ATC130520: First Report of the Committee on Public Accounts on the Report ff Auditor-General on the Annual Reports and Financial Statements of National Treasury 2011/12 Financial Year, dated 24 April 2013.

FIRST REPORT OF THE COMMITTEE ON PUBLIC ACCOUNTS ON THE REPORT OF AUDITOR-GENERAL ON THE ANNUAL REPORTS AND FINANCIAL STATEMENTS OF NATIONAL TREASURY 2011/12 FINANCIAL YEAR , DATED 24 APRIL 2013.

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 2011/12 financial statements of National Treasury (the Department). The Committee noted the unqualified audit opinion, highlighted areas which required the attention of the Accounting Officer, and reports as follows:

2. Material impairments

The Auditor-General identified the following:-

The Department had receivables for other debtors (as a result of beneficiaries investigated by independent consulting firms on Programme 7) totalling R17.165 million at 31 March 2012. This amount was disclosed as irregular expenditure in the 2010/11 financial year statements .

The Committee recommends that the Accounting Officer ensures that:

The annual financial statements are reviewed by governance structures i.e. management, internal audit and audit committee prior to submission to the auditors.

3. Material underspending of the vote

The Auditor-General identified the following:

The Department has materially underspent the budget to the amount of R2.477 billion.

The Committee recommends that the Accounting Officer ensures that:

The Department consults with the Development Bank of Southern Africa (DBSA), set realistic targets for the jobs fund or alternatively reflect their facilitation role accordingly in their pre-determined objectives.

4. Compliance with laws and regulations

The Auditor-General identified the following:

a) Strategic planning and performance management: The strategic plan did not include the measurable objectives, expected outcomes, programme outputs, indicators (measures) and targets of the institution’s Programme 8 – Employment Creation Facilitation Fund (i.e. Jobs Fund) as required by Treasury Regulations 5.2.3(d).

b) Annual financial statements, performance and annual report: The financial statements submitted for auditing were not prepared in all material respects in accordance with the requirements of section 40(1)(a) and (b) of the Public Finance Management Act (No 1 of 1999) (PFMA). Material misstatements of current assets, liabilities and disclosure items identified by the auditors were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion.

c) Procurement and contract management: Employees of the Department performed remunerative work outside their employment in the department without written permission from the relevant authority as required by section 30 of the Public Service Act (No 103 of 1994).

d) Sufficient appropriate audit evidence could not be obtained that goods and services of a transaction value above R500 000 were procured by means of inviting competitive bids and that deviations were only approved by the Accounting Officer if it was impractical to invite competitive bids, as required by the National Treasury Regulations 16A6.1 and 16A.6.4.

e) Human Resource management and compensation: A human resource plan was not in place as required by Public Service Regulation 1/III/B.2 (d).

The Committee recommends that the Accounting Officer ensures that:

a) Management prepare and review the financial statements on a monthly basis.

b) Financial statements are reviewed by governance structures i.e. management, internal audit and audit committee prior to submission to the auditors.

c) Disciplinary action is taken against employees found to have done business outside of their employ without declaring such interests.

d) The Department puts in place controls to ensure that procurement deviations comply with legislation.

e) Strict deadlines are imposed on those responsible for providing strategic information to Human Resources (HR) planning. Where delays are encountered this must be documented and action taken against delaying parties.

5. Conclusion

The Committee 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.

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

Report to be considered.