ATC110416:Sixth Report Auditor General on the annual report and financial statements of the Public  Services Sector Education Training Authority for the 2009/10 financial year

Public Accounts (SCOPA)

Sixth Report of the Standing Committee on Public Accounts on the Report of the Auditor General on the annual report and financial statements of the Public  Services Sector Education Training Authority for the 2009/10 financial year, dated 16 March 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 Public Services Sector Education Training Authority (PSETA). The Committee noted the disclaimer opinion, and highlighted areas which required the urgent attention of the Accounting Authority as follows.

 

2. Payments made out of National Skills Fund account raised as Department of Public Service and Administration’s debtor

 

The Auditor-General identified the following:

The Constitution of PSETA {section 15(3)} states purposes for which funds can be used as follows “The money received by the Authority may be used only in the prescribed manner and in accordance with any prescribed standards of criteria to:-

§         Fund the performance of its functions.

§         Pay for its administration within the prescribed limits.”

 

According to the Service Level Agreement (SLA) between the Department of Labour and PSETA (clause 17) on termination of the project:

§         “If the project is terminated for whatever reason, any undisbursed funds advanced by the National Skills Fund (NSF), for the project, including funds not utilised in accordance with agreed terms, should immediately be refunded to the NSF including interest accrued.”

a)       The Bank balance of the National Skills Fund account reduced from R7 666 840 to R2 497 935 during the year ending 31 Mach 2010. However, no projects were running during the year.

b)       Part of the movement is operational expenditure amounting to R3 594 549  which should have been paid out of the operational account managed by the Department of Public Service and Administration (DPSA), but was paid using the funds owed to NSF. The Board of PSETA authorised these transactions.

c)       A current loan receivable was created in the financial records of PSETA for this reduction in the NSF account which is due from the DPSA. This receivable does not justify the payment made out of NSF account. The DPSA indicated that they would only refund a portion of the expenditure incurred by the PSETA from the NSF funds. The recoverability of the balance at year end could therefore not be confirmed with DPSA.

d)       PSETA received funding from NSF to be used only for the specific government project which was skills transfer, however the project was finished in 2006 and the excess funds were not transferred back to the National Skills Fund.

e)       The payable has been disclosed as current liability for more than 12 months and has not yet been refunded.

f)         The NSF payable balance of R7 802 525 could not be confirmed by the National Skills Fund.

g)       The funds available at year end in the NSF bank account at PSETA amounted to R2 497 935.

h)       The balance of the liability forms part of the DPSA debtor as stated above.

 

The Committee recommends that the Accounting Authority ensures that:

a)        Mechanisms are in place for PSETA to comply with section 15 (3) of its Constitution.

b)       The correct amount payable is determined, agreed and paid over to the NSF.

c)       If payment is not made within 12 months from date of financial statements, it is classified as a long term liability.

d)        Quarterly progress reports are sent in order to maintain accurate balances outstanding with the NSF.

e)       The amount to be repaid by DPSA for the operational expenditure is agreed upon, and required steps are taken in terms of the PFMA to recover any losses.

 

3. No adequate supporting documentation for NSF learnership payments

The Auditor-General identified the following:

a)       It was determined that controls over the learners contracts were not effective, due to the fact that supporting documents were missing such as copies of learners’ identity documents, contracts initiation and termination dates.

b)       The occurrence of the learnership payments transactions could not be verified.

 

The Committee recommends that the Accounting Authority ensures that:

a)       All contracts are valid and are accompanied by an ID copy, correct dates, initiation and termination dates.

b)       If students terminate learnership before the termination date, there is supporting documentation in this regard.

 

4. Human Resources and related issues

The Auditor-General identified the following:

a)       The role of the Chief Financial Officer (CFO) was held by consultants.

b)       Due to the fact that a majority of PSETA employees are seconded from the Department of Public Service and Administration, there was a lack of proper human resources policies and procedures regarding the seconding of employees.

 

The Committee recommends that the Accounting Authority ensures that:

a)       The position of the Chief Financial Officer is filled by an adequately skilled official.

b)       Human Resource policies regarding secondments are developed and implemented.

 

5. Procurement and supply chain management (SCM) issues

The Auditor-General identified the following:

a)       Three price quotations were not obtained in all required instances.

b)       In some instances contracts entered into could not be produced.

c)       Inadequate contract performance measures or monitoring.

d)       Ineffective internal audit evaluation of supply chain management compliance due to the lack of internal audit function.

 

The Committee recommends that the Accounting Authority ensures that:

a)       The entity’s SCM policy is 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)       Internal audit scope with regards to SCM be increased to ensure that day to day controls are effectively implemented and all procurements comply with Supply Chain Management legislative requirements.

 

6. Information audit findings

The Auditor-General identified the following:

a)       The PSETA did not have adequate and reliable information systems for recording and reporting of financial information. The entity used MS Excel for financial information record keeping and this has an inherent risk of being easily manipulated.

b)       General information technology controls have not been designed to maintain the integrity of the information system and security of the data.

 

The Committee recommends that the Accounting Authority 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 so that no unauthorised access takes place.

 

7. Conclusion

The Committee further recommends that the Executive Authority 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.

Documents

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