progress with the improvement of financial...
TRANSCRIPT
PROGRESS WITH THE IMPROVEMENT
OF FINANCIAL MANAGEMENT
Office of the Accountant-General
Presenter: Jayce M Nair| Chief Director: Governance Monitoring and Compliance| 11 August 2015
PRESENTATION OUTLINE
Summary of 2013/2014 audit outcomes;
Unauthorised, Irregular & Fruitless and Wasteful Expenditure;
Non-compliance with laws and regulations;
Payments within 30 days;
National Treasury’s initiatives to improve financial management;
Financial Management Capability Maturity Model (FMCMM); and
Conclusion
2
SUMMARY OF AUDIT OUTCOMES
(2013/2014)
Audit Opinion Financial Year End
2012/2013
Financial Year End
2013/2014 Movement
Improvement/
Regression
Unqualified with no Findings 104 120 21%
Unqualified with Findings 232 222 -4%
Qualified 62 60 -3%
Adverse 0 1 1%
Disclaimer 13 7 -46%
Audit not Finalised 8 7 -11%
TOTAL ASSESSED 419 417
3
SUMMARY OF AUDIT OUTCOMES
(2013/2014)
NO DEPARTMENT FINANCIAL YEAR END
2012/2013
FINANCIAL YEAR END
2013/2014
IMPROVEMENT /
REGRESSION
1 Mineral Resources Qualified Unqualified (With Findings)
2 Public Works Qualified Unqualified (With Findings)
3 Environmental Affairs Unqualified (With Findings) Unqualified (With No Findings)
4 Public Enterprise Unqualified (With Findings) Unqualified (With No Findings)
5 Sports & Recreation Unqualified (With Findings) Unqualified (With No Findings)
6 Statistics Unqualified (With Findings) Unqualified (With No Findings)
7 Tourism Unqualified (With Findings) Unqualified (With No Findings)
8 Home Affairs Qualified Disclaimer
9 Arts and Culture Unqualified (With Findings) Qualified
10 International Relations and
Cooperation Unqualified (With Findings) Qualified
11 Public Service Commission Unqualified (With No Findings) Unqualified (With Findings)
COMPARATIVE ANALYSIS OF
AUDIT OUTCOMES (NATIONAL DEPTS)
5
0% 2% 2% 0% 2%
33%
26%
17% 17% 15%
57%
64%
73% 75%
65%
10% 8% 8% 8%
18%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2009/10 2010/11 2011/12 2012/13 2013/14
Graph - National Departments - 2009/10 to 2013/14 Audit Outcomes
Disclaimer Qualified Unqualified (with findings) Unqualified (with no findings)
COMPARATIVE ANALYSIS OF
AUDIT OUTCOMES (PROVINCIAL DEPTS)
…
6
62%
55% 59%
56%
50%
11% 15%
9%
17%
27%
20%
27% 27%
23% 22%
7% 3%
5% 4% 1%
0%
10%
20%
30%
40%
50%
60%
70%
2009/10 2010/11 2011/12 2012/13 2013/14
Graph - Provincial Departments - 2009/10 to 2013/14 Audit Outcomes
Unqualified (with findings) Unqualified (with no findings) Qualified Disclaimer
Audit outcomes of national & provincial departments;
Reduction in fruitless & wasteful expenditure;
Quality of annual performance reports;
Compliance with SCM legislation;
Human Resource Management;
Information Technology controls;
Gauteng and Western Cape performed admirably; and
40 departments and 79 public entities -
strong leadership, good governance, financial and performance
management controls that prevent, or detect and correct, errors
and non-compliance.
IMPROVEMENTS IDENTIFIED BY THE AUDITOR-GENERAL
7
QUALIFICATION AREAS - DEPARTMENTS
Property, infrastructure, plant and equipment;
Supply Chain Management (irregular expenditure);
Contingent liabilities and commitments; and
Receivables and revenue
8
UNAUTHORISED EXPENDITURE
9
2 855
1 727
1 678
Graph - Unauthorised Expenditure Provincial Departments R‘ Million
2011/2012
2012/2013
2013/2014
49
467
913
Graph - Unauthorised Expenditure National Departments R‘ Million
2011/2012
2012/2013
2013/2014
IRREGULAR EXPENDITURE
Non-compliance with laws and regulations;
Transgressions mainly SCM related:
Competitive bidding processes not followed for contracts above R500k;
Awards of contracts to employees and close family members;
Lack of controls to ensure declaration of interest;
Ineffective management of contracts;
SCM officials not adequately trained; and
Procurement without quotations.
