loss control policy - umda.org.za final loss control policy.… · the loss control policy provides...

Chairperson: Mr. Russell Tembe, Deputy Chairperson: Mr. Sibusiso Gumbi,

Mr. Fundo Thango, Mr. Zwelisha Ndwandwe, Mr. Sipho P Nyawo

Chief Executive Officer: Mr. Mandla Ntuli

UMHLOSINGA DEVELOPMENT AGENCY (PTY) LTD

“The Agency”

LOSS CONTROL

POLICY

Work shopped to all staff : 11 May 2015

Recommended by Audit committee : 25 May 2015

Approved by Board of Directors : 29 May 2015

Revision by Board of Directors : 29 June 2016

Signed by the chairman ________________________________

Umhlosinga Development Agency Final Loss Control Policy

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TABLE OF CONTENTS

Page No.

1. Definitions 3

2. Introduction 4

3. Establishment and Implementation of Loss Control Policy 4

4. Objectives of the Policy 4

5. Types of Losses, Damages and Fraud 5

6. Management of Losses 6

7. Gathering of Information and Reporting of Losses 6

8. Responsibilities of the Risk Officer 9

9. Record Keeping 9

10. Risk Insurance 9

11. Write-Off, Disposal and Recovery Processes 10

12. Calculation of Losses 11

13. Ethical Standards 12

14. Objections and Complaints 12

15. Policy Adoption 12


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1. DEFINITIONS

For the purposes of this policy, the following definition is applicable:

“Accounting Officer” – means the Chief Executive Officer of Umhlosinga Development

Agency.

“Agency”- means Umhlosinga Development Agency.

“Board” means the Board of Directors for Umhlosinga Development Agency.

“Debt” – means an amount owing to the Agency.

“Chief Financial Officer” – means the Chief Financial Officer of Umhlosinga

Development Agency.


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2. INTRODUCTION

The Loss Control Policy provides a framework within which the Agency will prevent, limit or

reduce unnecessary losses. It also serves as a basis for the development of our loss

control strategies and plans.

3. ESTABLISHMENT AND IMPLEMENTATION OF LOSS CONTROL POLICY

3.1 The Municipal Finance Management Act, 2003 (Act 53 of 2003) (hereafter MFMA)

compels the Accounting Officer and officials within that official’s area of responsibility,

amongst other things, to ensure that an effective, efficient and transparent system of risk

management and internal control is established and carried out respectively to prevent

losses and to ensure the safeguarding and maintenance of all assets of the Agency,

section 95 of the MFMA.

3.2 The officials of the Agency, shall in dealing with or on behalf of the Agency, observe their

financial management responsibilities in terms of Section 105 (1) of the MFMA.

3.3 A risk management strategy must be clearly communicated to all officials to ensure that

the said strategy is incorporated in the Agency. The Accounting Officer must also exercise

reasonable care in detecting and preventing losses and for this purpose effective and

transparent processes of financial and risk management must be implemented.

4. OBJECTIVE OF THE POLICY

It is to ensure that:

4.1 All officials including management are held accountable for losses in their respective area

of responsibility.

4.2 The Policy assists officials to create a climate that is conducive to internal control, risk

management and prevention of losses.

4.3 It contributes towards creating respect for the resources entrusted to the Agency for use in

the best way possible.


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4.4 It encourages officials to perform their duties in a responsible manner and to avoid

unlawful conduct that may result in unnecessary losses in general of claims for

compensation being instituted against the Agency in particular.

4.5 Uniform reporting procedure will not only ensure that the record of losses is kept more

efficiently and effectively, but will also contribute to the promotion of greater efficiency in

the management of losses and the establishment of an effective risk prevention strategy.

5. TYPES OF LOSSES, DAMAGES AND FRAUD

5.1 Loss, theft and damage of immovable assets:

5.1.1 Negligence of maintaining official buildings.

5.1.2 Rent paid for offices not in use.

5.2 Loss, theft and damage of moveable assets:

5.2.1 Company assets through thefts, accidents and other damage costs.

5.2.2 Official cell phones through thefts and negligence.

5.2.3 Office furniture, computers, printers, faxes, photocopiers, air conditioners and

other electronic equipment through thefts and other damage costs.

5.2.4 Minor equipment such as tools and maintenance equipment through thefts and

other damage costs.

5.3 Loss, theft and damage of inventory stores items:

5.3.1 Stationary, maintenance, electrical material, cleaning material through thefts and

other damage costs.

5.4 Overpaid salaries-after death or termination.

5.5 Salaries paid for staff under suspension.

5.6 Fraud cases with loss implications

5.6.1 Criminal/negligence

5.6.2 Stolen cheque cashed

5.6.3 Fraudulent credit transfers

5.6.4 Unauthorized orders


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5.6.5 Ghosts employees in salary system

5.7 Fruitless and wasteful expenditure

5.7.1 Late payment to a creditor for which interest is charge and for which we have

been invoiced and obligated to pay.

5.7.2 Any payment to a service provider for which the full value was not received, e.g.

paying for 2 officials booked for training when only 1 actually attended.

