receivable will be done by Mr V Smith (ANC), Support to Political Parties will be dealt with by Ms Hlangwana and Donor Funding and Unauthorised Expenditure by Mr R Mofokeng (ANC).

Financial Management, Legislative Framework and Legal Compliance
Mr Kannemeyer contended that Members of Parliament, as public representatives, are expected to set a particular example as their own conduct is supposed to be "beyond reproach" in executing their functions. It would be accepted that the institution of Parliament bears a similar obligation with regard to being the institution tasked with financial management oversight over the rest of the public sector and the executive as a whole. It is thus hoped and expected that Parliament's own financial management framework would serve as an example for the rest of the executive and administrations. This does become difficult in view of the apparent legislative vacuum or contradiction in terms of which Parliament is supposed to fulfil its own financial management oversight functions.

During this Committee's interaction with Parliament over the last two to three years the issue that has arisen relates to the areas of uncertainty as to whether the Public Finance Management Act (PFMA) is applicable to Parliament. Consensus is beginning to be obtained for the need for a separate legislative framework for Parliament and for legislatures generally in South Africa. The reply received from Parliament is that this matter is currently with the presiding officers, the Draft will be tabled and referred to the appropriate Committee for processing and approval by the two Houses of Parliament. What exactly is the cause of delay in terms of processing this matter, and has a particular timeframe been set for the finalisation of this matter?

Mr Mfenyana replied that the response to this question is obvious: his division is a Parliamentary Service (PS), it can provide the services but the decisions with regard to the reason for the delay in tabling the Draft is really beyond the scope of authority of the PS.

Mr Kannemeyer asked the PS to explain when last it brought the impact that the delay in processing this legislation has on the work of the PS to the attention of "the powers that be"?

Mr Mfenyana responded that the issue "continuously makes itself heard" at various times, and informed Members that he himself receives several queries from the provincial legislatures requesting information on the progress of that legislation. It is thus a matter that is "on the table of the presiding officers", and they are very much aware of it and the queries surrounding it. Mr Mfenyana stated that he would not be able to provide any further information on this matter.

Mr Kannemeyer asked Mr Mfenyana to explain what it would suggest this Committee should do should the PS find a way of fast-tracking this process.

Mr Mfenyana replied that it appears that he is not making himself clear, because the moment the PS is given instructions it carries them out, but he is not in a position to anything beyond forwarding to the presiding officers the queries which he has been receiving.

Mr Kannemeyer accepted the explanation offered by Mr Mfenyana.

Ms Hlangwana stated that Mr Kannemeyer is actually asking the PS to indicate what it is that this Committee can do to assist in the speeding up of this process, because it is also inconveniencing the Committee's work as it cannot continue to pose the same questions year after year.

Mr Mfenyana responded that was actually trying to avoid saying that the answer to this matter in fact lies with Members themselves because they have the powers, via various structures in Parliament, to push the matter forward.

Mr Kannemeyer asked the National Treasury or AG delegation to explain Point 4.2 of the Explanatory Memorandum of the PFMA which provides that "Parliament, provincial legislatures and independent institutions, established by the Constitution, are also covered in this Act". This in unclear because agreement does seem to have been reached that Parliament is not covered by the Act, yet it now appears that an incorrect conclusion could have been reached here. Could it also be that, on the other hand, the clause referred to deals only with specific issues mentioned in the Act relating to Parliament? Could this be clarified, because it does create the impression that the PFMA does cover Parliament as well.

Mr Nico Marais, from National Treasury's Parliamentary Office, responded that Section 3 of the PFMA indicates that it does apply to Parliament and provincial legislatures subject to Section 3(2), which in turn provides that it is the Speaker of Parliament and the Chairperson of the NCOP that acts in that capacity where National Treasury is mentioned.

Mr Kannemeyer sought clarity on National Treasury's involvement to date in the processing and development of the legislation, and does it agree that there is a need to provide a legislative framework so that the PS can be held accountable here.

Mr Marais replied that he agrees with Mr Kannemeyer that there is a legislative void or vacuum as far as Parliament is concerned. The old Exchequer Act required more involvement of National Treasury in the day-to-day financial administration of Parliament, yet this involvement is not present in the PFMA. There has traditionally been a practice of Parliament addressing National Treasury on certain issues and this does happen at present, but there is not way in which National Treasury can prescribe to Parliament what is should do.

Mr David Mmakola, National Treasury Director: Central Government Administration, added that he agrees with Mr Marais that National Treasury's role so far has focused on implementing the PFMA across all government spheres, although it is aware of the new process aimed at developing new legislation that is particularly relevant to Parliament. National Treasury's approach is that if it has to become involved that involvement would be in the form of providing the assistance that it required, but National Treasury would not be in a position to be proactive.

Mr Mfenyana added further that the PS does consider itself bound by the provisions of the PFMA to a large extent, until a legislative framework is put in place. This has to be made clear.

Mr Kannemeyer stated that it is of extreme importance that the Committee liaise with the relevant authority on this matter as there is even uncertainty as to whether this hearing should be taking place, because it essentially amounts to Parliament, in the form of this Committee, holding Parliament to account, in the form of the PS. This contradiction is also a result of the lack of legislative clarity in this regard, and thus the legislation has to be sped up.

Mr B Nair (ANC) agreed with Mr Kannemeyer that the contradiction created here relates to whether Parliament can exercise oversight over itself, and these types of issues have, of necessity, to be clarified in the new legislation.

The Chair referred to the statements made earlier by Mr Mfenyana regarding the requests from the provincial legislatures and stated that he is aware of fraternal organisations for the legislatures both on the secretarial and presiding officers level, and asked whether the need for this legislation to move forward was also discussed at those levels.

Mr Mfenyana replied that a meeting of the Speakers' Forum has already been scheduled for 28 March 2003, and it expected that this will be one of the main items on the agenda for that meeting.

Mr Kannemeyer proposed that the Chairperson of the South African Association of Public Accounts Committees (APAC) be requested to look into this matter, and find means to link up with the Speakers Forum to fast-track this matter.

Budget Priorities and Process
Ms Mothoagae referred to the portion in the AG's Report indicating that the budget could not be prepared on a zero basis, and asked the PS to explain the key priorities of Parliament.

