Department of Environmental Affairs and Tourism . Isebe leMicimbi yokuSiNgqongileyo noKhenketho
Lefapha la tsa Tikologo le Boeti . DEPARTEMENT van Omgewingsake en Toerisme
12 November 1999
Dr C Olver
Acting Director-General
Department of Environmental Affairs and Tourism
Private Bag X447
PRETORIA
INTERNAL AUDIT REPORT ON MARINE AND COASTAL MANAGEMENT
In accordance with the request of the previous Director-General, we have performed an internal audit review of Marine and Coastal Management. This review was undertaken during August 1999. The period reviewed was April to July 1999 and does not reflect any changes after that date.
It is worthwhile mentioning that the matters included in the attached report came to our attention during the conduct of our internal audit procedures. He defined the nature and scope of these internal audit procedures.
The attached report records the results of our internal audit findings and recommends possible ways in which the controls and operations could be improved to overcome the identified weaknesses in control to increase efficiency. The attached report has been set out in two sections. They are: -
Section A - an executive summary documenting the scope of our work, sources of information and summary of significant findings
Section B - the detailed internal control findings and recommendations identified
For the record, , our audit was hampered to a certain extent by lack of co-operation by certain staff members (especially the Secretariat and Office Services), who were reluctant to provide the requested information.
We would like to express our appreciation to the various members of the staff who assisted us in carrying out our work.
Our report has been prepared for your information and that of the managers of the different sections involved. We do not accept responsibility for any other party to whom it may be shown or who of their own volition may decide to rely on it.
The management responses should be directed to the undersigned. The final report that includes management responses will be submitted to the Audit Committee.
Please contact us should you need further assistance in this regard.
George Msiza
Head Internal Audit
Date
I-aud.Report-v
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CONTENTS |
EXECUTIVE SUMMARY
The Head: Internal Audit identified the audit areas under review
The areas covered by our members of staff during fieldwork consisted of the following budget items:
SOURCES OF INFORMATION
Discussions were held with staff of members in Marine and Coastal Management, Corporate Services and Harbours. We obtained documentation pertaining to rules, regulations and prescripts governing all the items under audit. Audit work was conducted on the basis of documenting key controls. Although key controls provide management with a prime source of internal control, inherent limitations exist in the reliance on manual controls since errors and lapses in control can result from carelessness, misunderstanding of instruction, collusion between individuals and management override.
FRAUD AND INTERNAL CONTROL
Internal audit work is planned with a reasonable expectation of detecting significant control weaknesses in the specific areas reviewed. However ,internal audit procedures alone, even when carried out with due professional care, do not guarantee that fraud will be detected. Accordingly, our review as internal auditors should not be relied upon solely to detect fraud, defalcation or other irregularities, which may exist.
Management's attention is also drawn to the fact that inherent limitations exist in the reliance on manual controls since errors and lapses in control can result from carelessness, misunderstanding of instruction, collusion between individuals and management override.
SUMMARY OF FINDINGS
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DETAILED INTERNAL AUDIT FINDINGS AND RECOMMENDATIONS |
13. SEGREGATION OF DUTIES
Observation
Adequate segregation of duties for certain staff members in the Finance section like Assistant Director Finance and State Accountant did not exist. They perform incompatible duties of compiling, capturing payments in the BAS system. Furthermore both can authorize journals, payment advises and are also signatories to manual cheques.
Potential effect
The possibility of collusion, misappropriation of funds, theft or fraud could occur.
Recommendation
We recommend that officials who are involved in authorization of payments in the BAS system should not compile the BAS payment advises and should not be signatories to manual cheques.
Management comment
Your concerns are noted and have been presented to Finance Division for rectification. Your recommendation will be implemented urgently once the appropriate duties have been identified and allocated.
Observation
We noted that there is no segregation of duties with regard to activities carried out by the cashiers. The cashiers receive state money, issue receipts and captures data in the BAS system. The same is taking place in harbours such as Hout Bay, Kalk Bay, Saldanha Bay, St Helena Bay and Veldrif. There cashiers receive state money, issue receipts and permits/ licenses, record the transactions in the financial books, count the money and send the money to the bank.
Potential effect
A situation where an officer carries out a transaction from its inception until its end is susceptible to risk of fraud or theft. This risk is high, especially in harbors where checking of books and supervision of staff members are lacking.
Recommendation
We recommend that:
- A person who receives money should not capture receipts in the BAS system;
- The person who receives money should not do banking;
- Segregation of duties should be exercised in any financial transaction whether it is a receipt or payment.
