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CONSIDERATION OF REPORT OF PORTFOLIO COMMITTEE ON DEFENCE - STUDY TOUR TO JAPAN
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| CONSIDERATION OF REPORT OF PORTFOLIO COMMITTEE ON DEFENCE - STUDY TOUR TO JAPAN
The DEPUTY CHIEF WHIP OF THE MAJORITY PARTY: Chairperson, I move: That the Report be noted. Agreed to. The House adjourned at 12:17. __________ ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS TABLINGS: National Assembly and National Council of Provinces: Papers: 1. The Minister of Finance: (a) Annual Report of the South African Reserve Bank - Bank Supervision Department for 2002. (a) Government Notice No 743 published in Government Gazette No 25050 dated 31 May 2003: Appointment of members of the Amnesty Unit, in terms of section 23 of the Exchange Control Amnesty and Amendment of Taxation Laws Act, 2003 (Act No 12 of 2003). 2. The Minister for Justice and Constitutional Development: Strategic Framework for the Department of Justice and Constitutional Development for 2003-2006. COMMITTEE REPORTS: National Assembly: 1. Report of the Portfolio Committee on Safety and Security on International Convention on Prevention and Punishment of Crimes against Internationally Protected Persons, including Diplomatic Agents, dated 11 June 2003: The Portfolio Committee on Safety and Security, having considered the request for approval by Parliament of the International Convention on Prevention and Punishment of Crimes against Internationally Protected Persons, including Diplomatic Agents, referred to it, and having conferred with the Portfolio Committee on Justice and Constitutional Development, recommends that the House, in terms of section 231(2) of the Constitution, approve the said Convention. Request to be considered. 2. Report of the Portfolio Committee on Safety and Security on International Convention Against the Taking of Hostages, dated 11 June 2003: The Portfolio Committee on Safety and Security, having considered the request for approval by Parliament of the International Convention Against the Taking of Hostages, referred to it, and having conferred with the Portfolio Committee on Justice and Constitutional Development, recommends that the House, in terms of section 231(2) of the Constitution, approve the said Convention. Request to be considered. 3. Seventeenth Report of the Standing Committee on Public Accounts, dated 18 February 2003: The Standing Committee on Public Accounts, having sent a delegation of nine members to the Cape Town International Airport, the Customs and Excise Unit and the Cape Town Harbour on an Oversight Exercise, reports as follows: Delegation: Mr F Beukman - New NP (Committee Chairperson) Mr L Chiba - ANC Mr B Nair - ANC Mr T E Vezi - IFP Ms N Hlangwana - ANC Mr B Kannemeyer - ANC Ms K Mothoagae - ANC Mr R Mofokeng - ANC
Researcher - B Letompa. Auditor-General's Office - Mr A van Dyk and Mr D Titus.
Branch Manager - Mr J Malgas National Customs Expert from Head Office - Mr F Versfeld The branch manager briefed the delegation on the activities and processes that are followed at CTIA with regard to the Customs Unit. Members were allowed to visit and inspect the warehouse and the cashier's office. D. Concerns raised by members The following concerns, relating to the bill of entry, the clearance period, clearing agencies and customs and state warehouses, were raised by members: 1. The first concern was around the reason why technology was not utilised more to facilitate and improve the processes that had to be followed, with specific reference being made to donor goods. The delegation was told by the branch manager that his unit was in the process of rolling out an electronic system to improve service delivery. 2. A concern was raised regarding the extent to which actual inspections were performed to verify the contents of the containers against their documentation. The delegation learned from Mr Shabalala that approximately 400 to 500 transactions are performed on a daily basis, in respect of which between two and five per cent inspections coverage are achieved. This unit was in the process of appointing 24 additional staff members at the location, as at the time there were not enough staff members available to perform such inspections. 3. The view was expressed that if inspections performed ranged between two and five per cent on 400 to 500 daily transactions, it was clearly not enough. Furthermore, if Sars has promised to collect R10 for every R1 spent, why were more people not employed to improve the inspection rate? On this issue, the Committee was told that human resources shortages were being managed actively. 4. Another concern related to instances where vehicles were hijacked in South Africa and exported to Australia, because Sars (Customs) did not check exports. In this regard, the Committee suggested that Sars should become more involved in the inspection of exported goods by investing in hi-tech equipment to improve the number of inspections executed and to detect stolen goods before they leave our shores. E. Recommendations 1. The Committee noted that controls over reports for ships or aircraft inwards or outwards were inadequate. Documentation such as inward reports were not submitted to Customs and Excise before the arrival of a vessel, resulting in Customs and Excise not being aware of the vessel's arrival. The Committee recommends that stricter controls be implemented in respect of inward/outward reports. 