1. PUBLIC ACCOUNTS COMMITTEE
Mr L Ely
06 June 2018

2. Public Accounts Committee
The major areas for improvement, as identified by the Audit Committee, during the 2016/17 financial year – Departmental Response
The Committee takes cognisance of the fact that the Audit Committee noted major areas for improvement for the Department, during the performance of its work during the 2016/17 financial year. The major areas included the following:
District Support to Schools;
Teacher Absenteeism;
HR Planning - Schools Principals;
Transfer Payments - (Norms and Standards Funding of Public Schools);
Specialised Support; and
Disaster Recovery.
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3. District Support to Schools:
For this risk area, the Department had a total of seven (7) risk treatments (internal controls) so reflected on the Departmental Risk Register. In order to assist the Department with the risk, Internal Audit completed a risk assessment and issued the Department with a report which included twenty five (25) recommendations in order for the Department to deal with the risk more effectively. The Department and Internal Audit also agreed on implementation dates for each recommendation.
 The implementation status for each recommendation is as follows:
Nineteen (19) – implemented
Six (6) – in progress
Teacher Absenteeism:
For this risk area, the Department had a total of four (4) risk treatments (internal controls) so reflected on the Departmental Risk Register. In order to assist the Department with the risk, Internal Audit completed a risk assessment and issued the Department with a report which included fifteen (15) recommendations in order for the Department to deal with the risk more effectively. The Department and Internal Audit also agreed on implementation dates for each recommendation.
The implementation status for each recommendation is as follows:
Fifteen (15) – implemented
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4. Transfer Payments – Norms and standards Funding of Public Schools:
HR Planning – Schools Principals:
For this risk area, the Department had a total of three (3) risk treatments (internal controls) so reflected on the Departmental Risk Register. In order to assist the Department with the risk, Internal Audit completed a risk assessment and issued the Department with a report which included fifteen (15) recommendations in order for the Department to deal with the risk more effectively. The Department and Internal Audit also agreed on implementation dates for each recommendation.
 The implementation status for each recommendation is as follows:
Thirteen (13) – implemented
Two (2) – in progress
Transfer Payments – Norms and standards Funding of Public Schools:
For this risk area, the Department had a total of five (5) risk treatments (internal controls) so reflected on the Departmental Risk Register. In order to assist the Department with the risk, Internal Audit completed a risk assessment and issued the Department with a report which included five (5) recommendations in order for the Department to deal with the risk more effectively. The Department and Internal Audit also agreed on implementation dates for each recommendation.
The implementation status for each recommendation is as follows:
Five (5) – implemented
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5. The implementation status for each recommendation is as follows:
Specialised Support:
For this risk area, the Department had a total of twelve (12) risk treatments (internal controls) so reflected on the Departmental Risk Register. In order to assist the Department with the risk, Internal Audit completed a risk assessment and issued the Department with a report which included twenty five (25) recommendations in order for the Department to deal with the risk more effectively. The Department and Internal Audit also agreed on implementation dates for each recommendation.
The implementation status for each recommendation is as follows:
Six (6) – implemented
One (1) – in progress
Eighteen (18) not yet expired – still to be followed-up by Internal Audit
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6. The implementation status for each recommendation is as follows:
Disaster Recovery:
For this risk area, the Department had a total of one (1) risk treatment (internal controls) so reflected on the Departmental Risk Register. In order to assist the Department with the risk, Internal Audit completed a risk assessment and issued the Department with a report which included one (1) recommendation in order for the Department to deal with the risk more effectively. The Department and Internal Audit also agreed on implementation dates for each recommendation.
The implementation status for each recommendation is as follows:
One (1) – in progress
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7. Salary overpayments in respect of PILIR cases – Departmental Response
An application for PILIR is sent to the appointed Health Risk Manager in certain cases of sick leave and where the normal sick leave is depleted. A staff debt is raised for the days the employee was sick and the employee’s application for PILIR is not granted. In some instances the employees has already left the service or leave the service before the full debt is recovered.
The amount of R5.562 million represented debt written off as irrecoverable in the 2016/17 financial year mainly due to prescription. It is not possible to indicate what amount of this relates to PILIR as the debt system does not distinguish to that level.
In the current reporting period an amount of R7.967 million was written of that related to overpaid salaries. These overpayments include PILIR but the amount cannot be determined. The department has however implemented stricter rules regarding the management of the recovery of debt due to leave without pay (LWP) where the recovery is authorised and instituted by the Financial Accounting Directorate. The WCED is managing the Policy on Incapacity Leave and Ill-health Retirement (PILIR) by ensuring that only those who are entitled to temporary incapacity leave with pay are granted this, and that there is no unnecessary delay in assessing their eligibility or over-payments for those not entitled to such leave. Due to this intervention the take-on of new debt cases in the reporting year was less than the previous years. Staff debt (in-service and ex-employees) has reduced by nearly 13 million in 2017/18 compared to 2016/17.
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8. Assessing contracts to clearly stipulate payment terms.
Accrual payments that were made after 30 days of receipt of invoices – Departmental Response
The department agrees that there are invoices dated in March that was not paid prior to 31 March 2018 that would be considered Accruals. The practice is that invoices must be verified for correctness and certified as payable. The bulk of the invoices relate to infrastructure work performed that needs to be signed off by DTPW (implementing Agent) and the services for the school feeding programme where schools need to certify delivery notes. Payments could therefore not be processed prior to the 31 March.
The department is actively engaging with all the sections to investigate what barriers exists to process invoices within 30 days, and find solutions to curb such challenges. These include:
Assessing contracts to clearly stipulate payment terms.
