The Treasury Regulations stipulated that when the accounting authority dealt with irregular expenditure, it had to consider the circumstances of the transgression, it had to consider the extent of the expenditure involved, and also had to consider the nature and seriousness of the transgression. Those factors would inform the nature of the action the accounting authority would take upon discovery of irregular expenditure.
This incident happened as one manager was leaving office and another one took over his duties. The matter was investigated and it was found that the state did not incur any loss and no employee benefited personally from the incident. The contracting and payment functions were centralized.
The contract with the employment agency was being monitored closely. An early warning system in the form of a calendar, was implemented which generated a six month notification prior to the expiry date of a contract.
The filing system had improved. Documents were files per supplier. Files contained valid contracts, tax clearance certificates and all relevant documentation for appointment and payment purposes.
The DG also embarked on a quality control exercise, consisting of random sample checks over time, to see whether procurement processes were adhered to. He would investigate further if he discovered anything suspect. This process proved to be useful in highlighting problem areas.
The R was incurred a long time ago, but until recently no department knew what to do with irregular expenditure once it had been discovered. The NT issued a communication that explained the process, through the Office of the Accountant General. The NT then clarified that communication through a practice note issued on the 24 April It clarified the procedures to follow once irregular expenditure had been discovered.
Irregular expenditure happened when a requirement of the law had not been adhered to in the execution of a transaction. For every transaction, permission had to be obtained from the relevant authority. It happened on occasion that the relevant authority could not give permission, but a civil servant had to procure material or a service urgently.
If the civil servant went ahead without the permission from the relevant authority, the spending on that item became irregular.
If the civil servant could obtain the permission afterwards, the amount could be condoned legitimised. Many instances of this occurrence would be found in many departments. The DG did an investigation into the issue of the R in order to understand how it was incurred. Dependant on his findings, he would either condone it, or take action if it was still possible.
This decision would be made before the end of this financial year. He requested that this practice be avoided in the future, because Members needed time to digest the information in these documents in order to interrogate them thoroughly.
He wanted to make sure what the normal procedure was. If the DG was unavailable, did he not have to give written consent for somebody else, in this case Mr Nomvalo, to represent him? He asked this in the interest of making sure the DG was not misrepresented and that Mr Nomvalo authentically represented the DG.
Mr Nomvalo replied that the DG wrote to the Committee to inform it that he would not be attending this meeting due to other commitments. The Committee wrote to the Department to ask whether, in the absence of the DG, a replacement could attend the meeting, in order for Parliament to finalise the issues.
Regarding the issue of misrepresentation, he replied that Parliament was a public forum. He would be held accountable for everything he said in Parliament. He did not want to misrepresent the DG and would still be accountable to the DG when he returned. Mr Williams asked whether the R was an accumulation of smaller amounts over time, or a once—off transaction. Mr Nomvalo replied that the R was not an accumulation. She asked which control measures existed to prevent the abuse of this practice.
It was becoming a trend. To what extent was the training effective in other departments to make sure that the malpractices did not recur? Mr Suka said that the R2. The report said that it was an oversight.
It could not be taken as casual. Was there a written warning? Were there any other corrective measures? NT was the custodian of the purse in the country. It was still in the report 10 years later which meant that it had been carried over for 10 years.
Would it still be in the report in the next financial year? Mr Suka said that something written, a cautioning, a warning had to be issued to the person that incurred the R2. Were no timeframes attached to the processing of the R2.
Mr Nomvalo replied that, as he said in the presentation, the Office of the Accountant General issued a practice note in on how to deal with irregular expenditure once it was discovered.
He further explained that when irregular expenditure was discovered, it had to be reported to the Accounting Officer and it had to be reported in the monthly financial statements. When the Accounting Officer received the report, he had to investigate the matter and put measures in place to prevent it from happening again. He had to determine whether there was any intention for any individual to benefit, or whether the state lost money. He then had to respond appropriately. In relation to both instances of irregular expenditure, the DG asked what the intention, the level, and the nature and extent of the negligence was.
The state did not lose any money. It was an honest mistake. There was no malice on the part of officials. Based on the findings regarding the R , there was still questions remaining. Why did it take so long? How did a department get irregular expenditure off the list once it has been discovered?
It could be carried ad infinitum, but after some time it did not contribute positively to accountability anymore. Irregular Expenditure occurred under the following circumstances. This official violated a prescript of the law. The prescript was that the DG had to give permission. In order to reverse the violation of the law, the official now had to approach the DG, explain the actions taken as well as the reasons for it and the circumstances under which it occurred.