Mr Mfenyana responded that Parliament itself has recognised the need to engage in a visioning process precisely to map out its plans for this Parliament, and the final decision with regard to the direction to be followed is really in the hands of Members. Minister Manuel has indicated on several occasions that it would be much easier for him to give as much support to Parliament as he can if the clear vision and direction to be followed by Parliament were to be clearly expressed.

With regard to the actual budget, there are processes to be followed in the actual compilation thereof. The PS has made submissions regarding its own view on this matter, but the final decision with regard to the direction to be followed by Parliament once again lies with Members.

Ms Mothoagae asked whether Mr Mfenyana is saying that Parliament is not being prioritised because there is no vision at the moment.

Mr Mfenyana replied that there are various appropriate bodies that make submission to Parliament's Joint Budget Committee, who put forward their own understanding of their own needs and make certain requisitions in terms of the budget. This is also done by the PS.

Ms Mothoagae asked whether Parliament needs money for the priorities it has identified, because as some stage it was suggested that donor funding would be utilised here.

Mr Mfenyana responded that it is common practice both at the level of the executive as well as Parliament and other State institutions as a developing country, to supplement as much as possible with whatever assistance can be acquired. South Africa is currently at the end of the European Union (EU) Support Programme which has provided approximately R89m was utilised over the last three to four years. The fact that such relationships with donor bodies do exist does not mean that Parliament cannot function independently, but it does help to supplement the meager resources, because South Africa is not one of the richest countries. These funds were offered to allow South Africa to put systems in place to effect transformation of both Parliament and the country in general.

Ms Mothoagae referred to the computer system for the catering services and asked whether this is seen as a priority, especially in view of the shortcomings that have been raised in recent times. Furthermore, what is the expenditure on the computer system for catering?

Mr Lionel Klassen, Parliamentary Service Manager: Institutional Support Division, replied that this is included in the budget for 2003/2004. The system is just about to be ordered and has already been approved by the Parliament Procurement Committee and the process is in the final stages. The system will be installed during April and will be operational very early in this new financial year.

Ms Mothoagae asked whether the problem might arise with the fact that this system is not self-supportive?

Mr Klassen responded by suggesting that Ms Mothoagae is probably referring to the so-called "loss in catering" which has been quantified in the vicinity of R12m, and stated that the catering computer system will not affect that aspect of the issue. The catering computer system will enable the PS to conduct more accurate purchases, sales and stock control, and this system will operate smoothly. The so-called "loss in catering" results from employment costs. Parliament's policy is to recover the costs of ingredients of the food, and the Joint Rules of Parliament determine the price charged for a plate of food. At the moment the food is sold at R25, which covers the cost of all the ingredients.

The so-called "loss" which are the personnel costs, and the catering services currently employs about 160 people. The new computer system will not recover the costs of these personnel and the PS is not in a position to change this, because the price of a plate of food is determined by the Joint Rules as a matter of Parliamentary policy. The PS cannot change this.

Ms Mothoagae asked whether such a policy is currently in place?

Mr Klassen replied that there is certainly a Joint Rules policy in place, although he is not sure where it is to be found, that indicates that Parliament does recover the cost of the ingredients of food. Each year the PS forwards a submission to Committee for Members Support in this regard which then forwards this to the Joint Rules Committee. This is how that amount is determined.

Ms Mothoagae referred to the Risk Management and Fraud Prevention Plan which was raised in Parliament's last Annual Report, and requested clarity on the progress made with regard to compilation and implementation of this plan.

Mr Jivan Beeharilell, from Parliament's Internal Audit Division, replied that the Fraud Prevention Plan has been adopted by the management board, and it will be implemented from the next financial year. Certain awareness workshops have been scheduled for the PS staff, and are in the process of being carried out.

Ms Mothoagae asked whether, if this plan is in place, any risk-assessment has been done which still has to be implemented. This is important, because if this is the case there would still currently be a great degree of risk before implementation is effected.

Mr Beeharilell responded that the risk-assessment has been done, with the most recent having been completed a few months ago in September 2002, and this exercise has been taken into account in the development of the Fraud Prevention Plan.

Ms Mothoagae sought clarity on the critical areas that were identified by that assessment.

Mr Klassen replied that risk-assessments have been done in Parliament for at least the last three years and the risk areas form the basis for the annual programme of the independent internal auditors. After each risk-assessment exercise has been conducted the key areas are identified, which then form the programme on which the internal auditors work. Thus all these areas are covered and are being covered in the Report of the Internal Auditors.

Ms Mothoagae indicated that another Member would be dealing with Internal Audits in more detail at a alter stage.

Mr Kannemeyer asked the PS to explain what exactly the critical risk areas are.

Mr Mfenyana responded that an entire document is presented to the PS and in turn handed over to the Internal Audit Committee which contains the classification of the various risk levels, and it can be made available to Members. It is quite elaborate and quiet clear and actually provides the programme of listing which risks have been attended to, which remain etc.

The Chair asked Mr Beeharilell to briefly indicate the major risk areas.

Mr Beeharilell replied that the Internal Audit Committee looked at the artworks, stores procurement and budgeting, payment and bank account management, human resources, payroll, IT and security systems, donor funding, contracts and Members' facilities.

Mr Kannemeyer contended that these seem to cover all the general areas of management and asked whether any higher risk areas where identified, or are all of these the higher risk areas?

Mr Klassen responded that Mr Kannemeyer is exactly correct, because when the risk-assessments are done they are analysed into critical risks, significant risks and what Mr Klassen calls "run of the mill risks". The PS then sits down with the Audit Committee and a decision is made which focuses primarily on the critical risks which are then being addressed even before the Internal Auditors commence their assessment, because these are identified as very serious risks. This is how the process has been functioning over the past few years, and it is via this process that the catering and stock control system was identified as a significant risk, and has resulted in the current development. The same was done with regard to procurement in Parliament and stores control, which was identified as one of the problematic areas a few years ago and which resulted in the adoption of the furnitures policy in terms of which certain furniture was then done away with. Thus these items have been and are being addressed over the years.

Ms Mothoagae asked whether there are any procedures in place to ensure that the Internet based budget model, aimed at controlling budget weaknesses for voted funds, is in place.

Mr H Charlton, Parliamentary Service CFO, replied that the budget model is in place and will be fully functional for the 2004/2005 financial year.