Management comment
Your concerns are noted and will be addressed with various harbour officials for rectification. It should however be noted that since the transfer of the Marine Conservation component in November1995 to this chief directorate, marine conservation inspectors is in a very haphazard fashion performed these duties. Since the appointment of the temporary administration clerks, these duties have solely been allocated to them. A concerted effort will be made to address this matter with the harbour masters once permanent administrative staff is appointed.
14. TEMPORARY EMPLOYEES ARE ENTRUSTED WITH RECEIVING STATE MONEY
Observation
We found that in some harbours for example in Hout Bay and Veldrif, Accounting clerks are not permanent. The department does not permanently employ cashiers who receive money. We also noted that some of their contracts have that expired and they do not have duty sheets that describe their duties and responsibilities.
Potential effect
The risk of fraud or theft is high.
Recommendation
We recommend that any person who is entrusted with receiving of state money should be a permanent employee of the department. Duties of that person should be assigned in writing.
Management comment
Your concerns are noted and will be addressed with the various harbour officials once permanent clerks are appointed. This Chief Directorate has received numerous complaints that the Marine Conservation inspectors are not performing their core responsibility. In response, the inspectors complained that they were being utilised to perform administrative duties as opposed to performing law enforcement duties .In the latter portion of 1998,temporary clerks were appointed to assist with this problem and due to the restructuring of the Department, the posts could not be filled until the establishment had be finalised. During the meeting held in September 1999,the matter of their employment contracts were discussed and it was approved that their period would only be extended to 31 December 1999 whereon these posts should be filled.
15. VELDRIF HARBOUR IS NOT CHARGING GATE ENTRANCE FEES
Observation
We observed that Veldrif harbour does not receive any income with regard to gate entrance fees. The gate is always wide open and motorists drive into the harbour grounds free of charge any time. There is no gatekeeper. The harbour master informed internal audit that they were instructed by head office (Foretrust) not to collect gate entrance fees (since 1996) because the local authority is in the process of rezoning the harbour. We obtained verbal confirmation from the Assistant Director: Finance, but documentation to support the statement could not be furnished to us.
Potential effect
The department is losing a substantial amount of revenue.
Recommendation
Gate entrance fees should be charged to customers until the process of rezoning is complete. Officials at Fore Trust Building should stop giving incorrect instructions to harbours without written instructions from the Director-General.
Management comment
Numerous access routes are available in order to enter this harbour. It should be noted that the entrance cannot be isolated as that of other harbours under our control. Although there has been discussions to rezone parts of the harbour, it would be practically impossible execute this responsibility and once the matter as be fully investigated ,your office will be informed accordingly.
16. NON-DISCLOSURE OF REVENUE IN THE CASH BOOK
Observation
Receipt no B0707834 of R46 582,07 was issued to S.H.B.F.I by St Helena Bay in receipt of payment for Ontginnings Reg. The payment was received on 07 May 1999 and deposited in the bank on 10 May 1999, but was not included in the total amount of the Daily CashBook. Our inquiry revealed that the Assistant Director: Finance telephonically advised the cashier who received the money not to include it in the total amount of the CashBook because the harbour was not supposed to receive that kind of income. On further enquiry the Assistant Director: Finance denied the statement and supported our assertion that the money should have been included in the total amount of the daily and monthly CashBook.
Potential effect
The practice of not disclosing received money in the CashBook is not in line with Generally Accepted Accounting Principles. In this situation the CashBook does not fairly present what transpired during the month i.e. it has a total of R34 333.62 instead of R80 915,69.
Recommendation
We recommend that all state money received be disclosed correctly in the Daily Cash Book. The total amount to be banked should include all money received in a given day.
Management comment
Our current finance staff implemented the Daily Cash Book that has been mentioned in your query in order to maintain certain amount of control over income and deposits It should however be mentioned that monies for Exploitation Rights are normally only received at our Foretrust Offices where the applicable permits are also issued. It is agreed that all receipts should be accounted for in the cash book of our outside offices.
11. MONEY IS NOT BANKED DAILY
Observation
We have noted that contrary to Treasury Instruction J5.12.2 money received by the harbours is not banked on the date of receipt, and neither is banked on the next official working date. We have, for example, found that in St. Helena Bay, an officer who receives state money asked (and was granted) permission from the Assistant Director: Finance to do banking twice a week. The Assistant Director: Finance informed us that head office in Pretoria has advised that if money received is less than R200,00 banking is not necessary. A letter to this effect was not furnished to us.
