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PRESENTATION TO THE PORTFOLIO COMMITTEE ON ARTS & CULTURE BY. 27 TH OCTOBER 2010 PARLIAMENT. BASIS FOR QUALIFIED OPINION BY THE AUDITOR GENERAL. HEREWITH FOLLOWS THE IDENTIFIED ISSUES ON WHICH THE AUDITOR GENERAL HAS BASED HIS QUALIFIED AUDIT OPINION FOR THE YEAR ENDED 31 MARCH 2010.

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basis for qualified opinion by the auditor general
BASIS FOR QUALIFIED OPINION BY THE AUDITOR GENERAL

HEREWITH FOLLOWS THE IDENTIFIED ISSUES ON

WHICH THE AUDITOR GENERAL HAS BASED HIS

QUALIFIED AUDIT OPINION FOR THE

YEAR ENDED 31 MARCH 2010

movable assets property motor vehicles and equipment
MOVABLE ASSETS: PROPERTY, MOTOR VEHICLES AND EQUIPMENT

PROBLEM: NO REVIEW OF RESIDUAL VALUES AND USEFUL LIVES OF SPECIALISED ASSETS

AMELIORATION: A SUBMISSION TO APPOINT AN EXTERNAL SERVICE PROVIDER HAS BEEN APPROVED. THE SCM PROCESS OF APPOINTING TAT I-CHAIN TECHNOLOGIES (AS RECOMMENDED BY DAC) FOR PHYSICAL VERIFICATION AND A FAIR MARKET VALUATION OF PACOFS’ ASSETS IS UNDERWAY

trade other payables
TRADE & OTHER PAYABLES

PROBLEM: NO OFFICIAL DOCUMENTATION AVAILABLE FOR ACCOUNTS

PAYABLE TO THE VALUE OF R6 174 113.64

AMELIORATION: THIS AMOUNT IS OWED ON THE ELECTRICITY ACCOUNT TO THE FREE STATE DEPARTMENT OF PUBLIC WORKS. NO OFFICIAL INVOICE HAS BEEN RECEIVED FROM THE DEPARTMENT AS ONE METER IS USED FOR PACOFS AS WELL

AS ANOTHER GOVERNMENT DEPARTMENT IN THE SAME

BUILDING. A MEETING WAS HELD WITH OFFICIALS TO RESOLVE THE METER READINGS. AN OFFICIAL INVOICE HAS BEEN

REQUESTED IN ORDER TO PAY THE OUTSTANDING AMOUNT

trade and other receivables
TRADE AND OTHER RECEIVABLES

PROBLEM: A SUSPENSE ACCOUNT FOR RECEIPTS AMOUNTING TO R605 076 WAS NOT CLEARED AT YEAR END

AMELIORATION: THE FINANCE SECTION HAS COMMENCED THE

IDENTIFICATION OF ALL TRANSACTIONS ON THE CONTROL ACCOUNTS AND ONCE IDENTIFIED, THEY WILL ALLOCATE THEM TO THE RELEVANT LEDGER ACCOUNTS

revenue rendering of services
REVENUE: RENDERING OF SERVICES

PROBLEM: INSUFFICIENT EVIDENCE TO CONFIRM COMPLETENESS OF

REVENUE RECEIVED FROM TICKET SALES ON OWN PRODUCTIONS AND ON COMMISSION ON TICKET SALES BY COMPUTICKET

AMELIORATION: COMPUTICKET HAS AGREED TO PROVIDE PACOFS WITH AUDITED FINANCIAL STATEMENTS AND THEIR ANNUAL REPORT. THIS WILL BE AVAILED TO EXTERNAL AUDITORS

FOR THIRD PARTY CONFIRMATION.

fruitless and wasteful expenditure
FRUITLESS AND WASTEFUL EXPENDITURE

PROBLEM: PRIOR YEAR AUDIT FINDING - FRUITLESS AND WASTEFUL EXPENDITURE

AMELIORATION: THE PACOFS CHAIRPERSON WILL SEND A REQUEST TO THE DIRECTOR GENERAL OF NATIONAL TREASURY FOR CONDONATION OF THIS FRUITLESS AND WASTEFUL EXPENDITURE

non compliance with regulatory and reporting requirements
NON COMPLIANCE WITH REGULATORY AND REPORTING REQUIREMENTS

PROBLEM: NO AUDIT COMMITTEE ESTABLISHED

AMELIORATION: THE AUDIT COMMITTEE WAS APPOINTED EFFECTIVE FROM THE 1ST OF APRIL 2010, FOR A PERIOD OF 1 YEAR

PROBLEM: RISK ASSESSMENT PLAN AND AUDIT PLAN NOT APPROVED BY THE ACCOUNTING AUTHORITY

AMELIORATION: THE RISK ASSESSMENT PLAN AND AUDIT PLAN WILL BE FINALIZED AND APPROVED BY THE ACCOUNTING AUTHORITY DURING THE CURRENT FINANCIAL YEAR

PROBLEM: NO RISK MANAGEMENT COMMITTEE ESTABLISHED AND NO FRAUD RISK PLAN DEVELOPED AND IMPLEMENTED

AMELIORATION: A RISK MANAGEMENT COMMITTEE WILL BE ESTABLISHED AND A FRAUD RISK PLAN WILL BE DEVELOPED AND IMPLEMENTED DURING THE CURRENT FINANCIAL YEAR

