The Committee met with the Civilian Secretariat for Police (CSP) and Independent Police Investigative Directorate (IPID) and their respective audit committees on their detailed actions plans to address the findings of the Auditor-General of SA (AG) for the 2015/16 financial year. This was the second time the Committee was meeting with the CSP on the matter because the Committee requested a detailed action plan on addressing the audit findings especially in terms of which officials would be responsible for specific actions and by which date the action would be implemented. The audit committee members of both entities were also present. The CSP then presented a comprehensive briefing on the actions to address the AG findings by looking at the specific findings, which numbered 43, root causes of the finding, the action plan to be implemented to address the finding and the date by which implementation must occur.
The Committee then engaged in detailed discussion with CSP management and its audit committee on the action plan where questions were raised the differences in interpretation on some processes and systems between the AG and the CSP management, splitting of orders to avoid prescribed procurement processes, when a permanent Secretary would be appointed in light of the findings made on leadership and if supply chain management, procurement and contract management was due to people not being fit and proper for purpose or if employees were overridden at various points to push through contracts – there was a concern that these patters were becoming systemic and entrenched. The Committee posed a number of questions directed at the audit committee in terms of how many meetings the committee had and who attended, that there was no clear indication of the audit projects carried out by the committee for the year under review and internal processes followed by the committee to ensure the annual financial statements were correct before they were submitted to the AG. The Committee found the audit committee report in the Annual Report problematic in terms of format – the report was supposed to give an overview of the financial and risk health of the department and this was not the case. Other questions were asked about clarity on the role of the audit committee, interaction between the audit committee and the Executive Authority and the nature of the relationship between the committee and CSP management. Specific assurance was sought that the audit outcome would improve and that the audit committee was taking proactive steps to ensure there was positive change.
Further concerns were raised on non-compliance and the late submission of documentation, suppliers not paid within 30 days and the affect this had on livelihoods especially small-scale suppliers, the large amount of irregular expenditure, that some of the root causes did not match the findings and increased expenditure on goods and services when the CSP was not a service department. There was discussion on inadequate accounting skills and the training to change this especially for compilation of the annual financial statements, the task team focused on reviewing the accuracy of the accrual list and disputed invoices. The Committee highlighted that many of the root causes were linked to basic, common tasks and it was concerning that since become a fully fledged department two years ago, the CSP was still getting the basics wrong. There was also engagement on the drive and motivation of the management team to play a crucial role in triggering the correct levers to make changes – more pointedly, what would really be done differently to make changes. The Committee requested that the CSP provide a further amended action plan to include detail on which the responsible managers would be for the specific actions. The Committee looked forward to a renewed energised approach to ensure progress was made towards the CSP achieving in clean audit.
IPID was present to brief the Committee on its action plan to address the findings of the AG for the 2014/15 financial year – the Committee highlighted that it wanted to interact on the action plan for the 2015/16 financial year so the entity would have to provide such a plan for interaction with Members within the next two weeks with detailed information on the dates for implementation of the actions and those managers responsible for implementation. Since the audit committee of the Directorate was present, the Committee did engage with the committee on various matters, namely, if there were meetings of the audit committee during the planning phases of the audit to address areas of concern, measures the committee put in place to ensure performance was sustained and if there was thorough interrogation of the annual financial statements before they were submitted to the AG. Further questions were raised on the opinion of the audit committee on sufficient capacity and challenges with non-compliance and how to deal with it to ensure progress was made, implementation of internal audit and AG findings and the monitoring thereof. Members flagged the big issue of payment of suppliers within 30 days and that a special approach was required to deal with this in the action plan to be submitted.
The Chairperson explained that the focus would be on the role of the audit committees to change audit outcomes of the Department and entities. This was an updated version of the presentation delivered by the Civilian Secretariat for Police (CSP) after the Committee instructed the entity to amend the presentation at its last meeting with the Committee – there was an appreciation for the inclusion of the asset holders and timelines. Going forward the CSP should ensure it was present when the financial performance of its areas of responsibilities were discussed – last week the Committee found it challenging to discuss the financial management of the Office of the DPCI Judge because the CSP, as accounting officer, was not present.
