ACTION PLAN AND PROGRESS REPORT

NPA & CARA AUDIT QUALIFICATIONS

2006 / 07

Last update: 22 February 2008

QUALIFICATIONS:

AUDIT FINDING / ACTION PLAN / CLOSE / OPEN / RESPONSIBLE PERSON / TARGET DATES / PROGRESS
1.ASSETS
  • The opening balance of R61 million and adjustments to the opening balance of R30 million for machinery & equipment, as disclosed in the note 26 to the financial statements, do not agree to the asset register.
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  • NPA went out on tender for an electronic asset management system.
  • Tender has been awarded on 14 September.
  • Project plan has been developed and in full swing.
  • Reconciliation to be done after completion of the electronic asset management register
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/ Johan Lucas & Mpho Mofokeng / 30 November 2007 and final report by 31 March 2008. / Capturing of invoices for the past 5 years 80% complete.
Project teams are in the regions verifying and where applicable bar coding assets.
AG, DOJ&CD, IT, CFM all part of the meeting.
  • Accounting policy 4.7 states that where the cost of an asset cannot be determined accurately, the asset must be stated at fair value. Own assets amounting to R61 million and leased assets amounting to R107 million were valued at fair value, where, where the cost price was available.
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  • The scope of work of the service provider provides for the evaluation of all assets purchased over the last five years.
  • Invoices for the last five years will be used to update the asset register of owned assets
  • Reconciliation to be done after completion of the electronic asset management register
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/ Johan Lucas & Mpho Mofokeng / 30 November 2007 and final report by 31 March 2008. / Matter will be addressed by the NPA project team and appointed service provider
  • The asset register was done on an excel spreadsheet with insufficient compensating controls to ensure that the integrity of data.
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  • The electronic asset management system (Asset Ware) will also address this issue as it will be password protected and traces any changes made during the life cycle of the asset.
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/ Johan Lucas & Wilma Raaths / Final report by 31 March 2008.. / Matter will be addressed by the NPA project team and appointed service provider
  • The existence of the assets in the regions could not in all instances be verified and some assets could not be traced to the asset register.
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  • The scope of work of the service provider makes provision for physical asset verification at every regional office.
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/ Johan Lucas & Wilma Raaths / Final report by 31 March 2008.. / Matter will be addressed by the NPA project team and appointed service provider
  • The closing balance of computer equipment incorrectly includes intangible assets amounting to R20 million
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  • This will be addressed as a separate category would be created for intangible assets as per the requirements.
  • Reconciliation to be done after completion of the electronic asset management register
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/ Johan Lucas & Wilma Raaths / Final report by 31 March 2008. / Matter will be addressed by the NPA project team and appointed service provider
  • Leased assets disclosed in note 26 excludes leased assets with an estimated value of R37 million, as no asset register was maintained
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  • The new electronic asset management system will contain all the assets.
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/ Johan Lucas & Wilma Raaths / Final report by 31 March 2008. / Matter will be addressed by the NPA project team and appointed service provider
2.LEASE COMMITMENTS
  • The operating & finance lease commitments as disclosed on note 22 to the financial statements are overstated by R40 million & R5 million respectively, as the lease commitment was not determined according to the rental schedules stipulated in the contract.
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  • Correct disclosure of leases & future lease commitments in the financial statements.
  • Correct disclosure of VAT according to rental schedules.
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/ Johan Lucas & Wilma Raaths / 30 November 2007 & ongoing / This was purely an interpretation difference. The approval was for 10 years and the lease signed for two years. Matter has been corrected. (Kimberly)
The R5 million was as a result of VAT and has already been corrected.
3.INTANGIBLE ASSESTS
  • Intangible assets amounting to R14 million purchased during the year was classified on the statement of financial performance as current expenditure instead of capital expenditure.
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  • Rectification of classification of expenditure for Intangible Assets.
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/ Johan Lucas & Mpho Mofokeng / 30 November 2007 and final report by 31 March 2008. / All future Intangible Asset expenditure will be reflected as part of the new asset management strategy and expenditure will be allocated on BAS and also to be verified on a monthly basis.
4. COMMITMENTS
  • On the LOGIS system, (Report 102), is amount R10 080 115.34 for order no 8772.
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  • Order to be cancelled on the Logis
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/ Tebogo / 30 November 2007 and final report by 31 March 2008. / Done
  • This amount relate to a commitment raised in the prior year for Datacentrix
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  • Commitment to be cleared from the report
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/ Tebogo / 30 November 2007 and final report by 31 March 2008. / Done
  • The amount has been paid during the financial year but the order was not cancelled on LOGIS.
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  • Commitments are being monitored on a monthly basis
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/ Tebogo / 30 November 2007 and final report by 31 March 2008. / Done
5. PREPAYMENTS
  • Prepayment to CFM
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  • Avoid future prepayment from CFM.
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/ Johan Lucas & Elias Lukwareni / 30 November 2007 & ongoing / Invoices for rental for the next month are now received from CFM before the 25th and are then processed

