EPIP AUDIT INTERVENTION PLAN 2018/2019

OUTLINE OF THE PRESENTATION EPIP Summary of Findings Audit Intervention: Current Projects Audit intervention: New Projects (Future)

EPIP summary audit Findings for 2017/2018 Non-disclosures in the Departmental Financials Project bank balances at the end of the financial year not recorded as pre-payments Irregular expenditure at the project level not disclosed in DEA’s financials Interest earned in projects not disclosed as additional revenue to DEA Unrelated costs such as marketing and others incurred at project level are included in infrastructure cost in the Department’s books Operational findings No PPE or WIP is disclosed in the project financials SCM processes not followed at project level No evidence that Service Providers/Suppliers were rotated on appointment

Audit Intervention measures on Old Contracts Issued before 31/03/18 Disclosure findings Monthly report to finance to be improved to include project bank balances The project audit templates to be reviewed to ensure that PPE and/or WIP, Bank Balances, Interest earned, fruitless, wasteful and irregular expenditure are disclosed for further disclosure in the Departmental financials The above to be included in the consolidated AFS by the Principal auditor Training of Implementer Accountants and Panel of Auditors Operational Findings Procurement planning and reporting templates to be developed and complied to Implementers will be required to develop procurement plans and monthly reports Officials and Implementers to be trained on SCM Conduct quarterly thorough admin inspections to ensure compliance Quarterly procurement reports to be submitted and signed off by the Directors EPIP will ensure that each Implementer advertises locally for establishment of panels and that service providers are rotated Deviations to be approved with proof of having tested the market No payment shall be processed by the PPM’s without the prerequisite proof of SCM having been followed based on source documents

Mid-term Audit: Proposed Approach Option 1 Appoint auditors from the panel as internal auditors rather than external auditors to ensure compliance AG comes as an external auditor Option 2 Two pronged approach to the appointment of auditors Appointment of auditing firms from the panel in the form of accountants to ensure compliance Appointment of auditing firms from the panel as external auditors

AUDIT INTERVENTION ACTION PLAN Task Responsibility Time Frames SCM Workshop with EPIP officials SCM, Risk Management, Internal Audit Conducted on 24 October 2018 Audit Process and Templates Workshop and Training CFO, Advisors, Epip, Central Finance, Deloitte, Panel Of Auditors, Implementers And And Their Accountants Conducted on 25 October 2018 Preparation and Auditing (Mid-Term) Auditors and Deloitte, EPIP and Central Finance November 2018 Submission for consolidation Deloitte November 2014 Submission to Finance

Audit Intervention measures for contracts entered after 31/03/2018: New Projects Panel of service providers for different categories (construction, project management, built environment professionals and training) were established following Treasury Regulation 16 A (SCM) Service providers to be appointed using quote system as independent contractors (not Implementing Agents) Specifications per project will be developed so as to source quotations Infrastructure projects will be designed and supervised by Built Environment Professional Consultants Construction will be done by CIDB accredited contractors and they will be paid separately so that Management Fees can be separate from construction costs Accredited Training and Environmental Protection Service providers shall be appointed through the quote system from the panel Participants to paid through Postbank Industry contracts such as JBCC, GCC and PROCSA will be used to avoid ambiguity on the relationship between DEA and the Service Providers No advance payments will be made as DEA will only pay for actual work done by the Service Providers.

Audit Intervention measures for contracts entered after 31/03/2018 New Projects There will be no need for opening of project dedicated accounts, procurement guides, project financial statements and audits at the project level. Value for Money (VFM) or Performance audits to be conducted to confirm that project objectives were met as per agreed cost, quality and quantity. There will be a direct relationship between money transferred and WIP as the Department will only pay for actual work done. Need to reclassify the budget from Transfers to Goods and Services (Capital and Current) for payment of Service Providers. Wages or Beneficiaries stipends payable through Post Bank to remain as Transfers Infrastructure projects to be included in DEA’s books and be transferred following section 42 b process.

SCM Process – New Projects Advertisement for panels Establishment of a Bid Spec & Evaluation Committees Development of ToR/ Spec for each project Briefing Session for Providers Approval by the DDG Appointment of Bid Spec & Evaluation Committees ENLISTMENT & USE OF PANELS IMPLEMENTATION Source Quotations & Proposals Evaluation Evaluation Presentation to the DAC Presentation to the DAC Approval by the DG (Quantum) Enlistment and Publishing on Govt Gazette (E- Tender) Publication / Gazetting

RECOMMENDATION Note the two approaches (Current Projects & New Projects) Consider the new approach including budget reclassification to make accounting easy.