annrep 1011 1 to 148.qxp - Department of Defence

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D E P A R T M E N T O F D E F E N C EDepartment of Defence and Military VeteransVote 21REPORT OF THE ACCOUNTING OFFICERfor the year ended 31 March 201110.6 Intangible AssetsThe DOD established a task team to compile an asset register for all intangible assets. A proper project plan has beencompiled and it is envisaged that a proper intangible asset register will be completed by the end of the 2011/12 financialyear. In the meantime all the additions as per the SCOA definitions for the 2010/11 financial year have been disclosed.11. InventoriesBoth the short and long term asset management plan will also address the current challenges with regards to inventory,especially the segregation between assets and inventory and the valuation of inventory. The DOD will however,in the interim, disclose inventory on the first-in-first-out (FIFO) basis which matches the design of the current systemsthat reflect values at the latest purchase price.12. Special Defence AccountIn the year under review, the annual financial statements of the Special Defence Account are excluded from the AnnualReport of the DOD. This has been necessitated by the decision to change the accounting framework from an entityspecificframework to GRAP. The change in the framework necessitated the financial statements to be reconstructedto be in line with the new framework, including the restatement of all comparative figures for the previous year, includingthe notes and accounting policies applicable. It is anticipated that these statements will be available for tabling tothe Legislature immediately after completion of the audit process.13. Events after the reporting dateThere were no events after the reporting date.14. Performance information14.1 Performance information is described in Part 1 to 4 of the Annual Report.14.2 The DOD is addressing the following issues regarding performance information as identified by the Auditor General:14.2.1 Policy Framework. In order to deal with the weaknesses in the policy framework around the management of performanceinformation, the department is developing a comprehensive corporate policy which clearly describes roles,responsibilities and control activities necessary for the efficient management of this task.14.2.2 Strategic Plan. During the financial year 2010/11 the DOD undertook the institutionalisation and implementation ofthe results-based planning process principles (outcomes, outputs, activities and inputs) as prescribed by the NationalTreasury through the development of the DOD Strategic Planning Framework (SPF). The SPF facilitated the reformulationand enhancement of departmental performance information as aligned to outcomes and outputs, thereby ensuringthe auditability of performance information in compliance with the National Treasury performance informationstandards. This will be evident in the financial year 2011/12.14.2.3 Internal Control. Taking cognisance of the weaknesses that have been raised regarding the accuracy and completenessof the information reported in the Annual Report, during the year under review, improvements in controls havebeen implemented to ensure that the information planned and reported at the lower levels is accurately and completelytransferred to the Annual Report. The matters raised in the Audit Report have been investigated and rectified inpreparation for the next audit cycle.14.2.4 Risk Management. The DOD Strategic Risk Register has been updated to include the risks and mitigation actionsrelating to performance information.170ANNUAL REPORT FY 2010/2011
D E P A R T M E N T O F D E F E N C EDepartment of Defence and Military VeteransVote 21REPORT OF THE ACCOUNTING OFFICERfor the year ended 31 March 201115. SCOPA Resolutions15.1 The DOD appeared before SCOPA on 1 March 2011 on its 2007/08 and 2008/09 Annual Reports and is awaiting theresultant resolutions to be adopted by SCOPA.15.2 The DOD has prepared a preliminary response to SCOPA on issues raised and commitments made at the hearing,which is in the approval process.15.3 The SCOPA Hearing on the DOD's 2006/07 AG Report was held on 21 November 2007 and the 2006/07 SCOPAResolutions were adopted on 8 February 2008 by Parliament. The DOD submitted the action plans on the 2006/07SCOPA Resolutions to Parliament (SCOPA) on 9 June 2008. The detailed feedback in the table below reflectsprogress made with the implementation of these action plans (only on those not yet finalised):0607 AG ANNUALREPORT REFER-ENCEPage 190RECOMMENDATIONS MADEIN SCOPA RESOLUTIONSDATED 8 FEB 08Par 1 - Tangible & intangible assets,accruals. The Committee recommendsthat the Accounting Officerensures that:a) the current information systemsused, are upgraded or alternativesbe investigated to implementa single logistical systemthat can provide the financialinformation as required byNational Treasury in respect ofaccruals, tangible and intangiblecapital assets;b) shortcomings in the informationsystems are reduced by implementingmanual controls toensure proper identification,classification, recording and disclosureof accruals andtangible/intangible capital assets;DOD PROGRESS ON ACTION PLANSThe Asset Management Project has been implementedin 2007. The scope of this project is brokeninto three phases, namely a) inventory verificationand error identification, b) asset register clean-upand functional specification development, and c)rolling out an Integrated Asset ManagementSystem in line with IFMS requirements. Phase onehas been completed and phase two is currentlyrunning. It is envisaged that phase three will kickin late 2010. Until then, CALMIS and OSIS willremain as the main systems.DOD representatives are involved with the developmentof the National Treasury IFMS system.CALMIS is implemented in the SA Army accordingto plan and OSIS has been implemented in 80%of SAAF units and 90% of SA Navy units. Once allunits are computerized migration to IFMS will proceed.The manual system implemented was refined andan amended instruction was issued to Services andDivisions to obtain additional information in orderto accurately complete accruals disclosure in the08/09 Annual Financial Statements. Differentteams, under the leadership of the Operation CleanAudit team (Accruals) were sent to pre-determinedunits to assist with the compilation of information.The outcome of this initiative will only be availableafter final reconciliation of accruals for the 08/09FY.ANNUAL REPORT FY 2010/2011 171
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