5.7.3 Wasteful Expenditure made in vain and would have been avoided had

reasonable care been taken. E.g. paying for 10 chairs when 5 is actually

necessary and needed.

5.7.4 Losses due to poor tender/bids allocation.

5.8 Other losses

write-offs

6. MANAGEMENT OF LOSSES

6.1 The following practices ensure adequate management of:-

6.1.1 Losses to be reported within 24 hours after acknowledgement to the Risk Officer.

6.1.2 The Risk Officer will investigate to determine accountability. In an event where

the Risk Officer receives a report of an incident, he/she must consider all possible

implications, including legal effect it might have on an individual and the Agency.

6.1.3 Recording such claims and/or losses in a loss register.

6.1.4 Timeous follow-up of all claims and/losses.

6.1.5 Ensuring that all registered loss cases are finalized within a prescribed period.

6.1.6 To refer cases of negligence to the Chief Executive Officer for investigation.

6.1.7 Report all cases to the Agency’s senior management in writing, so that it can be

investigated.

6.1.8 To periodically draw the attention of all officials to the fact that all possible efforts

are continually made to prevent claims arising against the Agency.

7. GATHERING OF INFORMATION AND REPORTING OF LOSSES


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Step 1: Registration of damages and losses

a) All departments must keep registers for all incidents reported.

b) When notified of a loss, the Line Manager must register such case/loss within two (2)

working days of receiving a report/notice of such case/loss to the Risk Officer.

c) After a proper notification of losses/damages/fruitless expenditure/claims, these are to

be handled in accordance with Part 5 Section 12 of the Treasury Regulations.

Step 2: Gathering of information

a) The Line Manager must reports the losses to the Risk Officer

d) The Risk Officer must seek legal advice as widely as possible; consult parties broadly as

possible consult experts; advice widely; follows and note (in writing) events

systematically as swiftly as possible and compile final reports for future reference

containing the following:

i. Detailed description of incidents and;

ii. Investigator’s observations and recommendations

Step 3: Collection of documents and evidence to determine liability

a) Liability investigation is mainly to determine the circumstances under which a loss

occurred and to determine whether any official could be held liable for such loss.

b) This type of investigation is independent from any criminal or misconduct investigation.

c) There is nothing that prohibits that documents, which were used in a liability

investigation, can also be used in a case of misconduct or neglect of duty for disciplinary

steps.

d) The Risk Officer shall acquaint himself of specific instructions that might be applicable to

the case, determine the accurate and most probable version of the occurrence by

checking initial reports.

e) Depending on the nature of the loss, specific responsibilities or duties shall be

determined and leveled against the responsible official (s).

f) Signed job descriptions will be serve as proof of communicating duties, responsibility

and area of work. Necessary proof that a duty was performed or neglected shall be


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obtained. Relevant copies of specific instructions should be made, and be included in the

investigation file.

g) If, for certain reasons, it is necessary to confiscate admission registers, the person giving

the instruction (for investigation) should be consulted. Certified copies of a register of

specific entry/entries are usually sufficient.

h) If any problems were encountered with a reluctant witness or with the destruction or

withholding of documentation or information, necessary steps will be taken to deal with

such.

i) Obtain certified copies of all the original documents and use only copies r the purposes

of the investigation. Keep the original documents in a safe place. No inscription,

deletions, changes or corrections should be made on original documents, as this would

negatively influence its evidential value with a view to possible legal action.

j) Evaluate data integrity of gathered information. Should any uncertainty exist regarding

the data integrity, steps must be taken in consultation with the stakeholders concerned

in order to rectify the situation and to ensure the said data is accurate and reliable.

Step 4: Identify possible causes and trends

a) If shortages/losses/theft/damages/ misuse of the Agency property or funds, or fruitless

expenditure, especially with regard to accommodation, or wasted, unauthorized or

irregular expenses are involved, investigation of liability shall be undertaken by the Risk

Officer to ensure impartiality and transparency.

b) It should however be noted that a liability investigation is mainly conducted to determine

the circumstances under which the loss occurred. The circumstances of the loss and

facts that came to light during the investigation, can eventually lead to a decision

whether an official can be held legally liable for a loss in terms of the applicable Treasury

Regulation. If any neglect of duty or other circumstances may have negative implications

for the Accounting Officer of the Agency, the investigator ought to complete his/her

investigation.

c) The Risk Officer shall display own initiative and shall be conversant with all the relevant

instructions, which may be applicable to the loss in question.


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d) When a liability investigation is considered necessary, it is important that it be instituted

immediately after the reporting of the loss to ensure that credible evidence is obtained

timeously before any contamination.

Step 5: Compilation of a report

a) To compile a report regarding losses, which have to be referred to UMDA Management,

one must determine liability and comply with certain provisions of the MFMA.

b) The report includes all gathered statements, documentary proof and recommendations.