10
IRREGULAR EXPENDITURE
(NATIONAL)
11
1.3 B 1.8 B
2.3 B
5.2 B
1.6 B
3.0 B
4.6 B
12.7 B
5 M 50 M 76 M 45 M -
2 000
4 000
6 000
8 000
10 000
12 000
14 000
2010/11 2011/12 2012/13 2013/14
Graph: Irregular Expenditure by National Institutions
National Departments
National Public Entities
Const Institutions
IRREGULAR EXPENDITURE
(PROVINCIAL)
12
4.2 B
6.4 B
1.4 B 507 M
5.8 B
11.8 B
18.1 B
15. 1 B
-
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
2010/11 2011/12 2012/13 2013/14
Graph - Irregular Expenditure by Provincial Institutions
Provincial Public Entities
Provincial Departments
TYPES OF TRANSGRESSIONS (FWE)
Interest on overdue accounts and late payments;
Litigations and claims;
Penalties;
Other:
Travel, accommodation and training bookings – no shows;
Reprinting of publications due to negligence;
Cancellation fees; and
Goods acquired but not utilised.
13
FRUITLESS AND WASTEFUL EXPENDITURE
(NATIONAL)
14
96 M 97 M
96 M
356 M
102 M
281 M
123 M
153 M
15 M
0
50
100
150
200
250
300
350
400
2010/11 2011/12 2012/13 2013/14
Graph 7 – Fruitless and Wasteful Expenditure
National Departments
National Public Entities
Constitutional Institutions
FRUITLESS AND WASTEFUL EXPENDITURE
(PROVINCIAL)
15
67 M 65 M 24 M
60 M
135 M
659 M
763 M
459 M
0
100
200
300
400
500
600
700
800
900
2010/11 2011/12 2012/13 2013/14
Graph - Fruitless and Wasteful Expenditure
Provincial Public Entities
Provincial Departments
NON-COMPLIANCE WITH LAWS
AND REGULATIONS
80% - General non-compliance with laws and regulations;
40% - Unauthorised, irregular and fruitless/wasteful expenditure;
40% - Human Resource Management (overtime paid without policy);
65% - Material misstatements in AFS; and
43% - Non- compliance with SCM regulations.
16
PAYMENTS WITHIN 30 DAYS
17
0%
10%
20%
30%
40%
50%
60%
70%
80%
64% 60%
66%
76%
39%
58%
73%
63% 67%
56% 56%
44%
Timeous submission of exception reports
National Departments Provincial Treasuries
NUMBER OF INVOICES PAID AFTER 30 DAYS
18
-
5 000
10 000
15 000
20 000
25 000 22 873
14 956 14 817 13 905
15 967
9 789 8 673
6 391 7 803
5 306 3 805 3 902
National Departments Number of invoices not paid within 30 days
Invoices paid after 30 days Invoices older than 30 days and not paid
RAND VALUE OF INVOICES
PAID AFTER 30 DAYS
19
-
100 000 000
200 000 000
300 000 000
400 000 000
500 000 000
600 000 000
700 000 000
800 000 000
900 000 000
382 M 384 M 382 M 378 M 377 M
255 M
143 M
225 M
860 M
664 M
591 M
147 M
National Departments Rand Value of invoices not paid within 30 days
Invoices paid after 30 days Invoices older than 30 days and not paid
NUMBER OF INVOICES OLDER THAN
30 DAYS AND NOT PAID
20
-
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
24 380 25 144
31 174
24 231
33 745 34 157
22 132
35 918 35 774
40 651
43 989 41 162
Provincial Departments Number of invoices not paid within 30 days
Invoices paid after 30 days Invoices older than 30 days and not paid
RAND VALUE OF INVOICES
OLDER THAN 30 DAYS AND NOT PAID
21
-
500 000 000
1 000 000 000
1 500 000 000
2 000 000 000
2 500 000 000
3 000 000 000
3 500 000 000
4 000 000 000
944 M
1.4 B
1.8 B
3.8 B
2.0 B 1.9 B
1.1 B
2.2 B
2.7 B 2.7 B 2.8 B
3.3 B
Provincial Departments Rand Value of invoices not paid within 30 days
Invoices paid after 30 days Invoices older than 30 days and not paid
MAIN REASONS FOR THE
LATE AND/OR NON-PAYMENT OF INVOICES
22
Standard Chart of Accounts (SCoA) related system problems;
Inadequate internal capacity to process payments timeously
Unresolved Supply Chain Management related queries;
IT system (BAS, LOGIS and SafetyWeb) related issues;
Delays in the submission of invoices for processing;
Delays in the timeous approval of payments;
Inadequate budget/cash flow management;
Incorrect banking details of suppliers;
Unresolved invoice discrepancies; and
Tax clearance certificate issues.
