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”. Values Service Charter that Underpins the Delivery of Services to Military Veterans W e, 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.

FINANCIAL PERFORMANCE BASIS OF PREPARATION 6 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 4 th quarter Interim Financial Statement as well as the 2014/15 Annual Financial Statement will be corrected accordingly.

7 Appropriation Statement FY 2013/14 ProgrammeMain VoteFinal AppropriationActual Expenditure R`000 % % Administration % % Socio Economic Support % % Empowerment and Stakeholder Management % % TOTAL % % 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

8 Appropriation Statement Per Economic Classification Economic classification Main Vote R ‘000 Final Appropriation R ‘000 % Actual Expenditure R ‘000 % Compensation of Employees % % Goods and services % % Payment of capital assets % % TOTAL % %

9 PROGRAMME 1: ADMINISTRATION The under expenditure was mainly due to: Progress 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 Progress (Financial Management including SCM capabilities were enhanced through staffing, policies and training). Progress 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

PROGRAMME 2: SOCIO-ECONOMIC SUPPORT 10 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 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 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.)

PROGRAMME 3: EMPOWERMENT AND STAKEHOLDER MANAGEMENT 11 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 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 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.)

12 HUMAN RESOURCE MANAGEMENT Employment and Vacancies Programme Number of posts on approved establishment Number of posts filled Vacancy Rate Number of employees additional to the establishment Administration %4 Socio Economic Support %15 Empowerment and Stakeholder Management %2 Total %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

13 Employment Equity Occupational category MaleFemaleTotal AfricanColouredIndianWhiteAfricanColouredIndianWhite Legislators, senior officials and managers Professionals Technicians and associate professionals Clerks Service and sales workers Skilled agriculture and fishery workers Craft and related trades workers Plant and machine operators and assemblers Elementary occupations Total Employees with disabilities

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 informationCompliance 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 FindingImpact R---current year Goods and services – Communication Payment vouchers were not provided for audit purposes AG could not verify the occurrence, accuracy and classification of expenditure on goods and services. 3, AccrualsThe 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, 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 (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

AGSA`s Audit Findings (5) Financial statement item FindingImpact R--- Opening balances/compar ative 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 Misstatements Consultants 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 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 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

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