Ms Mothoagae asked whether any guidelines have been put in place to cap any over-expenditure without relying on the surplus funds as a stop-gap.

Mr Kannemeyer stated that this question should be placed in context. National Treasury and Parliament arrived at an agreed position that the over-expenditure on the 2002/2003 budget was not strictly over-expenditure because Parliament does not have to surrender any surplus funds. This created the concern that if Parliament's budget is approved for R1000 and it has surplus funds of R100 or R200 lying around, there is the opportunity to have a less stringent budgetary control system in place because Parliament would have excesses to the R100 or R200 in surplus funds.

Mr Charlton responded that this is, in essence, a correct assessment. There is at the moment no legislative guideline as to how it should be dealt with in precise terms but the Auditor General on the basis of full accrual accounting in later periods, for example, will have a process in place that deals with this. It is thus not as onerous or odious at it may first seem.

It has to be made clear that unauthorised expenditure and the treatment of any surpluses is in fact dealt with under the authority of the presiding officers, and thus all of the detail is provided to that office.

Mr Mfenyana added that before it was decided that Parliament would be allowed to retain and use any excess the reality is that, over the past few years, the PS has abided by the principles of the PFMA including the Medium-Term Expenditure Framework (MTEF) cycle. The PS had been at pains to indicate that, whilst it is not yet able to do zero-based budgeting, the MTEF guidelines put the PS far below the requirements of a changing and growing Parliament. The PS has for some time been trying to state that the MTEF guidelines, which were prepared as far back as 1997 or 1998, were no consistent with the growth of the activities of the institution, with the result that the PS was practically underbudgeted from year to year.

It was during 2002 that a breakthrough was made with the National Treasury where they recognised that perhaps indeed the baselines given need to be adjusted. Thus the fears raised by Mr Kannemeyer with regard to the PS having excess funds and abusing the financial systems really do not exist, but the PS is simultaneously working towards having the type of system in place that will enable it to implement the zero-based budgeting.

Ms Mothoagae stated that Mr Mfenyana is referring to the very fear that plagues Members that once surplus funds do arise, there is no mechanism in place that would regulate the manner in which it has to utlised or one that would guard against the possible abuse of financial management. Furthermore, progress is sought on the case involving fraud of R20 144.

Mr Klassed responded that the criminal case is going ahead and is currently being dealt with by the South African Police Service (SAPS), and thus the case has not yet taken place. The civil case will then follow the conclusion of the criminal trial, which will seek to recover the funds if possible.

Ms Mothoagae asked the representative from the AG to indicate whether in fact the funds have been recovered, because it was suggested that it had been.

Ms Adele Yiatses, from the Auditor-General's Office: Central Manager responsible for the Audit, replied that as far as she is aware based on the information available and which is noted in the Annual Report, those funds were recovered.

The Chair stated that this is good news.

Ms Mothoagae stated that it appears that the PS is not aware of this as they are awaiting the continuation of the civil case.

Compliance and Internal Control Environment
Ms Hlangwana referred to both the AG's Report and to the Background Document, and noted that both documents indicate that the Internal Audit is outsourced and not done by Parliament itself as one of its functions. For how long will Price Waterhouse Coopers continue to conduct the audit, and is there any transference of skills within the process? She stated that she understands that is a manager and two officials that have been identified to "oversee" the process, but this merely implies a supervisory function and does not mean that the manager is actually part of the process. Is it sufficient to merely have two officials as part of that audit, or would it be better to have Parliament itself perform this function?

Mr M Coetzee, Deputy Secretary to Parliament, replied that management has decided to "contracted in" internal audit services, and the decision is not to provide Parliament's own internal capacity. The manager of the internal audit has the responsibility to manage the services that are contracted in. The reason for the decision to "contract in" here is that yields a greater return on expenditure by Parliament because of the level of skills acquired.

Mr Klassen added that the contract with Price Waterhouse Coopers is not permanent. Parliament has invited tenders for new internal auditors, and the decision as to who this tender will be awarded has not yet been finalised.

With regard to affirmative action, when the PS signed the last contract of employment with Price Waterhouse Coopers there was a specific agreement that they would increase their staff component and employ two additional personnel. The result is that two "black ladies" were identified and employed, and Price Waterhouse Coopers have regularly been reporting to the PS on their progress. Although the internal audit function has been outsourced, the PS has still ensured that there would be some progress made with regard to affirmative action. In the new contract being applied for, it has been ensured that there is a black economic empowerment (BEE) company amongst the new tender companies.

Ms Hlangwana stated that the responses given indicate that the PS itself will never have or does not have an internship programme aimed at putting an end to outsourcing the internal audit. What will happen to the two personnel that have been taken in by Price Waterhouse Coopers when its contract is not renewed? Will they remain with Price Waterhouse Coopers? What mechanisms have been put in place to ensure that this is not merely a part-time arrangement?

Mr Klassed responded that the contract of employment with the internal auditors is generally within the vicinity of approximately five years, and there is thus sufficient time for those employed to develop and progress up the ranks. Mr Coetzee has already provided the reasons for the decision to contract in this function but it has to be made clear that it is not a permanent arrangement, because it is being reviewed on a regular basis. The PS is satisfied with the current state of affairs, but the decision could still be taken to source this function internally.

Mr Mfenyana added that the PS is at a point where it has to balance certain requirements. The need for BEE is present, but the provisions of the PFMA clearly requires the institution to be efficient and cost-effective. Thus these two requirements constantly have to be balanced. As explained earlier, the PS has taken the initiative to ensure that at least some form of BEE does get effected, even if the efficiency is provided by the outsourced internal auditors. Thus the PS would also have to show, should the decision be taken to insource the internal audit function, that it is also in keeping with the principles of efficiency and cost-effectiveness.

Ms Hlangwana asked the PS to explain whether the measures it has put in place here are cost-effective and that they are overcoming all the problems with regard to the internal audit function.

Mr Mfenyana replied that he can answer "with a definite yes". Currently the internal audit plan and the implementation of that plan has illustrated an improvement in the issues that have been highlighted, especially in the risk areas. The PS is thus satisfied that it "is doing fine".

The Chair requested the internal auditors to confirm this .

Mr Willie Brits, from the Auditor-General's Office: Provincial Auditor of the Western Cape, responded that he also serves as an observer on the audit commitee, and confirms the improvement.

