Presentation of the DMV Annual Report for 2013/14 to Standing Committee on Public Accounts

(SCOPA) DG: Mr. T.E MOTUMI 03 March 2015

Together We Move South Africa Forward

Presentation outline• Aim of the presentation

• General Information

• Contextualization

• Financial Performance

• Human Resource Management

• AGSA`s Audit Findings

• Internal Controls

• Governance

• Mitigation Strategy of AGSA`s Audit Findings

• Conclusion

Aim of the presentation

To table the performance of the Department

of Military Veterans` Annual Report for the

period ending 31 March 2014.

GENERAL INFORMATION

Vision"A dignified, unified, empowered and self-sufficient military veterans’ community”Mission“To facilitate delivery and co-ordinate all activities that recognize and entrench the restoration of dignity and appreciation of the contribution of Military Veterans to our freedom and Nation Building”.ValuesService Charter that Underpins the Delivery of Services to Military Veterans We, as Department, pledge to: – Manage and administer the affairs of Military Veterans with dignity

and compassion and to ensure that the unique needs of all Military Veterans are provided for.

– This will be achieved through overall coordination and facilitation of the activities of Government and that of the private sector to ensure the provision of coherent assistance to all Military Veterans.

CONTEXTUALISATION

The DMV started operating independently with effect from 1 April 2013 and started to use the generic systems of Government as opposed to the DOD systems used in the previous Financial Year.

During the preparation of the annual financial statements the CFO could not execute his duties due to ill health. Consequently the responsibilities fell on the shoulders of junior finance personnel.

The National Treasury were approached to provide assistance but could not provide the required support.

The absence of leadership and guidance in the financial environment together with junior personnel coming from various departments contributed to the disclaimer.

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FINANCIAL PERFORMANCE

BASIS OF PREPARATION

• The Financial Statement have been prepared on a modified cash basis of accounting, except where stated otherwise. The modified cash basis constitutes the cash basis of accounting supplemented with additional disclosure items. Under the cash basis of accounting transaction and other events are recognised when cash is received or paid

COMPARATIVE FIGURES

• There was no record of comparative figures for Financial Year 2012/13 as the DMV operated within the DOD financial systems. Opening balances were not obtained from the DOD systems and this led to non-compliance with Sec 42 of the PFMA Act, handing over

certificate not signed by the two (2) Accounting officers.

Progress Report:

• All these balances were obtained and the 4th quarter Interim Financial Statement as well as the 2014/15 Annual Financial Statement will be corrected accordingly.

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Appropriation Statement FY 2013/14Programme Main Vote Final Appropriation Actual Expenditure

R`000 R`000 % R`000 %

Administration 139 469 139 469 39.69% 75 382 54.00%

Socio Economic Support 135 504 135 504 38.56% 60 772 45.00%Empowerment and Stakeholder Management 76 458 76 458 21.76% 29 796 39.00%

TOTAL 351 431 351 431 100% 165 950 47%

Root Causes:• Military Veterans Regulations Gazetted in February 2014 – (End of financial Year).• Slow staffing of vacant posts. • Dependency of the DMV on line function departments for delivery of benefits to MVs• The issue of the SCM and Finance elements residing at Proes Street whilst the Head Office is

situated at Hatfield

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Appropriation Statement Per Economic Classification

Economic classification

Main Vote R ‘000

Final AppropriationR ‘000 %

Actual Expenditure R ‘000 %

Compensation of Employees 80 602 80 602 22.94% 45 002 55%

Goods and services260 829 260 754 74.2% 118 033 45%

Payment of capital assets 10 000 10 075 2.87% 2 915 28%

TOTAL 351 431 351 431 100% 165 950 47%

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PROGRAMME 1: ADMINISTRATION

The under expenditure was mainly due to:

• the billing not received from the Department of Public Works for infrastructure and

property management services such as Head Office accommodation, rental, water

and electricity; Progress (The matter has been resolved and payments are

up to date);

• funds allocated for the procurement of furniture for the Head Office because the

appointed supplier could not deliver according to the specifications required;

Progress (Financial Management including SCM capabilities were

enhanced

through staffing, policies and training).