Potential effect
The practice of banking money as and when it suits individual officers, for whatever reasons, contravenes Treasury Instructions. This situation deprives the department of interest from the bank, and delays the closing of books by head office - Pretoria. The high risk of rolling of cash exists.
Recommendation
We recommend that all amounts received should, where possible be banked on the date of receipt, and that which could not be banked, should be banked on the next official working date.
Management comment
It is agreed that all monies should be banked as soon as possible in accordance with TI.J5.12.2.Although there is evidence of deviation from the afore -mentioned TI, this office will strive to rectify the situation be either obtaining a copy of the approved or to reapply to deviate as required.
24 LACK OF SECURITY AT HARBOUR ENTRY POINTS
Observation
We observed that the security with regard to harbour entry points appears to be lax. Most gatekeepers do not conduct themselves in a manner that guarantees the department receiving all income due to the state. Due to lack of supervision and accountability on the part of harbour managers, motor vehicles go through the gates as if there is no one manning the gates. In Saldanha Bay gatekeepers were busy washing a motor car belonging to the harbour master whilst vehicles passed through the gates freely. In St Helena Bay a gatekeeper invited about five friends to the security room for a chat whilst vehicles passed through (internal auditor's car also passed through). In all the harbours visited, gatekeepers were not always issuing entrance tickets to motorists, thereby reissuing the ticket and pocketing the money for their personal use.
Potential effect
The department is losing substantial income due to lack of proper supervision and controls at the entry points.
Recommendation
We recommend that:
Where there are two entry points, such as Hout Bay, one gate should be used for entry only and the second gate for exit only
The Harbour Master should ensure that gatekeepers do not leave gates open all the time instead, they should keep them closed and open only after the motorist has paid the required tariff
The Harbour Master should ensure that gatekeepers concentrate on manning the gates and leave other activities such as washing of cars or chatting to friends
Electronically controlled gates should be installed whereby a motorist will only go through with a valid ticket.
Management comment
Entry to all our proclaimed harbours has always been problematic. It should be noted that the out-sourcing of this duty will be investigated and your office will be informed accordingly.
28. UNAUTHORIZED USE OF INTERNAL AUDIT STAMP BY OFFICERS WHO ARE NOT INTERNAL AUDITORS
Observation
We noted that there are officers in the department who visit harbours presenting themselves as Internal Auditors whilst they are in fact financial inspectors. The officers even possess an Internal Audit stamp. We obtained confirmation that the internal audit stamp was used during financial inspections at the harbours. Our view is that the department has only one internal Audit section unit that reports to the Director-General and the Audit Committee. This unit does not have a rubber stamp.
Potential effect
Needless to say the practice of rubber stamping official documentation with 'Internal Audit' stamp is grossly improper and unprofessional, and is also causing confusion among staff members who want to know who the real Internal Auditors are. As a result, we did not receive the necessary cooperation due to the misrepresentation that has taken place. These officials also have a tendency to give incorrect instructions to staff in the harbours without approval from top management.
Recommendation
We recommend that this practice be stopped with immediate effect. Inspectors should present their true identity when they conduct financial inspection or such activities and should obtain approval from top management before giving instructions to staff at the harbour.
Management comment
Prior to the establishment of this Internal Audit Component, finance staff of this office were entrusted with this responsibly. This practice will be immediately terminated.
25. HARBOURS ARE IN A STATE OF DISREPAIR
Observation
We found that most harbours are in a terrible state of dilapidation, so much so that they are failing to render the services for which they were built. It would appear that maintenance work has not been done for a long time. A harbour such as Veldrif is obviously a danger to the people (and their vessels) that make use of it. The harbour Master informed us that there was a pending lawsuit against the department arising from damage to a ship caused by the unsuitable state of the harbour.
Potential effect
The situation may bring unnecessary lawsuits against the department in cases where vessels get damaged due to factors arising from negligence on the part of the department.
Recommendation
We recommend that management should address this situation with the relevant authorities, as a matter of urgency. The department should investigate the possibility of outsourcing the management of harbours to the private sector.
Management comment
Due to lack of financial support, the conditions of these harbours were not attended to. In addition, most of the expertise of our Coastal Structure component was lost when the majority of staff applied for the Voluntary Severance Package. During this financial year(1999/2000),the repairs have been prioritised and once all specifications are obtained, the repair work will be put out for tender.
