SPECIAL REPORT 
OF THE AUDITOR-GENERAL 

ON THE SHORTCOMINGS IN MANAGEMENT MEASURES AND FINANCIAL MEASURES AND FINANCIAL CONTROL AND THE EFFECTS THEREOF AT THE INDEPENDENT BROADCASTING AUTHORITY

TABLE OF CONTENTS

1. Purpose and content of the Report
2. Audit approach
3. Overview
4. Scope
5. Shortcomings in management measures and financial control, examples of the effects thereof as well as comments by the Chief Executive Officer and corrective steps envisaged by him
6. Conclusion and opinion
7. Appreciation

The purpose of this Special Report (Report) is to facilitate public accountability by bringing to the attention of Parliament material shortcomings in management measures and financial control and the effects thereof at the Independent Broadcasting Authority (IBA). The content of this Report is based mainly on the requirements of sections 3 and 5 of the Auditor-General Act, No. 12 of 1995 (Act). Examples have been included to illustrate the effect of the shortcomings.

Owing to the time constraint, an all-encompassing investigation was not conducted, nor would it be practicable. However, sufficient audit work was done to address the major areas of concern and to provide sufficient audit evidence for the findings set out herein. The findings contained in this Report document certain examples of the consequences of the deficient management measures and insufficient internal control and should not be regarded as comprehensive.

It is hoped that this Report will give rise to corrective steps, which will contribute constructively to the establishment and implementation of proper management measures and controls which will lead to improved value for money.

2. AUDIT APPROACH

(1) BACKGROUND:

1.  The auditing of government institutions takes place in a milieu in which, in the first instance, it is the responsibility of the accounting officers concerned to institute measures aimed at ensuring that resources allocated are utilised economically, efficiently, effectively and with probity.
2. The promotion of economy, efficiency, effectiveness and probity depends on adequate overall management measures for the planning, budgeting, , control and evaluation of the use of resources. Whereas accounting officers are responsible for the institution and proper functioning of such overall management measures, the Auditor-General is, in terms of sections 3 and 5 of the Act, responsible for confirming independently that these measures do exist and are effective and to report thereafter to Parliament.
3. It is not the Auditor-General's function to question policy. It is, however, his responsibility to investigate the effect of policy and the overall management measures that lead to policy decisions.

(2) MODUS OPERANDI: The audit was conducted in accordance with Generally Accepted Governmental Auditing Standards. The modus operandi adopted made provision for, inter alia, the following:

1. Steering committees:
1. When the initial arrangements were made for the audit, the management of the IBA was informed in detail regarding the objectives and the modus operandi that would be followed during the audit and arrangements were made for the establishment of a steering committee. The main purpose of the steering committee was to secure and maintain co-operation between all parties involved. The steering committee was made up of the audit team and a number of senior officials of the IBA, including members of the council of the IBA (Council), management and staff representatives. During meetings of the steering committee, which were chaired by members of the Council, efforts were made to reach consensus on matters such as focus areas, criteria, findings and conclusions so that the eventual report would not contain any surprises for the IBA and the IBA was afforded an opportunity to make timely inputs.
2. During the second meeting of the steering committee, the co-chairperson of the Council, the Acting Head: Finance and Administration and the Chief Executive Officer (CEO) were co-opted as members by special request of the Chairperson of the steering committee. Consensus on the factual correctness of all the findings contained in the management report could not be reached during this meeting, owing to the IBA not being able at the time to furnish supporting evidence to refute or modify the audit findings contained in the management report.
3. Since consensus on the factual correctness of all the findings contained in the management report could not be reached during the second meeting of the steering committee, the management report was discussed in detail with the CEO and the Acting Head: Finance and Administration to grant them another opportunity to furnish supporting evidence to refuting or modifying the audit findings.
2. Management report:
1. After the discussion mentioned in paragraph 2(2)(a)(iii), the formal comments of the CEO on the shortcomings and effects arising from the audit, which were included in the management report, were requested on 3 March 1997.
2. Bearing the above-mentioned in mind, it was required that when disputing the factual correctness of any information contained in the management report, supporting evidence to the contrary should be attached to the CEO's comments thereon. The CEO's formal comments were received on 19 March 1997.

