Madam Chairperson, as hon members know, the Standing Committee on Public Accounts carries out searching and rigorous assessments of financial administration in the national public sector, so that accounting authorities can be held accountable for their spending of taxpayers' money and their stewardship over public assets.
In their rigorous assessing of the financial administration in the public sector Scopa categorises the annual reports into categories A, B and C; categories C being the reports that Scopa is generally satisfied with and for which there is no need to call the department or entity to a hearing. However, Scopa would like the House to note that it is far from satisfied with the general position regarding public sector financial management.
Scopa looks at the first three levels of financial management capacity in the public sector. A level-one situation is basically a situation in which a department is still at the start-up level and has very little to nothing in terms of policies, procedures, guidance and clarity around how they should be managing the financial affairs in their organisation.
Often you then find no accountability from the point of view that nobody has broken any rule or law because there was no rule or law to break when carrying out their duties.
A level-two financial management capacity is when an entity has fairly good policies, procedures and guidance around financial management and how to manage and run the organisation. But those policies and procedures have not been institutionalised within the organisation and proper training has not been provided to the staff.
What you find in a level-two situation is that you do have policies and procedures but the level of compliance is very low.
A level-three financial management situation refers to a situation at a higher level than level two, where you have very good policies and procedures in place. In fact, a lot of training and education has been put into those policies and procedures. Those policies and procedures have been institutionalised within the organisation to the extent that you could go to the lowest-level person and ask them: "Are you aware of this human resource policy?" They would then be able to say, "Yes, we know of that policy and the policy requires me to do a, b and c." For example, the Auditor-General in his general report, which he tabled, raised the following area of concerned that demonstrate that most departments and entities are still struggling with financial management: 122 cases of policy frameworks that are either weak and/or not yet developed.
This situation represents a need for systems, policies and procedures to be put in place and adequate policies and skills to be made available. Seventy- eight cases are attributable to a lack of monitoring. These issues also indicate a lack of commitment and involvement by, amongst others, management in this important internal control process. The commitment and leadership from management sets the tone for internal control and the control environment within a department and contributes to the fact that issues continue to be reported. Nineteen percent of the total national expenditure represents compensation of employees, yet the departments and entities do not address the vacancy rate at senior management level, and this leads to a lack of monitoring, as I have just explained.
With regard to late submission and resubmission of annual financial statements, as I stand here some entities have still not tabled their annual reports and this issue needs Parliament's immediate intervention.
Asset management remains the major challenge for effective internal control. The issues range from the acquisition of those assets and their recording through to the reconciliation and evaluations. Internal audits, and audits to the committee remain other challenges. The root cause of these issues is the problem of capacity.
Having said that, I would like to call on the portfolio committees to take note of Scopa's resolutions to follow-up and ensure that there is a linkage between the problem areas identified by Scopa and departments' strategic planning, budgeting and performance reporting. Because if proper and effective financial management is not included as a strategic priority by departments, service delivery will always be hampered and South Africa's scarce resources will be wasted or mismanaged.
Before I sit down, I want to thank the outgoing Auditor-General Mr Shauket Fakie for the support and dedication he has shown in supporting Scopa. It would also be a grave mistake for me not to thank our chairperson, Mr Themba Godi, for the commitment and dedication he has shown to Scopa, but to advise all members of Scopa - Mr Pierre Gerber and the lot - to please go and rest. The beginning of next year will be very tough for all of us. Thank you very much.
Debate concluded.