2. The Committee noted that unresolved differences existed between the bills of entry and manifests. The Committee recommends that Customs and Excise attend to this as a matter of urgency and report back to it, within two months of the adoption of this report by the National Assembly, on progress made in this regard. 3. The Committee noted that controls over removal in bond/removal in transit were inadequate. The Committee recommends that when goods are removed to Botswana, Lesotho, Namibia and Swaziland, a removal-in-bond certificate be passed at Customs and Excise, indicating the final country of destination. These RIBs/RITs should be verified to ensure that the goods have in actual fact left the country and have not been entered for home consumption without paying duties. Furthermore, the Committee noted that controls over the receipt of terminal vessel out-turn (TVORs) were inadequate. The Committee recommends that this be addressed as a matter of urgency, as TVORs could be used by Customs and Excise as additional control measures to ensure that all inward/outward reports have been received, thus ensuring that Customs and Excise are aware of all vessels entering the control/harbour area. 4. The Committee noted that Break Bulk Goods were not acquitted at all. The Committee recommends that Customs and Excise verify the bills of entry and acquit them with the manifest to ensure that they are correct and correspond with what the shipmaster declared as having been discharged. However, the Committee noted that insufficient control existed over redirections or transhipments. It is therefore important that, after the arrival of the goods, the importer/clearing agent should either decide to off-load at the initial destination (ie Cape Town Harbour, where the duties are to be paid) or to redirect the goods to another harbour (ie from Cape Town to Durban, where the duties will be paid). 5. The Committee noted that control over the receipt of manifests was inadequate. Where control is not adequate, penalties are not levied, resulting in revenue being lost. The Committee recommends that the manifests be entered in a manifest register to ensure that the acquittal documentation is received within 40 days. If not, penalties should be levied. 6. The Committee noted that the bills of entry were not checked. The Committee recommends that tariff codes, weight, description of the goods and the calculation of VAT and duties be checked and verified to ensure correctness. The Committee also recommends that detected differences be addressed with a Voucher of Correction and that duties be collected. 7. The Committee noted that Sars was relying on the clearing agent's documentation. This was largely due to the fact that Sars did not have enough personnel available to perform physical inspections. If inspections performed ranges between two and five per cent on 400 to 500 daily transactions, clearly not enough coverage was achieved. The Committee recommends that Sars consider at least using Portnet as an agent in addressing its own personnel shortages. Furthermore, the Committee recommends that Sars become more involved in the inspection of exported goods by investing in hi-tech equipment to improve the number of inspections executed and to detect stolen goods before they leave South Africa's shores. 8. The Committee also noted that inland border posts were big risk areas and that the conditions under which border control personnel worked were unacceptable. The Committee recommends that more resources be made available to inland border posts and that the conditions for the personnel be upgraded, within the financial capacity of Sars. 9. The Committee, with regard to stop notes, noted that: (a) Outstanding stop notes were not followed up. (b) Controls over stop notes and registers were inadequate, as stop notes were removed from the registry. As a result, the register was incomplete and no reliance could be placed on the completeness of the stop notes. (c) Insufficient documentation was attached to the stop notes. (d) Insufficient segregation of duties over stop notes existed. The Committee recommends that: * This risk be adequately evaluated and addressed by obtaining additional manpower. * Access to the register be restricted to authorised personnel only and that each entry be made under strict supervision. * After stop notes have been finalised and inspected, a brief report be compiled, indicating the results of such inspection, and be attached to the stop notes. 10. The Committee noted that the seven-day grace period, in which the agent/importer should settle his or her account of the first deferment, overlaps with the starting of the next deferment. Furthermore, the Committee noted that no bonds were obtained to cover the deferment of VAT, although this makes up the greater amount of the deferment scheme. The Committee recommends that this matter be addressed urgently, as the bond held would not be sufficient, should the agent/importer default on the payment date. Cape Town Harbour (fuel levies) Observations and recommendations 11. The Committee noted that current losses claimed were not checked and reconciled. The Committee recommends that Sars address this deficiency as a matter of urgency, as the losses incurred would reduce duties payable to Sars. 12. The Committee noted that controls over documents and schedules were inadequate, thus leading to an account not having all the supporting documentation attached to it. The Committee recommends that Customs and Excise ensure that all supporting documentation is attached before an account is accepted for payment. 