3. OVERVIEW

1. The IBA was established by statute on 28 January 1994 and its activities are governed by the Independent Broadcasting Authority Act, No. 153 of 1993. It replaced the state control over broadcasting in South Africa and placed the regulation of the broadcasting industry in the hands of an independent body appointed by Parliament. The first Council was appointed by the Transitional Executive Council on I April 1994. The IBA is funded under the Vote of the Department of Posts, Telecommunications and Broadcasting.
2. The IBA is governed and represented by the Council, the members of which consist of two co-chairpersons and six councillors. The members of the Council are entitled to such remuneration, allowances and perquisites as the Minister of Posts, Telecommunications and Broadcasting may determine.
3. The primary objective of the IBA is to provide for the regulation of broadcasting activities in the Republic of South Africa.
4. In terms of the Independent Broadcasting Authority Act, No. 153 of 1993, the IBA is managed by a Chief Administrative Officer, referred to as the CEO in his Report, as well as a senior management team or heads of departments (HOD). The CEO is directly responsible to he Council.
5. The budgeted and actual expenses for the 1994-96 financial year amounted to R30 and R25 million respectively.

4. SCOPE

The audit report and audit opinion on the financial statements of the IBA for the year ended 31 March 1996 are contained in a separate Report to Parliament (RP67/1997), dated 11 April 1997.

It was decided to concentrate mainly on the concerns raised by the staff of the IBA and the media in a letter to he Public Protector, which this Office had also received in November 1996. The following areas were concentrated on, with an emphasis on diners club cards, cellular phones. overseas and local travelling, hired and subsidised vehicles, and financial procedures and controls:

1. Policy and planning.
2. Financial control and management information.
3. Human resource management.

5. SHORTCOMINGS IN MANAGEMENT MEASURES AND FINANCIAL CONTROL, EXAMPLES OF THE EFFECTS THEREOF AS WELL AS COMMENTS BY THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM

(1) POLICY AND PLANNING

(a) SHORTCOMING - Gifts and non-fraternisation: Although it had been decided during a council meeting on 2 June 1994 that councillors should not accept gifts exceeding R100 in value and that councillors should not fraternise with decision-makers in the broadcasting and advertising fields, various invitations from institutions such as M-Net, the South African Breweries (SAB), (SAC) the South African Broadcasting Corporation (SAC) and Telkom. were accepted. Owing to the lack of information, it could not be determined who had paid for the expenses of functions such as the Miss SA competition, the M-Net film awards and a Pavarrotti concert on invitation from M-Net, the 1996 Olympic Games in Atlanta on invitation from Telkom, the SABC orchestra and a SAB dinner. The IBA, however, had paid for travelling, accommodation and other expenses to the amount of R7 300 for the councillors and the CEO in respect of these functions.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. At an early stage of its existence, the IBA adopted policies on gifts and non-fraternisation with broadcasting and industry advertising decision-makers. However, it soon became clear that these policies were problematic. Corporate hospitality could be construed as a gift, and the application of the policy concerned would mean declining invitations to business lunches or functions.
2. This matter is being revisited and after observation of the practices of other regulators and public bodies. a revised policy will be tabled at the next council meeting. The definition of gifts will also be revised.

(b) SHORTCOMING - Sponsored trips: A policy and procedures for sponsored trips did not exist. Air tickets supplied by sponsors, were upgraded at additional costs for the IBA and councillors also claimed daily allowances although the sponsor included this.

EFFECTS: The United States Information Services (USIS) invited two councillors of the IBA to the United States of America. The invitation had stated that all travelling costs (economy class) would be paid by USIS and that councillors will be provided with daily allowances during their stay in the USA. However, the councillors upgraded their tickets to business class, and the additional costs in this regard were paid by the IBA. One of the councillors claimed the full IBA daily allowance as well as excess costs of R6,009 on hotel bills and also used the corporate diners club card.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM: Although no policy specifically directed at sponsored trips existed, the trips involved IBA activities. According to IBA policy,

councillors shall travel first class internationally and therefore the air tickets were upgraded. Furthermore, the IBA cannot impose its internal standards on sponsors, therefore accepts whatever they provide and matches the difference from IBA resources.

