ATC080311: Report on Annual Report & Auditor-General’s Report

Public Accounts (SCOPA)

Eighteenth Report of the Standing Committee on Public Accounts on the Annual Report and the Report of the Auditor-General on the Financial Statements of the Department of Labour for the financial year ending 31 March 2007, dated 11 March 2008 

The Standing Committee on Public Accounts (SCOPA) heard and considered evidence on the annual report and the report of the Auditor-General on the financial statements of the Department of Labour, National Skills Fund and Sheltered Employment Factories, for the year ended 31 March 2007. 

Department of Labour

The Committee noted the qualified audit opinion expressed by the Auditor-General. The Committee raised concerns on the following matters and reports as follows: 

Fixed assets

The Committee noted the following issues on the audit report::

1.1 fixed assets were not adequately supported by an asset register as prescribed by National Treasury. The accuracy and completeness of the fixed asset register and the closing balance of the register could not be verified;

1.2. the department does not have a dedicated asset management unit; and

1.3. the asset verification process was outsourced due to a lack of skills    and capacity in the department.

The Committee recommends that the Accounting Officer ensures that:
 

·           a correct and complete asset register is maintained in line with the asset management guide;

 

·           a consolidated and complete asset register for the whole department is maintained at Head Office level;

 

·           controls are put in place and monitored as per department’s policies and procedures; and

 

·           adequate resources are made available to continuously monitor the accuracy and completeness of the fixed asset register.

 

Vacancies 

The Committee noted the following:
 

2.1. the high vacancy levels of an average of 18.5% for the past three years across all levels. This applies to both the National Skills Fund and the Sheltered Employment Fund;

2.2. the use of contract-based and temporary workers rather than permanent staff resulted in positions being filled only temporarily; and 

2.3. the under spending by the department has negatively impacted on service delivery and on the department’s objectives. 

The Committee recommends that the Accounting Officer:
 

·           ensures that control procedures are implemented to improve recruitment processes;

 

·           establishes and reviews reasons for high staff turnover;

 

·           develops  and implements strategies to eliminate the problems in the entity;

 

·           provides a report to the Committee on the departmental action plan to address the above mentioned issues within 60 days; and

 

·           ensures that the department employs permanent staff.

 

Leave entitlement

The Committee noted shortcomings regarding the accuracy and completeness of leave entitlement amounting to R13 471 000.

The Committee recommends that the Accounting Officer ensures adequate monitoring controls are put in place regarding leave requirement.

Receivables 

The Committee noted staff debts of longer than 3 years, amounting to R10.2 million. 

The Committee recommends that the Accounting Officer ensures that:
 

·           the department write-off all irrecoverable debts; and that

 

·           write-offs should be done in accordance with the write-off policy and the requirements of Treasury Regulations.

 

General 

The Committee noted various weaknesses in the Department regarding:
 

·           the monitoring of the suspense account; and

 

·           inadequate remuneration policies.

 

The Committee recommends that the Accounting Officer ensures that quarterly progress reports are submitted to Parliament commencing within 60 days after the adoption of this report by the National Assembly. 

National Skills Fund

Governance arrangements 

The Committee noted significant weaknesses due to the lack of:

1.1. implementation of an organisational structure to comply with the requirements of supply chain management; and

1.2. monitoring of controls, through ongoing activities, which include supervising training projects.

The Committee recommends that the Accounting Authority ensures that: 
 

·           the procurement policy complies with the requirements of supply chain management;

 

·           an action plan is implemented to improve internal controls over training projects;

 

c). appropriate, skilled personnel are used to review the action plan; and

d). a quarterly progress report is submitted to Parliament within 60 days after the adoption of this report by the National Assembly.

Accuracy and completeness of commitments 

The Committee noted:
 

·           The lack of assurance relating to the accuracy and completeness of commitments as a result of inadequate file administration;

 

·           the absence of required systems to facilitate the process; and

 

·           the lack of monitoring of information accumulating

 

The Committee recommends that the Accounting Authority ensures that: 

a). controls are implemented by management to improve file administration;

b). all commitments of the fund are monitored; and

c). a system to facilitate the process of  information accumulation is implemented.

General

The Committee noted that the Department of Labour failed to resolve certain aspects which were raised in previous years’ reports, around:

3.1. the structure and accountability of the National Skills Fund;

3.2. the confirmation of commitments; and

3.3. the lacunae in the accounting system to allow for proper accrual accounting. 

The previous resolution highlighted these aspects but to date, no progress report has been submitted.

Sheltered Employment Factories

Supply chain management

The Committee noted that the following weaknesses were caused by the lack of monitoring controls:

1.1. no competitive bids were invited and no documented reasons were furnished for the deviation from the regulation regarding specific procurement amounting to R4.372 million;

1.2. currently there is no valid transport contract for the Sheltered Employment Factories and the total amount paid to the transport contractor for services rendered amounted to R6.795 million; and 

1.3 therefore, expenditure amounting to R11.167 million is regarded as irregular expenditure.

The Committee recommends that the Accounting Authority ensures that:
 

·           management complies with applicable laws and regulations and any deviations must be approved by National Treasury after the approval by the Accounting Authority;

 

·           there is adequate and accurate disclosure of irregular expenditure in the financial statements; and

 

·           all disciplinary processes are followed, as per the PFMA, regarding action leading to irregular expenditure.

 

Misstatement of fixed assets

The impairment test for all assets within the organisation was not completed as the Sheltered Employment Factories lacked sufficient staff to fully comply with Generally Accepted Accounting Practice. 

Although the financial statements reflected inventories in transit, no such inventory were identified at any factories.

The Committee recommends that the Accounting Authority ensures that:
 

·           the organization recruits fully skilled staff and deploys them appropriately; and

 

·          assets, deserving impairment,  are performed regularly.