Ms Hlangwana referred to the portion of the AG's Report which stipulates that there are no material problems that they have identified with regard to internal auditing. Could this be clarified?

Mr Beeharilell replied that it is correct that there have been no material problems to be concerned about. The internal controls over Parliament have been considered and all indications are that it has been functioning quite well, and the matters that have been raised have been addressed by management.

Mr Smith stated that a Member had earlier asked for clarity on the systems used for catering and the point of sale system (POS) specifically, and the PS replied that that system would enable the better management of sales, purchases and stock control. What system is currently being used, as the POS is not yet in operation? Who currently is responsible for the purchases, distribution and stock control in this regard?

Mr Klassen responded that currently a manual system is being employed. The orders are placed on a needs basis by the Head Chef and all documents are signed by the Manager of Catering and also has the responsibility of ensuring that all purchases are duly authorised. The issues than go from the stores to the kitchens, and here again it would be the responsibility of the chefs to control the physical movement of the goods between the various kitchens. Regular stock counts are conducted by the stores section, so that an independent view of the situation may be given. These are the processes put in place to control it manually.

Mr Smith stated that this means that the goods are ordered centrally by the stores, distributed and inventories are then done by stores. Who orders the "food and livestock", as the AG puts it?

Mr Klassen replied that this has to do with catering and thus a distinction has to be made between dry goods and perishables. All the dry goods are on the computerised Logus Control system and is administered by the stores system, and the Parliamentary Procurement Unit does the procurement. The computer system will tell them what the minimum order quantities are, the frequency etc. Thus orders are being placed based on computer-generated information which is first checked by the procurement manager before it is purchased. The catering manager then has to sign for al those goods, and the stores manager gets involved in the physical control of all dry goods. The perishables, which are bought on a daily basis, are ordered by the chefs and thereafter it is still the catering manager that exercises the administrative control to ensure that all the documents are authorised.

Mr Smith stated that the PS delegation did indicate in response to a question posed earlier that the average cost per meal, as determined by the Joint Rules Committee, currently stands at R25, which is the amount Members have to pay for their meals. Clarity is sought on the amount paid by members of the press and Parliamentary staff pay for their meals? This is important because, unless this catering is only bought for and sold to Members, then it makes sense that it costs R25 and that R25 is then recovered. But if what Members buy for their R25 is "for everybody that is entitled to catering in this establishment" then, with regard to Members of the press and visitors, there is a markup of R5 if they are charged R30, while there is no markup for Members, it costs R25 and R25 is charged. For members of staff meals cost R25 and they are charged approximately R13-15. Is this an accurate statement?

Mr Klassen responded that unfortunately he does not have accurate figures with him but stated he is pretty sure that this is exactly what the PS is saying. The price for Members, as stated earlier, is determined by the Joint Rules Committee based on the cost of ingredients. With regard to staff, personnel at lower levels are being subsidised. There is a programme which provides that staff earning below a certain amount will be issued what is called a "green ticket" or "red ticket" for the purchasing of food. Thus staff do get food at lower prices on the presentation of those tickets, and those in the management structures do not get any discount and pay the same price as Members.

There is a price differential for visitors, the press and other outsiders who are neither Parliamentary staff nor Members, but Mr Klassen stated that he is not sure of the precise difference in price here.

Mr Smith stated that he wants this to be placed on record because, although he is not blaming the Media, they always focus on this issue and argue that "Members get subsidised substantially". Yet the reality of the matter is that members of the lower level of staff, taking into consideration that they outnumber the 400 Members, receive all the subsidies because Members are paying the cost of food. Thus the catering in fact benefits the members of the lower level of staff. Is this correct?

Mr Klassen replied that he agrees with Mr Smith, but stated that he is not sure whether the sum of R12m suggested covers the cost of employment, because this is not factored into the price charged for food. This is instead a policy issue.

Mr Smith sought clarity on the present budget for Portfolio Committees. The figure of R14m was proposed, and could the breakdown of this amount be provided?

Mr Charlton responded that the amount for the 2003/2004 budget year is in fact R14m allocated to Committee work, with the most significant element being airfares and travel-related costs.

Mr Smith asked whether it is R14m per Committee, or whether it is R14m for all the 20-odd Parliamentary Committees?

Mr Charlton replied that it is R14m in total.

Mr Smith stated that if this is the case that R14m is allocated to the core business of the whole of Parliament, and if R12m has been allocated for the 160 people in catering department, is this not a problem? If this is the case then this Committee has to make it clear that the core business of Parliament cannot be allocated R14m when catering for only a section is granted R12m. Is this assessment of the matter correct?

Mr Charlton replied that the amount of R14m was decided by the presiding officers.

Mr Smith stated that he is not questioning or blaming the PS nor is he making a value judgement here, but merely seeks clarity on this matter so that this Committee can influence the management of Parliament as a whole.

Mr Mfenyana responded that he agrees with the situation sketched by Mr Smith.

Mr Charlton added that, with regard to the quantum of subsidy, the loss attributable to shortage or wastage of consumables is only R500 000, or thereabouts.

Mr Smith referred to Parliament's has twelve cafeteria outlets, and asked whether it is possible to quantify which of these twelve are operating better than others, with regard to the efficiency and effectiveness referred to earlier by Mr Mfenyana. Of particular concern here is the planning of catering services, because the current practice of over-catering is in itself a wastage, according to Mr Smith. Since this planning function is done centrally, as stated earlier by the PS, are there any mechanisms in place or that can be put in place by Management to guard against such wastages in planning?

Mr Klassen replied that the PS does have the benefit of experience and it does guess the number of Members that will usually be attending a specific meeting. The systems at the moment do not enable the PS to make accurate predictions, but all attempts are being made by management to be plan as accurately as possible. During 2002 the decision was taken to provide a buffet-type meal for Old Assembly meetings, and this was done specifically to provide better service. Members will probably also be aware that the PS has closed down seven of the twelve pubs in Parliament after a close monitoring period.

It is not possible to quantify in financial terms in which specific areas the PS is making a profit and those in which it is not because all the systems are not in place to assist here, but the PS does use its knowledge and experience to monitor this. Wastage is being curbed, and food that is not eaten is given to those less privileged on a daily basis.