(c) SHORTCOMING - Travelling and accommodation expenses of councillors' spouses or partners: A policy and procedures for payment of the travelling and accommodation expenses of councillors' spouses or partners joining them at meetings and functions, did not exist. Consequently the IBA had paid for the travelling expenses of people who were not staff of the IBA.

EFFECTS:

1. On 27 September 1996 a return business class air ticket from Cape Town to Johannesburg was bought for the partner of a councillor, to attend a function of the SABC. The cost of R2,020 in this regard was paid by the IBA.
2. Tickets to the value of R2,250 for the spouses or partners of councillors to attend a Pavarotti concert, were paid by the IBA.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM: The IBA is aware of only one instance where the travelling expenses of a spouse or partner of a councillor had been submitted to the IBA for payment, following which the Council decided that the IBA should not bear the cost. The amount was subsequently debited to the councillor's account and a salary deduction is to be made at the councillor's request. Policy proposals will be tabled at the next council meeting to accommodate the travelling and accommodation costs of accompanying spouses or partners during official business locally and abroad, in line with Civil Service practice and subject to budgetary constraints.

(d) SHORTCOMING - Fruitless expenditure: Fruitless expenditure had been incurred by the IBA owing to offices not being occupied for the period mentioned in the lease agreement.

EFFECTS: Owing to repairs and extensions to Khasho House, the IBA rented 560 square metres in the Sanlam Arena in Rosebank from 1 April 1995 to July 1996. Although the IBA moved out of the Sanlam Arena in January 1996, rentals of R167,050 were still paid Arena in January 1996, rentals of R167,050 were still paid for the period February 1996 to July 1996. This can be regarded as fruitless expenditure.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM: Premises were leased at the Sanlam Arena to temporarily accommodate 15 staff members of the Policy Unit and Legal Department within close proximity of Khasho House whilst it was being extended. In view of the scarcity of available premises close to Khasho House, and the typical uncertainty of completion dates with building undertakings, the IBA had no alternative but to enter into a lease agreement as insisted upon by the landlord of the Sanlam Arena. This, inter alia, entailed that should the IBA move staff members back to Khasho House within the lease period, it would have to find a new suitable tenant for the Sanlam Arena. This was done as soon as possible. The "fruitless expenditure" was therefore unfortunate, but unavoidable.

(e) SHORTCOMING - Control over consultants and contract workers: Measures pertaining to the appointment of consultants and contract workers did not exist to ensure the compliance with tender procedures and the regular evaluation of progress, outputs and target dates for reaching objectives. This contributed to the lack of performance evaluation of consultants that had been appointed at a total cost of R1 909 118 for the period up to the end of December 1996.

EFFECTS:

1. Although' dissatisfaction had been expressed with the performance of the communications consultant at council meetings in June and August 1994, these services were continued at a total cost of R440,000 up to January 1996.
2. From 10 June 1996 to 10 December 1996, a consultant was appointed, at a total cost of R72,000, to undertake a crisis image-building project and to train a nominated employee. On 8 December 1996, the contract was extended by the CEO, at a monthly fee of R16,000. However, no new contract could be provided and no approval in customary form for the extension thereof by the Council could be submitted.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. Because of limited in-house communications capacity in August 1994, a hasty termination of the contract with the communications consultant would have been disruptive. Therefore the consultancy contract was only terminated in October 1995, with a three-months notice period.
2. The contract with the consultant to undertake a crisis-image building Project, had been approved by the Council. Although the decision had not been reflected in the minutes, the proceedings were tape-recorded.

(2) FINANCIAL CONTROL AND MANAGEMENT INFORMATION

(a) SHORTCOMING - Corporate diners club cards: A resolution that each councillor should receive a corporate diners club card, was taken by the Council on 12 August 1994. No credit limits were set and supporting documentation could not be found for 45.9 per cent of the amount debited to the corporate diners club card account. These cards were often used for personal expenses and the IBA was not always appropriately reimbursed. The financial control exercised by the IBA, and the manner in which the credit cards were used, leave much to be desired.