13. The Committee noted that no audits were performed at the oil companies. The Committee recommends that audits be performed by Sars to ensure that the production schedules, losses claimed, systems in use, etc, are correct so as to enable a certain level of reliance to be placed on the correctness of the accounts as received. 14. The Committee noted that it was not possible to reconcile consolidated accounts, due to oil companies borrowing oil supplies from each other in the case of shortages. 15. Furthermore, the complexity of fuel accounts makes it extremely difficult to verify, and Sars does not have the expertise, which makes it nearly impossible to verify fuel accounts. Cape Town Harbour (excise duties) Observations and recommendations 16. The Committee noted that the control over bonds and bond amounts were inadequate, as bonds held were in most cases not sufficient. The bond register was also not regularly updated, thus making reliance there impossible. The Committee is of the opinion that the actual bond should be sufficient to cover at least six months' average duty. Furthermore, bonds should also be revised annually and originals kept in a safe. 17. The Committee noted that there was little or no segregation of duties, as one official would be responsible for receiving the account, checking the account and receiving the payment. The Committee recommends that duties be segregated as far as possible to ensure greater accountability and control. 18. The Committee noted that controls over the DA32s and information schedules attached to the accounts were inadequate. 19. The Committee noted that the supporting schedules for each DA32 were lacking or not attached, making it impossible to verify their correctness. 20. The Committee also noted that losses were not verified due to the fact that supporting documentation to substantiate losses claimed were not attached, thus making it impossible to verify. The Committee recommends that Customs and Excise ensure that all supporting documentation is attached before an account is accepted for payment. 21. The Committee noted that excise inspections were not carried out on a regular basis, and that excise inspections were not done at large companies such as SAB, due to the complexity of the task at hand. The Committee cannot over-emphasise the urgent and increasing need for officials to intensify physical checks to curb the smuggling of goods, and recommends that inspections be carried out to ensure that the manufacturer comply with the Customs and Excise Act so that all productions are declared and duties are paid. Cape Town Harbour (State Warehouse) The State Warehouse is a premise that is provided for by the state for the deposit of goods, the safekeeping thereof and the duties thereon, thus ensuring compliance with the provisions of the Customs and Excise Act. If due clearance is not affected within 28 days, the containers are removed to the State Warehouse and offloaded. The goods are recorded in a State Warehouse register and a reference number is assigned. The owners of the cargo are informed of the location of their goods, as well as to effect clearance thereof. The goods will only be cleared from the premises if the appropriate rental has been paid. In the event where the goods are not cleared within the prescribed time, the goods are either placed on auction or destroyed, in line with current legislation. Concerns An explanation was sought with regard to the transparency in the process of auctioning uncleared goods. The explanation was that uncleared goods may only be sold after three months. Sars (Cape Town) has to obtain approval from its Head Office. After approval has been granted, the auction is advertised in the Government Gazette and in Sars' newspapers two weeks in advance, and a private auctioneer is appointed. An explanation was also sought as to whether Sars had a fraud prevention plan. The explanation was that all fraud cases are reported to the Sars Head Office. Various committees have been appointed, tasked to assist in preventing fraud, such as: * Penalty Committee - to review all mitigation forwarded by clients. * Tariff Committee - to ensure correct classification of goods. * Valuation Committee - to ensure that the correct value is declared at the time of import, which in turn influences the duty payable. F. Conclusion The chairperson concluded the visit by expressing his appreciation on behalf of the Committee to the Sars management team for the opportunity to visit the Sars facilities at Cape Town International Airport, Cape Town Harbour (State Warehouse) and Sars Head Office, and for the programme that was presented to members. A word of thanks also goes to DFID for sponsoring the visit and ensuring its success. Report to be considered. 