Part Four by gyvwpsjkko


									  Part Four

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 Part Four
 Report of the Audit Committee
 1. Report from the Audit Committee on:                        ings of SCOPA and addressed various matters raised by
 • the effectiveness of internal control;
 • the quality of in-year management and monthly               During the course of the year, Internal Audit facilitated
   reports; and                                                the implementation of an anti-corruption and fraud strat-
 • the audit committee’s own evaluation of the annual          egy as well as risk management policy, and the internal
   financial statements.                                       audit charter was updated.

                                                               The contract with Custodiet expired on 31 December
 Internal Audit and Audit Committee                            2001 and has provided considerable assistance to inter-
                                                               nal audit in terms of work performed, audit approach and
 The independent Audit Committee continued to meet dur-        training of personnel. The Internal Audit Department has
 ing the year in terms of the PFMA, meeting on three           improved considerably this past year. However, the
 occasions. On each occasion, the members were provided        Department continues to be understaffed in terms of
 with extensive reports in advance on a variety of matters     suitably qualified personnel and the Audit Committee has
 by internal audit. The reports enabled the Audit              requested that this matter be given urgent attention.
 Committee to review the financial functioning of the
 Department.                                                   From the various reports submitted to the Audit Commit-
                                                               tee, it is clear that the necessary controls and detailed
 The chairman, Judge Mervyn King, resigned due to work         procedural manuals for the application of internal con-
 pressures on 12 April 2002 and was replaced by Mr S A         trols are in place. It is, however, disheartening to note
 Patterson. The Committee comprised three members at           from the reports that notwithstanding the clear and con-
 31 March 2002 and two further persons have since been         cise prescripts, there is what appears to be an increasing
 appointed. The Audit Committee fulfilled its responsibili-    culture of non-compliance with laid down procedures.
 ties as an oversight committee on internal control, moni-     There continues to be a lack of supervision and discipline
 toring the internal audit function and the approach to        and if this is not rectified, this culture of non-compliance
 risk management. From the reports, it is clear that           will continue and the audit result of each new year is
 Internal Audit is meeting its objectives. Internal Audit is   unlikely to reflect significant improvement over that of
 functioning in close consultation with the Auditor-           the previous year.
 General and a good deal has been done to ensure that
 the internal auditors complement the work of the exter-        With this in mind, the Audit Committee requested the
 nal auditors. In the process measures have been taken to      Auditor-General and Internal Audit during December
 ensure that there is no unnecessary overlapping of func-      2001, to consider a solution to rectify this rather than to
 tions. Internal Audit consist of well-qualified personnel.    continue to submit extensive audit reports, the results of
                                                               which are predictable.
 The Audit Committee has in the process of its meetings
 had regular contact with internal audit, the Auditor-         The continuous process of non-compliance inevitably
 General and the Department.                                   leads to fraud and corruption. This was confirmed by the
                                                               forensic audit reports presented to the Audit Committee
 The Committee has also monitored the scope of the work        on 12 April 2002. It is clear from these that areas of the
 of the Auditor-General, considered progress reports on        Department are possessed with a culture of fraud, theft
 the audit and level of audit fees proposed.                   and corruption, including the fact that criminal syndi-
                                                               cates are operating with the assistance of employees.
 The Audit Committee was represented at certain meet-          Internal Audit and the Auditor-General with the

    assistance of other audit firms, must be congratulated on     Evaluation of the Annual Financial Statements
    the exposure of these corrupt situations.
                                                                  Our review of the Annual Financial Statements, support-
    One other matter of great concern to the Audit Commit-        ed by input from the Accounting Officer and his manage-
    tee is the fact that when reviewing Internal Audit reports    ment team, the Head of Internal Audit and the Office of
    on the Information Technology section, the same pro-          the Auditor-General, facilitated the Audit Committee’s
    blems which occurred in the previous year were still in       decision to accept the opinion expressed by the Auditor-
    existence. We find it disturbing that no information secu-    General on the Annual Financial Statements of the
    rity policy is in place and that back-ups are not stored in   Department.
    a safe place and that users are not aware of good secu-
    rity practices.                                               It should be noted that in prior years a disclaimer of
                                                                  opinion was issued by the Auditor-General, whereas in
    Overall comment on the effectiveness of the systems of        the current year a qualified opinion has been issued,
    internal control                                              which reflects a substantial improvement in the accuracy
                                                                  of the records kept by the Department.
    Although extensive reliance cannot be placed on the sys-
    tems of internal control, there is commitment from man-       The Audit Committee has requested the Accounting
    agement to improve the situation. As a result of manage-      Officer and his management team to implement the
    ment commitment, the Audit Committee decided to play          necessary remedial actions on the matters leading to the
    a bigger role by having additional special purpose meet-      qualification of the audit opinion, as well as in respect of
    ings with the aim of discussing the prioritised (high)        certain other matters affecting the Annual Financial
    risks, among other things. To date special purpose Audit      Statements referred to in the report of the Auditor-
    Committee meetings were held as follows:                      General.
    On 24/05/02                NPA - Internal Audit report
                               Performance audit - HR
                               (Internal Audit)
                               Risk management strategy
    On 29/05/02                Annual Financial Statements

    The above achievements indicate that positive progress
    has been made by the Department in resolving issues and
    engaging in a process of implementing good governance.

    Where weaknesses were identified in internal controls,
    corrective action has been or is being planned to be
    taken to eliminate or reduce the concomitant risks.

... go to Part 5, Index page                                                                                                125

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