At the end of January, end of February 2017, the Committee would again call the police portfolio on their responses to the Committee’s Budgetary Review and Recommendation Report (BRRR) recently adopted by Parliament. During a recent engagement between the Auditor-General of SA (AGSA) and the Chairpersons of Parliamentary Committees, some important points raised related to:
-Ensuring key positions were filled with competent people and stabilised administration
-Slow response by Accounting Officers and senior management to the recommendations of the AGSA
-Vacancies at key positions
-Little improvement in getting the basics right
-No improvement in the audit opinion on financial statements
-Too much reliance on auditors for the material statements
-Non-compliance remained high
On the audit committees, the AGSA noted:
-Audit committees should be in place, functioning well and have a positive impact
-Increased focus on having the desired effect
-Concern that some audit committees championed the view of management against the AGSA without fully interrogating the facts
-Importance of effective internal audit units
Briefing on Addressing the Findings of the AGSA
The CFO for the Civilian Secretariat then took the Committee through the amended more detailed presentation on the responses of the Secretariat on its audit findings. The presentation covered findings by the AG, root causes of the finding, action plans to address the findings and he implementation date for actions. Some findings and root causes included:
-Indicators not well defined and targets not SMART: lack of common interpretation of indicators amongst different role players
-Suppliers were not paid within 30 days in terms of expenditure management: certain invoices were being disputes and there was an absence of a manual register for invoices and invoice tracking for the age analysis of invoices
-Effective steps were not taken to prevent irregular expenditure amounted to R22.2 million: lack of consequential management action against non-compliance
-Ineffective review and monitoring controls in place to ensure accurate and valid financial and performance information reported
-Splitting of orders to avoid prescribed procurement process: non-compliance with National Treasury prescripts and late submission of procurement requests by line managers
-Quotations awarded to a supplier without an original tax clearance certificate: non-compliance with National Treasury prescripts and late submission of procurement requests by line managers
-Supplier with the lowest points selected for procurement of service: non-compliance with National Treasury prescripts and late submission of procurement requests by line managers
-No declaration of interest by suppliers doing business with departments: absence of a verification process
-Job descriptions not reviewed within three years: department did not have a dedicated Organisational Development Specialist
The Chairperson asked if the Director appointed would be responsible for ensuring all the steps recommended by the AG would be followed up. Many of the dates in the presentation were very late in the financial year and this would affect the capability of the Secretariat to get a clean audit – were these dates then realistic? He looked at the report of the audit committee which he found problematic in terms of format – at a glance, the audit committee report should present the state of the department but this was not provided in the audit committee report of the CSP. There also needed to be a clear indication of how many meetings were held by the committee and who attended. The audit committee was also responsible for internal audit – the audit committee report did not provide any indication of what audit projects had been undertaken in the year under review. Other observations and issues should be in the report – the current format of the report made it impossible to determine the financial and risk “health” of the department. What were the internal processes in the audit committee to evaluate the financial statements of the CSP to ensure it was appropriate for the statements to be submitted? Surely it was the role of the audit committee to ensure the statements were correct before it went to the AG – he wanted to get a sense of how the audit committee dealt with these statements.
Mr Alvin Rapea, Acting Secretary of Police, said that with the concern of the late dates, some of the actions had been implemented while other actions could not be implemented immediately and would run into the new financial year, such as, training, putting systems in place etc. as such actions took longer. In terms of the director appointed, this person would be responsible for ensuring the findings of the AG were addressed while the managers in charge of the divisions would also be responsible.
Prof H de Jager, Chairperson of the Internal Audit Committee of the Civilian Secretariat for Police, said, by way of background, that the audit committee meeting was planned for 29 July as the financial statements were not ready and the committee realised at the time that the financial statements were not properly prepared – management was requested to rectify the statements and were advised to make use of external consultants to have a look at the statements. It seemed that management then referred the statements to internal audit and the view of the audit committee was that this was not the role of internal audit. Up until this point, the audit committee had not seen the audit report, he did not see who compiled the report and he was sure the audit report was not signed. Management of the Secretariat prepared the audit report themselves without consulting the audit committee.