7. NON - RECOVERY OF OUTSTANDING DEBTS
Observation
We noted that the Fishing industry is refusing to pay the new tariffs as enacted by the department in the Marine Living Resources Act. Outstanding money owed by the fishing industry has grown to an unacceptable proportion that needs serious management attention. At the time of our review, the figure of outstanding debts was more than R1.3 million. The existing process of making use of legal section and State Attorneys in collecting debts is not yielding the desired results.
Potential effect
The fishing industry is contravening the following sections of the Marine Living Resources Act, No. 18 of 1998 and is undermining the law passed by Parliament.
Section 25(2) stipulates that, an application for any right, permit or license in terms of this Act shall be accompanied by an application fee determined by the Minister in consultation with the Minister of Finance.
Section 27(3)stipulate that the Minister may, in consultation with the Minister of Finance, determine the fees payable in respect of the use of a fishing harbour or the facilities available in such a harbour.
The fishing industry is illegally depriving the department of revenue by refusing to pay applicable tariffs.
The Minister and the Director-General could be held liable by Parliament through the Standing Committee on Public Accounts for failure to comply with the provisions of the Act as passed by Parliament.
Recommendation
We recommend that:
The Director-General and Minister exercise their powers as provided by the following sections of the Act:
Section 26 stipulates that, the Director-General may recover the money of any interest or fee, which is due and payable in terms of this Act in a competent court of law.
Section 28(1) stipulates that the Director-General may, by written notice delivered to such holders who have contravene the Act or send by registered post to the said holder last known address, request the holder to show cause in writing, within a period of 21 days of the notice, why the right, licence or permit should not be revoked, suspended, cancelled, altered or reduced, as the case may be
Section 28(3) stipulates that when the matter is referred to the Minister in terms of subsection (2), the Minister may:
- Revoke the right, licence or permit
- Suspend the right, licence or permit for a period determined by the Minister
- Cancel the right, licence or permit from a date determined by the Minister
- Alter the terms or conditions of the right, licence or permit
- Decide not to revoke, suspend, cancel, alter or reduce the right, licence or permit.
Section (581)(b) stipulates that any person who contravenes any other provision of this Act shall be guilty of an offence and liable on conviction to a fine not exceeding a million rand, or to imprisonment for a period not exceeding five years.
Management should obtain a court order to seize the property of defaulters.
Management should look seriously into the option of making use of lawyers outside the public service who have expertise in debt collection.
Defaulters should be refused entry to the harbour.
Management comments
This matter is currently receiving attention and you will be informed of the outcome.
12. LONG OVERDUE ADVANCES
Observation
We noted that there are advances that were taken by officials that have not been cleared and have been outstanding for a long time.
Potential effect
The department may incur financial losses when employees terminate their services without clearing their debt. This could result in the overstatement of subsistence and travel.
Recommendation
We recommend that recovery steps be taken to recover the outstanding amounts from the officials. The advances should be settled within 30 days after returning from a trip.
Management comment
A concerted effort will be made to recover the long outstanding advances. Final
notices have been sent to certain officials with outstanding advances while deductions have been implemented for either December or January 2000. The attached schedule reflects further comments of action taken to recover or process the outstanding advances.
19. MISALLOCATION EXPENSES IN THE SUSPENSE ACCOUNTS
Observation
We have noted the following misallocation:
An amount of R9 684,25 paid to E M Swart, was misallocated as subsistence and travelling, which was a resettlement amount paid out in terms of the Public Service Regulation F4.5.
Payment amounting to R555 635,00 is misallocated as suspense local salaries to the Fisheries Transformation Council. This expense should correctly be allocated to professional services, accommodation, private transport and subsistence and travelling accounts.
Potential effect
This could result in the overstatement of subsistence and travelling and the understatement of professional services, private transport and accommodation.
Recommendations
Senior officials should properly scrutinise account allocation before processing it, and the counter signatories should ensure that all details are correct before approving the transactions.
Management comment
Your recommendation is accepted and a reallocation of expenditure will be made. You will be supplied with the journal details once a full analysis has been made.
4. DELEGATION POWERS EXCEEDED
Observation
We noted that officials are exceeding their delegated powers in terms of annexure G1 3.1 and 3.2 of the State Tender Board Act. For example, payment No. 76878 with a value of R178 410,83 was signed for by a Senior Provisioning Administration Officer whose delegation is to sign for amounts not exceeding R10 000,00, and the VA1 form accompanying the payment was signed by the Assistant Director: Finance, who does not have signing powers in procurement.
