ATC110301: First Report onAuditor General on 2009/10 financial statements of Department of Justice & Constitutional Development, dated 09 February 2011

Public Accounts (SCOPA)

First Report of the Standing Committee on Public Accounts on the Report of the Auditor General on the 2009/10 financial statements of the Department of Justice and Constitutional Development, dated 09 February 2011


1. Introduction

The Standing Committee on Public Accounts (SCOPA) heard evidence on and considered the contents of the Annual Report and the Report of the Auditor-General on the 2009/10 financial statements of the Department of Justice and Constitutional Development. The Committee noted the qualified audit opinion, highlighted areas which required the urgent attention of the Accounting Officer, and reports as follows:


2.                   Irregular and Fruitless expenditure


The Auditor-General identified the following:


a)       As disclosed in note 26 to the financial statements, irregular expenditure to the amount of R812 million was incurred, R436 million of which related to the current year’s irregular expenditure and R368 million related to the prior year’s irregular expenditure identified in the current year.

b)       R3,8 million of irregular expenditure not condoned is a result of competitive procurement procedures not followed and prior approval for procurement not obtained from the Bid Adjudication Committee.

c)       Fruitless and wasteful expenditure amounting to R2 million was incurred as a result of officials not boarding flights or not using reserved accommodation.


The Committee recommends that the Accounting Officer ensures that:


a)       disciplinary actions are taken against employees who were responsible for incurring such irregular and fruitless expenditure as required by section 51 (e) (iii) of the PFMA;

b)       The Department strengthens its internal control systems in order to avoid incurring further irregular expenditure.




3.                   Supply chain management issues


The Auditor-General identified the following:


a)       Three price quotations not in all instances invited.

b)       Awards to certain suppliers who failed to provide a valid tax clearance certificate.

c)       The preference point system as required by the Preferred Procurement Policy Framework was not in all instances applied.

d)       Awards to certain suppliers did not score the highest points in terms of the preference points system.

e)       Contracts amendments or extensions resulted in circumvention of competitive bidding.

f)         Ineffective internal audit evaluation of SCM compliance.


The Committee recommends that the Accounting Officer ensures that:


a)       The departmental SCM policy be updated encompassing all the elements of the PFMA, Treasury Regulations, Preferential Procurement Framework Act, Preferential Procurement Regulations and SCM practice notes issued by the National Treasury that will ensure an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost effective.

b)       A checklist of all legislative requirements be kept for all SCM related transactions, signed by both the preparer and reviewer.

c)       A proper filing system for all information supporting SCM related transactions be kept.

d)       Critical vacancies in the SCM unit are filled with adequately skilled officials.

e)       Early warning reports listing contracts that will soon expire be compiled and further that new tender processes be entered into timeously.

f)         Monthly reconciliations should be done in order to avoid non-compliance with SCM requirements.

g)       Internal audit scope with regards to SCM be increased to ensure that day to day controls are effectively implemented and all procurement comply with SCM legislative requirements.

h)       The total population of expenditure be revisited to determine the full extent of the non-compliance which will lead to irregular expenditure..

i)         Disciplinary measures be taken against all officials that do not comply with the legislative requirements surrounding SCM.


4.             Internal Audit Unit


The Auditor-General identified the following:


a)       Internal audit unit established but not in operation throughout the year.

b)       Internal audit unit did not fulfill required responsibilities.


The Committee recommends that the Accounting Officer ensures that:


a)       A fully functional audit committee that promotes independence, accountability and service delivery be established.

b)       Internal audit function monitors the adequacy and implementation of internal control.

c)       Effective risk assessments and strategies, including fraud prevention plans are maintained, to address identified weaknesses.


5.                   Human Resources related issues


The Auditor-General identified the following:


a)       The vacancy rate for senior management deteriorated by 14% to 25% in 2009/10

b)       Verification of criminal and financial or asset records, citizenship, financial status, qualifications and previous employment for all new appointments were not done

c)       Certain officials acted for periods exceeding 12 months.

d)       All performance management agreements were not signed by 31 July.

e)       More temporary/permanent incapacity leave was granted than entitled to and non-compliance with DPSA’s policy and procedure on incapacity leave for ill health retirement.

f)         Not all leave taken by employees was captured accurately and in full.

g)       All monthly payroll reports were not certified, all certified payroll reports not returned to finance within 10 days, completeness of certified payroll reports were not in all instances checked and corrective measures not in all instances taken where discrepancies were noted.


The Committee recommends that the Accounting Officer ensures that:


a)       HR policies are developed and implemented.

b)        DPSA policies and procedures are complied with.

c)       The vacancy rate is reduced by appointing permanent senior management.

d)       Leave forms are timeously and correctly captured on PERSAL.


6.                   Asset register


The Auditor-General identified that:


The completeness of the asset register and the existence of certain assets could not be confirmed.


The Committee recommends that the Accounting Officer ensures that:


a)       All capital assets are properly recorded as required by section 40 (1)(a) of the PFMA and Treasury Regulations 17.2.3.

b)       There is regular asset counting, verification and reconciliation in order to avoid incorrect disclosures in the annual financial statements.


7.                   Governance


The Auditor-General identified that:


The Department does not have adequate monitoring processes in place to identify deficiencies and ensure that corrective actions have been implemented that will result in reliable performance information.


The Committee recommends that the Accounting Officer ensures that:


a)       A monitoring system is developed that will address the adequacy of performance information.

b)       Such a system is frequently reviewed in order to address any gaps that are identified. 


8.                   Third Party Funds


The Auditor-General identified the following:


a)       No financial statements were prepared for the Third Party Fund as no reliable financial information exists, for revenue to be determined.

b)       The potential claims against the fund as a result of fraud, theft and loss to the Department are not complete.

c)       The money collected on behalf of the State and not yet paid to the Department could not be ascertained.


The Committee recommends that the Accounting Officer ensures that:


a)       A proper financial system is developed or that the current features of the Justice Deposit Administration System (JDAS) be enhanced with the required controls to ensure complete, accurate and reliable financial information and reporting.

b)       The vacancies at court level are filled with adequately skilled officials.

c)       All fraud, cash shortages and losses are investigated timeously.

d)       Disciplinary measures are taken against every official that does not comply with the policies and procedures or who was charged or found guilty of misconduct.

The internal audit scope with regards to the Fund is increased to ensure that daily controls are implemented and effective.


9.                   Information Systems and related issues


The Auditor-General identified the following deficiencies in the information and related issues:


a)       Information technology governance, which provides for the structures, policies and processes through which departments ensure that IT supports the Department’s strategic objectives.

b)       Security management, which should prevent unauthorised access to the application system that generates the information used to prepare the financial statements.

c)       User access controls, through which the Department ensures that only valid and authourised users are allowed access to initiate and approve transactions on the system and that user access is adequately segregated when transactions are captured and approved.

d)       IT service continuity, through which the Department ensures the availability of financial and performance in instances of data loss or a disaster.


The Committee recommends that the Accounting Officer ensures that:


a)       An IT governance framework is developed that directs the positioning of IT, resource requirements, service continuity in instances of data loss and risk and internal control management.

b)       The access control security is strengthened to ensure that no unauthorised access takes place.


10. Conclusion


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


Report to be considered.



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