EFFECTS:

1. The total expenditure debited to the corporate diners club card account since, the issuing of these cards late in 1994 up to December 1996, amounted to approximately R395,901. Supporting documentation for transactions amounting to R181,651 (45.9 per cent) of the total expenditure could not be found. Of the total expenditure debited, R81,678 has now been specified as personal expenses by the councillors concerned. Prior to the audit, R79,860 in respect of personal expenses, had been reimbursed to the IBA. Of the amount of R181,651 for which no supporting documentation could be submitted, R84,381 had subsequent to the audit been certified by the councillors, without auditable evidence, as business-related expenses. An amount of R18,945 was reimbursed during the audit, which is not reconcilable to the information set out above. Transactions to the amount of approximately R10,471. for which no supporting documentation could be submitted, had neither been specified as business-related expenses nor reimbursed to the IBA. The effect of the above is that the total expenditure of  R395,901 debited to the corporate diners club card account, has still not been properly accounted for.
2. Transactions of a specific councillor, included in the total in (i) above, debited to the corporate diners club card account, amounted to R168,710 of which 38 per cent (R63,686) has now been specified as personal expenses. However, only R60,343 had been reimbursed to the IBA prior to the audit. In addition, payment took place on average four months after expenses had been incurred. Contrary to a Council resolution, no interest was paid on the late payment of personal expenses.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. It is true that corporate diners club cards were often used for personal expenses. Councillors are expected to provide documentation in support of business expenses, failing which the amounts are debited to their personal expense accounts. However, owing to a backlog that existed in the Department: Finance and Administration, the raising of these debits had fallen into arrears. This matter is now being addressed and all arrears are being liquidated.
2. The management is of the opinion that corporate diners club cards should be restricted to business purposes and will be making such a proposal for consideration by the Council.
3. Business expenses on corporate diners club cards, in respect of which no vouchers had been available, were accounted for by certified statements by the respective councillors, duly endorsed by the Council. In total, an amount of R84,381 had been certified by councillors as business expenses, in respect of which no vouchers were available. The balances outstanding for personal expenses on the corporate diners club account, were paid.

AUDIT COMMENTS: Since no supporting documentation could be submitted for transactions to the amount of R84,381, which had been certified by councillors as business-related expenses, no audit could be conducted or independent assurance provided in this regard.

(b) SHORTCOMING - Cellular phones: There were no clear policies in respect of the use of cellular phones for private and official purposes. The cost of calls for pool cellular phones for the period 9 May 1996 up to 10 October 1996 amounted to R19,888, while that of councillors and the CEO for the period 28 February 1995 up to 27 October 1996 amounted to R26,868. However, all the accounts in this regard could not be submitted.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. Duplicate copies for missing cellular phone accounts have been requested from the service providers.
2. The general practice in other organisations is being investigated and appropriate policy proposals will be lodged with the Council at its next meeting.

(c) SHORTCOMING - Expenditure on local hearings and conferences in the Johannesburg area: Conference facilities were rented at hotels in the region of Johannesburg, while a board-room and a conference hall at President Place and Khasho House were unutilised. During hearings/conferences in the Johannesburg region. some councillors had stayed in hotels and had claimed daily allowances although they were permanent residents of the region. However, proper motivations to demonstrate due process as to why these decisions had been taken to rent these facilities, and whether appropriate attention had been devoted to securing the most cost effective alternatives, could not be submitted.

EFFECTS: (i) The following are examples of conference facilities which were rented from hotels in the Johannesburg region:

2. During hearings/conferences in the Johannesburg region, two female councillors had stayed in hotels and had claimed accommodation and daily allowances to the amount of R49 234 for the period April 1994 to December 1996, although they were permanent residents of the region.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. The conference facilities at Khasho House can accommodate 50 people at the most. When more than 50 people wish to attend an event, the IBA has no alternative but to find more suitable conference facilities elsewhere. Availability of public transport and accessibility to the public is also important. Most venues were used for the Triple Inquiry hearings which were attended daily by upwards of 80 to 100 people. Owing to the shortage of suitable venues in the main metropolitan areas, the IBA is compelled almost without exception to choose the most suitable venue regardless of cost.
2. The two female councillors as a rule preferred to break away from their domestic chores to confine themselves to the privacy of hotels during hearings and enquiries to wade through piles of documentation and submissions. it was imperative for them to be accommodated at the hearing venues even if these were to be in Johannesburg. It also minimised the risk of travelling late at night.

