1. REPORT ON FINANCIAL PERFORMANCE AND AUDIT OUTCOME
Portfolio Committee
4 October 2017

2. Content Guardian Fund President’s Fund
Third Party Funds / Justice Administered Funds
Voted Funds
Challenges

3. Guardians fund AFS – Key observations 2016/17 Financial Year
Audit Opinion - Unqualified - Clean
Overall status of the fund
Total Assets – R12.1 Billion
Total Liabilities – R11,1 billion
Accumulated surplus - R1,061 billion
Moneys received from beneficiaries – R1,597 billion
Payments to beneficiaries – R1,414 billion

4. Guardians fund Key observations 2016/17
10% growth in fund value - R12,1 billion compared to R11,06 billion in 2015/16
26,1 % Growth in investment revenue - R 929,7 million compared to R737,1 million in 2015/16
Interest rate paid to beneficiaries in 2016/17 – 9 %
Interest Distribution to beneficiaries – R 825,5 million compared to R614,4 million in 2015/16
Surplus for the year – R107,8 million
Number of beneficiary payments –
Unclaimed monies paid to NRF – R2,9 million

5. GUARDIAN FUND INVESTMENTS
PIC Investments at year end: R11,8 Billion
0 -3 months R5,000,668,397
3-6 months R2,424,494,527
6-9 months R1,112,688,548
9-12 months R3,239,005,187
Money market R55,696,879
Other Financial Institutions Investments at year end: R126,1 million
PIC Trading Cash: R189,967 million
Management fees: R3,2 million

6. President’s Fund Audit Outcome – Unqualified & Clean
Balance in Fund: R Invested with PIC Money Market
Payments from Fund to Date: R
Individual Reparations: R
Exhumation and Reburial: R
Higher Education (R70200): R (2015: 167/ 2016:159)
Basic Education (R44820): R (2015: 272/ 2016:576)

7. TPF Portfolio
Audit Opinion – Qualified based on prior year corresponding figures
2016/17 figures unqualified
Performance:
R5.3 billion payment and receipt transactions processed
(13% State Attorney; 11% Agency Collections;76% Justice Administrated Funds)
Ringfenced Amounts: Reduced from R46,6million to R16,3million

8. FINAL APPROPRIATION VOTE ACCOUNT 2016/17

9. Audit Outcome 2016/17 Qualification:
Non-implementation of National Treasury Guideline published in January 2017 on Modified Cash Standard on Work in Progress for Infrastructure.
521 projects registered with DPW. Some projects started more than 10 years ago in terms of planning. Requirement for componentisation of project costs supported by invoices. Standard process not in place between user departments and DPW. Previous National Treasury Instructions not repealed and in contradiction.
Inconsistency in interpretation of requirement between Accountant General, Auditor General and Department. Meeting on 9 October 2017 to find way forward.

10. EMPHASIS OF MATTER
Significant uncertainties on Contingent Liabilities of R7.1 billion claims against the Department – no provision created
OTHER MATTERS
Material Misstatements Corrected
Contingent Liabilities and Commitments relating to SCM Contracts
Action by Management Currently
Filling of critical vacant posts currently & additional training
30 Day Payments
Non-compliance increased from previous year due to the following matters outside the control of the Department
Implementation of Centralised Supplier Database (CSD) (Challenges experienced during implementation period on change in names and banking details and differences on existing orders from May 2016 until July 2017)
Upgrade of IT infrastructure at the NT impacting on interface between systems (Impacted from December 2016 until May 2017)

11. Procurement and Contract Management
81 Quotations awarded to bidders who did not submit declarations of whether they were employed by the state or connected to any person employed by the state
This matter to be addressed when registering on CSD at the NT
Going Concern – Bank Overdraft and Claims against the State
R1.04 billion (SAPS and Department of Health contribute to just under half of this amount)
Consequence management
In some instances the AG disagreed with the decision taken by the Supervisor in terms of disciplinary action
Timeliness of consequence management a challenge
The Department is engaging with the AG to determine the way forward in so far as finding the right balance

12. Fruitless and Wasteful Expenditure
4 Mobile units deployed not in operation as yet R1.1 million
Various challenges - from clearance certificates to electricity connections
Irregular Expenditure
Current year R29 million added to register for investigation in relation to deviation from procurement policy and procedures. According to our subsequent investigations approximately R15 million in our opinion not irregular.
Potential Irregular expenditure not on register and currently being investigated R102 Million (Interest not declared R27 million and current Service Providers under review for non-compliance to mandatory contract requirements R63.8 Million).

13. Possible Fraudulent Declaration by Suppliers Whose Members are Employed by the State
Department’s Response:
The department cannot confirm the accuracy of the information declared by a supplier on the SBD 4 form.
The only system available to departments is the Central Supplier Database (CSD) which provides limited information.
The Department does not have access to the verification systems of other institutions such as the one utilized by Auditor General to detect all state employees, including those at both national and provincial level including municipalities and public entities.
It is the responsibility of National Treasury to ensure that information on CSD has been verified and is accurate. The system must have controls in place to prevent such occurrences.
National Treasury Central Supplier Data Base (CSD):
CSD does not fully support the detection and prevention of external remunerative work.
There are no preventive controls in place to block registration of government officials on CSD.
CSD does not detect if a supplier is related to an employee in government and indicated as such in the report.

14. Possible Fraudulent Declaration by Suppliers Whose Members are Employed by the State
Corrective Action taken by National Treasury
From 1 July 2016 the Central Supplier Database has made provision for directors who are State employed to be flagged (NB – this flag however is subject to limitations such as to only reflect persons paid via PERSAL).
Corrective Action to be taken by department (SCM):
Refer all 78 cases to National Treasury to investigate and consider restriction of suppliers.
Request National Treasury to strengthen controls on CSD to:
Prevent government employees (currently employed) to register as suppliers on CSD to ensure compliance to Public Service Regulation (PSA) 13(c); and
Detect when a supplier is related or in business with a government employee and indicate as such on the CSD system.

15. Challenges
Budget cuts led to operational budget being reprioritised to:
Compensation
ICT & IJS justice related projects
Infrastructure
Vacancies not filled since September 2016 impacted on oversight control