The Chairperson said this was totally unacceptable.
Prof de Jager continued that on 31 May there was the same problem where the financial statements were not finalised and without the audit committee having signed off.
Ms A Molebatsi (ANC) said it was unacceptable that the engagement with the Committee be treated as a complaints session – the CSP and audit committee should have dealt with these challenges before coming to the Committee.
The Chairperson thought it was important that the Committee know what was occurring to ensure the audit committee was functioning effectively – if the audit committee was experiencing problems, the Committee should be informed to ensure that matters were dealt with proactively instead of after-the-fact.
Prof de Jager replied that he was just trying to be open and honest with the Committee and he requested that what he was sharing be taken in that light. Regarding procedures, the CSP had a tracking list and he was of the opinion that the root causes outlined were just symptoms because the real problem was leadership especially from the financial section. The audit committee met two weeks ago on the findings of the AG and the strategic plan of the Secretariat was rejected as the audit committee felt that it would not result in any changes. The CSP then changed the strategic plan and although it was now a much better document, there were still huge shortcomings especially with who the responsible persons were.
The Chairperson requested that the Secretariat re-submit the AG findings action plan with the detail on who the responsible personnel were – this directive was communicated to the Secretariat previously and there should be adherence.
Prof de Jager noted that at the meeting of the audit committee two weeks ago, the draft report for the six months was received and the opinion of the committee on the report was adverse. The Secretariat was requested to correct the half year financial statements. The CSP was in the process of changing and correcting the statements to National Treasury.
Mr Mavunda (ANC) thought the entire presentation by the Secretariat was questionable – he wanted to know how long non-compliance and late submission of documentation had been taking place in the CSP. Looking at the root cause of suppliers not being paid within 30 days, the cause was “no dedicated personnel to validate the invoices” and he did not understand why there was nobody responsible for this – clarity and greater expansion was required on this point. He was also concerned about the ineffective review and monitoring controls in place to ensure accurate and valid financial and performance information reported due to the “non-existence of monitoring and tracking of financial and non-financial information to ensure accuracy and validity” – perhaps greater understanding was needed in this regard. What mechanism was used to pay overtime since there was no policy? What informed the policy subsequently developed? Was there any research made to determine the policy?
Mr Rapea responded that the Secretariat became a designated department in April 2014 and one of the challenges for the current situation was that when the Act was passed, there was no proper preparation to ensure all systems were in place. The CSP only began putting its house in order when it became a designated department and there were also challenges due to the over-reliance on the SA Police Service (SAPS) even after the legislation was passed. To put an organisation in place was not an overnight process.
Ms A Molebatsi (ANC) sought more information on the inadequate accounting skills and what the status of the environment was now. Reference was also made to information that was not valid – did this mean invalid information was submitted? If this was so, it was a very serious offence. Most, if not all, of the findings and root causes were common sense – why was this not picked up on time?
Mr Willem Basson, CSP Director: Strategic Planning, explained that prior to the arrival of the current Acting Secretary in September 2015, the CSP did not have a system where performance information was verified after being submitted by business unit heads by internal audit. The practice was to submit information to the director for strategic planning with the profile of evidence from the business units who then submitted it to internal audit to verify the information. It was discovered that units would submit information in the incorrect timeframes which resulted in invalid information. The validation of improvement had since improved.
Ms M Mmola (ANC) noted that some of the dates for implementation had already passed such as 1 October and 4 November 2016 and she asked if those steps had then since been implemented. She was concerned about the effective steps not taken to prevent irregular expenditure amounting to R22.2 million. Who would serve on the task team focused on reviewing the accuracy of the accrual list?
Mr L Ramatlakane (ANC) wanted to understand what was really meant by the lack of common understanding and interpretation of some processes and standards – would the people who lacked this interpretation previously be relied on for interpretation in the future? He wanted the opinion of the audit committee on whether there was clarity on roles and responsibility on their role and the role of others. What procedure did the audit committee follow to ensure the recommendations of the AG, in terms of the finding, were implemented?