THE EFFECTS OF NON-COMPLIANCE
WITH TR 8.2.3
Impact on the cash flow positions of SMME’s;
SMME’s - forced to borrow money to meet their contractual obligations;
Retrenchments & forced closures due to constrained cash flow positions;
NDP; NGP and 9 point plan – economic growth & job creation;
Corruption factor; and
Reputational risk to Government.
23
FOSAD AND CABINET RESOLUTIONS
24
The National Treasury, DPSA and DPME - convene workshop with CFO’s;
National Treasury, DPSA and DPME - develop a guideline;
DPME – establish unit to monitor and engage with transgressing depts;
Establishment of hotline for suppliers;
Minister of PME and PSA – submit quarterly progress reports to Cabinet; &
National Treasury, DPSA and DPME – investigate appropriate sanctions
to hold accounting officers accountable.
NATIONAL TREASURY INTERVENTIONS TO
IMPROVE COMPLIANCE WITH TR 8.2.3 Development of a web based system to collate monthly information;
Standing item on the CFO Forum;
Improved monthly and annual reports to FOSAD;
Supplier queries on late/non-payment of invoices; and
Workshop with Chief Financial Officers on 20 August 2015 – develop
strategies to improve compliance with TR 8.2.3
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PAYMENTS WITHIN 30 DAYS
OBSERVATIONS
The number and Rand value of unpaid invoices - acceptably high;
Lack of internal controls and systems to track invoices;
Little appetite to rectify continuing situation of unpaid invoices;
Little or no consequence management;
Little or no management oversight in the payment process;
Late submission of information to the National Treasury – impacts on
completeness of information submitted to FOSAD.
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NATIONAL TREASURY INITIATIVES TO
IMPROVE FINANCIAL MANAGEMENT
Financial Management Improvement Programme (FMIP III);
Revised Treasury Regulations;
Payment of Suppliers within Thirty (30) Days;
Instruction Note 34
Bi-Monthly FOSAD Reports
Training Programme Initiatives
Manual for Head Officials of Provincial Treasuries
Members of the Executive Council for Finance
The Chartered Accountants Academy (CAA)
27
NATIONAL TREASURY INITIATIVES TO
IMPROVE FINANCIAL MANAGEMENT
Development of a Compliance Framework;
Internal Audit Quality Reviews;
PFMA Queries Portal
PFMA Guidelines:
Accounting Officers Guide to the PFMA;
Accounting Authority’s Guide to the PFMA;
Executive Authority’s Guide to the PFMA
Cost Containment Guidelines; and
Payments within 30 days
28
REVISION OF THE FINANCIAL MANAGEMENT
CAPABILITY MATURITY MODEL (FMCMM)
FMCMM is the self-assessment and
monitoring tool developed by the
National Treasury with a view to
assess the financial maturity of
PFMA-compliant institutions in order
to determine whether public funds
are being spent economically,
efficiently and effectively.
Governance,
Performance Management,
Financial Management (financial and management accounting),
Supply Chain Management,
Reporting
29
LAYOUT OF NEW FMCMM MODEL
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MODULE 1 - GOVERNANCE
LEADERSHIP CONTROL
ENVIRONMENT ASSURANCE
COMMITTEES DELEGATIONS
INTERNAL AUDIT
RISK MANAGEMENT
CAPACITY BUILDING
IT GOVERNANCE
ANTI-CORRUPTION
MODULE 2 – PERFORMANCE MANAGEMENT
PLANNING BUDGET MANAGEMENT
MODULE 3 – FINANCIAL MANAGEMENT
EXPENDITURE MANAGEMENT
TRANSFER PAYMENTS AND
GRANTS
ASSET MANAGEMENT
INVENTORY MANAGEMENT
COMPENSATION OF EMPLOYEES
REVENUE MANAGEMENT
BANK, CASH & INVESTMENT MANAGEMENT
LIABILITY MANAGEMENT
MODULE 4 – SUPPLY CHAIN MANAGEMENT
ETHICS BID COMMITTEES CONTRACT MANAGEMENT SCM SYSTEM
MODULE 5 – REPORTING
PERFORMANCE REPORTING FINANCIAL STATEMENTS FINANCIAL MISCONDUCT
CONCLUSION
Audit outcomes – improvement in unqualified audit opinions;
Irregular expenditure – increasing exponentially in all institutions;
National departments - UIF expenditure increasing year on year;
Provincial departments - irregular expenditure too high;
Cabinet Memorandum on Audit Outcomes:
AO to submit correctives steps to their relevant EA to address concerns;
AO to act on AG recommendations to address audit findings; and
EA to monitor the progress and receive regular reports thereon.
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SUMMARY OF AUDIT OUTCOMES OF
NATIONAL DEPARTMENTS (2014/2015)
32
0
5
10
15
20
25
30
6
29
5
2
0
9
19
4
0
10
2014/2015 Audit Opinions
2014 2015
THANK YOU
33