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DEPARTMENT OF COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS

Presentation on the Q3 financial statements for the period ending 31 December 2013, emphasizing key notes and comparisons with the previous year as per Treasury guidelines.

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DEPARTMENT OF COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS

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  1. DEPARTMENT OF COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS PORTFOLIO COMMITTEE MEETING PRESENTATION ON THE 2013/14 QUARTER FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2013 (QUARTER 3) Presented by: Mr M Mtyhuda 11 March 2014

  2. OVERVIEW OF THE PRESENTATION The outline of the presentation is as follows: • Purpose • Background • 3rd Quarter Interim Financial Statements for the period ended 31 December 2013

  3. PURPOSE • The purpose of the presentation is to brief the Portfolio Committee on the quarterly financial statements for the period ended 31 December 2013. • The presentation will cover the significant notes and disclosures that need to be highlighted. • For the purpose of this presentation, comparisons were made between Quarter 3 of the previous financial year 2012/13 (end 31 December 2012) and of the current financial year 2013/14 (ended 31 December 2013).

  4. BACKGROUND • In terms of the PFMA and the National Treasury Guidelines for the compilation of annual Financial Statements, the Department is expected to compile quarterly interim Financial Statements for submission to National Treasury and annual Financial Statements for auditing by the Auditor-General of South Africa. • As a result of the large numbers of audit findings on material misstatements and/or corrections to the annual Financial Statements of government institutions over the past few years, the Auditor-General has recommended to Parliament that Departments should compile monthly interim Financial Statements for review by Management and the Internal Audit Units, to prevent similar findings.

  5. BACKGROUND (Cont.) • The Department is complying with the submission of the interim Financial Statements to the National Treasury. • The Department also managed to compile the monthly key disclosure notes for October 2013 and a full set of monthly Financial Statements for November 2013.

  6. 2013/14 3RD QUARTER FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2013

  7. SELECTED NOTES TO THE IFS Note 6.3: Consultants, contractors and outsourced services With regard to this note in the 3rd quarter financial statement for the current financial year, the expenditure relates to the procurement of critical services rendered through consultants, contractors and outsourced services such as: • Business and advisory services – R 388 million (29.97%) Of this amount, R 303 million relates to disbursements to Community Works Programme (CWP) service providers. • Contractors – R 902 million (69.62%) Of this amounts, R 897 million relates to disbursements to Community Works Programme (CWP) participants. • Legal fees – R 5 million (0.41%)

  8. SELECTED NOTES TO THE IFS (Cont..) Note 14: Prepayments and Advances • In 2012/13 prepayments and advances amounted to R165 million and has increased to R182 million in the 2013/14 financial year. • The increase in this amount relates to the advances paid to the Community Works Programme (CWP) Lead Agents to pay wages to the participants. The numbers of participants have also increased compared to the previous financial year. • These advances paid to the Lead Agents are being recovered in the remaining months of the financial year to ensure that they are cleared before the end of March 2014.

  9. SELECTED NOTES TO THE IFS (Cont..) Note 15.5: Other debtors (Disallowance Miscellaneous) • In 2012/13 other debtors (Disallowance Miscellaneous) amounted to R17 million and has decreased to R8 million in the 2013/14 financial year. • During the month of January 2014, R7 million was cleared after measures were put in place to speed up the process of clearing the suspense account. The balance as at 31 January 2014 had decreased to R1 million.

  10. DISCLOSURE NOTES TO THE IFS Disclosure note 25: Contingent liabilities • The amount of R170 thousand reflected in Disclosure note 25: Contingent Liability in the 3rd quarter financial statements for the 2013/14 financial year relate to a court case where the service provider claims relief for additional services rendered. Disclosure note 26: Commitment • Commitments decreased from R116 million in the 2012/13 to R61 million in the 2013/14 financial year mainly as a result of orders and contracts that are committed and services rendered. • Commitments to an amount of approximately R47 million of the R61 million reflected in the 2013/14 financial year may be carried over to the 2014/15 financial year.

  11. DISCLOSURE NOTES TO THE IFS (Cont.) Disclosure note 27: Accruals • Accruals substantially decreased from R24 million in the 2012/13 financial year to R3 million in the 2013/14 financial year. • The decrease shows an improvement of paying suppliers within the prescribed time frame of 30 days. Disclosure note 29: Lease Commitment • The lease commitments for the current financial year 2013/14 (excluding office leases) relates to the following: • Parking space outside the departmental premises; • Cell phones; • Photocopying machines; and • Motor vehicles.

  12. DISCLOSURE NOTES TO THE IFS (Cont.) Disclosure note 31: Irregular expenditure • Irregular expenditure to an the amount of R264 million was incurred up to the same period in the 2012/13 financial year compared to the R339 million reflected in the 3rd quarter financial statements for the 2013/14 financial year. • The irregular expenditure incurred, mainly relate to cases of non-compliance to procurement policies. All these incidents are being investigated to determine liability. • The bulk of the irregular expenditure relate to the following areas in both the financial years: • Payments relating to the Community Works Programme (CWP) contracts identified as irregular in the previous financial year (2012/13)to the amounts of R216 million in 2012/13 and R276 million in 2013/14; and • Payments relating to the lease of office space where the Department of Public Works has not renewed the lease agreements with the landlordsto the amounts of R16 million in 2012/13 and R27 million in 2013/14.

  13. DISCLOSURE NOTES TO THE IFS (Cont.) Disclosure note 31: Irregular expenditure (Cont.) • A letter was sent in February 2014 to the National Treasury for consideration of the possible condonement of the above-mentioned two cases of irregular expenditure. • The Department has also developed and is implementing a Post Audit Action Plan on the 2012/13 audit outcome, which is assisting to mitigate the control weaknesses identified by the Auditor General.

  14. THANK YOU!

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