Mr Rapea provided an example of differing interpretation noting that the Secretariat held an imbizo where quotations were requested such as for the procurement of the tent, catering, supply of water, stage etc. Quotations were submitted from different suppliers. The financial department of the Secretariat saw it as the procurement of different goods and services while the AG saw it as one matter – this was one example of a problem with differing interpretation. Another example was with the legal fees using the suspense account for eventual refund by SAPS as the Minister requested the Secretariat procures the services. Moving forward the CSP would not have issues with interpretation as it was now on the same wave length as the AG.
Prof de Jager, having had experience of 14 years on audit committees, knew exactly what the role of the committee was although there was always room for improvement but the audit committee did know what it was doing.
Mr J Maake (ANC) found that some of the root causes did not correlate with the finding. For example, with the finding “quotation awarded to a supplier without an original tax clearance certificate”, the root causes could not be “late submission of the procurement request by line managers/non-compliance with National Treasury prescripts” - explanation on this was needed. With the action plan to develop a register for all disputed invoices with evidence to support such, he wanted to know what the nature of these disputed invoices were and how such disputes occurred. How did the splitting of orders to avoid prescribed procurement processes occur and under which circumstances?
The CFO outlined that disputed invoices were those where the supplier had alleged the department had not paid but payment did occur – that was the nature of most of the disputed invoices which resulted in late payment of suppliers.
Mr Motau added that this was the first time the Secretariat was looking into identifying the root causes of the findings and it was not an easy process of an internal audit point of view – in his experience of over 20 years in internal audit, there were often disagreements with management in terms of root causes. Some of the root causes stated were only part of the problem with the finding occurring – for example with the root cause of late submission of procurement requests by managers, the manager could have submitted the request one day late which would mean the checking of tax clearance certificates of the suppliers could not be checked because of the lack of time to check if there was adequate compliance. Once problems and challenges were identified they could then be addressed. Internal audit did not just look at the root causes but also the process from planning to execution.
Mr S Matuba, audit committee member of the Civilian Secretariat for Police, said the disconnect between findings and root causes was raised with management as the audit committee was not happy with the way the report was compiled.
Mr Z Mbhele (DA) noted that it had been two years since the Secretariat became a designated department but it was still unfortunately getting the basics wrong. He was mainly concerned with supply chain management, procurement and contract management as seen in the findings – his analysis of this was that either people in the supply chain management environment were not fit for purpose and they did not know how to do the job because of a lack of capacity or the people did know how to do the job but were overridden at various points and in various ways to push through contracts which were non-compliant or a mixture of the two. He wanted to know which of these dynamics were at play because the concern was that the processes were becoming systemic and entrenched. Going back to the budget presentation of the CSP from a previous engagement with the Committee, R43 million of the pre-adjustment budget was for goods and services and the AG found R22 million in irregular expenditure i.e. effectively half of the funds spent through supply chain management. Given that the CSP was not a delivery department, which service providers were getting the problematic contracts resulting in irregular expenditure? The CSP Act required that a permanent Secretary be appointed within a year of the vacancy occurring and it had been almost two years since previous Secretary, Ms Jenni Irish-Qhobosheane, left the position. This meant the Minister was in contravention of this requirement of the statute. The AG had also mentioned that one of the top three root causes in the police portfolio included instability in senior positions – he then asked the audit committee how much of its encountered challenges concerning audit risk mitigation were attributed to instability in leadership as a prime factor. If it was a glaring factor, as he presumed it was, had the matter been taken up with the Minister and what had his response been because the power to address leadership lied solely with the Minister?
Mr Rapea responded that in line with the audit and risk committee, an investigation had been conducted to begin taking disciplinary action. The disciplinary process would reveal whether the problem was one of skills or because personnel were being forced to do things the wrong way or why the rules were not followed. With the instability of leadership at the top, interviews for the position of Secretary took place a week ago and the process would be finalised by the end of the month.
The CFO added that irregular expenditure was linked to suppliers not being paid on time. The irregular expenditure was linked to a travel agency appointed by the Secretariat without actually following the bidding process – this meant everything procured through this supplier was irregular. The amount of R22 million was from a number of years because the supplier was used since the Secretariat became a designated supplier.
