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FINANCIAL MANAGEMENT IMPROVEMENT:
ACTION PLAN TO ADDRESS ISSUES RAISED IN THE 2012/13 AUDITOR-GENERAL REPORT, UNRESOLVED ISSUES HIGHLIGHTED IN THE MANAGEMENT REPORT
NAME OF DEPARTMENT/PUBLIC/TRADING ENTITY: South African Institute for Drug-Free Sport
KEY FINDING - (Core Problem)Source:
AG Report / MRProposed actions to address findingResponsible unit/personTimelineAction taken to dateCompetitive bidding process not followed
Contrary to the requirements of Treasury Regulations and Practice Notes weidentified that competitive bidding processes were not followed for certain transactions. No evidence has been provided by management as proof that thedeviations wererecorded and approved by a delegated official as is required. AG Report 2012
Responses in the management letter state our case for these exceptions.
We are of the opinion that the expenditure as identified by AG is not irregular in certain instances. We have analysed the AG findings and have not determined the expenditure to be irregular.
Where applicable, prescripts of Treasury Regulations and Practice Notes will be adhered to.CEOOn-goingConstant monitoring of SCM procedures and application of relevant Practise notes and Treasury Regulations.Price quotations not invited for procurement below R500 000
Contrary to the requirements of TRs and PNs weidentified procurement below R500,000 where price quotations were not invited.
AG Report 2012
Refer management response in management report.
CEOOn- goingMonitoring of expenditure in line with TRs and PNs. Where goods or services are procured from suppliers/service providers not on the board approved list, a deviation will be noted if normal SCM policy has not been followed.Procurement policy
In terms of Treasury Regulation (TR) 16A9.1(d) the accounting authority must reject any bid from a supplier who fails to provide written proof from the South African Revenue Service that that supplier either has no outstanding tax obligations or has made arrangements to meet outstanding tax obligations, while in terms of TR16A9.2(a) the accounting authority may disregard the bid of any bidder if that bidder, or any of its directors have failed to perform on any previous contract.
Contrary to the above Treasury Regulations, it was noted during our audit of supply chain management that the above stipulations were not addressed in the entity's Supply Chain Management Policy.
AG Report 2012
The supply chain practices of the entity are informed by the Treasury Regulations, and are followed as far as possible.CFOOngoingThe Supply Chain procedures do incorporate the content of the finding.Inconsistency between planned targets / indicators and reported targets / indicators
In accordance with Treasury regulation 30.1.3(g) -
"The strategic plan must form the basis for the annual reports of accounting authorities in terms of section 55 of the PFMA."
Certain targets reportedin the Annual Performance Report for 2011/2012 are not consistent with the planned targets in the Strategic Plan for 2011/2012. A total of 46% (>20%) of the reported targets are not consistent with the targets as per the approved strategic plan. This is due to the lack of policies and procedures not being implemented to ensure compliance with treasury regulations:
AG Report 2012
The targets and indicators in the annual performance report will be reworded so as to better report on the indicators and targets in the strategic plan.
With a new board been constituted, the strategic plan will be reviewed in its entirety.
CEODec 13The process of re-wording the annual performance report has commenced. Variances between planned and reported targets are not explained in the annual performance report
During our audit work performed on performance information, it was identified that variances between planned targets (as per the Strategic Plan) and the reported targets (as per the Annual Performance Report) were not explained and disclosed in the Annual Performance Report. A total of 100% (>20%) of major variances between planned and actual achievements were not explained in the annual performance report for the year under review as per the National Treasury annual report preparation guide. This relates to the following targets:
AG Report 2012Management will review the finding and determine the course of action necessary to address the finding.CEODec 2013Variances between planned and reported targets were explained in the 2013 Annual Report.Tracking the movement of individual assets
Public Finance Management Act, 1999 (Act 1 of 1999) (PFMA), section51 (1) (c)
"An accounting authority for a public entity-
(c) is responsible for the management, including the safe-guarding, of the assets and for the management of the revenue, expenditure and liabilities of the public entity."
Contrary to the requirements of the PFMA, section 51 (1) (c), documentation to prove that the custodian of the items of office equipment signed for the applicable asset when it was issued was not made available for auditing.
AG Report 2012
Where applicable, documentation will be obtained to confirm individual holding of assets.
CFODec 2013Documentation proving custody of assets, where applicable, has been obtained.
The entity has accounted for all assets at Sep 2013.New positions filled were not advertised
Certain staff members were appointed without the post first being advertised.AG Report 2012
The audit recommendation has been noted.
CEOImmediateWhere appointments are made without the post first being advertised, the reason for the deviation will be recorded.Key performance indicators not specific
In accordance with the National Treasury Framework for Managing Programme Performance Information chapter 3.3, page 10 an indicator should be specific.
For an indicator to be specific, it should meet the following qualities -
"Specific: the nature and the required level of performance can be clearly identified"
During our testing of performance information, it was identified that certain key performance indicators are not specific.