Accounts Receivable
Mr Smith stated that the AG's Report shows accounts receivable for 2003 of about R4,9m and includes an amount of R2,4m for "other loans and debts", which presumably includes the amount of R703 000 that is not recoverable. What then would make up the remaining R1,4m of the "other loans and debts", assuming that the R703 000 is included here?

Mr Charlton responded that it comprises residual monies owed by Members on lap-top computers, for instance.

Mr Smith stated that the AG indicates that the R703 000 referred to is included but it may not be recoverable, nor is it written off. Is this money in fact recoverable, and if it is recoverable, would it be recovered in this financial year or the next? Should it not be recoverable for whatever reason, why is that amount not simply being written off?

Mr Charlton replied that the write off could only be conducted once the debt had been declared unrecoverable by the State Attorney, and it was not current practice to provide for debt because the PS accounts for its affairs on a receipts and payments basis.

Mr Smith asked whether such advice has been sought from the State Attorney and, if so, when was this advice sought and what was the nature of that advice?

Mr Charlton responded that the matters are dealt with on a case-by-case basis literally on a daily basis, and the PS takes advice and reviews the debtor's ledger on a monthly basis. Thus any action that is required in taken.

Mr Smith contended that the R703 000 referred to is therefore not one incident.

Mr Charlton answered in the affirmative.

Support to Political Parties
Ms Hlangwana referred to the AG's Report and stated that there was an indication by Mr Dube, the Section Manager in Finance, on 6 February 2003 that the written assurance and the contracts of employment of the eight political parties were still outstanding. What follow-up procedures have been taken to ensure that these assurances are obtained, and how long will it take for this to be finalised?

Mr Charlton replied that continued efforts are made to obtain those letters, but there is no mechanism in place to compel parties to provide those letters. With regard to any other requirement, monies are withheld until the PS receives unqualified audit reports from independent professional accountants, in respect of political parties' activities.

Ms Hlangwana sought clarity on the "continued efforts" referred to and asked whether sufficient pressure is being placed on parties to comply here?

Mr Charlton responded that every effort is made to obtain the letters and the presiding officers have been asked to write letters to the appropriate political parties in this regard. With regard to the constituency party leadership and party support issues, the PS is very strict about not providing funding until the unqualified reports have been submitted.

Ms Hlangwana expressed her concern with the same response given to questions posed by Members that the matters are dealt with by the presiding officers. This is problematic because she was under the impression that it is the CFO, who is present today, that would be responsible here.

Mr Mfenyana replied that it is at the last instance when all else has failed that the presiding officers are involved, because they are not the ones resolving issues. In the ordinary run of things the CFO and his office will primarily be dealt with, and if issues relating to outstanding monies arise, for example, then correspondence will be directed to the responsible party. A few Members have received letters threatening to approach the office of the AG if they do not meet their obligations.

At certain levels, such as dealing with political parties, there are measures in place her such as requesting a report indicating that the party has spent the previous allocations properly, before any further allocations are granted. Mr Mfenyana stated that if he does not receive a favourable response here he would then advise the presiding officers of the problem, and in most cases they use their positions to approach the party whips to deal with the issue. This route is adopted because Parliament is a political institution and Mr Mfenyana cannot "behave like a corporate or business enterprise", as there are certain sensitivities which are also part of his responsibilities. It is thus not the presiding officers that deal with the matters here.

Ms Hlangwana asked whether Parliament has considered putting a policy or law in place that deals with all the issues related to the funding of political parties and all related issues?

Mr Charlton responded that the policy is quite clearly set by the appropriate Parliamentary bodies. With regard to the letters, there is currently no policy in place that allows the PS to withhold money, but there is a policy in place that allows money to be withheld until such time as the constituency allowance is paid, for example.

Ms Hlangwana asked whether all these parties' monies will be withheld for the 2002/2003 year?

Mr Klassen replied that the PS can withhold money if annual financial statements have not been submitted, but the Rules do not permit money to be withheld for contracts of employment.

Mr Kannemeyer asked whether the Accounting Officer is the Secretary to Parliament, and also asked whether it is correct that Mr Mfenyana cannot withhold money until he has seen proof of a contract of employment? This implies that the PS is paying money to parties without knowing exactly how that money is being spent.

Mr Mfenyana responded that Mr Klassen was not saying that the PS would wait until it has seen the contract of employment because work has to be done, but it does follow-up and ensure that it does get the necessary evidence.

Mr Kannemeyer stated that he accepts this, but the AG's Report states that an entire financial year has passed without the PS seeing the contracts of employment of certain political parties, and it was in no position to acquire such evidence as the Accounting Officer of Parliament. If this is the problem, it is then the role of this Committee to assist the PS in future undertakings, even if it is on a post facto basis to prevent a recurrence of this kind of situation.

Mr Charlton replied that it is true that there are no rules in place that allow the PS to stop payment in this particular issue.

Donor Funding and Unauthorised Expenditure
Mr Mofokeng contended that there are usually "some strings attached" to donor funding outside of Parliament, and the donors usually request a narration report that has to indicate that the funds donated have been spent in the proper manner. Have the donor requirements for the accounting and auditing arrangements of the Parliament Media Project been obtained?

Mr Mfenyana responded that the major donors during the last financial year were the European Union Parliamentary Support Programme, as well as Danish Agency for International Development (DANIDA) from Denmark. As far as DANIDA is concerned, provision is made in the funding agreement for the final audit that Parliament will appoint the auditors in a statement which is signed by the auditors, together with all interest accrued, and this will be forwarded to the donor body. The Secretary to Parliament or his Deputy signs the payment vouchers and applications for the release of funds.

With regard to the European Union Parliamentary Support Programme, an office was established to run this programme and it is responsible for the audit of the European Union funds, as it includes expenditure not only by Parliament but by the Provincial legislatures as well. There is a European Union Commission which is based in Pretoria which appoints the auditors, and this European Union programme authorises all applications for expenditure which exceed R10 000. This ensures that the expenditure request conforms to the approved result areas. Applications below this amount are for internal authorisation and are signed by the divisional manager, the project co-ordinator and the Deputy Secretary of Parliament, as the three co-signatories.

Applications for goods exceeding R30 000 and services exceeding R100 000 are forwarded by the European Union Parliamentary Support Programme staff to the European Union Commission in Pretoria for final approval. Payments are made via the finance section and all invoices with supporting documentation are forwarded to the Support Programme, and the programme will also undertake the reconciliation of the bank account.