(d) SHORTCOMING - Financial record keeping: The measures to ensure good financial control were inadequate despite thereof that chartered accountants had been appointed at a cost of R126,130, to render financial assistance to the IBA. This contributed to an inability to review financial records timeously as well as incomplete financial information.

EFFECTS:

1. Updated bank reconciliations could not be submitted.
2. Monthly financial statements could not be submitted.
3. The allocation of expenses was incorrect in some instances.
4. Duplicate payments had occurred. During the review of an account for the period 1 April 1995 to 31 October 1995, sixteen duplicate payments, amounting to R18,125, were identified.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. The IBA brought the matter to the attention of the chartered accountants, who have now successfully brought the books up to standard.
2. Whilst it is true that updated bank reconciliations could not be submitted at the time of the audit, this has since been rectified.
3. The incorrect allocations have been rectified and duplicate payments have been accounted for in subsequent payments.

(e) SHORTCOMING - Fraud prevention measures: The measures instituted to identify the perpetrators and prevent the recurrence of fraud, were not effective.

EFFECTS:

1. Since fraud, amounting to R215,000, had occurred during December 1995, the police, on 22 May 1996, requested statements from two signatories, in order to verify their signatures as well as to assess their possible involvement in the fraud. However, the required statements were only made available on 4 November 1996.
2. On l l December 1996, an amount of R800,000 was fraudulently transferred from the call account of the IBA to a non-IBA account at Investec Bank Ltd. On 13 January 1997 the said amount, including interest (R811,325), was deposited in another non-lBA account at First National Bank. This was only discovered after the bank had notified the IBA thereof on 17 January 1997.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM: The unsuccessful attempt to defraud the IBA of some R800,000 is still under investigation and the amount involved has been recovered with interest.

(f) SHORTCOMING - Travelling expenses: The policy and procedures for travelling expenses had not been adhered to in all instances. Councillors had used more expensive hotels than prescribed without proper motivation.

EFFECTS: According to the draft financial manual, members of the IBA had to make use of adequate and reasonably priced accommodation for specific regions. Four star hotels or equivalent accommodation for the councillors had thus been recommended. However, in several instances, councillors had made use of five-star hotels and no motivation for the deviation from the policy could be submitted.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. Availability and location are factors that at times may necessitate a departure from the IBA's guidelines, but such exceptions are allowed only when there is no alternative or in cases here the cost of such accommodation would be the same or less than that of four star hotels.
2. The financial manual will be updated to make revision for instances where no alternative accommodation is available or where the cost of accommodation would be the same or less than that of four star hotels.

(g) SHORTCOMING - Cost of council meetings:

Measures had not been instituted to regularly evaluate and control the expenses incurred for council meetings. This contributed to high costs, which appear to require explanation, being incurred in this regard.

EFFECTS: The costs for refreshments for the 16 council meetings held in the 1995-96 financial year amounted to R103,742, an equivalent of R6,484 per meeting. Furthermore, the costs of the 14 council meetings held from April 1996 to November 1996 amounted to R20,973, an equivalent of R1,498 per meeting.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM: The Council and the management of the IBA monitor expenses on an ongoing basis. When the Council is engaged in hearings around the country, some meetings are held at venues away from Johannesburg and may continue for longer than a day. Such factors have to be taken into account in determining whether meetings concerned were unduly expensive.

(h) SHORTCOMING Payment of allowances: The system did not facilitate the identification and prevention of duplicate payment of allowances.

