ATC100825: Report on Auditor General on the 2008/09 financial statements of the Department of Public Works and its Property Management Trading Entity

Public Accounts (SCOPA)

Tenth Report of the Standing Committee on Public Accounts on the Report of the Auditor General on the 2008/09 financial statements of the Department of Public Works and its Property Management Trading Entity, dated 25 August 2010

 

1. Introduction

 

The Standing Committee on Public Accounts (the Committee) heard evidence on and considered the contents of the Annual Report and  Report of the Auditor-General on the 2008/09 financial statements of the Department of Public Works. The Committee noted the qualified audit opinion, highlighted areas which required urgent attention by the Accounting Authority and reports as follows:

 

2. Movable tangible capital assets and minor assets

 

The Auditor-General noted various instances where the existence, completeness, rights and obligations as well as accuracy of assets in the asset register could not be verified.

 

The following were reported:

a)    “Moveable tangible assets could not be supported by a complete asset register and minor assets could not be confirmed due to the incomplete asset register;  

b)    Not all immovable assets were accounted for in the asset register; title deeds and stand numbers for some of the assets were not indicated on the asset register;

c)    The Departments of Public Works, Rural Development, and Provincial Departments as custodians were tasked with leading a government-wide initiative to complete the vesting of ownership of state owned land; and

d)    The adjustment of intangible assets consisted of software purchased during the 2005/06 financial year  to an amount of R40,3 million. At the time of reporting the software had not been utilised”.

 

The Committee recommends that the Accounting Officer ensures that:

a)       Management understands and exercises oversight responsibility in relation to financial reporting and  internal control;

b)       Management undertakes a needs’ assessment before any assets are purchased; and

c)       Progress with regard to the government-wide initiative in respect of the vesting of ownership of state owned land is continually monitored and reported on annually.

 

3. Non-compliance with applicable legislation

 

The Auditor-General reported the following:

 

“The Department did not comply with applicable legislation and regulations, inter alia:

a)       PFMA - the management and safeguarding of assets;

b)       Treasury Regulations - persons in charge at pay points did not verify on the date of payment that all persons listed on the payroll report were entitled to payment;

c)       Treasury Regulations - immovable state property was  not always let at market-related tarriffs;

d)       Treasury Regulations - evidence was not provided that transfers and subsidies to entities were applied for the intended purposes;

e)       Public service regulations - cases were noted where senior management positions were advertised and filled before the job evaluation was approved; and

f)         Division of Revenue Act - the Department did not evaluate the performance of programmes funded by conditional grants and report thereon to Treasury within four months after the end of the financial year as prescribed by the Division of Revenue Act (No. 12 of 2009)”.

 

The Committee recommends that the Accounting Officer ensures that:

a) Ongoing monitoring and supervision are undertaken and that controls are present and functioning;

 b) Officials are held accountable and that disciplinary steps are taken against those who contravene prescripts; and

c)    Management implements a performance management system in terms of which staff performance is evaluated against key performance indicators to enable management to take appropriate steps based on agreed deliverables.

 

 

4. Investigations

 

The Auditor- General reported on the following:

a) “The process followed with the procuring of the SAS Business Intelligence     Solution;

b)  Allegations of irregular appointments and management practices;

 c) The process followed with the appointment of service providers for the asset verification and condition assesment project; and

 d) Allegations of unauthorised changes in service providers’ bank details”.     

 

The Committee recommends that the Accounting Officer ensures that:

a) The Department finalises all pending investigations by ensuring that the necessary resources are made available;

 b) Management understands and exercises oversight in respect of financial    reporting and internal controls; and

             c)  Investigation reports are submitted to SCOPA when finalised.

 

5. Staff Establishment

 

The Auditor-General reported that “The marginal decrease in the vacancy rate (from 22 percent to 16 percent,) is insufficient and impedes service delivery”.

 

The Committee recommends that the Accounting Officer ensures that vacancies are filled urgently, so as to strengthen internal controls and improve service delivery.

 

6. Governance Issues

 

The Auditor-General reported that “the Audit Committee saw the resignation of some members during the year, and new members were appointed on 31 May 2009”.

 

The Committee recommends that the Accounting Officer ensures that the Audit Committee becomes effective and oversees controls in order to eliminate non-compliance.

 

7. Property Management Trading Entity

 

The Committee heard evidence on and considered the contents of the Annual Report and Report of the Auditor-General on the 2008/09 financial statements of the Property Management Trading Entity. The Committee noted an adverse audit opinion, highlighted areas which required the urgent attention of the Accounting Officer and reports as follows:

 

7.1 Inter-departmental receivables

 

The Auditor-General reported that “inter-departmental receivables owed by a number of national departments and national public entities amounted to R419 million (31 March 2008: R48 million). This has been outstanding for more than two years. Management did not implement appropriate steps to collect money owed and further did not assess the recoverability of the long-outstanding debts. The receivables amount disclosed is thus overstated by an unknown amount and the provision is understated due to the assessment not being performed”. 

 

The Committee recommends that the Accounting Officer must ensure that:

a)       Disciplinary action is taken against staff who fail to perform their duties as required;

b)       Reasonable steps are taken to recover debts before they are written off; and

c)       Management understands and exercises oversight in respect of finances and related internal controls.

 

8. Further Recommendation

 

The Committee is concerned with various government Departments’ failure to honour their debts to the Department of Public Works for services rendered on their behalf and has ordered the Property Management Trading Entity to forward the list of such defaulters. The Committee has already written to some of the defaulting Departments and entities seeking clarity on their non-payments.

 

 

 

 

9. Conclusion

 

The Committee further recommends that the Executive Authority submits a progress report on the implementation of all the above recommendations to the National Assembly within 60 days of the adoption of this report by the House.

 

Report to be considered