Mr Mofokeng sought clarity that the R15m in donor funds were only spent as specifically earmarked, and asked what plans are in place to continue sustaining activities currently funded by donors?

Mr Mfenyana responded that, in terms of provision for when the Programme will close, it was part of the original agreement that when the funds of projects that are initiated with the assistance of the European Union monies are exhausted, provision must be made for the institution to take over and run those projects. This has been happening even a year before the end of the project, because the various legislatures and Parliament began budgeting for taking over those projects.

Mr Mofokeng asker whether the Accounting Officer could submit a copy of the audited financial statements to the Committee, as well as the narration report.

Mr Mfenyana replied that this can be done.

Mr Mofokeng asked the Accounting Officer to explain whether he is still accountable to the AG for the transactions on the books at the end of this period?

Mr Mfenyana replied that, besides the auditing done by the European Union itself to control the use of its funds, the PS is also accountable to the AG, who audits not only the funds in the Parliamentary budget but also those funds donated. Thus the source of the funds have to be explained.

Mr Mofokeng requested Mr Mfenyana to provide Members with a copy of the audited financial statements of those donors.

Mr Mfenyana responded that this can be done, with the assistance of the AG.

Unauthorised Expenditure
Mr Mofokeng stated that figures up to R17,4m have been reflected in the AG's Report as unauthorised expenditure, and clarity is sought on this figure.

Mr Mfenyana replied that the AG and National Treasury held opposing views on the treatment of the amount of R17,5m shown in the income statement as unauthorised expenditure. The management board agreed to the treatment shown in the 2001/2002 financial statements in order to avoid an audit qualification. It does not appear that the AG may be persuaded by the views of the National Treasury that the expenditure was not unauthorised.

Mr Mofokeng asked the National Treasury to explain whether this amount is in fact unauthorised expenditure, because if it is not cleared up it could mean that in future any surplus might not subject to the audit. The problem is that confusion is created here because the auditors have declared these amounts as unauthorised expenditure, yet the National Treasury is now proposing that it might not be unauthorised.

Mr Marais responded that if the PS was a normal government department, there would have been no doubt in his mind that this would have been unauthorised expenditure in terms of the PFMA. National Treasury is of the view that Parliament did not have to pay back the surplus funds involved into Revenue, as is done by all other government departments. The problem however is that there are currently no guidelines in place to regulate the expenditure or use of those surplus funds.

Mr Mofokeng contended that the problem here is that the lack of legislative guidance with regard to the use of surplus funds essentially allows the relevant department to use the money as it sees fit. National Treasury is asked to explain whether it uses a "top-up" measure with regard to its roll out?

Mr Marais replied that the roll-overs are usually dealt with in the Adjustments Appropriation Act because those monies are actually paid back into revenue at the end of the financial year, and the National Treasury does not therefore have any control over that money.

Mr Brits added that this also a concern for the AG, and stated that he agrees with National Treasury's recommendations. There is current a legislative vacuum with regard to the legalities involving the use of unauthorised expenditure, services rendered as well as accounting for own revenue and making up the shortfall. The Office of the AG therefore agrees with National Treasury's interpretation that the funds were not unauthorised in terms of the present laws, because it was funded from surplus funds or own revenue, which is an important consideration here. However, clearer guidelines are requested for the future regarding the manner in which Parliament would be allowed to handle the roll-over funds, adjustment estimates and unauthorised expenditure.

Mr Kannemeyer stated that it always seems that the lifts and general maintenance work is done during Members' first week back at Parliament at the beginning of the year. Surely this work can be scheduled during the recess, because it does interfere with Members' work.

Mr Klassen replied that maintenance is currently being performed by the Department of Public Works, but it has assured the PS that the lifts are being maintained as required by law. It is unfortunate that the lifts seem to breakdown upon Members' return. The problem is that most of the work is scheduled for the recess periods but unfortunately this also happens to be the time when the contractors are also on leave, and this does make it very difficult.

Mr Kannemeyer asked whether any plans have been made to provide Members with new access permits if their permits are showing signs of age, and also sought clarity on the implementation of the security system on which quite some money was spent.

Mr Klassen responded that any problems being experienced by Members with their access disks can be reported to the PS and it will be replaced.

Mr Kannemeyer sought clarity on the progress made with regard to the updating of the artworks index and the bar-coding of the artworks, or whether this is in the process of being facilitated.

Mr Klassen replied that the PS does submit regular monthly reports to the Secretary to Parliament as well as to the presiding officers on artworks, the curator and assistant curator are still operating. The compilation of the database is an ongoing exercise and about 80% of the artworks have been identified and entered into the system, but unfortunately barcodes cannot be placed on the artworks because that would damage them. Consultants are currently being engaged to identify how exactly the artworks should be marked, and also with regard to all assets of Parliament. The Joint Rules Committee has approved investigation into an asset tracking system and this project in continuing under the supervision of the consultants, and they are expected to furnish results within a month or so.

Mr Nair proposed that those outstanding funds of R2m due to Members who have not yet paid for lap-tops, for example, could easily be recovered by simply "docking" that amount from their pay, subject to an admission of liability by the Member in this regard.

Mr Klassen replied that the Pensions Act specifically does not allow any monies to be recovered in this manner, even if the Member agrees. This has been attempted in the past. It can however be deducted from salaries but generally the PS pays Members on the 15th of the month and Members generally tend to resign at the end of every month, with the result that it is difficult to recover the funds because the Member would already have left by the time the amount has to be recovered.

Mr Kannemeyer asked the following three questions but stated that he does not expect them to be answered during this meeting:
Whether any guidelines or legislative frameworks have been put in place by PS management to regulate unauthorised expenditure.

The accounting basis in which a subsidised service is sometimes reflected as a loss makes it difficult for an oversight to be exercised over this matter, because Parliament has to be in a position to distinguish the subsidised portion and the loss incurred by the government department. As this is not the case in the catering section, the figure of R500 000 in possible wastage and loss was buried in the R12m, and the lay person will be left with the impression that there is a R12m loss in a budget totalling R17m. Mr Kannemeyer stated that this has to be redressed because, according to his understanding, this is certainly not a R12m loss if there is an agreement that the staff section of it is covered by Parliament.