EMPHASIS OF MATTERS:

AUDIT FINDING / ACTION PLAN / CLOSE / OPEN / RESPONSIBLE PERSON / TARGET DATES / PROGRESS
1.IRREGULAR EXPENDITURE
  • The prior year’s irregular expenditure amounting to R65 million as disclosed in note 23 to financial statements, was still not reported to National Treasury in terms of section 38(1) of the PFMA.
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  • Request Condonement of Irregular Expenditure from National Treasury.
  • Prepare internal memo to CFO & Acting CEO for consideration & approval to be granted.
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/ Andre Malan / 31 March 2008 / A memorandum was drafted and forwarded to National Treasury for the condonement of the irregular expenditure incurred by the NPA for the financial years 2001/02 to 2006/07 as well as a memorandum for the condonement of revenue to be surrendered for the 2005/06 financial year. To date we received an e-mail on 13 December 2007 from Mr. R. Randela (National Treasury) confirming receipt of our request in which he indicate that he referred our request to the Accountant General and Specialist Function for their comments and advise. We are still awaiting the final response from National Treasury. Follow-up letter sent NT on the 22 February 20008 to determine approval status
  • Irregular expenditure amounting to R186 million disclosed in note 23 to the financial statements is as a result of non-compliance to supply chain management and finance lease agreements entered into.
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  • Request Condonement of Irregular Expenditure from National Treasury.
  • Prepare internal memo to CFO & Acting CEO for consideration & approval to be granted.
  • CFM Finance lease transaction over lease term to be condone.
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/ Andre Malan / 31March 2008 / A memorandum was drafted and forwarded to National Treasury for the condonement of the irregular expenditure incurred by the NPA for the financial years 2001/02 to 2006/07. To date we received an e-mail on 13 December 2007 from Mr. R. Randela (National Treasury) confirming receipt of our request in which he indicate that he referred our request to the Accountant General and Specialist Function for their comments and advise. We are still awaiting the final response from National Treasury. Follow-up letter sent NT on the 22 February 20008 to determine approval status
  • IRREGULAR EXPENDITURE MADE UP AS FOLLOWS:
Cases prior year R65,341,000
Irregular appointment R686,000
Rentworks Payments R38,996,000
Noted cases R10,666,000
CFM Finance Lease R54,000,000
CFM Soft services R17,000,000 /
  • Request Condonement of Irregular Expenditure from National Treasury.
  • Prepare internal memo to CFO & Acting CEO for consideration & approval to be granted
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  • Open
/ Andre Malan / 31March 2008 / A memorandum was drafted and forwarded to National Treasury for the condonement of the irregular expenditure incurred by the NPA for the financial years 2001/02 to 2006/07. To date we received an e-mail on 13 December 2007 from Mr. R. Randela (National Treasury) confirming receipt of our request in which he indicate that he referred our request to the Accountant General and Specialist Function for their comments and advise. We are still awaiting the final response from National Treasury. Follow-up letter sent NT on the 22 February 20008 to determine approval status
2.ASSETS LESS THAN R5 000
  • In terms of accounting policy 3.2, only assets with a cost in excess of R5000 are classified as capital assets. The accumulative value of assets with a value less than R5000 was estimated to be R24 million and was not disclosed in note 26
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  • Went out on tender for an electronic asset management system.
  • Tender has been awarded on 14 September.
  • Project plan has been developed and scheduled meetings held with service provider to address this and all the other issues.
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/ Johan Lucas & Mpho Mofokeng / 30 November 2007 and final report by 31 March 2008. / Capturing of invoices for the past 5 years 80% complete.
Project teams are in the regions verifying and where applicable bar coding assets.
AG, DOJ&CD, IT, CFM all part of the project meetings
3. DEPARTMENTAL REVENUE TO BE SURRENDERED
  • Departmental revenue of R22 million as disclosed in note 14 to the financial statements, originating from the prior year, was still not surrendered to the National Revenue Fund as required by the PFMA, SECTION 2(11)(1)(a).
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  • Request Condone of Irregular Expenditure from National Treasury.
  • Prepare internal memo to CFO & Acting CEO for consideration & approval to be granted
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  • Open
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/ Andre Malan / 31 March 2008 / A memorandum for the condonement of revenue to be surrendered for the 2005/06 financial year. To date we received an e-mail on 13 December 2007 from Mr. R. Randela (National Treasury) confirming receipt of our request in which he indicate that he referred our request to the Accountant General and Specialist Function for their comments and advise. We are still awaiting the final response from National Treasury.
  • As part of the sale and leaseback transaction for the sale of IT equipment to Rentworks, the NPA has recorded the sale of R21.899 million as departmental revenue with the corresponding leg going to prepayments and advances during the last financial year.
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  • Request Condone of Irregular Expenditure from National Treasury.
  • Prepare internal memo to CFO & Acting CEO for consideration & approval to be granted
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  • Open
/ Andre Malan / 31March 2008 / A memorandum for the condonement of revenue to be surrendered for the 2005/06 financial year. To date we received an e-mail on 13 December 2007 from Mr. R. Randela (National Treasury) confirming receipt of our request in which he indicate that he referred our request to the Accountant General and Specialist Function for their comments and advise. We are still awaiting the final response from National Treasury.
  • We have identified during the current financial year that this monies was not transferred to the Revenue Fund and the amount of R21.899 million remained as a prepayment in the financial statements.
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  • Request Condone of Irregular Expenditure from National Treasury.
  • Prepare internal memo to CFO & Acting CEO for consideration & approval to be granted
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  • Open
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/ Andre Malan
Andre Malan / 31March 2008 / A memorandum for the condonement of revenue to be surrendered for the 2005/06 financial year. To date we received an e-mail on 13 December 2007 from Mr. R. Randela (National Treasury) confirming receipt of our request in which he indicate that he referred our request to the Accountant General and Specialist Function for their comments and advise. We are still awaiting the final response from National Treasury.
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OTHER MATTERS:

AUDIT FINDING / ACTION PLAN / CLOSE / OPEN / RESPONSIBLE PERSON / TARGET DATES / PROGRESS
1.Internal Control
The following areas within the NPA revealed that control activities are not regularly evaluated to ensure that they are still appropriate and working as intended and resulted in:
  • The delegation of authority for the authorization of journals and orders, were not in all instances followed,
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  • Remind staff to refer all journals to the Finance Manager or Senior Manager for approval by means of a memorandum.
  • Monitor and review transactions for ledger and expenditure accounts.
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/ All SM’s / 15 November 2007 and ongoing
Daily (Ongoing) / The matter was addressed with relevant staff in Finance and Budget sections. Journals for current financial year were approved by Finance Managers and Senior Manager: Financial Ops. All managers monitor & review transactions on regular basis to ensure adherence to Financial Delegations.
  • Insufficient management of travel and subsistence advances and debtors as evident from the following:
  • New advances given without clearing old advances
  • Advances are used as loan as advances are paid back in instalments
  • Long outstanding advances and debtors are not timeously followed up
  • Debtors’ files were not always updated and were, in some cases, incomplete
  • Debtors indicated as being settled, but still have an outstanding balance.
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  • Send a circular to staff informing them that no S & T advances will be paid before the previous ones are settled.
  • Provide progress on S & T Advances issued. This must amongst others include reminders sent to staff and deductions implemented.
  • Ones off deductions must be implemented from other amounts due to the official e.g service bonus.
  • Provide age analysis report on debtors and S & T.
  • Indicate movement on the In-service and Out-of-service debtors.
  • Recovery from pensions
  • Recovery from in-service employees.
  • Letters of reminders to be sent to debtors
All debt files to be updated and reconciliations performed monthly on each debtor file.
Reconcile detail debt account, Trial Bal, Age analysis and list of debtors. /
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/ Benedicta Mogaladi / 30 November 2007
Monthly
Monthly
  • Monthly
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/ Circular no. 65 of 2007 was distributed to staff and the implementation is on going.
The S & T Dec 07 balance has decreased with 12.5%. Monthly deductions have been implemented.
Currently deductions from officials’ salaries are still made in installments as per section 34 of the Basic Conditions of Employment Act. It states that the total deduction must not exceed 25% of the employee’s net salary. From November 2007 deductions are being made from officials’ service bonus and other amounts due to them.
Age Analysis report is attached as Annexure B.
The debt has decreased with 12.87% since April to December 2007
Out of Service debtors: Finance is in the process of issuing a tender to appoint a Service Provider that will assist with tracing and recovery of debt from ex-employees. A memo requesting approval to appoint the debt collector is submitted to the CFO. An amount of R1,3m was recovered from pensions in the current fin. year .
In-service debtors: Letters signed by the NDPP were sent to all senior management, from level 13 to 16, who have debts. All other levels will be submitted to the respective Heads of BU’s by 10/01/2008. The lists will be accompanied by memos signed by the CFO.
Out of 1221 debt files we managed to update 977 files. Reconcilliations were also performed per debt file.