AG Report 2012
Management and the board understand what the performance indicators are measuring and that its description is indeed specific and defined as it pertains to the nature of agencys operations.
CEODecember 2013The KPIs will be reviewed with the new strategic plan to be implemented by the new board.Performance bonuses
The Public Finance Management Act, 1999 (Act No 1 of 1999) (PFMA) prescribed the following in section 51(a)(i)
General responsibilities of accounting authorities.(1) An accounting authority for a
public entity
(a) must ensure that that public entity has and maintains -
(i) effective, efficient and transparent systems of financial and risk management and internal control;
During the audit of the employee costs it was noted performance bonuses were paid or accrued for the management staff, with
no indication found in the minutes that these performance bonuses were approved.AG Report 2012
As these decisions/authority is determined by a sub-committee of the board, no specific minute was available to verify this. Various emails were exchanged between various parties confirming the committee decision.
The bonuses were confirmed by the chairmanCEOOn-goingBonus awards will be recorded in the minutes of board meetings.2013 AUDIT FINDINGSAOPO - Inconsistency between planned targets/indicators and reported targets/indicators
Audit finding
In accordance with Treasury regulation 30.1.3(g) -
"The strategic plan must form the basis for the annual reports of accounting authorities in terms of section 55 of the PFMA."AG Report 2013
We recommend that management consider implementing the following:
The targets and indicators reported in the annual and quarterly performance report should be amended so as to reflect those in the strategic planning document.
Targets and indicators should be set before the start of the financial year and these should be reported against in the annual performance.
Any changes in the planning documents should be approved by the board.
CEODec 2013An overall review of the planned targets and reported targets is being undertaken.AOPO - Key Performance Indicators are not measurable and time bound.
Audit finding
In terms of the National Treasury Regulations 5.2.2:
The strategic plan must:
include the measurable objectives, expected outcomes, programme outputs, indicators (measures) and targets of the institutions programmes;"
In accordance with the National Treasury Framework for Managing Programme Performance Information chapter 3.3, page 10 an indicator should be specific, measurable and time bound.
"Measurable: the required performance can be measured
"Time-bound: the time period or deadline for delivery is specified."
During our testing of performance information, it was identified that certain key performance indicators are not measurable and time bound.AG Report 2013
The entity does not agree with the findings of the AG.
The measurement of performance indicators from the strategic plan is contextually relevant to the nature of the work of the agency. Indicators can be measured through different means not only via numerical quantity. The indicators are measured through its strategic value to the agency and this value is reported in the performance report. The strategic plan is applicable from 2010 -2014. The performance report is time-bound to 2012/13N/AN/AN/AExpenditure in excess of approved budget
Audit Finding
In terms of section 53(4) of the Public Finance Management Act The accounting authority for such a public entity is responsible for ensuring that expenditure of that public entity is in accordance with the approved budget
During the audit of the budgeted information it was noted that the entity overspent their budgeted expenditure as per the budget submitted to National Treasury. Management did not submit an adjusted budget and thereby did not obtain approval from National Treasury to incur such additional expenditure for the year under review. Please refer to table below for the calculation.
Amount budgeted for expenditure
R 15,876m
Amount actually expensed (less adjustment for depreciation and amortization)
R 18,054m
Amount by which expenditure exceeds budget
R 2,178m
The entity does not have systems in place to ensure that they do not overspend on the approved budget and obtain approval in advance should they foresee that the approved budget is inadequate.AG Report 2013
The entity did overspend its budget. The nature of the entities operations do not allow for control over certain aspects of the budget/forecast expenditure.
The main reason for the overrun in expenditure was the increased results management expenses that were incurred as a result of the handling of positive tests. When management became aware that there would be a shortfall in the allocated budget, a request was made the entity of Sports and Recreation to provide additional funding to alleviate the cash flow shortfall that had been predicted, We therefore disagree with the finding that management does not have systems in place to ensure that they do not overspend on the approved budget and obtain approval in advance should they foresee that the approved budget is inadequate
CEO/CFOOngoingManagement is engaging with the department of sports and recreation to access additional funding for the increase scope of activities of the entity.No internal audit function
Audit Finding
In terms of section 51(1) (a) of the Public Finance Management Act
(1) An accounting authority for a public entity
(a) must ensure that that public entity has and maintains
(i) effective, efficient and transparent systems of financial and risk management and internal control;
(ii) a system of internal audit under the control and direction of an audit committee complying with and operating in accordance with regulations and instructions prescribed in terms of sections 76 and 77;
During the year under review the entity had no internal audit function. The internal audit is outsourced and the contract expired without it being replaced.
