2013-14

Audit Outcomes

Audit report qualifications

Tangible Assets

The main contributing factors to the audit report paragraph relate to assets that the department owns, but have not been captured into the asset register. The assets were identified as technical publications and ground support equipment (relating to the aircrafts). There were also some assets within the machinery and equipment category that were found at the bases, but were not recorded in the asset register, as well as assets incorrectly valued.

Summary of errors:

Summary
Tangible Capital Assets / Assets could not be found on the asset register
Technical publications
Ground support equipment not found
Assets purchased during the year that could not recorded on asset register
Documentation supporting the values does not agree with the values in the asset register
Asset acquired through SDA not recorded at the correct value on the asset register

Intangible Assets

Intangible assets were identified which were not recorded on the asset register. The department did not correctly apply the reporting framework and the asset register and the asset disclosure note did not agree.

What must the department do to clear the qualifications?

Tangible Assets

·  The contracts relating to aircrafts (purchased as part of the SDP, including other systems (Rooivalk)), should be evaluated and analysed to identify the relevant ground support equipment. These assets should be bar-coded and recorded in the asset register.

·  All technical publications in the various Arms of Service should be identified, bar-coded and captured in the asset register. The department is currently in discussions with National Treasury regarding the disclosure of these assets.

·  Proper asset counts must be performed and ensure that the asset register is complete.

·  All assets must be supported by accurate valuation documents.

Intangible Assets

·  All intangible assets must be identified and recorded in the asset register.

·  The Finance Division must give proper accounting support to the section responsible for compiling the asset register. Furthermore, adequate training should be given to the Arms of Services and Divisions submitting inputs to the asset register.

·  Proper controls should be implemented and monitored to ensure that all Arms of Services and Divisions complete and submit their inputs to the register.

Possible areas of concern for 2013/14 audit

Tangible Assets

·  Major capital components / spares: National Treasury granted a departure not to disclose these assets in the prior financial year. The department in conjunction with National Treasury is currently in the process of initiating a benchmarking process with other defence forces worldwide on how to disclose these items.

·  Technical publications: According to the department, the disclosure of these assets will form part of the above benchmarking.

·  Ground support equipment: The department is currently in the process of addressing this matter.

Intangible Assets

·  The AGSA has not had sight of a detail action plan to address shortcomings identified during the previous audit.

Possible questions that could be raised

·  Is there a comprehensive action plan to address all the findings of the prior year? Does this include adequate accounting support and training on the report framework for Intangible assets? Is it monitored?

·  When will assets registers be submitted for audit?

·  Will these asset registers be accurate and complete?

·  Are there controls in place to ensure the accuracy and completeness of these registers?

·  What is the current status of the areas reported on during the 2012/13 audit? Have the register been updated?

·  What is the progress with the NT SSP relating to :

o  Capital spares

o  Technical materials

Predetermined Objectives

Findings reported in the audit report:

·  The reliability of information presented for significantly important targets with respect to the Force Employment Programme could not be presented.

Compliance with Laws and Regulations

Non compliance with the following laws were noted:

·  Treasury Regulations 3.2.2- The accounting officer did not ensure that an operational internal audit function was in place.

·  Public Finance Management Act section 77(a) - The audit committee did not consist of at least three persons.

·  PSR 1/VII/D.8. - Employees were appointed without following a proper process to verify the information made in their applications.

·  Public Finance Management Act section 38(1)(j) - The accounting officer transferred funds to entities without obtaining written assurance that the entity implements effective, efficient and transparent financial management and internal control systems.

·  Public Finance Management Act section 40 (1)(a) and (b) - The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records. Material misstatements identified by the auditors in the submitted financial statements and performance report were subsequently corrected and the supporting records were provided. However, the uncorrected material misstatements and related supporting records that could not be provided resulted in a qualified audit opinion on the financial statements.

·  Public Finance Management Act section 38(1)(c)(ii) and Treasury Regulation 9.1.1. - The accounting officer did not take effective steps to prevent irregular expenditure.

·  Treasury Regulation 16A6.1. - Goods and services with a transaction value below R500 000 were procured without obtaining the required price quotations.

·  Treasury Regulation 16A9.1(d) and the Preferential Procurement Regulations - Contracts and quotations were awarded to suppliers whose tax clearance certificates from the South African Revenue Services had not been submitted.

·  Preferential Procurement Policy Framework Act section 2(a) and Treasury Regulations 16A6.3(b) - The preference point system was not applied in all procurement of goods and services above R30000.

·  Contracts and quotations were awarded to bidders who did not submit a declaration on whether they are employed by the state or related to any person employed by the state/department and who may be involved with the evaluation and/or adjudication of bids.

Internal Control

Leadership

·  The department did not exercise sufficient oversight responsibility regarding financial reporting over capital assets, reliability of performance information, compliance and related internal controls. The department did not have sufficient monitoring controls over the overall process of reporting, and regular reviewing of information to ensure the accuracy and completeness of financial and performance information.

·  Management did not always have approved updated policies and procedures to guide management at the lower levels to ensure compliance with National Treasury disclosure requirements and the Framework for managing programme performance information.

Financial and performance management

·  Existing manual and automated controls were not designed to ensure adequate record keeping to support accurate and complete financial reporting on assets and reliability of performance reporting which is accessible and available, as required by National Treasury.

Governance

·  The department is still in the process of capacitating the internal audit component.

2013-14

Notes