Monthly Reconciliations have been performed and the list of debtors report is the only report which does not balance. This report shows as if some debts are not settled. A matter was reported to NT and they indicated that the report will never balance with the other reports (copy of letter from NT is available).
  • Insufficient management of local and foreign donations as evident from the following:
  • Reconciliations of donor funds are not performed
  • Donor funds not utilized were not surrendered to the National Revenue Fund
  • Incorrect treatment of VAT
  • Supply chain process not followed for procurement
  • Several instances of non-compliance with the terms of donor agreements
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  • Send a circular informing staff about Donor Funding procedures.
  • Perform Donor Funding reconciliations.
  • Surrender Donor Funds not utilized to the Donor or National Revenue Fund.
  • Vat must be claimed from SARS and reported accordingly in the Financial Statements.
  • Monitor compliance with donor agreements.
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/ Benedicat Mogaladi / 30 November 2007 and ongoing / Circular 64 of 2007 was distributed.
Reconciliations between expenditure and the supporting doc’s have been performed and filed in each donor’s file.
Recommendation s were made to the CFO about surrendering remaining funds of 5 Donors. We are awaiting audit certificate from the AG for the FHR Donor.
Recieved refund of R210, 364 from SARS for Vat claimed.
Of 8 Donors 6 contracts have expired.
2.Material non-compliance with applicable legislation
Treasury Regulations (TR) were not complied with in the following respects
  • Prepayments were made where no contractual obligation required the payment as required in terms of TR15.10.1.2
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  • To prevent all future prepayments.
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/ Brian Graham / Andre Malan / 30 November 2007 & ongoing / SM’s report monthly to CFO on all the accounts / transactions and indicate delays where possible.
  • Payments to service providers was not in all instances made within 30 days as is required in terms of TR8.2.3
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  • Implement and monitor “date receipt stamps”
  • Decentralisation of processing of orders and payments to the regions.
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/ Benedicat Mogaladi / Tebogo Sethabela / 30 November 2007 & ongoing / Implemented and ongoing. There are still offices which do not comply.
Procure to Pay process will be reviewed.
  • A bank account was opened without obtaining the necessary approval from National Treasury as is required in terms of TR 15.10.3.1
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  • Develop a policy on sponsorships in respect of social clubs.
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/ Theo Leeuwschut / 31 January 2008 / The bank account opened was for the Golfday not the NPA. Therefore it was not necessary for the NPA to open the bank acc. WIP -Policy still to be design.
  • Fruitless and wasteful expenditure with an estimated value of R1.2 million identified as a result of the suspension of the P2P system was not reported as required in terms of TR 9.1.2 and was not accounted in the financial statements
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  • Suspended P2P and revert back to LOGIS.
  • Memo to Acting CEO for condonement of Fruitless & Wasteful expenditure (P2P).
  • Awaiting the implementation of IFMS approval from NT.
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/ Andre Malan / 31 March 2008 / CFO suspended service in March 2007.