EFFECTS:

1. Expenses on telephone calls and room service were charged to hotel bills and were therefore paid by the IBA, while the full daily allowances, which provided for such expenses, were also claimed.
2. Allowances in respect of journeys to foreign countries covered all meals and incidental expenses. However, the latter had been paid by means of corporate diners club cards, but had not been deducted from allowances. This resulted in the double payment of certain expenses to the amount of R14,500 in respect of only three journeys to foreign countries, which were examined for audit purposes.
3. On 19 December 1995, a councillor claimed an allowance of R260 for four days from 6 to 10 November 1995 while engaged in the Pretoria Triple Inquiry Report. Although she had received a cheque for this amount on 19 December 1995, she once again claimed the amount on 19 December 1995, she once again claimed the amount on 27 June 1996 and received the cheque for this on 16 July 1996.
4. On 20 December 1995, a councillor claimed R2,795 for 59 days spent away from home during the period November 1994 to November 1995, following which she received a cheque for that amount on 20 December 1995. On 15 August 1996, however, she again claimed an amount of R2,520, following which a cheque for the amount was issued on 23 September 1996.

COMMENTS BY THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. The IBA undertakes to exercise greater vigilance to identify and prevent the duplicate payment of allowances.
2.  Incidental expenses charged to hotel bills are to be recovered from persons concerned where appropriate.

(i) SHORTCOMING - Timeous payment of creditors: Measures did not exist to ensure that creditors were paid timeously. The payment of creditors was significantly in arrears, which resulted in interest having to be paid on overdue accounts.

EFFECTS: Interest of R38,314 was paid on the late payment of corporate diners club cards, petrol cards and telephone accounts from 30 June 1996 up to 31 December 1996.

COMMENTS BY THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM: It is agreed that creditors should be paid timeously, not only to avoid merest but also to uphold the good name of the IBA. During the period in question, the IBA had had staffing problems which have now been resolved.

(j) SHORTCOMING - Vehicles for staff: The IBA had purchased vehicles for certain staff members and the vehicles had been registered in their names. However, an agreements had not been entered into and instalments had not been paid by the staff concerned. The IBA ad issued petrol cards in respect of each of these vehicles ad had paid all the transactions incurred thereon. In addition, there was no limit on the use of the petrol cards. [monthly log-sheets and itineraries submitted by staff members indicated that, in certain instances, vehicles had been used for private purposes.

EFFECTS:

1. An amount of R21,542 incurred on petrol cards in this regard up to 30 September 1996, had been paid by the IBA in full.
2. From April 1996 up to December 1996, the IBA had also paid R52,177 for maintenance, fuel, parking, cleaning and sundry costs of the vehicles in question.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. A vehicle purchasing scheme for provincial staff is in the process of being finalised for implementation on 1 April 1997. Allowances will be payable by the IBA and a certain portion will be paid by staff members to cover the residual value in order to qualify for ownership at the end of the contract period. In the interim, the vehicles in question remain the property of the IBA, although they have been registered in the names of users to avoid the double payment of value-added tax upon the transfer of a vehicle to a staff member concerned. Ownership will be transferred only upon the final settlement of the residual values.
2. Expenditure on petrol cards is limited by budget restrictions, like all other expenditure of the IBA. Any extraordinary distance covered, is monitored and justified against the nature of the business done. It is a requirement that log-sheets and itineraries be submitted monthly for scrutiny and action by the HOD: Provinces.

(k) SHORTCOMING - Staff loans: Loans had been granted to staff without the approval of the Council and in the absence of written contracts. In addition, the loans were interest-free and tax on fringe benefits had not been recovered thereon.

EFFECTS:

1. During 1994 loans were granted to two staff members without proper contracts having been drawn up. The loans were interest-free and were repaid by means of monthly salary deductions. On 31 March 1995 the balances on these loans amounted to R20,318 and R136,417, respectively.
2. An interest-free loan was granted to a staff member in 1994. However, no regular monthly repayments had been made. As from August 1996, however, regular monthly instalments had been made.
3. On 20 September 1996, a loan of R28,006 to a staff member was made. However, no formal agreement had been signed and no documentation could be submitted with regard to interest or repayment terms. At the end of December 1996, no interest had been charged and no repayments had been made.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM: The loans concerned are recruitment commitments, some of which were negotiated by individual councillors before the arrival of the CEO. The loans are now being recovered from salaries monthly.