Potential effect
Violation of the State Tender Board Act is regarded as unauthorized expenditure in terms of Section 33(1)(d) of the Exchequer Act, 1975 (Act No. 66 of 1975).
Recommendation
The officials should adhere to the provision of the State Tender Board Act and sign according to delegated powers.
Management comment
Officials in the Provisioning Administration component will be informed to comply with the necessary State Tender Board Regulations and delegations. Due to the fact that the service was rendered satisfactorily and the invoice was certified accordingly, the official had mistakenly signed for the payment of account. It should be however be noted that Emergency Delegation 406 had already been approved to incur this expenditure. TheVA1 signed by the Assistant Director: Finance was due to the vacancy of Assistant Director; Provisioning Administration at that time as well as the Deputy Director: Administration not being available to sign the form. The officer acted in good faith and no fruitless expenditure was incurred. A copy of the departmental delegation is attached as Schedule B for perusal.
3. SIGNING OF CONTRACTS BY OFFICIAL WITHOUT THE DIRECTOR-GENERAL CONSENT
Observation
We noted that there are ad hoc contracts signed by officials other than the Director-General between the departments Marine and Coastal Management component and other institutions/suppliers/consultants without the Director-General's written delegation in terms of 13.1.1 of the State Tender Board Act. We requested a written delegation by the Director-General that was not provided to us.
Potential Effect
Violation of the State Tender Board Act is regarded as unauthorized expenditure in terms of Section 33(1)(d) of the Exchequer Act, 1975 (Act No. 66 of 1975).
Recommendation
The Director-General should be the one who sign the contracts or a written delegation of his powers to a particular individual should be attached to each contract where he has delegated his powers. The Director-General should consider the possibility of recovering the unauthorized expenditure from the officials, who signed contracts without the Director-General written delegation, if the contract was not to the benefit of the department in terms of Section 33(4) of the Exchequer Act, (Act No. 66 of 1975).
Management Comment
Over the past few years, the senior officials of this chief directorate signed contracts finance through the Sea Fisheries Fund that were concluded with various organisations and companies. This practice has been in existence for the last ten years and carried the blessing of the previous Director-General and was continued after the implementation of the Marine Living Resources Act, Act No. 18 of 1998 on 1 September 1998. Due to the fact that the necessary delegation has not been applied for, arrangements have now been made to obtain the required delegation from the Director-General. On receipt of his approval, your office will be informed accordingly.
2. NON - COMPLIANCE TO TENDER PROCEDURES
Observation
Ad hoc contracts are entered into without following the tender procedures i.e. Contracts are entered into without prior approval of the Tender Board or seeking exemption in terms of 13.3.1 of the State Tender Board Act and without the Director-General's approval as per 15.1.5 of the State Tender Board Act which also refers to Treasury Instruction S3.1.1(a).
Potential Effect
Violation of the State Tender Board Act is regarded as unauthorized expenditure in terms of Section 33(1)(d) of the Exchequer Act, 1975 (Act No. 66 of 1975).
Recommendation
Tender procedures and Treasury Instruction S3.1.1(a) should be adhered to all ad hoc contracts and the Director-General should approve the requests for procurement of services. The Director-General should consider the possibility of recovering the unauthorized expenditure from the officials, who signed contracts without the prior approval of the Tender Board or apply for exemption in terms of Tender Board and the approval from the Director-General, if the contract was not to the benefit of the department in terms of Section 33(4) of the Exchequer Act (Act No. 66 of 1975) .
Management Comment
This matter is currently being addressed and you will be informed of the outcome.
21. DELIVERY OF GOODS IN FORE TRUST INSTEAD OF PAARDEN ISLAND
Observation
We noted that some suppliers were delivering goods to the Fore Trust building instead of Paarden Island storeroom. We observed delivery of boxes by L P Printers to the Finance section where the Assistant Director: Finance received the delivery.
Potential Effect
This could result in collusion, fraud, theft between the suppliers and some staff members. The possibility exists of goods received not being accounted for in stock. This could result in losses to the department.
Recommendation
We recommend that only officials entrusted to receive goods ordered by the department should receive goods. The officials entrusted with the authorization of payment of suppliers and who are signatories to manual cheques should not receive goods or collect cheques on behalf of suppliers.