PROBLEM: THE ACCOUNTING AUTHORITY DID NOT INCLUDE MULTI-YEAR PROJECTIONS OF REVENUE IN THE STRATEGUC PLAN

AMELIORATION: PROJECTED INCOME AND EXPENDITURE FOR MULTI-YEARS HAVE BEEN INCLUDED IN THE 2010/11 - 2012/13 STRATEGIC PLAN

internal control
INTERNAL CONTROL

PROBLEM 1: LEADERSHIP: BREAKDOWN IN COMMUNICATION BETWEEN THE ACCOUNTING AUTHORITY AND THE CEO

AMELIORATION: THE FORMER CHAIRPERSON OF THE COUNCIL WAS REMOVED FROM OFFICE ON 31/08/2010 IN TERMS OF THE CULTURAL INSTITUTIONS ACT OF 1998, SECTION 5(9) (a) DUE TO ABSENCE OF 5 CONSECUTIVE COUNCIL MEETINGS . SEE EXECUTIVE SUMMARY FOR FULL DETAILS ON THE BREAKDOWN IN COMMUNICATION BETWEEN COUNCIL AND THE CEO)

PROBLEM 2: FINANCIAL AND PERFORMANCE MANAGEMENT

AMELIORATION: THE ACCOUNTING AUTHORITY WILL ESTABLISH AND IMPLEMENT PROCEDURES FOR QUARTERLY REPORTING TO THE MINISTER TO FACILITATE EFFECTIVE PERFORMANCE MONITORING , EVALUATION AND CORRECTIVE ACTION

PROBLEM 3: GOVERNANCE

AMELIORATION: AN AUDIT COMMITTEE WAS APPOINTED AS FROM 1ST APRIL 2010

macufe
MACUFE

PROBLEM: THE FINANCIAL POSITION OF PACOFS TRADING AS MACUFE AS AT 31 MARCH 2010

AMELIORATION: DEPT OF SACR, PACOFS AND COMPUTICKET ENTERED INTO AN AGREEMENT REGARDING TICKET SALES FOR MACUFE.

THIS ARRANGEMENT WAS DIFFICULT TO MONITOR MORE

SO IN THAT IT WAS IMPOSSIBLE TO SCRUTINISE THE AUDIT BY

COMPUTICKET THUS CREATING A PROBLEM OF

RECONCILIATION RESULTING IN MONEY BEING LEFT IN OUR

ACCOUNT. THE ACCOUNT HAS NOW BEEN CLOSED AND ALL

DUE MONIES TRANFERRED TO THE DEPT OF SACR. OUR

OWN INTERNAL SYSTEMS WILL ALSO BE REVIEWED

executive summary
EXECUTIVE SUMMARY
  • PACOFS, as an organization has been through a difficult and challenging few months .
  • We have emerged from a period of consistent paralysis of governance due to the previous culture perpetuated by the former Chairperson of the Board who did not call Council meetings and consequently alienated the entire Council in the decision-making processes of the institution.
  • This practice created a conduit through which the CEO only communicated with the former Chairperson and both disposed of Council business unilaterally. This practice further diminished the communication between Council and the CEO which consequently has revealed tendencies which are alien to corporate governance. As a result Council was marginalised and could not exercise its fiduciary duties and maintain oversight on administration to ensure compliance with laws and regulations to address internal weaknesses.
executive summary cont
EXECUTIVE SUMMARY CONT.
  • The unilateral culture of running PACOFS came to a head when the institution experienced industrial action on the brink of the 2010 FIFA World Cup games as a result of the unilateral alteration of conditions of service of the employees.
  • The relationship between the staff and the CEO appeared to have broken down and Council had to intervene and put the institution on its current path by:
  • restoring the conditions of service of employees;
  • restoring discipline and work ethic at the institution;
  • starting with a process of consultation with employee representatives on issues of mutual interest;
  • removing the Chairperson;
  • implementing an artistic programme;
  • re-establishing relationships with Transnet Foundation and other stakeholders.
executive summary cont13
EXECUTIVE SUMMARY CONT.
  • Once the Chairperson was removed Council proceeded to deal with a wide

range of issues in a quest to turn-around the institution. We have managed to

amass a number of policies that are pending approval at our next council

meeting. We have proceeded to appoint Council Committees such as the

Artistic Committee, Finance and Corporate Governance, and Human Resource

Committee.

  • It is notable that matters raised by the AG were in essence a lack of internal controls

rather than of any financial mismanagement in nature. For over a period of time,

asset valuation and requisite disposal where so required, presented a huge

challenge, more so due to the technical nature of our services, equipment, and

deployments and activations. A specialised service provider for this purpose was

critical and Council has appointed a reputable company that has provided this

service in the sector with measurable success and this qualification will indeed

be circumvented in future.

executive summary cont14
EXECUTIVE SUMMARY CONT.
  • We continue to put systems in place and in the next week a CFO will be appointed to take this process further through the able assistance of our Audit Committee. Particular emphasis will be on the following in moving forward:
  • document management and security;
  • review of residual values and useful lives of specialised assets;
  • valuation and existence of trade payables;
  • revenue collection and cash handling processes;
  • zero tolerance on fruitless and wasteful expenditure;
  • strict compliance with regulatory and reporting requirements;
  • general conditions of service and performance management.
executive summary cont15
EXECUTIVE SUMMARY CONT.
  • It is the belief of the PACOFS Council that despite our challenges, we have turned the corner and will further present a hard-hitting artistic programme as evidenced by the work presented by Messrs Aubrey Sekgabi and Jerry Pooe, who have been assigned to us by the Honourable Minister, the MEC and HOD for the provincial Department of Sport, Arts, Culture & Recreation.
  • Better stakeholder relationships have been established with the provincial department that has seen the MEC attending some of our Council meetings. MOU’s with municipalities will be fast-tracked for better dissemination of our services to the communities. We are also in the process of meeting with other stakeholders to ensure that the Sand Complex becomes vibrant and alive once more as a theatre of note.
  • We have seen measurable endeavours and commitment by staff to walk the extra mile to reclaim the institution and position it where it belongs, among the best in the country.