• possible irregularities which occurred in the tender process resulted in putting a

hold on the procurement of goods and services; Progress (Forensic audit

report highlighted specific weaknesses and corrective actions. Progress

is already evident by the appointment of the Committees: Bid

Specification Committee, Bid Evaluation Committee and Bid Adjudication

Committee

Financial under performance

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PROGRAMME 2: SOCIO-ECONOMIC SUPPORT

• The late approval of the Military Veterans Regulations (19 February

2014) resulted in under-spending relating to the budget allocation

for houses, healthcare support and other Military Veterans socio-

economic support benefits.

Progress (Good progress was made during the 2014/15

FY and the situation will improve even more during the

2015/16 reporting period.)

• The slow filling of the funded vacant posts –

Progress (A concerted effort is in progress to staff all

vacant posts (posts have been advertised, shortlisting,

interviews and appointments to be finalized by the end

of the 2014/15 FY.)

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PROGRAMME 3: EMPOWERMENT AND STAKEHOLDER MANAGEMENT

• The late approval of the Military Veterans Regulations (19 February

2014) resulted in under-spending relating to the honouring, skills

development and other Military Veterans support benefits.

Progress (Good progress was made during the 2014/15

FY and the situation will improve even more during the

2015/16 reporting period.)

• The slow filling of the funded vacant posts. –

Progress (A concerted effort is in progress to staff all

vacant posts (posts have been advertised, shortlisting,

interviews and appointments to be finalized by the end

of the 2014/15 FY.)

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HUMAN RESOURCE MANAGEMENTEmployment and Vacancies

Programme Number of posts on approved

establishment

Number of posts filled

Vacancy Rate Number of employees

additional to the

establishment

Administration 104 80 23% 4

Socio Economic Support

20 16 20% 15

Empowerment and Stakeholder Management

45 27 40% 2

Total169 123 27.2% 21

The approved posts according to the 2010 approved structure are 169.

The funded posts for 2013/14 were 135.

The posts filled out of 135 were 123 posts

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Employment Equity

Occupational category

Male Female Total

African Coloured

Indian White African Coloured

Indian White  

Legislators, senior officials and managers

37 2 0 1 23 0 1 0 64

Professionals 23 1 1 1 22 1 1 2 52

Technicians and associate professionals

0 0 0 0 0 0 0 0  

Clerks 6 0 0 0 1 0 0 0 7

Service and sales workers

0 0 0 0 0 0 0 0 0

Skilled agriculture and fishery workers

0 0 0 0 0 0 0 0 0

Craft and related trades workers

0 0 0 0 0 0 0 0 0

Plant and machine operators and assemblers

0 0 0 0 0 0 0 0 0

Elementary occupations

0 0 0 0 0 0 0 0 0

Total 66 3 1 2 46 1 2 2 123

Employees with disabilities

0 1 0 1 0 0 0 0 2

AGSA`s Audit Findings (1)

During the 2013/14 financial year the AGSA highlighted the following key aspects for

considerations:

Annual Financial Statements (AFS)

• A total of 146 reported findings.

• Disclaimer opinion.

• Qualified:-

- Goods & Services – (Misstatements and misallocations – numerous corrective

journals processed to prevent a recurrence)

- Accruals - (Processes in place to ensure accurate reporting, capacity to be

increased)

- Irregular Expenditure - (None for 2014/15 to date)

- Tangible capital assets - (Asset Register almost completely updated)

- Asset Management - (Asset Register almost completely updated)

- Opening balances and comparative figures of all items disclosed in the financial statements

- (Information gathered and will be corrected by 31 March 2015)

- Scope limitations - (oversight and spot-checks by A/CFO, Syscon and supervisors)

- Material misstatements – (oversight and spot-checks by A/CFO, Syscon and supervisors)

AGSA`s Audit Findings (2) Predetermined objectives

• Inconsistency of pre-determined objectives, indicators and targets (Availability of

Technical Indicators Descriptions (TIDs))

• Measurability of indicators and targets

• Reliability of reported performance information

Compliance

• Financial statements, performance and annual reports – (Improved policies

and procedures.)

• Expenditure management - (Improved policies and procedures.)