Prof de Jager, on the link between the audit findings and leadership, was of the opinion that 60 to 80% of the AG findings directly related to leadership and management in general – specifically on the side of finances, there was a lack of discipline and energy to ensure the documents were submitted correctly, at the correct time and to the correct agency. The Secretariat had an acting CFO for two years who did not have real financial skills.
Mr Mbhele noted he also asked about the role from the side of the Minister to assist and interact on issues of leadership – that part of his initial question was not responded to.
Prof de Jager replied that there was no communication with the Minister and this was a shortcoming because in other departments there were regular meetings between the Minister, audit committee, CFO and representatives from the AG – this was an aspect to look at.
Mr Ramatlakane asked if the audit committee actually took the time to write a report on its function that was meant to be part of the Annual Report. He wanted to know why management wrote a report on behalf of the audit committee and for it then not to be signed – in other words, where was the audit committee while this was taking place? How could the Secretariat have drafted a report for the audit committee and submit it purporting it to be a report of the audit committee when indeed it was not?
Prof de Jager indicated that the head of internal audit just showed him the audit report when it was signed on 4 August – the audit committee did in fact compile the report and signed it.
The Chairperson asked for confirmation that the audit report in the Annual Report was the report of the audit committee.
Prof de Jager confirmed this.
Mr Matuba added that the format of the audit committee reported followed Treasury guidelines.
Ms Mmola found that it was wrong and unacceptable for Prof de Jager to mislead the Committee regarding the signed audit report.
Mr Rapea assured the Committee that he would have tendered his resignation if the Secretariat submitted a report to Parliament without approval of the audit committee. He was strict on maintaining independence and did not even communicate with the audit committee – all direct communication between the audit committee and management was left to Mr Matau as the head of internal audit.
Mr Ramatlakane felt that the discussion today suggested that the professional relationship between the audit committee and Secretariat was not good – he asked if this was a correct assesment.
Mr Mothuba said the relationship between the audit committee and Secretariat was very cordial and good and there was always discussion if there were problems from both sides. The audit committee did not have problems with the Secretariat and the relationship was in order.
Adv Simthandile Gugwini-Peter, Audit Committee member of the Civilian Secretariat for Police, echoed the sentiments of Mr Mothuba that the relationship was cordial. While she was on the risk committee, she observed that people would understand the importance and need for internal controls but would then place controls which were not verifiable. There was then work shopping and talking through of the issues relating to verifiable controls to place in the register that internal audit could test. The challenges with late submission had always been around and it was like “pulling teeth” when the audit committee tried to extract information. At times this was due to lack of capacity in the Secretariat where personnel with know-how were thinly spread. Internal audit was also playing the role of risk management when it was supposed to be in the responsibilities of management as a red flag for management to fix things before audit came in. Mr Motau was then wearing both hats of internal audit and risk management so he was often unable to raise red flags and provide assurance at the same time. The desire was to capacitate the key departments especially financial to begin to see issues of compliance being uprooted in the Secretariat.
Prof de Jager added that the relationship between an audit committee and management should be seen in two perspectives – one as the relationship being too close and another as a real professional relationship. Having been in the audit committee of the CSP for two years, he could confirm that the audit committee was not afraid to put issues directly to management and management, in turn, was always willing to listen. The relationship between the audit committee and the CSP was professional.
Mr Rapea said that he saw the relationship between the audit committee and the Secretariat was very professional and open. Decisions of the audit committee were always implemented by management as resolutions – he did not see any tension to indicate that the relationship was not good, from his perspective.
Ms Molebatsi questioned whether the audit committee tried to bring matters occurring to the attention of management.
Mr Mavunda was not inspired by the presentation of the CSP and felt it did not give hope to the people of SA. He was concerned that the Secretariat did not have the personnel with the correct skills and it was a recipe for disaster as was seen today. As politicians, the Members expected matters to be presented in a simple manner for the Committee to play an oversight role.
Mr Rapea responded that the Secretariat was learning, fixing and putting processes in place as it went along – this was the focus.
