1. DEPARTMENT OF SOCIAL DEVELOPMENT
PROGRESS ON THE AUDIT OUTCOME FOR THE 2008/2009 FINANCIAL YEAR
24 FEBRUARY 2010

2. CONTENT Purpose Emphasis of matters Other matters Matter of Governance
Recurring Items

3. PURPOSE
The purpose of the presentation is to highlight the progress made with regard to the Audit Outcome for the 2008/09 financial year.

4. EMPHASIS OF MATTERS Flow of funds: Basis of accounting:
The current flow of funds model for social assistance grants remain in place, also for the 2010/11 financial year.
SASSA is responsible for the administration of these funds, and the Director-General of the Department of Social Development remains accountable for the expenditure and the disclosure thereof in the annual consolidated financial statements.
Thus, any shortcomings and or failures in the internal control systems of SASSA in respect of the area of social assistance transfers may have a negative effect on the financial statements of the Department of Social Development.
Basis of accounting:
The Department prepare the annual financial statements in compliance with the directives of the National Treasury.

5. OTHER MATTERS: Social relief of distress:
During the 08/09 financial year, the South African Social Security Agency was tasked with the distribution of the Social Relief of Distress (SRD) grant (which consisted of either food, food vouchers, school uniforms or cash) to alleviate general poverty.
The following shortcomings existed within the processes of the Agency in distributing the grant to the intended beneficiaries:
Documentation critical to the application for the grant was not complete.
It could not be confirmed in all instances that the correct person received the correct amount of relief aid at the correct time and place.
Effective controls in respect of food vouchers and aid purchased to be distributed were not implemented.
Beneficiary applications were captured offline which could have resulted in unnoticed erroneous duplication of payments.
Distribution of relief aid was not performed in a standardised or consistent manner in all provinces.
Supply chain management requirements, were not adhered to in the procurement of relief aid.

6. OTHER MATTERS [Cont.] Social relief of distress [Cont.]:
Progress made:
Non compliance with supply chain processes:
SASSA is finalizing the roll-out of the voucher system.
In the interim, Regions are utilizing the supplier database to obtain quotations from suppliers within their thresholds of R
A register is maintained for the issuing of assistance to beneficiaries.
Procurement prescripts adhered to.

7. OTHER MATTERS [Cont.] Social relief of distress [Cont.]:
Progress made:
Inadequate controls:
A system is in place to ensure the matching of invoices and till slips with quotations.
Control measures are in place to ensure that application forms are duly completed.
No stock holding, procurement takes place as and when beneficiaries are identified.
Control measures are in place to ensure the safeguarding of voucher books.
All Regions are complying to procurement prescripts.

8. OTHER MATTERS [Cont.]: Social assistance grant debtors:
Repayments made by the grant debtors originated from multiple sources, including bank deposits. Numerous cash deposits contained inadequate references which resulted in unallocated receipts not being allocated to debtor accounts. The Department is in consultation with the National Treasury regarding this issue.
A single dedicated financial debtor system did not exist for the management of grant debtors.
Due to the circumstances affecting the majority of the debtors (being poverty stricken individuals), many of the recorded debtors may not be recoverable or recovery may not be cost effective.

9. OTHER MATTERS [Cont.]: Social assistance grant debtors [Cont.]:
Progress made:
Unallocated receipts:
Guidelines have been issued to all SASSA Regions to minimise unallocated receipts in future.
A process is underway to clear all unallocated receipts, of which the bulk will be done before the end of April 2010.
Any un-cleared amount will be written back to income after Treasury approval has been obtained.
Single social assistance grant debtors system:
SASSA is administering all social assistance grant debtors on behalf of the Department in accordance with the directive of the National Treasury. .

10. OTHER MATTERS [Cont.]: Social assistance grant debtors [Cont.]:
Progress made:
Recoverability of Grant Debtors:
An integrated process is underway to determine the recoverability of all outstanding social assistance grant debtors in consultation with all role-payers.

11. MATTERS OF GOVERNANCE
Material adjustments were made to the financial statements after being submitted. The reason for this was due to the insufficiency of human resources within the finance section of the Department.
Progress made:
A more detailed and comprehensive action plan has been developed to ensure the timeous submission of inputs by the different role-players and amendments to figures, to avoid a similar situation.
The financial management and administration capacity in the Department is strengthened through the filling of vacant posts and ongoing capacity building of existing staff.

12. RECURRING ITEMS Closing of funds:
The Angola Appeal Fund and DRC Humanitarian Appeal Fund accounts were closed.
The High School Vorentoe and Disaster Relief Accounts have not yet been closed. The closure of these accounts are subject to the approval of the new Disaster Relief Bill.
Discrepancies between the Appropriation Statement and the Statement of Performance:
The discrepancies were mainly due to the late changes to the final figures.
The more detailed and comprehensive action plan developed should ensure the timeous submission of inputs by all role-players and amendments of figures, to avoid a similar situation.
The strengthening of the financial management and administration capacity of the Department should assist to avoid a similar situation in future.

13. RECURRING ITEMS [Cont.]
Investigation of irregular expenditure.
The processes have been reviewed and enhanced to ensure that cases are assessed and dealt with on a continuous basis.
Almost half of the number of possible irregular expenditure cases recorded are in the last stages of investigation, before a final recommendation will be made.
Annual Financial Statements not submitted by NPO’s:
An NPO Capacity Building Framework has been developed.
The Community Development Practitioners employed by the nine provincial Departments of Social Development have been trained to assist with local queries and or compliance matters related to the registration and compliance by NPOs.
The development of an electronic on-line registration and compliance system is underway.
The capacity of the Registration and Compliance Unit in the national Department of Social Development is in the process to be strengthened through the creation and filling of new posts. 13 13

14. RECURRING ITEMS [Cont.]
Occupational Health and Safety: Meetings and Members:
Members have been appointed in writing and meetings are held more frequently.
Misallocations to general ledger accounts:
Training has been offered to staff on the interpretation and application of the new Standard Chart of Account classifications.
As far as possible, misallocations are minimized, and if needed corrected on an ongoing basis. 14 14

15. RECURRING ITEMS [Cont.]
Creditors not paid within 30 days:
The processes in respect of the administration of the receipt and payment of invoices have been reviewed and is being improved.
Improvements have been made to pay creditors within 30 days after the receipt of an invoice, but is impacted by the budget pressures experienced.
Asset Register and Physical Assets don’t correspond:
Reconciliations of asset movements are done on a regular basis.
The Department is in the process to strengthen the capacity of the Asset Management Unit through the filling of vacant posts.
The required stocktaking plan for fixed assets has been developed and in process of implementation. 15 15

16. RECURRING ITEMS [Cont.]
IT Assets take long for repairs:
Regular follow-ups are done with service providers to fast track returns of IT Assets sent for repairs.
Ministerial Hand Book (fringe benefit & expense claims):
The Department of Public Service and Administration and the South African Revenue Service were consulted for advise, and feedback were received.
The feedback received will be submitted as a follow-up management response to the Auditor-General for consideration. 16 16

17. RECURRING ITEMS [Cont.]
Financial Reporting Systems:
Inadequate user account management procedures (BAS, LOGIS, PERSAL)
Inadequate system configuration and monitoring of user activity
Users access not periodically reviewed.
An audit has been conducted to clear the unused/inactive accounts.
National Treasury will be consulted to address the transversal system configuration processes.

18. THANK
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