Defining and stipulating what and when the WCED would regard an invoice as a “valid invoice” at the point of contract conclusion
Incorporating late payments into the performance agreements of all officials involved in the payment process to enforce accountability.
Utilization technology to enhance processes, such as the bulk payment system.
Enhancing awareness through circulars, training interventions and feedback sessions.
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9. 2017/18 Movement (Number of cases)
The status of the investigations that relates to irregular expenditure – Departmental Response
The response below refers to Irregular Expenditure that was reported as under investigation in the 2016/17 AFS amounting to R10 514 million.
2016/17
2017/18 Movement (Number of cases)
2017/18
Number of cases
Rand value R'000
New cases
Cases Confirmed
Cases Removed
Alleged fraudulent activities 1 11 -
Company suspended 46
3 956 8 27 12
2 391
Contract management 70
2 635 52 6
115
Insufficient quotes
117
3 396 23
107 33
199
Other 28
516
 Total
262
10 514 24 21
214 51
2 705
The investigations for 88% of cases that were under investigation as per the 2016/17 Annual Financial Statements have been finalised during the 2017/18 financial year.
It should be noted that the vast majority (91%) of 2016/17 cases reported as under investigation were in fact found not to be irregular expenditure. Only 9% of cases were confirmed to be irregular expenditure.
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10. The main reasons for the possible irregular expenditure cases, found not to be irregular, finalised in 2017/18 financial year are as follow:
Classification
Classification Description
Number of invalid cases
Main Reasons for Invalid Findings
Alleged fraudulent activities
Any fraudulent activity that took place during the procurement process. 1
2010 AGSA Management Report finding. The payment voucher was water damaged in the AGSA audit room during the audit period. Additional supporting documents were not received in the past and have been disposed.
Company suspended
Company suspended on the supplier database due to non-submission of required documents. E.g. Tax clearance certificate etc. 27
Companies were indeed registered at time of award/order. Outstanding required documents were submitted with the quote/tender.
Contract management
Correct procurement process not followed or supplier still paid when contracts had expired already. 52
Similarities were noted in bidding documents of different suppliers by the AG. No evidence of any irregularities were found. Supporting documents were initially verified incorrectly. Documentation was subsequently attached.
Insufficient quotes
The required number of quotations were not attached to the payment voucher.
107
IPS quotes requested from companies but less than three companies quoted. Approved Limited bidding. Quotations were obtained but only winning quote attached to payment. The other quotes were obtained but not retained. Payment relates to tender. Memorandum of Agreement was in place with the WCED institution (E.g. school)
Other
Various. E.g. No reason provided for not choosing the lowest quote, lack of supporting documents attached to payment, invoice and quote does not correspond etc.
Director's entertainment allowance does not require procurement process. Supporting documents attached subsequently.
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11. The main reason for the high amount of invalid cases reported is because the Department followed a two-phased quality assurance approach. The Directorate: Internal Control performed a first observation only without any thorough investigation. This is followed by a detailed investigation performed by the Directorate: Financial Accounting. There has also been a backlog of investigations relating to cases dated as far back as This backlog has been cleared during the 2017/18 financial year.
Some of the general challenges faced by the Loss Control Unit, delaying the finalisation of investigations were as a result of the fact that many of the cases related to incidents that occurred years ago, dating as far back as 2010.
All cases that were confirmed to be valid were reported in the 2017/18 AFS as required.
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12. 2017/18 Movement (Number of cases)
The status of the investigations that relates to fruitless and wasteful expenditure – Departmental Response
The response below refers to Fruitless and Wasteful Expenditure that was reported as under investigation in the 2016/17 AFS amounting to R2 019 million.
2016/17
2017/18 Movement (Number of cases)
2017/18
Number of cases
Rand value R'000
New cases
Cases Confirmed
Cases Removed
Catering 37
196 2 12 24 3 15
Overpaid Contract 1 -
Overpaid Transport 33
1 703
Interest 26 52 29 38 14 6
Other 67 31
134
2 019 34 57 88 23
The investigations for 96%of cases that were under investigation as per the 2016/17 Annual Financial Statements have been finalised during the 2017/18 financial year.
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13. Number of invalid cases
 It should be noted that the vast majority (73%) of 2016/17 cases reported as under investigation were in fact found not to be Fruitless and Wasteful expenditure. Only 27% of cases were confirmed to be Fruitless and Wasteful expenditure.
The main reasons for the possible Fruitless and Wasteful expenditure investigations finalised in 2017/18 financial year, found not to be fruitless and wasteful, are as follow:
Classification
Classification Description
Number of invalid cases
Main Reasons for Invalid Findings
Catering
Not complying with maximum rates allowed as per Catering circulars. 24
Catering was not for official gatherings, therefore the catering circular does not apply. Number of people were increased to include presenters and not only attendees. Charges that are not limited by the catering circular were also charged. Multiple venues/classrooms has been charged for.
Overpaid Contract
Paid more than stipulated amount on contract. 1
Payment was in terms of the contract.
Overpaid Transport
Paid more than calculated amount on learner transport contract. 33
Errors were found on the invoice submitted by the supplier. The WCED paid the correct amount in terms of the contract. Ascension Day, WCED paid for driving on public holidays when certain schools on a given route chose to be closed on the public holiday.
Interest
Interest is paid 3
Interest was charged on the invoice but the interest amount was not paid.
Other
Various findings. E.g. Cell phone claims not in accordance with prescribed rate etc. 31
Overpayments have been recovered.

15. Mr Leon Ely DDG: Corporate Services 021-4672537