Management Comment
Over the past few months with the implementation of the new systems for application for commercial and subsistence fishing rights , innovative mechanism were put in place in order to obtain the required application forms urgently. Due to the fact that these application are not handled on a renewal basis, it is extremely difficult to obtain the correct required quantities to be printed. In order to secure that application forms are ready available, drastic measures had to be taken in order to meet these demands so that applicants could have sufficient time prior to the closing ate and time to complete them. Your recommendation is accepted and all necessary steps will be taken to ensure that a re-occurrence does not occur.
20. STOCK KEPT IN AN OFFICE IN FORE TRUST INSTEAD OF THE STORE IN PAARDEN ISLAND
Observation
We noted that goods (e.g. biscuits and cold drinks) were kept in an office of the Chief Provision Administrative Clerk in Office Services in the Foretrust building instead of the being stored in Paarden Island and safeguarded by the Stores Clerk. This stock is not accounted for in Bin cards like other items that are in store in Paarden Island.
Potential Effect
This is a high risk of the department paying for goods purchased for personal use. The department might be purchasing goods without determining the need for such goods. Furthermore, this could result in theft because such goods aren't accounted for or taken to stock.
Recommendation
We recommend that all goods that are kept as stock be kept in the store, safe guarded by the Stores Clerk and accounted for in bin cards like all other items in store.
Management Comment
The stock that are currently kept at this office was requisitioned by VA2 from the main store in Paarden Island to be issued to the various committees and gathering during the evaluation process of applications for fishing rights. Due to the fact that no spare office space is available, the stores were kept in this office. It should however be noted that these stocks are only issued on receipt of an approved request and controlled by our Office Services components. Due to geographical reasons, it is more practical to hold a small quantity of stock that can be immediately available for urgent meetings of the Chief Director, Directors or other bodies. A separate office will be made available to store these items and a register will be maintained.
9. PAYING WITHOUT SUPPORTING DOCUMENTATION OR COPIES THAT ARE NOT CERTIFIED
Observation
We noted that some payments are processed without supporting documentation. Payments were made on uncertified Photocopies/fax copies of invoices. Certain invoices were not certified as correct, which is against the regulations (e.g. in several instances payment were made for catering for meetings and workshops without indication of the nature of those meetings/workshops or attaching any attendance register).
Potential Effect
The possibility of collusion, misappropriation of funds, theft or fraud could occur. Payment without supporting documentation could result in duplicate payment and unauthorized expenditure.
Recommendations
Payments should not be paid without all the supporting documentation as prescribed by treasury instruction K2.2.5.
Management Comment
We concur with your recommendation and await the details of the identified payments.
8. AUTHORISATION OF PAYMENTS BY UNAUTHORISED PERSONNEL
Observation
We noted that there are BAS payment forms that are authorised by the Chief Provisioning Administration Clerk on behalf of other sections, e. g. payment of Arcon services for the month of July.
Potential Effect
The various sections will overspend and be unable to account for their overspending, due to payments that are not authorised by them.
Recommendation
Payments must be authorised by the heads of the sections concerned.
Management Comment
Payments are normally made once the respective responsible manager has certified the invoices for payments. In certain instances it would be impracticable for each responsibility manager to authorise the payment advice or order forms for payment.
22. DOCUMENTS NOT STAMPED PAID
Observation
We noted that some of the payments weren't stamped paid.
Potential Effect
This results in high risk of double payments.
Recommendation
All payments including supporting documents should be stamped paid.
Management Comment
We concur with your recommendation and our finance staff will be informed accordingly.
6. DOUBLE PAYMENT
Observation
Overpayment amounting to R238 568,17 was paid twice to Elite Maritime Personnel in the month of July, with the payments processed within two days of each other. The first payment was processed with the invoice and paid through EBT while the second payment was processed with a memo and paid for by a manual cheque which was collected by the State Accountant who happened to be the compiler of the BAS payment form for the payment. Furthermore, the department have paid R1 675 711,63 to Elite Maritime Personnel as at 10 August 1999 without a contract, Director-General authority and Tender Board approval . (Annexure A).
Potential Effect
Lack of proper control measures over the submission, processing and payment of invoices could lead to unauthorized payments and the overstatement of expenditure.
Recommendation
We recommend that the amount be recovered and strict measures be taken to avoid the occurrence in future.
Management Comment
We concur with your recommendation and can inform you that the amount of R238568,17 has been recovered as follows, Receipt No.C982782 dated 28 July 1999.
23. PAYMENT OF TRAVEL COSTS FROM PETTY CASH
Observation
We noted that a payment for official travel by a privately owned vehicle was paid out of petty cash. The particular person is the cashier’s supervisor responsible for petty cash.
