Third Party Funds Reforms and Enhancements

Manage maintenance beneficiary monies (local and foreign), Collect fines on behalf of government institutions (national, provincial, local and other authorities), The safe-keeping of bail monies on behalf of depositors, The safe-keeping of payments into court, and The collection of debts on behalf of government institutions through the State Attorney and deeds transfers on behalf of government. Introduction: The purpose of TPF 2

These transactions are recorded on JDAS4 or SAS which are mainly administration systems with the main objective of delivering a service to the public. As JDAS and SAS are case management systems it does not have sufficient financial capabilities and internal controls to allow for proper accounting principles in accordance with the Public Finance Management Act (PFMA) on TPF. The administration part of the systems allow for capturing of case details of parties, court orders, etcetera while the current financial part of the systems allows for the recording of receipts, payments and provide for reports on these receipts and payments, although no reliable consolidated reporting functionality is available on JDAS or SAS. Administrative arrangements 3

5,9 million receipt transactions (2010/11)5,8 million payment transactions, (2010/11) On average maintenance payments to beneficiaries per month Banking arrangements : 496 bank accounts at 4 major banking institutions Data management : 477 JDAS + 11 SAS databasesAudit disclaimer of opinion on TPF Department not been able to produce complete accurate and auditable financial statements since 1994/1995 Qualification of the vote because of TPFDetected and undetected Fraud ???? The TPF landscape 4

The Third Party Funds Portfolio: Receipts 5

The Third Party Funds Portfolio: Receipts – Proportional Allocations per Module The Challenge : Unclassified Receipts 6

The Third Party Funds Portfolio: Regional Receipts 7

The Third Party Funds Portfolio: Receipts – Proportional allocation per Region 8

The Third Party Funds Portfolio: Cash Payments 9

The Third Party Funds Portfolio: Payments into National Revenue Fund 10

The Third Party Funds Portfolio: Cumulative Shortages 11

PwC Elements of the AFS Project 12 AFS Validation 2. Codification 3. Queries 5. SQL Scripts 6. SQL Packages 4. Format of the AFS 9. Courier Services 7. Printing and Binding Services 8. Quality Control of AFS pack 11. Additional Software 12. Project Alignment / Education 13. Communication 15. Validation Process JDAS Data Bank Statements SAS Data SQL Developers Licenses CASEWARE 10. Additional Hardware 1. Data

The Third Party Funds Statement of Financial Position – Balance Sheet 13

14 Banking Arrangements: Spread and Costs (2010/11) Standard Bank (174) FNB (187) ABSA (130) Nedbank (5) Charges R198k Interest R113 Charges R12,4m Interest R12,3m Charges R6,9m Interest R6,3m Charges R8,1m Interest R8,5m

We are not alone – International (HM) Experience The courts service risks losing around £1.4 billion in uncollected fines and other financial penalties by not being able to properly account for them, according to the National Audit Office, which laid part of the blame with the beleaguered £444 million Libra system. In a report to parliament, NAO auditor general Amyas Morse said HM Courts Service has been "unable to provide proper accounting records supporting fines, confiscation orders and penalties". This meant he "could not give an audit opinion on whether transactions and balances were complete, proper and appropriately raised". Morse said: "Because of limitations in the underlying systems, HM Courts Service has not been able to provide me with proper accounting records relating to the collection of fines, confiscation orders and penalties. I have therefore disclaimed my audit opinion on its accounts December 2011 ” 15

Service delivery enhancement through decentralized EFT payment channel Launched in Worcester – August 2010 Reduced turn around time – payment with 24/48 hours after identification has been concluded Management oversight and control Full audit trial Segregation of duties Actual number of courts rolled-out : 103 Number of beneficiaries paid through this system; paid in April 2012 Planned roll-out to further sites: 100 courts in 2012/13 16

EFT Payments - Maintenance 17

EFT Payments – Proportional Utilization of Decentralized EFT Over 90 % of payments in the North West is directly in beneficiary bank accounts 18

19 EFT Decentralization – 2012 Priority Courts

20 The TPF Challenge Disclaimed financial statements No Historical Financial Reporting Vote Qualification Absence of a regulatory framework Weak Financial administrative systems Internal control and operational oversight shortcomings Inadequate Service Delivery Transaction Volumes Transaction Volumes 477 JDAS Databases 477 JDAS Databases Expected Shortages Cash Collections/ Payments Cash Collections/ Payments Unreferenced deposits Theft And corruption Theft And corruption

21 The TPF Roadmap for Enhanced Management of TPF …. Effecting the Change Step 1.Step 2.Step 3Step 4.Step 5 Business Case Baseline Financial Reporting Capicitation Business Process Review Legislative Review

22 Targeted outputs and defined outcomes Business case Sound decision- making Baseline Financial Reporting Creditable accounting and financial performance information Capicitation Trained personnel and additional appointments Business Process Review Enhanced operational efficiency New Service Channels Legislative Review Effective Governance Accountability Transparency Enhanced delivery of TPF Services Accountability Transparency Enhanced delivery of TPF Services

23 1. The Business Case  Conclusion of Compressive Business Case Option 1:Maintenance of the status-quo Option 2: Outsourcing through a PPP Option 3: Enhanced Public Sector Managed TPF  Selection: Option3 – Based on affordability and Employment consideration  Communication of selection to stakeholders ( Executive Authority, Parliamentary Committees and NT) Considerations: Value for Money, Affordability and Risk

24 2. Baseline Financial Reporting  Finalised a reporting framework for TPF  Annual Financial Statements 2009/ / Courts - 12 Corporate Accounts - 11 State Attorney Offices (Accounts) - 27 Million Transactions - Consolidation - Submission to AG for Audit  Interim Financial Statements – 2011/12 - All Accounts as above as at 30 November Submission for Internal Review – 31 March 2012  Annual Financial Statements – 2011/ June 2012

25  Personnel training - Comprehensive training manuals developed - Level 1 Training: 41 Senior Financial Practitioners and Senior Managers - Level 2 Training: 116 Area Court Managers, Directors: Court Operations, National and Regional TPF staff and Financial Operations Managers trained by SAIPA accredited accountants  Personnel Appointments - Funding secured for 45 finance practitioners at middle management and technical level - 25 contract appointments concluded whilst remainder advertised - 2 database administrators and 8 quality assurance and technical personnel appointed on six months contracts 3. Capicitation

26  Revised and Standardized Business Process - Concluded a review linking audit trails, daily reconciliations and operational performance - TPF processes standardized and process mapped - Financial operations managers and Area Court managers orientated on the standardized operating procedures Next Steps: Training all court managers and checking officers on standardized operating procedures  New Payment Channel - Introduced decentralized EFT payment system at courts with reduced cycle times - Full audit trial and segregation of duty (key requirement) -Reduction of payment time from10 days to within 24 and 48 hours after beneficiary has been identified 4. Business Process and Systems Review

27  Possible Legislative amendments to be considered - Amendments to Maintenance Act in relation to direct beneficiary payments -Amendment of Criminal Procedure Act to redirect local authority admission of guilt fines to Municipalities -Investigate options to amend legislation for refunding of bail (Electronic refund of bail) -Legislation Governing TPF 5. Legislative Review