DIRCO Annual Report

12. AUDIT COMMITTEE REPORT

We are pleased to present our report for the financial year ended 31 March 2021. Audit Committee Responsibility The Audit Committee reports that it has complied with its responsibilities arising from Section 38 (1) (a) (ii) of the Public Finance Management Act and Treasury Regulation 3.1.10. The Audit Committee also reports that it has adopted appropriate formal terms of reference as its Audit Committee Charter, has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein, except that we have not reviewed changes in accounting policies and practices. The Effectiveness of Internal Control The system of controls is designed to provide reasonable assurance that assets are safeguarded and that liabilities and working capital are efficiently managed. In line with the PFMA, Internal Audit provides the committee with assurance that the internal controls are appropriate and effective. This is achieved by means of reviews and testing of the design, implementation and effectiveness of internal controls, as well as the identification of corrective actions and suggested enhancement to the internal controls and processes. The Audit Committee is concerned that in many instances matters raised by the internal auditors and external auditors in the current financial year and prior years were not adequately addressed by management. An Audit Action Plan was in place during the reporting period; however, the Audit Committee was impeded in its ability to monitor its implementation, due to lack of reporting on it by management. From the various reports of the internal auditors and the Auditor-General of South Africa’s (AGSA) Final Management Report, it was reported that there were serious control deficiencies. Accordingly, we can report that the system of internal controls for the period under review was generally inadequate and ineffective, and so was the Audit Action Plan. The following were raised as areas that require improvement:

1.

Asset management.

2. Skills and training in the financial, asset management units and Supply Chain Management unit. 3. Disallowances and damages account. 4. Inadequate implementation of consequence management. 5. Non-compliance with the Supply Chain Management prescripts. 6. Inadequate information and communications technology (ICT) systems and governance. 7. The process for the management and monitoring of risks, including the effectiveness of the risk management system to manage the risks to an acceptable level. The committee did not receive any comprehensive risk management report in the financial period under review. This concern was raised with management and is receiving attention. 8. ICT systems and governance. The issue of inadequate ICT systems and lack of ICT governance in the department was raised as a high risk, including the capacity issues in the unit. In-year management and monthly/quarterly report The department has been reporting monthly and quarterly to the National Treasury as is required by the PFMA, 1999. Evaluation of financial statements The committee has: • reviewed and discussed with the Auditor-General and the Accounting Officer the audited annual financial statements to be included in the Annual Report • reviewed the Auditor-General’s Audit Report, the management letter and management’s responses thereto • reviewed changes in accounting policies and practices (where applicable) • reviewed significant adjustments resulting from the audit.

Annual Report 2020/2021 I Vote No. 6

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