AG Report 2013An internal audit service provider has been appointedBoardAugust 2013An internal audit service provider has been appointedProperty Plant and Equipment - Accounting policy indicates incorrect useful lives and failure to derecognize EPO equipment which is no longer in useAG Report 2013Management should review the fixed asset register and check that assets on the register are still in use. PPE assets that are no longer in use should be identified and derecognizedCFOOngoingA monthly review of the fixed asset register is undertakenSupply chain management
Audit Finding
In terms of Treasury Regulation 16A9.1The accounting officer or accounting authority must
(c) check the National Treasurys database prior to awarding any contract to ensure that no recommended bidder, nor any of its directors, are listed as companies or persons prohibited from doing business with the public sector;
(d) reject any bid from a supplier who fails to provide written proof from the South African Revenue Service that that supplier either has no outstanding tax obligations or has made arrangements to meet outstanding tax obligations;
(e) reject a proposal for the award of a contract if the recommended bidder has committed a corrupt or fraudulent act in competing for the particular contract;
In terms of 16A8.2The National Treasurys Code of Conduct for Supply Chain Management Practitioners must be adhered to by all officials and other role players involved in supply chain management.
(d) must ensure that they do not compromise the credibility or integrity of the supply chain management system through the acceptance of gifts or hospitality or any other act;
It was noted during our audit of supply chain management that the above stipulations were not addressed in the entity's Supply Chain Management Policy.
AG Report 2013We recommend that the accounting authority together with management implement the following:
The entitys current procurement policy should be updated to reflect the requirements of TR 16A9.1(d) and TR16A9.2(a)
Management should review the treasury regulations as published by the National Treasury to ensure that the public entitys procurement policy is aligned to the requirements of the Treasury RegulationsCFODEC 2013A review of the current procurement policy is being undertaken.Expense items due and not yet paid not accrued for at year endAG Report 2013Management should implement appropriate procedures that would ensure the all invoices that related to goods and services that were received or performed before year end is accrued for.
The list of expenses should be reviewed and evidence of review should be shownCFOApril 2014A review of accruals will be undertaken at the financial year end.Human resource management
Audit Finding
Whilst performing the audit of human resource policies we have discovered that the entity does not have performance agreements in place. This could result in employees receiving performance bonuses which they did not earn and which were not approved in advance.
Employees should also know in advance how their performance will be measured and what their performance areas are.AG Report 2013Employment contracts serve as job specs and performance is evaluated against this.N/AN/AN/ALease payments under operating lease not recognised on straight line basisAG Report 2013Lease payments will be reviewed to ensure straight lining is correctly accounted for.CFOOngoingReview straight lining of lease paymentsCommitments: Operating lease commitments incorrectly calculatedAG Report 2013A review of lease commitments will be done at year end.CFOYear endn/aThe gross minimum lease payments disclosed under finance lease differ from recalculated amountAG Report 2013AFS have been adjusted. CFOYear endn/aRelated party: Disclosure in the financial statements is incompleteAG Report 2013Disclosure in AFS will be checkedCFOYear endn/aEmployee benefits disclosure - comparative amount disclosed in the Financial Statements does not agree with prior published Annual Financial StatementAG Report 2013Disclosure in AFS will be checkedCFOYear endn/aDisclosure of the Lotto funding expenditure does not agree with the schedule sent to the National LotteryAG Report 2013Disclosure in AFS will be checkedCFOYear endn/aForex: Incorrect transaction date used in the recording of foreign purchasesAG Report 2013Management will set procedures in place to determine the transaction date for foreign purchases
CFOOngoingA thorough analysis of all foreign purchases is being conducted.Computer equipment tracking of the movement of individual assetsAG Report 2013The assets has been receivedCFOAugust 2013The asset has been receivedIntangible Assets: No disclosure for change in accounting estimateAG Report 2013Disclosure in AFS will be checkedCFOYear endn/aExpenditure: Lease hold expenditure incorrectly expensedAG Report 2013None immaterial findingn/an/an/aProperty plant and equipment - Incomplete Change in Estimate NoteAG Report 2013Disclosure in AFS will be checkedCFOYear endn/aLate payment of laboratory feesAG Report 2013Monitoring of payment dates will be enforcesCFOOngoingPayments have been monitored on a monthly basisExpenditure: Operating lease incentives incorrectly accounted for
AG Report 2013AFS were adjustedCFOJuly 2013AFS were adjustedInventory: Difference between recalculated cost per unit and difference in DCO inventory countAG Report 2013Checks will be put in place to review DCO stock calculationsCFOYear endn/aPrepaid assets not recognisedAG Report 2013Prepayment checks will be conductedCFOYear endn/aTrade and Other Receivables: Differences between aging as per financial statements and aging as per accounting records.AG Report 2013Disclosure in AFS will be checkedCFOYear endn/aCustomers with credit balances at year endAG Report 2013Debtor accounts with credit balances will be transferred to creditorsCFOYear endn/aRevenue: Sales invoices translated at incorrect spot rates.AG Report 2013Checks will be put in place to ensure correct spot rates for sales transactions are usedCFOOngoingInvoices are being checked to ensure correct spot rate is used.
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ACCOUNTING OFFICER/ATHORITY/ CHIEF FINANCIAL OFFICER
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