4. Eighteenth Report of the Standing Committee on Public Accounts, dated 25 February 2003: The Standing Committee on Public Accounts, having visited the Magistrate's Court in Umlazi (KZN) and the Master's Office in Pietermaritzburg, reports as follows: A. Purpose The purpose of the visit to the Department of Justice and Constitutional Development by Committee members was to interact with the Department in pursuing particular matters contained within their finance reports. B. Background The Committee undertook the visits to selected courts during the week of 1 November 2002. The visits formed part of the oversight function that the Committee exercises to ensure that government policies are timeously and correctly implemented, that service delivery is taking place, that problem areas are identified and isolated and that mechanisms are devised to address them. The Committee sought to be briefed by the head of each respective office, members of management and heads of certain departments, varying from regional to magisterial level, as well as to conduct an on-site inspection. C. Umlazi Magistrate's Court The listing process conducted by the Department of Justice and Constitutional Development shows that the Umlazi Magistrate's Office is one of the 10 worst-run offices, from a financial management point of view. 1. Scope Four focused areas were identified, namely: (a) Financial management systems. (b) Cash office. (c) Information system. (d) Guardian fund. 2. Delegation Committee members: Ms N Hlangwana Ms C Dudley Mr B Kannemeyer Mr M Lowe Mr D Gumede Mr B Nair Members of Justice Department: Mr P Mtshali (Director of Finance) Mr M J Langenhoven (Regional Head) Mr D Govender (PWHC) Mr M Mjamba (Internal Audit) Mrs Z S Pienaar (Office Manager)
Mr K Dlamini Mr A van Dyk (OAG)
At 13:00, the payment office is closed. When the paymaster is finished with the payouts, she then hands over the payment voucher (J492) to the checking office. The paymaster will then balance in the afternoon, checking the cash payout against the cash balance. Cash left over is then handed over to Fidelity Guards for banking. 5. Problems Part of the problem in Umlazi is that clerks do not write up their books on a daily basis - it is easy for money to disappear. The other problem is that the staff members do not want to rotate - staff in offices do not want to move to other sections because they refuse to be given different responsibilities. Everything is done manually. Recommendations (a) Disciplinary action should be taken against those who refuse to be given responsibilities. (b) Staff should be rotated to ensure that they are not placed in a position where they can indulge in corrupt practices to the detriment of the public. (c) Multi-skilled employees are needed to deal with the changing environment, and the Accounting Officer should report to the Committee on this matter. (d) The speeding up of computerisation. 6. Observations - PERSAL/LOGIS Umlazi does not have access to PERSAL because they are not linked to the national network and they are not automated. This poses a very serious risk area, both in terms of personnel and stock. Although the office did look at the problem and was fully aware of the risks involved, the biggest problem, as indicated by the internal audit, was that there was no significant move towards creating the will to eradicate the problem. Fear of victimisation and of being threatened prevented them from taking appropriate action. Management identified the risks and provided reports to the National Office, but at present there is no movement towards implementing this because of budget constraints, a serious problem at most magistrate's offices. Before computers can be installed, there must be proper security in place, something with which the office is battling at present. Some computers were stolen, so all new computers were removed from the premises into a safe storage. In KwaZulu-Natal, none of the magistrate's offices have PERSAL. They only have viewer status to PERSAL, centrally controlled from the regional office. Forms are processed in one office and then go through the channels of supervisor, head of the office and on to the regional office for capturing. The Auditor-General's report highlighted the weaknesses in Asset Management. A physical count of all equipment has been done and submitted to national office to profile a national inventory for the Department. Recommendations (a) Disciplinary action must be more vigorous and it has to be done promptly. (b) There should be a request for additional budgeting for the identified risk areas. (c) Urgent implementation of computer systems. (d) Security should be upgraded. 7. Observations - cash management and cash control A key concern is that cash management is a weakness. Where one comes across problems, things are not being done properly or people simply do not record, or care about, daily activities. Six people work in the cash office. On Monday morning they go to the bank, where the cash is counted, taken over by Fidelity Guards, sealed by the cashiers and delivered to the office on a daily basis. Three people receive the money bags and two recording them. It is checked and then signed for. The office handles about R100 000 to R120 000 a day, three days a week (Tuesday, Wednesday and Thursday). The problem is the lack of infrastructure - drawers and cubicles are not locked and there are no bullet-proof windows for staff handling the cash. The staff handling the cash cannot leave their counters and have to stay there the whole day. D. Master's Office, Pietermaritzburg 1. Delegation: Committee members: Ms N Hlangwana Ms C Dudley Mr B Kannemeyer Mr M Lowe Mr D Gumede Mr B Nair Members of Justice Department: Mr P Mtshali (Director of Finance) Mr M J Langenhoven (Regional Head) Mr D Govender (PWHC) Mr M Mjamba (Internal Audit) Mrs Z S Pienaar (Office Manager)