The response from the PS to Mr Smith's earlier question regarding the accounts receivable and the amount deemed probably unrecoverable is troubling, because the AG's Report indicates that an understanding was reached that National Treasury would refund the amount that was not honoured and, because of this, that amount would probably have to be written off. What is it that led to the fact that National Treasury now seems to be unprepared not to honour the agreement, because it does appear to be a deviation from accepted practice.

Report on New Format on Status Report
The presentation (see document) was conducted by Mr Cobus Botes, from the Office of the AG, and stated that it allows for a much better tracking of the different process stages that the Committee is engaged in with regard to the processing of policies or legislation, from the actual tabling right through to the actual resolution.

Adoption of the India Report
Members proposed certain amendments to the Draft Report (see document), and the amended version will be considered further at a later stage.

Letter from Mr Cassiem
The Chair noted that Members agreed that the Committee had to respond to the letter by submitting a formal recommendation on the Task Team's activities.

The meeting was adjourned.

Appendix: Background Document to Hearing on Parliamentary Services

Background document to SCOPA hearing of Parliamentary Services: 14 March 2003

In preparation for the SCOPA hearing scheduled for 14 March 2003, the Secretary to Parliament has prepared the following background information.

1. Legislation pertaining to the financial management of Parliament:

The matter is currently with the Presiding Officers. The draft will need to be tabled and referred to the appropriate Committee for processing and approval by the 2 houses of Parliament. The Parliamentary Service is complying with the spirit of the PFMA for the purposes of good corporate governance.

2. Internal Audit:
(a) Parliamentary Security:
The access control system is now operational. An appropriate asset tracking system is being investigated for approval and installation. The curator of Artworks has made significant progress in updating the Artworks inventory.

(b) Outsourcing of Internal Audit:
Tenders for the outsourcing of Internal audit were called for. Four professional auditing companies submitted proposals, which are being evaluated. The tender committee will award the contract to the successful company during the course of the month. Management of the audit company personnel and its performance vests with the Manager: Treasury Advice and Auditing.

(c) Audit Plan
The audit plan for 2003/04 will be presented to and approved by the Secretary to Parliament before the end of March 2003.

(d) Effectiveness of Internal Audit
The Audit Committee and the Auditor General have been satisfied with the functioning of internal audit. The Management Board is addressing the issues raised in the internal audit reports. The Fraud Prevention Plan has been adopted by the Management Board and will be implemented from 01 April 2003, following the awareness workshops for Parliamentary Services staff.

3. Management Information Systems
(a) Proposed short/medium term solutions
The Finance Management Office has recommended the installation of a mid range, fully intergrated human resource, procurement and asset management, budgeting and accounting software package on a single network. This has been approved by the Management Board.

(b) Electronic-business strategy
A service provider is currently developing the e-business strategy. It is anticipated that this will be completed by the end of March 2003.

4. Accountability and control of Parliamentary and constituency funds of political parties
Political Party Funding
1) 2001/2002 financial year
Letters asking parties to submit employment contracts of their party support staff and letters requesting parties to make declarations indicating that they have in place effective, efficient and transparent financial management and internal control systems (PFMA requirement) were sent to the parties at the beginning of the 2001/2002 financial year.

Thus audited financial statements for the 2000/2001 financial year were received from all parties before Party Leadership, Party Support and Constituency allowances were paid in the 2001/2002 financial year.

2) 2002/2003 financial year
Audited financial statements for the 2001/2002 financial year were received from all parties before Party Leadership, Party Support and Constituency allowances were paid in the 2002/2003 financial year.

(b) The rules pertaining to the administration of the constituency allowance
A draft has been prepared, and is being circulated for comments and final adoption.
The draft envisages that each political party must appoint an accounting officer who must annually submit audited statements to the Secretary to Parliament on how its allowance was expended. The auditor must be a registered accountant and may not be a Member of Parliament.

5. Accounting of subsidy for cafeterias and restaurants
(a) Costs incurred
The net loss on the catering operations arises from the set off of catering income against total catering expenses (personnel, administrative, equipment and professional services). These costs cover all catering including that provided to Committees, outside catering for Parliamentary Service functions etc. on which no recovery is made.

The costs of meals in the canteens and restaurants are based on the cost of ingredients only. This obtains whether catering is done for Parliament itself or for outside bodies (e.g. National departments).

In January 2002, the average costed meal was R24.50. No costing has been done subsequently.

(b) Catering controls
Procurement of a Point of Sale (POS) system has been budgeted for in the 2003/2004 financial year and this will facilitate stock control, debtor management etc. The Catering Section is committed to going live with the new system during the 2003/04 financial year.

6. Budget and unauthorised expenses
The Office of the Auditor-General and National Treasury held opposing views about the treatment of the amount of R17,5 million shown in the Income Statement as "unauthorised expenditure disallowed " (Note 9). The Management Board agreed to the treatment shown in the 2001/2002 financial statements in order to avoid an audit qualification. It appears that the Office of the Auditor-General may now be persuaded by National Treasury' views in that the expenditure was not unauthorised.

7. Donor funding
Parliamentary Millenium Project - Several donations have been made. The Office of the Auditor-General will audit these financial statements.

8. Zimbabwe Debtor Balance
The decision was taken by the 2 Houses on the understanding that Treasury would refund the amount, which was not honoured. The amount in question is being considered for write- off.

Appendix 2: Auditor-General's Report on South African Parliament 2001/2002


The financial statements as set out on pages 7 to 21, for the year ended 31 March 2002, have been audited in terms of section 188 of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996), read with sections 3 and 5 of the Auditor-General Act, 1995 (Act No. 12 of 1995). These financial statements, the maintenance of effective control measures and compliance with relevant laws and regulations are the responsibility of the accounting officer. My responsibility is to express an opinion on these financial statements, based on the audit.


The audit was conducted in accordance with Statements of South African Auditing Standards. Those standards require that I plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement.

An audit includes:
- examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
- assessing the accounting principles used and significant estimates made by management, and
- evaluating the overall financial statement presentation.

Furthermore, an audit includes an examination, on a test basis, of evidence supporting compliance in all material respects with the relevant laws and regulations which came to my attention and are applicable to financial matters.

I believe that the audit provides a reasonable basis for my opinion.