The DG now had to consider whether he would have agreed with the actions of the official, separate from the fact that the official violated a prescript. If the answer was yes, it would be reasonable to give the DG the opportunity to condone the expenditure after the fact. Condonation could be abused, but it did not lend itself automatically to abuse. It was how the condoning was done by the DG.
What could be abused was the flexibility in the legislation. How did one guard against abuse? All these matters had to be reported properly and discussed at forums like this committee, and these forums had to interrogate these matters thoroughly and satisfy themselves that all the facts were known and that no malpractice remained hidden.
There was a procedure governing condoning as well as a procedure governing how these issues had to be reported.
Concerning the issues raised about other Departments and whether they have been trained, when the PFMA was implemented, the Departments were trained on its procedures. The Departments were currently undergoing another round of training. There were quarterly meetings for the chief financial officers CFOs , where procedures were discussed and explained and problems were highlighted.
Workshops were run on specific procedures, depending on the need. Treasury had developed, during the last two years, the Financial Capability and Maturity Model. The purpose of this model was to provide the Departments with the tools to assess themselves and pick up weaknesses in their financial control systems with the help of NT. NT would then address these weaknesses. The NT and the department involved then formulated and signed a formal agreement stipulating the roles and duties of each party in resolving these weaknesses.
The R2. The R was still awaiting condonement. It was still a hanging matter because departments did not know how to deal with the matter after it had been discovered. The DG could ratify decisions taken in the past, after informing himself of the circumstances under which it had been taken. It could be taken to Parliament and Parliament could finalise the matter. As these items were picked up in other departments they would be processed and cleaned up properly.
Irregular expenditure did not automatically imply that the state had lost money; it underlined out that there were weaknesses in their financial control systems. The Accounting Officers AOs in departments had to be careful and had to take steps. Ms Bikani said that her concern was that it was a grey area in the policies and regulations of the state including the PFMA and other Acts governing state finances.
She asked what specifically were the grey areas identified out of the processes, in order to improve control measures in the future. Her argument was that the AG would continue to say that it was irregular. Mr Nomvalo said that the grey area in this instance was that once irregular expenditure was picked up, it could not be resolved.
The condonement dispensation allowed it to be closed. The AG wanted it disclosed. When the AO condoned an amount, the AGSA could still refute the condonement and say that the AO did not apply his mind properly, on the grounds of evidence to that effect. In terms of Section 38 of the PFMA, every AO had to have risk management, internal audit and systems of internal control to ensure that malpractices did not occur.
Whatever control systems were put in place, there would always be areas that were unprotected, and staff always found ways around the rules. As these were discovered, they would be improved upon. The Financial Capability and Maturity Model assisted in this process.
Mr Nomvalo replied that the model was used in the report to Standing Committee on Public Accounts SCOPA and that this report would provide more useful information and demonstrate the use of the model better that the model itself, and it was available. The model was also available. Mr Suka said that, according to the report, the amount of R was paid for professional services.
What did the term include? Mr Nomvalo replied that an amount of R41 was paid for the economic information that NT received. An amount of R36 was paid for legal services.
The rest was used to pay for the Peoples Guide as part of the national Budgeting process. It was a guide that was developed at the time to simplify the national budget for people on the street. Sourcing those three services in was not done according to the rules governing procurement at the time.
Mr Suka asked whether there was a ceiling to the amount of money an official could deviate, but still stay within the law. Mr Nomvalo replied that normal supply chain policies had thresholds, for example, beyond X amount, quotation have to be invited, beyond Y amount, a tender have to be put out, etc.
An AO could only condone amounts and functions that would fall within his normal scope of power. The Acting Chairperson asked how the process of condonation would reflect on the financial books of the Department. In her understanding the debit and credit sides of the books had to balance out. Did the AG have to pronounce it as being resolved?
Mr Novalo replied that in most cases the official did exactly what he was supposed to do. He paid for a service that was rendered and there was nothing essentially wrong with the transaction. However, in paying for the service, he had to obtain permission from his superior, who was not available at the time of payment. This expenditure was then flagged on the books as irregular, because of the outstanding permission.
The fact that the expenditure was flagged as irregular did not affect the normal running of the Department in any way; it was just a note in the financial statements. When the official obtained the permission from his superior at a later stage, the matter was considered resolved.
The official was obliged to report it, until it was resolved. Controls had to be put in place to prevent it from recurring. In the case of the R2. In order not to interrupt the service, which would have had a detrimental effect on the Department, the service stayed in place while the contract was being renewed.
There was thus a period when the service continued, without a contract being in place. However, the company still had to be paid for this period. This was where the R2. The other element that was embedded in the question asked was this: the fact that an incident of irregular expenditure occurred did not automatically mean that the state lost money, or that an individual benefited from the situation or that something criminal had occurred. It merely meant that there was a deviation from prescribed procedures.