Mr K Dlamini Mr A Van Dyk (OAG) During the said visits, the Committee sought to be briefed by the heads of the respective offices, conduct an on-site inspection and be briefed by employees. 2. General overview The office is responsible for the administration of: * Guardian's Fund. * Deceased's estates. * Appointments of insolvencies. * Appointment of curatorships. * Bonds security. At present the Guardian's Fund in Pietermaritzburg holds R454 million in trust, a substantial amount of money. Only 12 people are employed (with a minimum qualification of St 10) in the office, with no accounting or finance background. This clearly indicates high-risk areas in terms of financial control. Each and every financial transaction is recorded manually, which makes retrieval of the information difficult. The payment process is risky and is prone to major errors. There is a backlog of processed cheques, waiting for signature, verification or approval by the head of the department. The problem with the said process is that no-one is overseeing the work of the head of the department (supervising the cheques signed by the head). No internal auditors assist the department in the office. If estate/inheritance money is not collected within five years, the Master places it in the Government's Special Reserve Fund for a period of 30 years. At present they have 30 000 clients. The names of those outstanding beneficiaries who are entitled to claim and are not coming forward are advertised once a year in the Gazette. The Committee doubts whether there are proper checks and balances to track the money and the accumulated interest. Example: The process of handling estate money is as follows: * Post is received and given to Mrs Eichbauer to record on computer. * Post is given to six temporary workers to attach to cards. * Maintenance and inheritance cases are taken to Mr Van Wijk for approval. * Payments are then processed by Ms Thandeka, Mlaba, Laura, Kim, Kavitha, Dees and Matilda, and are checked by Mr Van Wijk, Kim or Kavitha. All payments are recorded in the Abstract Book and in the Cash Book by Dees, and checked by Mrs Loubser and Hack. * Overcrediting is recorded on computer by Kim, (Z53s written by Thembeka or Prudence). * Z53s, J341s and cheques are posted and all registered mail is recorded by Thembeka. 3. Recommendations (a) The Guardian's Fund needs to employ people with a financial background who can effectively and efficiently deal with the early problems, and the Accounting Officer must report to the Committee on what steps are taken to ensure that people with a financial background are employed by the Department. (b) Urgent implementation of an information system that will assist the office to handle R454 million effectively and serve their 30 000 clients efficiently. (c) The office must also use national media to inform the public, as well as community newspapers, written in a language that everyone is able to understand. (d) Staff must be enabled to understand the cycle of work. E. Conclusion The Committee should follow up with other site visits to ensure that its recommendations are implemented by the offices concerned. The Committee would like to extend a word of thanks to DFID for making financial assistance available to undertake the visits, and to the Department and its officials for their co-operation. Report to be considered. 5. Nineteenth Report of the Standing Committee on Public Accounts, dated 25 February 2003: The Standing Committee on Public Accounts, having sent a delegation of four members to the Mdantsane Magistrate's Office and to the Grahamstown Master's Office on an oversight exercise, reports as follows: Mdantsane Magistrate's Office Delegation: Mr F Beukman - New NP (Committee Chairperson) Mr P Gerber - ANC Ms K Mothoagae - ANC Mr R Mofokeng - ANC Secretariat - Ms N Madide and Mr G Dixon. The group was well received by the following management team in Mdantsane: Adv N Cetywatyo - Regional Head Mr D Roux - Human Resource Director Ms M Nyumase - Finance Manager Ms Gqiba - Chief Magistrate: Mdantsane Ms Elliott - Office Manager: Mdantsane Ms Siqendu - Internal Audit A. Introduction On 1 November 2002, the delegation undertook the visit to the Mdantsane Magistrate Office to display an interest and provide a presence from the political perspective that a serious effort was being made to understand the unique and difficult circumstances under which the Department of Justice and Constitutional Development (the Department), especially Mdantsane, operates. The visit followed a Committee resolution on interaction with the Department regarding progress and implementation of financial management systems and compliance with the PFMA, as well as a hearing on the Auditor-General's Report on the Department of Justice and Constitutional Development. B. Purpose of visit The Department is facing problems, ranging from financial misconduct and maladmistration to corruption by officials. The purpose of the visit was to provide the Committee with insight on issues relating to: * Method of work * Segregation of duties * Financial Management Systems (FMS) * Cash office control * Staff complement * Information systems. The Committee wishes to further improve both its efficiency and effectiveness in respect of oversight. C. Concerns raised by Committee 1. Staff complement (a) One Chief Magistrate, assisted by a Senior Magistrate and seven Magistrates. (b) Two Regional Magistrates. (c) One Senior Prosecutor, assisted by nine Prosecutors. (d) One Assistant Director (Office Manager), assisted by two Supervisors and 25 Administration Clerks, Typists, Telkom Operators, etc. (e) One Principle Court Interpreter, assisted by Court Interpreters. (f) 24 Cleaners. 