In my opinion, the financial statements fairly present, in all material respects, the financial position of Parliament at 31 March 2002 and the results of its operations and cash flows for the year then ended in accordance with prescribed accounting practice and in the manner required by the relevant act.

Without qualifying the audit opinion expressed above, attention is drawn to the following matters:

4.1 Matters not affecting the financial statements
4.1.1 Unauthorised expenditure: R17 463 000: Notes to the financial statements page 14, note 9 and the management report page 2, paragraph 1.1
As shown in the income statement and note 9 to the financial statements, the budget of the Vote has been exceeded by R17 463 000, and the amount is reported as unauthorised expenditure in terms of section 1 of the Public Finance Management Act, 1999 (Act No. 1 of 1999).

In reply to a management letter, the accounting officer indicated that the unexpended funds will form part of the adjustments estimate.

4.1.2 Employee tax
Included under personnel expenditure as reflected in the income statement for the year under review was a payment of R468 555 in respect of employee tax for the 1997 tax year. This amount included a penalty of R194 568 for the late payment of the outstanding account which may, dependent on the dispute refer to hereunder, have to be treated as fruitless expenditure as defined in section 1 of the PFMA.

In reply to a management letter, the accounting officer indicated that discussions with the South African Revenue Services (SARS) regarding the amount were ongoing, as agreement with SARS on the calculation could not be reached. SARS is in the process of checking Parliament's resubmission in respect of the 1997 year, whereupon the amount owing to SARS will be finalised.

4.1.3 Budget process
(a) Proof could not be submitted that the budget was prepared on a zero basis.
(b) Furthermore, although key outputs, output measures/indicators and targets per programme are included in the Estimates of National Expenditure 2002, an indication of the parameters to measure these indicators were not provided.

In reply to a management letter, the accounting officer indicated that:
(a) The budget tools were not available to prepare the budget on a zero basis and that they are currently engaged in developing the tools for that purpose. It is expected that future budgets will be prepared on that basis.

(b) Key outputs, output measures/indicators and targets per programme were not included in the original budget templates and that provisions will be made for these items in the budget model being developed.

The corrective measures indicated will be evaluated during the normal course of auditing.

4.1.4 Catering
Catering services reflected a loss of R12 838 918 for the year under review, i.e. only 25% of expenditure was recovered. It would, therefore, appear that this service is not self-supporting and therefore substantially subsidised.

In reply to a management letter, the accounting officer indicated that the provision of catering services is subsidised as a matter of policy and the pricing of meals sold, is based on recovery of materials and does not include the recovery of capital and labour overheads.

4.1.5 Parliamentary Millennium Project (PMP): Management report page 4, paragraph 3 and statements of local and foreign aid assistance received pages 20 and 21
As indicated in the above-mentioned financial statements funds were received from various local and foreign donors. According to the proposal to raise funds for the PMP the aim of the project is to facilitate nation-building and democracy by empowering South Africans to explore their common identity and assist them in the development of tools to build a shared future. During the current audit, additional information with regard to the donor terms, e.g. accounting requirements and audit arrangements were requested.

In reply to a management letter, the accounting officer indicated that the matter has been discussed with the presiding officers and that they have undertaken to examine the donor requirements regarding the accounting and auditing arrangements and that the audit office will be advised accordingly.

4.1.6 Constituent's allowances and financing of support staff of political parties: Management report page 5, paragraph 5
(a) A written assurance, as required in terms of section 38(1)(j) of the PFMA, that effective efficient and transparent financial management and internal control systems had been implemented by the political parties which had received funds from Parliament, could only be submitted in respect of five of the thirteen political parties. (This matter was also reported on page 40, paragraph 3.2 of the previous year's audit report)

(b) Employment contracts for support staff in terms of the Memorandum Financing and Administration of Support Staff for Leaders of Political Parties, Support Staff for Political Parties and General Administrative Support in the National Assembly dated 1 July 1999, could only be submitted in respect of five of the thirteen political parties.

In reply to a management letter, the accounting officer indicated that:
(a) At the beginning of the current financial year, the Speaker sent out letters to all political parties, requesting them to make declarations indicating whether they had implemented effective, efficient and transparent financial management systems. To date, only five parties have responded and submitted their declarations, whilst the other political parties have promised to submit their declarations, but have not yet submitted them.

(b) At the beginning of the current financial year, the Speaker reminded all the political parties to submit the copies of the contracts of their party leadership staff. Five political parties have since submitted their copies of the contracts, whilst the other outstanding contracts will be followed up.

4.1.7 Weaknesses in internal control
During the audit internal control weaknesses were identified and reported in various informal queries and a management letter that were issued during the audit. The accounting officer confirmed, that where considered necessary, steps would be taken to ensure that the relevant checking and control measures are placed on a sound footing. The corrective steps indicated will be followed up during the normal course of auditing.

4.1.8 Late submission of financial statements
Section 40(1)(c)(i) of the PFMA requires financial statements to be submitted to the Auditor-General within two months (by 31 May) after the end of the financial year. Unsigned financial statements were submitted for audit purposes on 31 May 2002. These unsigned financial statements were subsequently changed and resubmitted to audit on 03 June 2002. The Secretary to Parliament signed the financial statements on 5 June 2002 which were submitted to audit on the same day. The date of the signed financial statements has been recognised as the submission date. Therefore, this is considered to be a late submission and a non-compliance with the requirements of the PFMA.

4.1.9 Internal audit and audit committee
Internal audit, which was outsourced to a private audit firm during the year under review, submitted two reports to the audit committee. The findings included in the aforementioned reports as detailed below, were discussed at the audit committee meetings held on 6 December 2001 and 4 June 2002:

- Overall control environment - follow-up on issues reported during 1999
- Purchasing activity - follow-up on issues reported during 1999
- Catering store - follow-up on issues reported during 1999
- Budgetary control - follow-up on issues reported during 1999
- Claims submitted by members - follow-up on issues reported during 2000
- Payroll - follow-up on issues reported during 2000
- Electronic fund transfer - new issues
- Fixed assets - new issues
- Purchases and payables - new issues

Management indicated various corrective steps that would be evaluated during the normal course of auditing. Furthermore, management indicated that a Manager: Treasury Advice and Auditing was appointed on 1 February 2002 to oversee the internal audit function.

The assistance rendered by the staff of Parliament during the audit is sincerely appreciated.

for Auditor-General
26 July 2002


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