Mr Mbhele noted that there was identification of some systemic and ongoing issues and the interest of the Committee was to see issues resolved – a big part of this was the drive and motivation of the management team to play their crucial role in triggering the correct levers to make the changes. Generally, the challenge with the public service was the lack of strong incentives for innovation and excellence. The nature of bureaucracy and weak accountability meant that the lowest common denominator manifested – he wanted a sense of clarity as to the incentive driving a sense of drive and proactive momentum on the side of the Acting Secretary and his management team. What would be different to ensure there was an improved picture in audit issues? Government did well in identifying deficiencies and introducing plans to deal with them but it was during implementation, backed with the right sustainable energy, which proved to be the big challenge.
Mr Rapea answered that the task team established was chaired by internal audit and met twice a month to look into how far actions were in terms of the commitments made. Those attending the meetings were not below the level of director. It was believed that this task team would change the culture to ensure that people did the right things because they would be held accountable.
Mr Mavunda wanted more detail on the finding of “no declaration of interest by suppliers doing business with the departments”. He did not understand how the audit committee executed its duty in terms of projects identified by the Secretariat in terms of the Annual Report.
Mr Motuba said that the audit committee would be following up on the strategy of the CSP to address the findings of the AG.
Mr Rapea added that the strategy was not yet perfect but it was being built upon to become a perfect product.
With the declaration of interests, the CFO explained the different suppliers were supposed to provide the department with information at least on the directors of the companies which usually did occur but the AG found find that some directors were not listed or were employees of another department or municipality for example – the AG had a special system to pick up on this.
Ms Mmola questioned the content of the training of staff on preparation for interim and annual financial statements and if this action would be enough to ensure the CSP received a qualified audit opinion in the current financial year. With the finding of the quotation awarded to a supplier without an original tax clearance certificate, who was responsible for awarding the tenders? Who was responsible for overseeing and checking the quotations? She did not quite understand the finding related to selecting suppliers with the lowest points for procurement of service – it was unacceptable to award the suppliers with the lowest points.
The CFO explained that previously the financial statements were only prepared by the senior manager of the unit – since then, assistant directors would now prepare the annual financial statements after which quality check would occur before moving on to the senior manager, CFO and management. This system and team had already been introduced. With the suppliers with the lowest points, this related to poor planning and not doing things on time. At times the initial supplier, at the last minute, would indicate it did not have the necessary capacity to supply the service and the process of requesting quotations would have to be started again – this was often where the supplier with the lowest points was contracted as that supplier would be prepared to deliver the service. Using the supplier with the lowest points was not the norm but what happened under certain circumstances.
Mr Ramatlakane was concerned about the differing perspectives between the AG and the Secretariat in terms of the earlier example of goods and services procured for a function where the AG saw procurement for the function as one area of goods and services while the Secretariat saw it as various goods and services being procured as different service providers were being used. He then questioned the capacity of the CSP’s finance division and what would be done to address this capacity which even the audit committee referred to. The capacity was not just in terms of warm bodies but also in terms of addressing the skills gap. Who would comprise the task team to review the accuracy of the accrual list?
The CFO replied that at times, the line manager would make known the goods and services required bit by bit – this practice was not condoned but it was at times the reality of how requests were received by the line managers.
Mr Rapea added that the AG was an oversight body and its word could not be differed with unless National Treasury, as the policy custodian, stated otherwise. Differences of opinion in terms of policy would be referred to Treasury – this would be the discipline to be maintained instead of having differences.
Mr Maake reiterated that the aim was to get the Secretariat right – he was concerned that the overall structure of the entity was still “teething” and perhaps it might be best the Secretariat let the Committee know what the challenges were and solutions therefore to get the system right, for example, BUS vs. LOGIS. Perhaps the piecemeal questions of the Committee were not helpful – the duty of the Committee was not interrogation but on ensuring the department was functioning optimally.
The CFO said LOGIS was not yet implemented because of the lack of staff in the financial department – a memo had been approved for the attention of the Executive Authority to appoint the additional staff required.
Mr Rapea added that LOGIS would be implemented once there was more capacity in terms of personnel numbers – the report to the Executive Authority would address this and ensure Excel was no longer used to record transactions.