• Revenue management – (Creating a capability to manage debtors in the

Dept).

• Asset management – (Asset Register populated and barcoding almost

completed)

• Procurement and contract management – (Improvement in capability)

• Human resource management and compensation

AGSA`s Audit Findings (3)

Internal Control

• Leadership

• Financial an performance management

AGSA`s Audit Findings (4) Financial

statement item

Finding Impact R---current year

Goods and services – Communication

Payment vouchers were not provided for audit purposesAG could not verify the occurrence, accuracy and classification of expenditure on goods and services.

3, 738 000

Accruals The invoices, payment dates and delivery notes could not been provided for audit purposes. Furthermore, the invoices selected from the general ledger after end could not be traced back to the accrual listing. Therefore the existence, valuation, rights and obligations and completeness of accruals could not be verified

4, 658 000

Irregular expenditure

Understatement Various non-compliance with legislation, resulting in irregular expenditure has been identified which have not been included in the amount disclosed in the financial statements.

23 854 000 (R24M)

Capital and Minor Assets

The assets could not be traced to the asset register and the amount assets selected from the asset register could not be traced to the invoice. Therefore the completeness and valuation of capital and minor assets could not be verified.

2 915 000

AGSA`s Audit Findings (5) Financial

statement item

Finding Impact R---

Opening balances/comparative information

The department did not disclose opening balances and comparative information which was previously included in the financial statements of the Department of Defence.

---

Emphasis of Matter: Material MisstatementsConsultants Housing

Material misstatements relating to incorrect classification have been identified.

Basis of accounting

Material misstatements relating to incorrect classification have been identified, and not corrected in the AFS and supporting records not provided for audit purposes.

16 764 902 14 545 927

Expenditure Management -Fruitless expend.

Not identified and not recorded in the financial statements

Non-compliance with PFMA-Asset Management

Proper systems to safeguard and maintain assets were not implemented,

Internal Controls

Inadequate oversight responsibility regarding financial and

performance reporting resulted in:

material misstatements,

Limitation of scope

Non-compliance with regards to the annual financial

statements; and

absence of regulations, documented policies and procedures.

GOVERNANCE

The Audit Committee (AC) was satisfied with the quality of In-Year-Monitoring and monthly monitoring reports

The AC was satisfied with the quality of quarterly reports and where the department did not achieve the set targets, corrective measures where put in place

The AC has noted progress made by the department in relation to assets that were not disclosed as opening balance in the financial statement in compliance with Section 42 of the PFMA .

The AC has reviewed and noted the AGSA‘s final Management and Audit Report. The Committee agrees with many of these however they are in disagreement with regard to assets.

Mitigation Strategy of AGSA`s Audit Findings (1)

Implementation Plan

• The department has developed an implementation plan to address all issues raised. Post

mortem workshop held on 04 November 2014 - CSIR

• The plan clearly spell out what each manager must do with time frames.

• The Chief Audit Executive (CAE) is spearheading this process which is assessed by Audit

Committee (AC) which meet regularly.

• The DMV is currently using EXCO & MANCO meetings to monitor the departmental

dashboard.

• Engagements underway to solicit the services of a service provider to conduct an

Operation Clean Audit (OCA).

• Appointment of Acting CFO and secondment of SCM Head (Chief Director )

• Establishment of Bid Specification Committee, Bid Evaluation Committee and Bid

Adjudication Committee.

Mitigation Strategy of AGSA`s Audit Findings (2)

Implementation Plan

• Strengthened the EXCO & MANCO sittings - Compliance section

functional,

• Separation of functions between SCM and Finance,

• Progress is already evident by the appointment of the following

Committees: Bid Specification Committee (BSC), Bid Evaluation

Committee (BEC) and Bid Adjudication Committee (BAC),

• Asset register available wherein all assets have been captured.

CONCLUSION

The DMV requests SCOPA to

– Note that the DMV is in the process to review both the MV Act

and Supporting Regulations to address identified

shortcomings and to improve service delivery.

– Note the contents of the 2013/14 Annual Report on the

Departmental performance

– Acknowledge the progress made in correcting deviations

THANK YOU

Together We Move South Africa Forward