2. Human resources (a) Poor performance led to an enquiry in respect of the Office Manager and Middle Managers involved with financial matters. (b) Lack of competent staff. (c) Removing of staff not able to perform. 3. On the issue of adequate staffing, the view was expressed that there was not enough expertise, given that the office had to deal with all problems from the former Ciskei as well. 4. Other issues that members and the management discussed: (a) Control Personnel Officer (Office Manager) not up to standard (b) Middle Management not up to standard (c) Clerical staff, especially those dealing with finances and maintenance, not up to standard (d) Training of staff in respect of cash hall, vote account, new Maintenance Act, human rights, equity court, provisioning and administration; (e) Transformation in Magistrates Courts, anticorruption awareness, Small Claims Court, clerk of criminal court not up to standard (f) Institution of disciplinary measures, where applicable, not up to standard (g) Noncompliance with prescripts (h) Lack of proper management internal control (i) Lack of physical security and access control (j) Lack of segregation of duties (k) Missing records (l) Difficulty in reconciling the deposit account before change-over to the new Trust Account in April 2000, which led to both intentional and nonintentional misstatements of accounting records (m) Misappropriation of State money (n) About 700 inactive maintenance cards not being followed up (o) Difficult to reconcile the vote account and to monitor vote account reports on a monthly basis (p) Payments to Sars were not made. D. Recommendations 1. The Committee noted that a "rolling stone" project team and a task team from the Regional office had visited and assisted all the sub-offices with the major problem of balancing money in trusts. The Committee recommends that the management report to it on their progress within one month of the adoption of this Report by the National Assembly. 2. The Committee noted that Human Resources followed up all cases of misconduct and that there has been some staff re-shuffling and transfers. A new control officer was appointed at the end of 2001. The Committee recommends that the management of Mdantsane Magistrate's Office deal with their staff complement as matter of urgency. 3. The Committee noted that the office of the CFO is currently piloting the outsourcing of cash management in cash halls in order to circumvent the theft of trust money. The Committee recommends that progress be reported to it within one month of the adoption of this Report by the National Assembly. 4. The Committee noted that two officials from the regional office have been checking the old vote account records not filed, so as to determine whether they were ever captured onto the system or not, and also to determine which vote account transactions needed to be journalised. The Committee recommends that progress on the capturing of votes be reported to it within one month of the adoption of this Report by the National Assembly. 5. The Committee recommends that all offices have security doors/burglar bars fitted as a matter of urgency. 6. The Committee recommends that the Regional Office make every attempt to update the Asset Register, and report on progress. 7. The Committee recommends, as a matter of priority, that the management appoint a Loss Control Officer. E. Conclusion The Committee's main concern was the lack of communication between the CFO of the Department of Justice and the management of Mdantsane Magistrate's Office, which impacted on the effectiveness and functioning of the office. The Committee recommends that the Portfolio Committee on Justice and Constitutional Development be informed in order to try and assist with improving the situation as part of its oversight duty. Grahamstown Master's Office: Administration of Guardian's Fund The delegation was welcomed by: Mr S S Moodley - Master of Grahamstown Mr Leon Keyter - Assistant Master: Grahamstown Mr K van der Merwe - Project Manager: Master's National Office Ms Mary Clayton - Chief Administrative Clerk
