ATC120523: Report on Annual Report & Financial Statements of the Road Traffic Management Corporation & the Report of the Auditor General for the 2010/11 Financial Year, dated 23 May 2012

Public Accounts (SCOPA)

DEPERTMENT OF CORRECTIONAL SERVICES

EIGHTH REPORT OF THE COMMITTEE ON PUBLIC ACCOUNTS ON THE ANNUAL REPORT AND FINANCIAL STATEMENTS OF THE ROAD TRAFFIC MANAGEMENT CORPORATION AND THE REPORT OF THE AUDITOR GENERAL FOR THE 2010/11 FINANCIAL YEAR , DATED 23 MAY 2012

 

1. Introduction

 

The Committee on Public Accounts (the Committee) heard evidence on and considered the contents of the Annual Report and the Report of the Auditor-General (AG) on the financial statements of the Road Traffic Management Corporation (the entity) for the 2010/11 financial year. The Committee noted the adverse audit opinion, highlighted areas which required the attention of the Accounting Authority, and reports as follows:

 

2. Trade and other receivables

 

The Auditor-General identified the following:

 

a) Included in accounts receivable is an amount of R6 222 882, the recovery of which is doubtful, based on the past payment history of the specific debtor. An impairment loss has not been recognised in accordance with South African Statement of Generally Accepted Accounting Practice, IAS 39 (AC 133). Had an impairment loss been recognised, accounts receivable would have been stated at R177 204 412, and the deficit for the period and accumulated deficit would have been increased by

R6 222 88; and.

b) Included in accounts receivable is an amount of R3 521 375 for the group collection authorities of the Administrative Adjudication of Road Traffic Offences (AARTO) infringement fees debtors. Alternative audit procedures, to validate the completeness and accuracy of the individual balances making up the amount of R3 521 375, could not be performed.

 

The Committee recommends that the Accounting Authority ensures that:

 

a) Management develops and implements policies and procedures to make certain that the recoverability of all debts is assessed at least annually;

b) Management performs regular reconciliations on the individual debts in order to correct possible error; and

c) The entity develops and implements policies to ensure that the reconciliations of debtor accounts are performed, reviewed and approved on a monthly basis.

 

3. Property, plant and equipment

 

The Auditor-General identified the following:

 

a) The entity did not review the residual values and useful lives of office equipment, furniture and fittings and computer equipment at each reporting date in accordance with Standard of Generally Recognised Accounting Practice, GRAP 17. Had this review been done, office equipment, furniture and fitting and computer equipment, included in note 7 to the financial statements, would have been stated at R324 194, R1 165 966 and R6 891 358 respectively, and the deficit for the period and the accumulated deficit would have been decreased by R198 100; and

b) The completeness and existence of property, plant and equipment, stated at R10 010 490 (2010: R15 164 993) in the financial statement could not be verified as the relevant details of these assets were not included in the fixed asset register and accounting records. The entity’s records did not permit the application of alternative audit procedures regarding the completeness and existence of these assets.

 

The Committee recommends that the Accounting Authority ensures that:

 

a) Fixed assets that have been identified through the physical verification process are included in the asset register; and

b) Management makes certain that the useful lives and residual values of all assets are estimated at least annually, and that these estimates are reviewed and approved by a senior official and signed to verify the correctness thereof.

 

4. Intangible assets

 

The Auditor- General identified the following:

 

a) The entity did not derecognise computer software that has no future economic benefits or service potential from its use or disposal as required by GRAP 102. Had the computer software been derecognised, computer software, included in note 8 to the financial statements, would have been stated at R1 217 771, and the deficit for the period and the accumulated deficit would have been increased by R334 537; and

b) The entity did not assess at each reporting period whether there is any indication that an intangible asset may be impaired as required by GRAP 21. An assessment was not performed on the IT Service Desk and Network Diagnostic System, as disclosed in note 8 to the annual financial statements. Consequently, the information and explanations that auditors considered necessary to satisfy themselves as to the valuation of the intangible assets of R8 186 884, was not obtained.

 

The Committee recommends that the Accounting Authority ensures that:

 

a) Management makes certain that assets on the fixed asset register that are no longer in use are written off, if appropriate, on a bi-annual basis to coincide with the asset verification processes; and

b) Management assesses whether assets may be impaired at least on an annual basis to ensure that financial statements are supported by reliable information.

 

5. Road Traffic Infringement Agency information included in the prior financial year comparative figures in the annual statements

 

The Auditor-General reported that, during the prior periods, the entity included in its records income and expenses relating to the Road Traffic Infringement Agency (RTIA). The RTIA should have submitted separate financial statements in terms of section 14 (3) of the AARTO Act and the failure to submit separate financial statements resulted in the RTMC’s prior period financial statements being materially misstated by the following amounts, after taking corrections of prior period errors into account:

 

AARTO infringement collection fees (overstated) : R14 169 009

Other income (understated) : R95 642 347

Operating expenses (understated) : R81 473 338

 

The Committee recommends that the Accounting Authority ensures that all prior year consolidation entries are reversed and that entity does not include RTIA entries in its annual financial statements.

 

5. Conclusion

 

The Committee recommends that the Executive Authority submits a progress report on all 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