PRESENTATION TO PORTFOLIO COMMITTEE ON LABOUR (PCL)

Presentation on the 2005/06 ETDP SETA Annual Report&

2006/07 Auditor General’s Management Letter

Contents

Auditor General’s Finding on 05/06

Special investigation

Split on DoL levy income between mandatory and discretionary

Finance leases – no approval from Minister

Bank reconciliation not performed weekly

Incomplete documentation on learnership agreements

Inadequate SDL debtors management

WSP received after cut-off date

2

Contents (continued)

06/07 Management Letter

Special investigations not yet concluded

Excessive reliance on DoE levies

VAT treatment on discretionary grant payments

Related party transactions

No evaluation of Audit Committee members

Non compliance with Occupational Health and Safety

3

Auditor General’s finding on 05/06

Special investigation

The ETDP SETA Board had appointed an audit firm in 2006 to conduct an Audit Investigation on the projects grants that were disbursed as part of the R74 million discretionary allocation in the 2002/03 financial year.The purpose of the Audit Investigation was to:

Establish if all approved funds of the R74 million went to the approved programmes.

Establish that funds had an impact on the Board’s constituencies.

Establish that approved policies, process and procedures had been followed in the disbursement of the R74 million.

To this end, a firm of forensic accountants was appointed and have subsequently provided the Board with a final report which the Board has officially accepted.

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The findings of the final report indicated that:Governance problems existed at the ETDP SETAInternal controls were fundamentally weakCertain ETDP SETA staff did not perform their duties

accordingly.Suspicions of fraud from various service providers abound.

In this regard, the Board had directed that the recommendations of the Audit Investigation should be implemented forthwith. As part of the recommendations:

Internal control will be looked into, with the intention of plugging the glaring gaps.

Governance related problems will be sorted out.Affected ETDP SETA staff will be accordingly disciplined.Further and forensic investigations will be conducted by the

Internal Auditors on the identified problematic transactions and those that are considered to indicate red flags

Affected ETDP SETA staff will be accordingly disciplined.Further investigations relating to internal process

issues will be conducted by the Internal Auditors on the identified problematic transactions.

Forensic investigations will be undertaken against the identified service providers whose transactions with the ETDP SETA suggest possible fraudulent activities.

FEED BACK ON IMPROVEMENTS SINCE 2003INTERNAL CONTROLS:

Since 2003, internal controls have been improved within the ETDP SETA through development of policies, Quality Management manual, appointment of key senior managers, strong audit committee and internal audit function. Proper procurement policies and contract management procedures.

GOVERNANCE:ETDP SETA operates on a Board approved delegation of Authority and policiesMinute taking, signing and recording of resolutions has been improved via dedicated secretariesProcurement processes in accordance with the PPPFA and the procedure have good built in controls

Quality of audits by both the internal and external auditors

bears testimony to improved governance since 2003.

Auditor General’s finding on 05/06

Special investigation

Conclusion

The ETDP SETA Board remains committed that such further investigations should be concluded within the next two months. The ETDP SETA Board wishes to reiterate its commitment to ensuring clean governance and adherence to PFMA in discharging its fiduciary duties. The Board will ensure that no stone is left unturned in its quest for above-board conduct by all the ETDP SETA staff and service providers and that where evidence of wrong doing is identified, the Board will not hesitate to relentlessly pursue all avenues at its disposal.

A press statement was by the Executive committee on behalf of the ETDP SETA board

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Auditor General’s finding on 05/06

FindingThere is no split between mandatory and discretionary grants in the

financial records.Management’s Action

• ETDP SETA installed a grants accounting system that resolved this finding.

Finding

• Finance leases – no approval from Minister

• Management’s Action

The office of the Accountant General’s Practice note 5 of 06/07 has since given approval for economic finance lease transactions.

6

Auditor General’s finding on 05/06

Finding

Inadequate SDL debtors management.

Management’s Action

• Based on information received from DoL SARS debtors are contacted and a provision is raised.

Finding

• WSP received after cut-off date.Management’s Action

Proper and effective communication along WSP mobilisation workshops was done to stress the cut-off date

(30 June) for receipt of WSP. 7

Auditor General’s finding on 05/06

Finding

Bank reconciliation not performed weekly.

Management’s Action

• Bank reconciliations are done at minimum of weekly performance.

• Finding

• Incomplete documentation on learnership agreements.Management’s Action

Contract management recording and numbering was improved in 06/07.

8End of 05/06 Auditor General’s findings

Management letter 06/07

FindingSpecial investigations not yet concluded.

Management’s Action

• Investigation has been dealt with by addressing issues that related to internal processes and by approving that further investigation must be done against possible red flags.

Finding

• Excessive reliance on DoE levies.Management’s Action

The concern that ETDP SETA reliance on DoE for its funding was raised with the DG of DoE and the DG provided commitment that the DoE’s will honour their contributions.

9

Management letter 06/07

Finding

VAT treatment on discretionary grant payments.

Management’s Action

• The contract agreement was revised and cleared by the lawyers to ensure that VAT is correctly treated at the time of contracting.

Finding

• Related party transactions.

• Management’s Action

A procedure for identifying related parties has been developed and it is being followed.

10

FindingNo evaluation of Audit Committee members.

Management’s Action

• A tool was developed and given to Audit Committee members for evaluation.

Finding

• Non compliance with Occupational Health and Safety.Management’s Action

Occupational Health and Safety policy has been incorporated into the HR policy manual and safety representative has been appointed.

Management letter 06/07

11End of 06/07 management letter issues

THANK YOU