The group also needed to know under whose the Fund was administered in the former TBVC states and what steps were taken to hold anyone accountable for the maladministration that took place with respect to the Guardian's Fund. B. How Guardian's Fund works The Master's Offices receive funds from various sources. These funds are deposited and credited to Control Accounts. Payments in the form of maintenance and interest are made to beneficiaries and to SARS for funds belonging to the State. While the Fund was being administered within the TBVC states, there appeared to be no suitable accounting systems and procedures in place to effectively and efficiently run it. The system was primarily a card system that was opened for each individual account. Interest, deposits and payments were reflected on the cards and were calculated by hand. The Fund, after being transferred to the Grahamstown and Pretoria Master's Offices, was upgraded to a computerised system, to be implemented in February 2003. The overall responsibility for the Fund at present lies with individual Master's Offices, but the post of National Director of the Guardian's Fund has been advertised and is to be filled in February 2003. The responsibility for the Fund prior to 1994 was that of the individual Masters in Umtata and Bisho. C. Problems associated with Guardian's Fund The reconciling of figures was calculated by hand and was done by unqualified people, which led to discrepancies in the information-capturing system. The Fund was understaffed and the correct expertise were not linked to the running of the Fund. In one instance, secretaries were allowed to calculate and record interest in respect of the individual cards. Coupled with the fact that the calculations were time-consuming, this resulted in numerous discrepancies, mistakes and omissions. The Guardian's Funds in the Bisho and Umtata areas had not been audited, at least not since the incorporation of the TBVC states in 1994. Integration of the Funds took place in 1996 and 1997, but no audit was done on the accounts due to the Auditor-General not having the authority to audit within the TBVC states. Due to an enquiry by the Portfolio Committee on Justice into irregularities that occurred at these Guardian's Fund offices, the Funds were subsequently transferred to the Master's Offices. The Bisho and Umtata branch was transferred to Grahamstown and the Mmabatho and Thohoyandou branches were transferred to the Pretoria Master's Offices. Shortfalls amounting to R3 470 817,14 were recorded for the Bisho Guardian's Fund, and shortfalls in respect of the Umtata Guardian's Fund amounted to R2 592 610,17. The corruption uncovered by the Auditor-General has been referred for investigation, subsequent arrests have been made and people have been charged. The account administration needs to be improved in order to tighten security measures in respect of the accounts. The Guardian's Fund accounts have been moved to a secure building in Grahamstown, supplied by the Public Works Department. A safe has been requested to house the cards and accounts. Upgrading of the systems and procedures to be computerised, will allow for tighter control measures to be implemented. D. Reasons for deficits 1. Overpayments, incorrect postings and irregular payments were made to persons not entitled to funds. 2. There was a lack of record-keeping in respect of direct deposits. As a result, beneficiaries' funds cannot be traced. 3. Acounting practices were not adhered to in respect of the administration of the Fund. E. Problems faced 1. Due to a lack of information, it is difficult to determine the exact trust obligation to beneficiaries and the Fund's obligation to issue maintenance payments and final payments. 2. Funding for a full-scale forensic audit by the Auditor-General is lacking due to the Department not being able to pay the expenses associated with the audit. 3. The Guardian's Fund is understaffed and the required level of expertise does not relate to the value of the job. F. Recommended solutions The Committee recommends that: 1. Funding be made available for the Auditor-General to apply a full-scale forensic audit to the accounts and entries. 2. The appointment of the National Director of the Guardian's Fund and the Accountant to each Guardian's Fund, along with adequate staff appointments, be expedited. 3. The surplus funds accumulated for the Guardian's Fund in the PIC account be investigated in order to rectify the shortfalls and deficits. 4. The computerisation of the Guardian's Fund be expedited and that appropriate checks and balances and access by authorised persons be put in place as soon as possible. Report to be considered. 6. Twentieth Report of the Standing Committee on Public Accounts, dated 18 March 2003: The Standing Committee on Public Accounts, having sent a delegation of 11 members to India, reports as follows: A. Background A delegation from the Committee undertook a study visit to New Delhi, India, from 16 to 24 November 2002. B. Objectives of visit 1. To meet with the members of the Public Accounts Committee (PAC), the Controller-General of Accounts (CGA), the Controller and Auditor-General (CAG) of India, and senior officials from the two offices, to share experiences and learn aspects of public finance management and financial oversight. 2. To observe how the PAC conducts public hearings and other business. 3. To investigate support and other resources the PAC receives from their Parliament. 4. To meet other roleplayers in public finance management and financial oversight in order to gain more insight in this field. C. Meetings with other role-players In addition to meeting government officials and Parliamentarians, the delegation met the following role-players: 1. Academics at the National Institute of Financial Management (NIFM). 2. Academics at the National Institute of Public Finance and Policy (NIPFP). 3. Academics at the International Center for Information Systems and Audit (ICISA). 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