RESPONSE TO THE FINDINGS OF THE OFFICE OF THE AUDITOR GENERAL FOR THE FINANCIAL YEAR ENDING 31 MARCH 2006

AUDITOR GENERAL’S FINDINGS MANAGEMENT RESPONSE QUALIFICATION 4. PROPERTY, PLANT & EQUIPMENT Asset management a. Certain assets could not be traced from the location to the assets register and vice- versa. b. Assets were incorrectly classified in the assets register PROPERTY, PLANT AND All assets were subsequently tracked and accounted for as at 31 July 2006. All assets were correctly classified as recommended by the Office of the Auditor General as at 31 August 2006

tagged and some were incorrectly tagged Continued.. c. A certain number of assets were not tagged and some were incorrectly tagged d. Assets which did not satisfy the definition of an asset as per AC123 were recognized as such in the financial statements. e. The useful lives and residual values of assets were not reviewed annually as required by AC123 All missing tags were identified and corrected as at 31 August 2006. All architecture fees and demolishing costs have, with the approval of the Board, been written off as at 31 August 2006 An independent sworn appraiser has been appointed to estimate the useful lives and to revalue all fixed assets as required by AC123.

6.1.2 Lack of Documented Policies and Procedures such as: Continued. .. EMPHASIS OF THE MATTER 6.1.2 Lack of Documented Policies and Procedures such as: (a) Cash management policy (b) Revenue and receipt policy (c) Purchases and accounts payable policy and procedure (d) Accounts receivable policy (e) Investments Policies and Procedures At the time of the audit the listed policies were in a draft stage as acknowledged by the office of the Auditor General and have subsequently been circulated to all Board members for approval

(f) Fraud Prevention Plan (g) Supply Chain Management Continued.. (f) Fraud Prevention Plan (g) Supply Chain Management Policy and Procedure (h) Local and International Travel Policy and Procedures (i) Fleet Management Policy and Procedure (j) Policy and Procedures in Dealing with Consultants (k)* Fixed assets Management Policy and Procedures At the time of the audit the listed policies were in a draft stage as acknowledged by the office of the Auditor General and have subsequently been circulated to all Board members for approval *Policy being drafted

6.1.2 Provision for Bad Debts Continued… 6.1.2 Provision for Bad Debts 6.1.3 Contract not signed This refers to the contract between the SADB and African Legend IT - consultants 6.2.1 Human Resource Plan This refers to a debtor who owed the Board an amount of R60 000.00. The debtor was handed over for legal action. Ordinarily, the Board does not carry debtors. The contract in question was signed on 31 July 2006 The Human Resource Plan is delayed by the transitional situation from the current Board to the new Regulator

6.2..2 Lack of a Performance Contract Continued… 6.2..2 Lack of a Performance Contract 6.3.1 Late budget submission 6.3.2 Incomplete strategic plan The contract of the accounting officer is to be re-drafted in line with the proposed new role of the Regulatory Body (i.e. the SAD&PMR). The budget was delayed due to the following negotiations with DME a. proposed reduction in service fees b. approval for retention of surplus cash The strategic plan has been kept on hold pending the finalization of the current changes anticipated

6.3.2 Lack of materiality Framework and Significant Framework Continued.. 6.3.2 Lack of materiality Framework and Significant Framework 6.3.4 Submission of Annual Financial Statements 6.4 GOING CONCERN The Board is currently considering various forms of Materiality and Significant Framework thresholds. The delay in the submission of the Annual Financial Statements was due to the fact that Board Members authorized to sign were out of town. The statements were delayed by 3 working days The going concern status will be resolved by the implementation of the amended legislation

-Thank You-