The Chairperson asked if the audit committee was confident that there would be improvement on the audit outcomes of the Secretariat for the current financial year. What other proactive steps would the audit committee take to ensure the Secretariat progress positively in terms of the outcomes of the AG? He asked the Acting Secretary if he was satisfied, in light of the presentation and action plan that the Secretariat would move from a qualified to an unqualified audit opinion.
Prof de Jager responded that he could not provide that assurance but he was pleased that there was a CFO – the energy, understanding of role and leadership of the CFO could take the department forwarded in achieving an unqualified outcome. The findings of the AG could easily have been prevented.
Adv Gugwini-Peter added that the audit committee requested a policy matrix from the Secretariat to ensure the department understood the responsibilities flowing from policies to ensure issues of compliance were addressed.
Mr Rapea noted there were some legacy issues in the Secretariat such as the legal fees where IPID indicated it could not pay for the fees so the money might have to come from the coffers of the CSP and this already could affect the audit outcome. With irregular expenditure, things were now being done correctly. The contract with the travel agent had already been cancelled but there was a dispute on the invoices and a court case in this regard which were being addressed – this was another historical issue which would be carried over into the current financial year.
In closing this session of the agenda, the Chairperson outlined the role of the audit committee was important in ensuring proper oversight. He looked forward to the energised approach for the coming months to ensure there was positive progress made with the audit outcomes of the Secretariat. He again emphasised the issues indicated by the AG:
-Management should act on the recommendations made by the AG in a timely manner and implement action plans and sustainable internal controls
-The authority of the Accounting Officer must ensure basic controls were implemented along with accounting disciplines by preparing regular and accurate financial statements and performance reports
-Senior management, leadership and oversight structures should continue to play close attention to supply chain management transgressions
Many of the Committee’s BRRR recommendations, adopted by the House last week, related to financial management and issues raised by the AG in terms of the Secretariat – he advised the audit committee, in an endeavour to have closer relations with management, also study the recommendations of the BRRR and Secretariat management would have to return to the Committee in mid-January 2017 to indicate what it had done to implement the BRRR recommendations – there were only two months left until this would occur.
Briefing by IPID on Progress of 2014/2015 AGSA Action Plan
In outlining the rationale behind the meeting, the Chairperson explained after its BRRR process in scrutinising the Annual Reports of the police portfolio, the Committee recognised the need to step up its oversight in ensuring the portfolio received unqualified audit outcomes. IPID did relatively well in terms of the police portfolio in the 2015/16 financial year in achieving an unqualified audit outcome and the status of the financial statements. IPID also fared well on the usefulness of reported information and reliability of performance information as compared to the other departments in the police portfolio. The focus of the engagement would also be to look at legal compliance and assurance.
In an interaction between the AG and the Portfolio Committee Chairpersons last week, the AG highlighted the needed for a sharpened focus on management and performance information. Additionally, the role of the audit committee was quite vital in playing an independent role and providing assurance instead of defending management – the audit report in the IPID Annual Report was of good quality. Further points raised by the AG in the said engagement included:
-Slow response by Accounting Officers and senior management to the recommendations of the AGSA
-No improvement in the audit opinion on financial statements
-Non-compliance remained high
-Important role of the audit committee
SAPS was returning to the Committee next Tuesday on a revised action plan to address the findings of the AG – today was the second interaction with the Secretariat on its revised action plan. The presentation of IPID focused on the 2014/15 action plan which the Committee already dealt with – the Committee really wanted to interact with a comprehensive action plan in terms of the line manager responsible for certain actions to be taken and timelines as to the dates by which actions would have to be implemented. The Chairperson suggested IPID return in the next two weeks with such a presentation focused on these specific requirements. The Committee would however interact with the audit committee the committee was an important vehicle in assuring the Directorate moved towards a clean audit.
The IPID Director of Internal Audit apologised for the incorrect presentation provided to the Committee.
The Chairperson wanted to get an indication if the audit committee met with the Office of the AG during the planning phase of the audit to address any areas of concern. What measures did the audit committee put in place to ensure performance was sustained? Was there a thorough interrogation of annual financial statements before they were submitted to the AG? He then sought an indication from the audit committee on its opinion on whether there was enough capacity. What did the committee see as the challenges with non-compliance and how would this be dealt with to ensure there was progress in this area?