8. RESPONSIBILITIES OF THE RISK OFFICER

8.1 Obtaining all details and statements regarding claims and losses and recording the same

in loss register;

8.2 Following up and settling reported cases;

8.3 Reporting all cases falling within the applicable financial year to the Auditor-General

9. RECORD KEEPING

9.1 Records of loss, damage, forms, files, registers etc. should include the following minimum

info:

9.1.1 Gross value of the loss

9.1.2 Amount recovered

9.1.3 Approved amount written off

9.1.4 Authority/reference for adjustment

9.1.5 Updating of assets register and inventory record.

10. RISK ASSURANCE

10.1 In general the Agency bears its own damages and accident risk and accepts responsibility

for all claims and losses of Agency property arising from activities by a person who is

liable in law and who is or was employed by an the Agency to which the loss control


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instructions applied or originated from or took place during the performance of the Agency

activities.

10.2 Officials causing unnecessary losses, or who abuse or exceed their powers or misuse the

Agency property and/or resources, or neglect their duties resulting in unnecessary losses

for the Agency, should also be prepared to face disciplinary steps initiated against them.

11. WRITE-OFF, DISPOSAL AND RECOVERY PROCESSES

11.1 WRITE-OFF

Write-offs shall be administered and approved in terms of the Agency’s Applicable Write-Off

Policy.

11.2 DISPOSAL

Disposal refers to the applicable Supply Chain Management Policy

11.2.1 The Agency from time to time has assets, which are either damaged by storm

(nature) or through the negligence by officials or material or store, which had

been bought but is not used.

11.2.2 Disposal is an approved process of getting rid of asset/item owing to redundancy

or obsolescence condition. It involves the transfer, sale as a scrap or condemning

the asset/item. The income that accrues form disposal process depends on the

economic residual value of the item/asset and the demand.

11.3 RECOVERY

11.3.1 Recovery and claims are implemented in terms of the current value of the loss

and payment thereof in terms may accrue interests.

11.3.2 Recovery can be made from any responsible Agency official (s) or private party.

11.4 PROCESS OF RECOVERY


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11.4.1 It may happen depending on the outcome of investigation that the relevant officer

involved is approached to compensate for the loss/damaged, undertakes to pay

the loss/damaged suffered by the Agency.

11.4.2 Under such circumstances:-

a) Should the person, personally offer to pay off the debt in a once-off payment, or to pay

monthly installments so that the total loss is redeemed within 24 months, an undertaking

must be obtained from him/her and submitted to the delegated official for his/her

approval.

b) Should a person make an offer as set out in sub-paragraph (a) above, and the recovery

of the loss/damage exceeds 24 months, a statement of his/her assets and liabilities

together with his/her undertaking must be submitted to the delegated official in order to

obtain approval.

12. . CALCULATION OF LOSSES

12.1 With the recovery of any damage or loss it is of vital importance that the total extent of the

Agency’s loss be determined beforehand and substantiated by means of documentation.

12.2 For the purpose of calculating the recoverable amount when equipment, stock or other

Agency property are lost or become damaged by an official or other person, such

equipment, stock and Agency property shall be classified as such.

12.3 Items with a long life, where almost no depreciation occurs, against replacement value,

i.e, the cost price of a new or similar item;

12.4 Determination of depreciation values loss/damaged items shall be in terms of an

applicable Asset Management Policy.

12.5 The calculation of depreciation and percentage reduction does not apply in instances

where the loss is written off as a loss against the Agency. In such instances the loss is

calculated against the replacement value at all times.


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12.6 For the purpose of calculating the recoverable amount in instances where the loss in

respect of lost-damaged personal equipment items must be recovered from responsible

official, the amount of the Agency’s loss or damage must be obtained via three quotations.

12.7 As far as the damage/loss of Agency equipment or items are concerned; the recoverable

amount of the loss must be collected from the responsible official.

12.8 Only in exceptional cases where the responsible official does not have any funds to

compensate for the full recoverable amount in a once-off amount, salary payments may

be requested to recover the amount due from the salary of the official concerned.

13. ETHICAL STANDARDS

13.1 A code of good practice is established for Loss Control Management and must be

adhered to by all officials and other role players in the system in order to promote

13.1.1 Mutual trust and respect; and

13.1.2 A control environment where risks can be control and managed in a fair and

reasonable manner.

13.1.3 Must assist the accounting officer in combating fraud, corruption, favoritism and

unfair and irregular practices;

13.1.4 Must report to the accounting officer any alleged irregular conduct in the supply

chain management system which that person may become aware of, including-

a) Any alleged fraud, corruption, favoritism or unfair conduct;

b) Any alleged breach of this code of ethical standards

14. OBJECTIONS AND COMPLAINTS

14.1 Persons aggrieved by decisions or actions taken in the implantation of the loss control

policy, may lodge within 14 days of the decision or action, a written objection or complaint

against the decision or action.

13. POLICY ADOPTION

This revised Policy replaces the current Policy; it has been considered and approved by the

BOARD OF DIRECTORS OF UMHLOSINGA DEVELOPMENT AGENCY as follows:


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Resolution No:………………………..

Approval Date:...................................

loss control policy - umda.org.za final loss control policy.… · the loss control policy provides...

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