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 20110607 AG ANNUALREPORT REFER-ENCEPage 191-192Page 268-269RECOMMENDATIONS MADEIN SCOPA RESOLUTIONSDATED 8 FEB 08Par 3 - Lease commitments. TheCommittee recommends that theAccounting Officer ensures that:a) internal controls are implementedto ensure that transactionsand other significantevents with respect to leasecommitments are properlyidentified, classified, promptlyrecorded and disclosed;Par 6 - Special Defence Account(SDA). The Committee recommendsthat the Accounting Officerensures that:a) the accounting frameworkapplicable to the SDA and theclassification of the SDA,which have been outstandingsince 2004/05, is clarified withNational Treasury as a matterof urgency;b) surplus funds not required forimmediate use are investedand withdrawn when necessary;andc) a policy governing investmentsof all moneys to thecredit of the account is compliedwith, approved andimplemented as a matter ofurgency. If investing is not theway to go, the Defence SpecialAccount Act, 1974 (Act No. 6of 1974) must be amended.DOD PROGRESS ON ACTION PLANSAn interim instruction was issued in April 2008,clearly spelling out the processes and procedures forthe control of leases and also how to maintain thelease register. Although Services and Divisions havemaintained the required register, a lack of training atunit level resulted in limited successes beingachieved. Interventions undertaken include thedeployment of specialists from the consortium ofKPMG and SAB&T(Operation Clean Audit Team)throughout the DOD to assist with training andcompilation of lease registers. A letter was also distributedto Services and Divisions to confirm the correctaccounting of all hired equipment.Classification. The DOD has decided not to proceedwith the reclassification of the SDA as aSchedule 4.Framework. The National Treasury wasapproached for guidance on the accounting frameworkfor the SDA. In the absence of an answer fromthe National Treasury and in the light of the possiblerepeal of the Defence Special Account Act to beincluded in the Public Finance Management Bill theDOD recommended to the National Treasury to proceedpreparing the financial statements for the SDAon the entity-specific basis of accounting and it wasagain approved for the 2008/09, 2009/10 and2010/11 financial statements.The National Treasury instructed the DOD to, inspite of the requirements of the Defence SpecialAccount Act, not invest the reserve funds of the SDAas it will not be in the economic interest of the State.The investment policy is currently in the approvalprocess and will be promulgated during the 2011/12financial year.The DOD has prepared an investment policy for theSDA reflecting the instruction by the NationalTreasury not to invest the reserve funds of the SDA.The amendment of the Defence Special Account Actis not currently considered in the light of the possiblerepeal of the Act and the inclusion of the conditionsof the Act in the Public Finance ManagementBill.172ANNUAL 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 201116. Prior modifications to audit reportsMatters reported on by the AGSA in the 2009/10 financial year.09/10 AGSA Audit ReportReferenceTangible and Intangible CapitalAssets Qualification - Page 176.The department did not discloseany financial information forboth the current and prior yearin notes 34, 35 and 36 to thefinancial statements as requiredby the financial reporting frameworkset by National Treasury.The DOD did not maintain aproper asset register, supportedby relevant documentation toenable me to quantify the misstatements.FY firstreported06/07Progress made in clearing/resolving the matterTangible Movable Capital Assets. The following initiativesare underway to accomplish NT asset managementrequirements: Implementation of a DOD Asset and InventoryVerification Program (started in 2008 - first phase completed,busy with second phase). Busy procuring a two-dimensional bar-coding, taggingand scanning capability to enhance item identificationand tracking. Continuous monitoring of National Stock Numbers(NSNs) to SCOA which enables the DOD to report inthe required categories. Completed functional specifications for a single, integratedasset and inventory management system (inclusiveof cataloguing and codification).Busy engaging the IFMS team to consider the uniquenessof the DOD supply chain requirements and togrant a deviation from the moratorium for the procurementof a single logistics information system.Tangible Immovable Assets. The following initiativesare underway to accomplish NT asset managementrequirements:A user Asset Management Plan has been developed inco-operation with the CSIR.Busy with the verification of all Defence EndowmentProperties, assisted by the CSIR.The requirement specifications for an IntegratedImmovable Asset Management System have beendeveloped.Intangible Capital Assets (ICA). The following initiativesare underway to accomplish NT asset managementrequirements:SLA with Armscor was extended to include the establishmentand maintenance of an ICA register.Busy revising the DOD IP policy to include all ICAs.Busy establishing the current and historical DefenceICA and population of the ICA register.ANNUAL REPORT FY 2010/2011 173
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