RBIG WORKSHOP 1 Supply Chain and Asset Management

2 Presentation outline Audit findings (Basis for qualified audit opinion) Proposed solution for Asset Management Proposed solution for Commitments Way forward

3 Audit finding (Basis for qualified opinion Commitments The department did not have adequate systems in place to maintain records of Regional Bulk Infrastructure Projects (RBIG) commitments where the procurement of goods and services have been approved and/or contracted, but where no delivery has taken place at year end, which resulted in RBIG commitments being misstated by R97 million for the restatement of the corresponding figure for RBIG commitments. In addition, I was unable to obtain sufficient appropriate audit evidence for the corresponding amounts disclosed as RBIG commitments in note 22 to the financial statements and I could not confirm the disclosure by alternative means. Consequently I was unable to determine whether any further adjustments to RBIG commitments stated at R5.9 billion in the financial statements were necessary, the restatement was made in order to rectify a prior year misstatement. I was unable to confirm the restatement by alternative means. The department did not have adequate systems in place to maintain records of RBIG commitments where the procurement of goods and services have been approved and/or contracted, but where no delivery has taken place at year end, which resulted in RBIG commitments being misstated by R830 million. In addition, I was unable to obtain sufficient appropriate audit evidence for the amounts disclosed as RBIG commitments in note 22 to the financial statements and I could not confirm the disclosure by alternative means. Consequently I was unable to determine whether any further adjustments to RBIG commitments stated at R5.4 billion in the financial statements were necessary.

4 Asset Management The department did not have adequate systems in place to maintain records of additions to the buildings and other fixed structures for the current and prior year due to the status of the accounting records, which resulted in additions being misstated by R149 million. In addition, I was unable to obtain sufficient appropriate audit evidence due to lack of supporting documents for the amounts disclosed as additions for current year and prior year in note 33 to the financial statements and I could not confirm the disclosure by alternative means. Consequently I was unable to determine whether any further adjustments to additions stated at R1.5 billion in the financial statements were necessary.

5 Asset Management proposed solution Types of Assets 1.Work in Progress (WIP)  supporting documents -progress report -complete supporting documents 2. Completed  Supporting Documents -completion certificate -complete supporting document

6 Commitments proposed solution.  Challenges lead to qualification - Document control - Payment supporting documents - Duplication of supporting documents  Solutions - commitment on LOGIS (next financial year) - Develop Checklist - Documents be submitted to H/O monthly - Fourth quarter report

No.DESCRIPTION/REQUIREMENTYES/NO 1. Signed MOU/Funding Agreements 2.Approved Allocations/ BAS 3.Capex Approval/DBAC 4.Valid SARS Certificate 5.Authorized Request Form (VA2) PAYMENTS 1.Signed off IA invoice by Project Managers 2.Contractors invoices supporting IA claim 3.Contractor’s letter of appointment by IA 4.Payment certificate 5.MOU/Funding Agreements 6.Capex Approval

8 Way forward Finalise policy/guidelines for commitments. (Business process) Task team established at H/O Continuous communication and guidance to Regions by Head Office. Coordinate and monitor the processes and systems used to process, record, and report payments Perform quality control reviews / internal reviews to confirm that controls are effective and processes are efficient. Finance involvement in Projects and understanding of projects costs and processes. Regional visits already scheduled and will incorporate the above aspects and facilitating implementation of AG/IA recommendations. Monthly reporting of progress by Regions to Head Office with effect from 01 September October 2014 submit disclosure for interim correcting all prior year errors

9 THANK YOU