Potential Effect
The potential of collusion, fraud or theft is high due to the nature of reporting it will be difficult for the cashier to refuse to pay a claim made by his supervisor.
The risk of officials being paid more than they are supposed to get is high if paid out of petty cash than if they were paid through subsistence and travel and advances could be left uncleared for a long period.
Recommendations
We recommend that subsistence and travel claims should not be paid out of petty cash.
Management Comment
We concur with your recommendation and the supervisor has also be been informed accordingly. Payment of transport claims are processed on the Subsistence and Transport Claim form.
1. UNAUTHORISED EXPENDITURE: R290 304,00
Observation
Section 34 of the Marine Living Resources Act No. 18 of 1998 stipulates that the Director-General may pay to a member of the Council (who is not in the full-time employment of an organ of state) the allowances and remuneration from the money appropriated for that purpose, that the Minister, in consultation with the Minister of Finance may determine in general or in a specific case.
No formal written agreement existed between the department and members.
Certain claims by members were paid without supporting documentation.
Potential Effect
Violation of the Marine Living Resources Act is regarded as unauthorised expenditure. Furthermore the payment of Fisheries Transformation Council higher tariff than those paid to other committees serving in parastatals under the control of the department will create bad precedence in future.
Recommendation
Management Comment
This matter has been addressed as early as December1998 and has again been addressed with the Deputy Director-General (Dr T Abrahamse) for second instance. The matter is receiving the necessary attention and you will be informed accordingly.
26. REGISTER OF RIGHT AND PERMIT
Observation
We noted that a register of rights of access, permits and licenses granted was not kept and available for inspection by the public as prescribed by section 12 of the Marine Living Resources Act No. 18 of 1998.
Potential Effect
The possibility that holders could continue using rights permits and licenses that have expired, resulting in substantial financial loss for the department.
Recommendation
The register of rights, permits and licenses should be maintained and regularly updated in accordance to the Marine Living Resources Act.
Management Comment
We concur with your recommendation and all attempts will be made in order to comply with the requirements of the Marine Living Resources Act.
5. INVESTMENT OF SURPLUS FUND BY THE DIRECTOR-GENERAL
Observation
In terms of section 10(5) of the Marine Living Resources Act No. 18 of 1998, the Director-General shall invest money in the fund not required for immediate use with the Public Investment Commissioners. This function is currently performed telephonically or sometimes through faxes without the Director-General written delegation by officials in Head Office in consultation with a official at Marine and Coastal Management. The Director-General and the Exco at Marine and Coastal Management are not informed or given a report.
Potential Effect
The possibility of investing money from voted funds without considering the whole budget, of the as the department uses a joint bank account and only line management of Marine and Coastal Management is consulted.
It could also result in bank overdraft, interest on bank overdraft and overspending.
Recommendation
The Director-General or a senior person with written delegation instructions from him should be consulted before a decision is taken.
The Director-General should be supplied with monthly reports including bank statement, statement from the Public Investment Commissioners and motivation for investing the funds.
Management Comment
Over the past few years, investments of the Sea Fisheries Fund and now of the Marine Living Resources Fund has always been managed by the finance staff at the Directorate: Finance and Logistics. Your enquiry has been directed to the to the Director: Finance and Logistics.
Comments by Director :Finance and Logistics
No written delegation from the Director-General could be traced in the department records.
The investment of funds is prescribed by the Act . The practice in the Directorate, which predates the current legislation, has been to invest surplus funds that remains after provision for monthly commitment have been made. The Assistant Director at the Marine and Coastal Management collects information from line managers about commitment they have to meet from the Fund, for the given month. On the basis of this information he prepares an estimate of commitments, subtracts it from the recorded income to determine the amount that may be invested. He then advices the Senior Accountant in Pretoria on the amount to be invested.
The Public Investment Commissioner is thereafter instructed per written order signed by two authorised signatories to debit our current account and credit the investment account. The
P.I.C. , who is part-and-parcel of the banking system at the Reserve Bank, is then able to effect the transaction accordingly. The Director-General has not yet been specifically informed about this process nor approached for advice or opinion. The was no deliberate attempt to keep the Director-General or any senior official uninformed about the matter. The Director-General was not supplied with any report. I have not required as Director: Finance and Logistics to be supplied with a report on regular basis, but have consulted such records and discussed the matter with staff on a number of occasions. Although this investment portfolio may still require a lot of refinements in order to maximise returns have been generally encouraged by the fact that the broader issues relating to the management of the Fund have been highlighted at the Budget Committee meetings.
