ATC120418: Report on Auditor-General On The 2010/11 Financial Statements Of The Department Of Cooperative Governance And Traditional Affairs, Dated 18 April 2012

Public Accounts (SCOPA)

DEPARTMENT OF COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS (COGTA)

FIFTH REPORT OF THE COMMITTEE ON PUBLIC ACCOUNTS ON THE REPORT OF THE AUDITOR-GENERAL ON THE 2010/11 FINANCIAL STATEMENTS OF THE DEPARTMENT OF COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS , DATED 18 APRIL 2012

 

The Committee on Public Accounts (the Committee) heard evidence and considered the contents of the Annual Report and the Report of the Auditor-General (AG) on the 2010/11 financial statements of the Department of Cooperative Governance and Traditional Affairs (COGTA). The Committee noted the qualified audit opinion, highlighted areas which required the urgent attention of the Accounting Officer, and reports as follows:

 

1. Irregular Expenditure

 

The Auditor-General identified the following:

 

a) The Department incurred irregular expenditure of R271 208 000, disclosed in note 27.4 to the financial statements, as the expenditure was in contravention of the Public Financial Management Act (PFMA) and Treasury Regulations (TR) relating to supply chain management.

b) Transfer payments amounting to R127 908 000, disclosed in note 27.2 to the financial statements, were made to municipalities from an amended payment schedule which was not approved by National Treasury, which resulted in irregular expenditure.

c) Transfer payments of R18 198 000, as disclosed in note 27.2 to the financial statements, were also made to the municipalities into the bank accounts other than the primary bank accounts approved by the National Treasury, which resulted in irregular expenditure.

 

The Committee recommends that the Accounting Officer ensures that:

 

a) Disciplinary action are taken against employees who were responsible for incurring such irregular expenditure as required by Section 51 (e) (iii) of the PFMA;

b) The Department strengthens its internal control environment in order to avoid incurring further irregular expenditure; and

c) All transfers and payments are made into the primary bank accounts as required by section 10(1) (c) of the Division of Revenue Act (DoRA).

 

 

 

 

2. Fruitless and wasteful expenditure

 

The Auditor-General identified the following:

 

a) The Accounting Officer did not take effective and/or appropriate steps to prevent irregular expenditure, as required by section 38 (1) of the PFMA and TR 9.1.1, 16A6.3(c) and 16A6.3 (e).

b) All payments due to creditors were not settled within 30 days from receipt of an invoice, as required by section 38(1) (f) of the PFMA and TR 8.2.3.

 

The Committee recommends that the Accounting Officer ensures that:

 

a) A Complete, accurate and valid register of irregular expenditure incurred be maintained throughout the year and be made available for audit purposes;and

b) Creditors are paid within the required time of 30 days in order to avoid penalties that might arise from late payment of creditors as required by Treasury Regulation 8.2.3;

c) Monies are recovered from employees who were responsible for incurring the identified fruitless and wasteful expenditure;

d) Disciplinary action are taken against employees who were responsible for incurring such irregular expenditure as required by Section 51 (e) (iii) of the PFMA;and

 

3. Non-compliance with laws and regulations

 

The Auditor-General identified the following:

 

(a) The Accounting Officer did not provide Parliament with the strategic plan at least 10 days prior to the discussion of department’s budget vote, as required by National Treasury Regulations 5.2.1 and 5.2.2.

(b) The Accounting Officer did not ensure that the Department had and maintained an effective, efficient and transparent system of internal control regarding performance management, which described and represented the how the institution’s processes of performance planning, monitoring , measurement, review and reporting was conducted, organised and managed as required by section 38(1)(i)and (b) of the PFMA.

(c) The strategic plan of the Department did not include measurable objectives, expected outcomes, programme outputs, indicators(measures) and targets for all of the entity’s programmes as required by National Treasury Regulation 5.2.3(d).

 

The Committee recommends that the Accounting Officer ensures that:

 

a) The Department improves its monitoring system so as to address challenges of poor financial reporting, compliance with legislation and the adequacy of performance information; and

b) The Department should have an adequate system in place to ensure compliance with strategic planning laws and regulations as required by Treasury Regulation 5.2.1 and 5.2.2.

 

4. Annual financial statements, performance and annual report

 

The Auditor-General identified the following:

 

The financial statements of the Department were not prepared in all material aspects in accordance with generally recognised accounting framework prescribed by National Treasury, as required by sections 40(1)(a)and (b) of the PFMA.

 

The Committee recommends that the Accounting Officer ensures that:

 

Financial statements are reviewed by appropriate delegated levels prior to them being submitted for the audit so as to comply with the PFMA and Treasury Regulations.

 

5. Investigations

 

The Auditor-General identified the following:

 

An investigation was conducted by an independent consulting firm at the request of the Department. The investigation was initiated based on the allegation of possible tender irregularities in different section of the department.

 

The Committee recommends that the Accounting Officer ensures that:

 

The findings of the finalised investigations are acted upon and action be taken against employees who are found guilty of contravening the provisions of the law.

 

 

 

 

 

6. Conclusion

 

The Committee recommends that the Accounting 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.

 

The Committee further recommends that the Accounting Authority submits quarterly reports on all the above-mentioned recommendations.

 

 

Report to be considered