The AO had to investigate the matter to determine whether anything untoward had occurred, in order to determine the course of action he would have to take. The Acting Chairperson asked whether NT took the findings of the AG into consideration when it had to decide on allocating budgets to departments.
Mr Nomvalo replied that no executive authority could allocate money unless it was authorised by Parliament to do so. The allocation of money was the sole power of Parliament. Money Bills provided the process that Parliament had to follow. Treasury made the recommendations to Parliament and Parliament passed the law.
The allocation of money was a legal matter. Did they consider audit outcomes in that process? Yes, it would concern their minds, but priorities that Government had to satisfy, were more important. There was legislation that compelled all spending agencies to have controls to deal with this matter. It would be assuming too much of a responsibility for NT to say no to entities when they asked for money, because it was the prerogative of Parliament, according to the law.
The Acting Chairperson thanked NT for its presentation and expressed the hope that the next time NT met with the PC, it would have dealt with irregular expenditure.
Mr Nomvalo replied that, realistically speaking, the NT was a big department and it was impossible to have absolute control over all aspects of its spending. He hoped that where irregular expenditure did occur it would be detected early and dealt with swiftly, by the risk management processes that had been implemented, and that the controls would thereby be improved.
The qualification rested on two issues. This was an historical matter and the Department was dealing with it. The second reason for the qualification was the fact that the information on irregular expenditure was incomplete. There was emphasis of matter as well. The first matter was fruitless and wasteful expenditure to the amount of roughly R2 million and the second matter was accruals.
There was a Treasury Regulation that stipulated that Departments paid their creditors within 30 days. According to the financial statements, if the Department had paid all it creditors within 30 days, it would have spend more than its voted funds. Furthermore, the incorrect application of other Supply Chain Management Procedures resulted in an additional amount of irregular expenditure of R The remainder of the irregular expenditure related to the Department entering into finance leases, which were prohibited in terms of the PFMA, as a result the annual instalments amounting to R Some finance leases were RT3 leases for which Treasury issued a practice note which meant that it was condoned.
It was thus incurred and condoned in the same year. This amounted to R12 million. Irregular expenditure identified in the current year relating to the previous year amounted to R The Department did not have adequate systems and procedures to identify and record all irregular expenditure.
Sufficient and appropriate audit evidence could not be obtained to determine the completeness of the irregular expenditure disclosed in the financial statements of the Department.
This audit qualification occurred as a result of a lack of oversight responsibility by leadership over reporting and compliance with laws and regulations and internal control. There was fruitless and wasteful expenditure to the amount of R2. These emanated from cancellation fees and lease contracts that expired, where the Department did not raise the lease amount for the new term.
She mentioned that she briefed both the Minister and Deputy Minister on the contents of her presentation. She apologized for providing the Committee with the documents just before the meeting started. To this end it implemented strategic interventions, which the presentation would elaborate upon. She would also explain the status of the non-compliance and the Issues the AG mentioned.
She would explain the disciplinary and corrective actions that had been taken. It would end with the way forward. The first slide of the presentation explained the strategic interventions the Department embarked upon in order to stabilise itself and work towards an unqualified audit. It set up executive committee Exco subcommittees in Finance, information technology IT and Risk in order to strengthen the oversight function in these areas.
Delegations were revised and improved. It instituted dedicated capacity to investigate and institute disciplinary action for non-compliance and misconduct at executive management level. It appointed additional personnel and embarked on training interventions in the supply chain management environment.
It strengthened the internal audit function as well as national and regional oversight and monitoring. It included financial and internal control in performance contracts of executive and senior management. It revised and updated departmental prescripts and policies. It invited technical assistance by National Treasury. It strengthened audit committee oversight and periodic structured engagement with the AGSA.
Tech Bio Companies Mon, November 15, Posted : The Cyberspace Administration of China issued a notice on Aug. Right after the notice was announced, Tencent's music streaming service, QQ Music, restricted customers from purchasing more than one copy of an album online.
Total exports of K-pop albums in July this year surged 3. But the Chinese regulation is expected to affect this trend, while local securities firms say they will have to see the actual impact of the regulations during the third quarter of this year before estimating monetary losses. Chinese authorities said these regulations aim to eliminate immoral entertainers who commit illegal activities, and television stations will cast actors and singers based on their political sophistication, moral conduct and social assessment.
Keyeast, a management agency specializing in actors, also saw its stock price drop 4 percent on the same day. But officials at domestic talent agencies are saying the impact of the restrictive measures from China on their financial soundness will be limited as the level of reliance in terms of generating money from the sale of music albums isn't that high compared to previous years.
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