(1) SHORTCOMING - Expenditure by the Council: Limited financial information was disclosed in the budgets and financial statements of expenses incurred by the Council. This made effective financial control impossible.

EFFECTS:

1. The operating expenditure incurred by the Council during 1995 and 1996, compiled by this Office, amounted to R8,298,817, or 13 per cent of the total budget, as reflected in the table below:

1. The operating expenses set out above may well be incomplete since costs pertaining to, for instance, cellular phone rental and the stocking of bar fridges in councillors' off ces, could not be readily determined.
2. Although a list of assets utilised in councillors' offices homes included a fax machine, copier, television set, computer, printer, satellite dish, digital receiver, video recorder, M-Net decoder and a laptop/notebook, the cost thereof to the IBA could not be readily determined.
3. Although the 1995-96 budget reflected council capital expenditure for the acquisition of equipment of R307,500, no details could be submitted. According to council meeting minutes, the Council had approved that each councillor would receive, amongst other equipment, a M-Net decoder, a combined television and radio set, a refrigerator in the office and a digital satellite dish.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. Since the IBA did not have any previous track record to guide it, internal virement on budgets were made from time to time.
2. The IBA pays councillors' subscriptions for decoders as these are regarded as tools necessary for the regulating and monitoring of broadcasting services.

(3) HUMAN RESOURCE MANAGEMENT

(a) SHORTCOMING - Training of staff: The lack of a training policy and a structured training programme contributed to funds budgeted for training, not being utilised.

EFFECTS: Although R224,000 and R518,284 were budgeted for training during the 1995-96 and the 1996-97 financial years respectively, only R30,767 and R256,763 had been spent for the respective financial years at the end of December 1996.

COMMENTS OF THE CEO AND CORRECTIVE STEP ENVISAGED BY HIM: Training has been centralised and will be better co-ordinated in future.

(b) SHORTCOMING Recruitment of staff: The lack of formal policy, such as the advertising of posts and interviews, contributed to the transfer and promotion of staff members on an individual and an ad hoc basis. No performance evaluation had been performed in this regard and no external or internal advertisements could be submitted in some instances.

EFFECTS: A staff member was transferred from the Department: Finance and Administration to the Department: Licensing with an increase in basic salary from R1,300 to R2,700 per month. However, no formal performance evaluation or an advertisement of the post took place.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM:

1. Although it is practice at the IBA to advertise posts and to follow-up the recruitment process, there is also a commitment to recognise and develop internal staff with required skills and qualifications. In this regard, the HOD concerned would at times recommend the promotion of existing staff to vacant positions. Policies to regulate human resource management have now. however, been formulated and are being finalised.
2. The staff member concerned had been in the position of clerical assistant with the IBA for about 18 months. Since the typist in the Department: Licensing was leaving, there was a need to replace her before she left so as to cater for a handing-over. Since she had demonstrated her abilities she was recommended for the position by the HOD: Licensing.

(c) SHORTCOMING - Staff records: Personnel files kept in the Department: Human Resources did not in all instances contain appropriate proof of professional and educational qualifications.

COMMENTS OF THE CEO AND CORRECTIVE STEPS ENVISAGED BY HIM: All staff had been given a deadline to submit outstanding certificates, following which most thereof have been sub mined.

6. CONCLUSION AND OPINION

The contents of this Report indicate a serious lack of management measures and financial controls to ensure that resources allocated are utilised economically, efficiently, effectively and with probity. This has undoubtedly, and justifiably, contributed to the concerns of staff and other role players. Various matters require further investigation. It is clear that these matters, and the effects thereof, call for a fundamental review of the manner in which the IBA conducts its finances and that comprehensive corrective action, under appropriate and strong leadership, will have to be instituted.

7. APPRECIATION

I would like to express my appreciation to the members of my staff for their dedicated work in completing this Report and would also like to record my thanks for the support and co-operation of the officials of the IBA.

J A J Loots
Acting Auditor-General
Pretoria, 4/4/97.