10. CONTROL OF MANUAL CHEQUES
Observation
The control of manual cheques are insufficient as indicated by the following:
Potential Effect
There is a high risk of theft, fraud and collusion between suppliers and staff members.
Recommendation
Management Comment
We concur with your recommendations and the Finance staff will be informed accordingly.
17. OVERTIME
Observation
In respect of overtime we noted the following:
Reasons for staff members working overtime in the Finance, Personnel, Office Services and Secretariat are not always recorded in the overtime work register.
Certain sections overspend their overtime without prior approval by the Chief Director: Corporate Services (MVO management, Coastal Management and Office Services).
A senior staff member in the Personnel Section was paid R2 287,41 for two consecutive months (April and May). Overtime was worked for the same number of hours in these months and the reasons for working overtime were not recorded in the overtime work register.
Potential Effect
The department may lose money by paying for work never performed. The supervisor should ensure that only overtime worked is paid.
Recommendation
The overtime should be approved in advance by head of section and reasons for working overtime should also be recorded in the register.
Management Comment
Application for remunerated overtime is normally submitted well in advance prior to the commencement of a new quarter. Although certain aspects for the payment of overtime are undesirable, circumstances are unavoidable due to the nature and complexity of certain operations.
27. TELEPHONES AND CELLPHONES
Observation
We noted that telephonic account are not send to section heads in order for their staff members to identify private calls. Marine and Coastal Management is contravening the adopted guidelines issued as per Treasury Instructions, Chapter R, paragraph R2.
Potential Effect
The department is unnecessarily bearing cost of private calls. Staff members are freely making private calls with the knowledge that the head of the section does not check if calls are made for official purposes.
Recommendation
We recommend that the Treasury Instruction should be adhered to.
Management Comment
We concur with your recommendations and can inform you that a circular has already has been issued whereby supervisors are required to certify the accounts of their subordinates in accordance with the depicted regulation. More active control will be exercised and recovery of private calls will be implemented. It should however be noted that our current switchboard does not lend to itself to assist with managing the normal telephone calls. It has been ascertained that the instrument does not comply with the Y2K requirements and will be replaced shortly with a more modern one which will be able to generate reports to manage the different types of calls.
18. LEAVE
Leave is not timely updated in the Persal system. In certain instances leave was not updated for a period of six months leave taken in December 1998 was only updated in June 1999, although the person is on the same floor as Personnel Section.
Potential Effect
Leave forms can be lost and result in employees receiving leave credit not due to them.
In cases when the employee resign the department will pay double because the leave was not updated and it will be difficult to recover the money.
Recommendation
Leave form should be submitted timely to the Personnel Section for capturing in order to update the leave record of employees.
Management Comment
We concur with your recommendation and the Personnel staff will be informed accordingly. Your attention is however drawn to the fact that in certain instances, leave forms are only arrive long after the leave had been granted.
29. MANUAL CHEQUES ISSUED IN FAVOUR OF THE CHIEF DIRECTOR FOR PAYMENT OF SUNDRIES WITHOUT HIS CONSENT.
Manual cheques were made on behalf of Chief Director without his consent , for payment of sundries, instead of using petty cash.
Potential Effect
The potential of financial loss as manual cheques being used for paying any items and charging under sundries.
Recommendation
Only Manual cheques for reimbursement of petty cash should be issued on behalf of the Chief Director.
Management Comment
The following payments are for the replenishment of petty cash and would include numerous difference disbursements. These cheques are immediately cashed so that new disbursements can be paid from petty cash. Payment 82974,73737 and 79126 are in respect of Tag Rewards where fisherman return the Rock Lobster and the tags for compensation. Due to the fact that these fishermen don’t have banking accounts for individual amount of R2,00, a cheque is issued on behalf of the Chief Director which is cashed for distribution amongst those involved.
Payment 82554,81271 and 82789 is in respect of the purchase of fresh fish for fisheries research. The Research component would notify the Finance Section for a cheque whereby after the cash is drawn, fresh fish is purchase from the local fishermen so that research can be conducted on the specimens. Payment 82788 is in respect of the Per Diem that was paid by the Norwegian Government for attendance to the Bio-Economics Seminar that was held in South Africa. The organisers requested this arrangement and the amount was claimed from the Norwegian Government. Control over the issuing of hand-written cheques will be improved and limited as requested.