Mr I Motala, Chairperson of the IPID Audit Committee, said that the view the audit committee made known to management was that one may not want to wait until the report was issued before the process of preparing the audit action plan was started. In engagement with the AG, there was a fair idea as to which findings would occur and so preparing an audit action plan could the start quite soon – if taken forward, this could add a lot of value. There was a dedicated meeting between the audit committee and the AG during the planning stage. Any issues picked up by the audit committee would then be communicated with the AG. With sustainability of the unqualified audit outcome of IPID, the audit committee would continue to play an oversight and monitoring role. The quarterly meetings did provide the necessary platform for the audit committee to comprehensively engage the Accounting Officer and CFO. Furthermore, the approach of the audit committee was to apply a fair measure of scepticism to not simply gullibly accept what management put before it. The support from internal audit was also important in ensuring the role of the audit committee was effectively executed. He was confident IPID could attain a clean audit in the next audit and that sustainability would endure. One of the challenging areas in internal audit was the lack of capacity for IT – this was raised with the Acting Executive Director but he was sure it would be raised more substantively moving forward. The recommendation was to consider a co-sourcing model for IT but it required a budget. Another challenge was the non-implementation of some of the internal audit recommendations but there was a tracking register of the number of internal audit recommendations implemented and management was held accountable if certain recommendations were not implemented. With non-compliance, his sense was that this was more on the operational side of IPID. To some extent it was a reflection on provincial capacity.
Ms Molebatsi sought information on why the findings and recommendations of internal audit were not fully implemented.
Mr Motala responded that this was, to some extent, based on the nature of the findings, based on the issue of capacity. Many of the recommendations were indeed implemented.
Ms Mmola wanted to know how follow up was conducted with the AGSA findings and how action steps were monitored.
Mr Motala noted that there was improvement with the implementation of the AG‘s findings for the 2014/15 financial year and this was pleasing for the audit committee. There was disappointment with the repeat findings. At each quarterly planning there was follow up on the implementation of audit findings as a standing item on the agenda. Management was held to account in terms of those findings not implemented and the reasons therefore. The audit committee also played an advisory role so it was important to provide advice to management.
The Chairperson asked if the audit committee looked at the financial statements before they were submitted to the AG.
Mr Motala confirmed this – a special meeting was convened for that purpose. Certain recommendations were made on changes. There was no follow up meeting to look at the amendments but on a round-robin basis, by way of email, the audit committee members did respond on the final statements so there was signing off of the financial statements before submission to the AG.
Ms Molebatsi noted that one of the role of the audit committee were to address matters raised by the AGSA – how far was the process in addressing the debt between the CSP and IPID?
Mr Motala answered that as an audit committee, he did not information on that debt.
Mr Mbhele was curious to know if the monitoring functions were more attributed to challenges with ICT managing information flow systems or if it was an issue of a HR capacity where there were not enough people specifically in terms of repeat findings. One of the AG’s findings under HR management for fruitless and wasteful expenditure incurred by advertising a position not on the approved structure – what position was this?
Mr Motala thought it was a mixture of both dynamics. The challenge with IT was more on the side of internal audit capacity.
The Chairperson flagged that the payment of suppliers within 30 days was also a big issue across all departments and it affected suppliers who were dependent on the payment for survival. A special approach to dealing with this should be included in the revised action plan.
Mr Motala noted that this was a standing item and the matter had resorted to requesting detailed information on payments to suppliers to find out exactly why payments were not being paid. This was largely a cash flow issue.
Mr Robert McBride, IPID Executive Director, added that management was awaiting a detailed handover report which would provide more clarity on some decisions taken.
In closing the Chairperson noted the Committee looked forward to receiving the detailed action plan of IPID with details pertaining to the manager in charge of actions and dates for implementation. In the third week of January 2017, the Committee would meet with the police portfolio to be briefed on the implementation of the Committee’s BRRR recommendations.
The Committee would next week meet with SAPS on its amended action plan in terms of the AG’s findings as well as the Private Security Industry Regulatory Authority.
The meeting was adjourned.
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