Chapter 2 - P rogramme 1 - Department of Defence

| Financial Performance |
Annual Report FY 2007 - 2008 248
| Department of Defence | Vote 20 |
REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT
ON THE FINANCIAL STATEMENTS AND PERFORMANCE
INFORMATION OF VOTE NO. 20 - DEPARTMENT OF
DEFENCE for the year ended 31 March 2008 (continued)
7.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for
my audit opinion.
Basis of accounting
8.
The department’s policy is to prepare financial statements on the modified cash basis of accounting
determined by National Treasury, as set out in accounting policy note 1.1.
Basis for qualified opinion
Tangible and intangible capital assets: Tangible assets R360.4m (2006-07: R0); Intangible
assets R8.4m (2006-07: R0)
9.
As was reported in the previous year the movement in tangible and intangible assets per asset register
was once again not disclosed while the disclosure in the notes did not conform to the modified cash
basis of accounting as determined by National Treasury.
The disclosure in notes 32 and 33 of the financial statements was limited to cash additions as
disclosed in note 8. The opening balance, current year adjustments to prior year balances, non-cash
additions and disposals were not included. The effect of these omissions could not be quantified nor
could alternative audit procedures be performed due to the inadequacy of the asset registers in use
and the weaknesses identified in internal control. Consequently the completeness, existence, rights
and obligations, valuation and allocation, and presentation and disclosure assertions could not be
verified.
Employee benefit provision: Capped leave commitments R865m (2006-07: R886m)
10.
Due to inadequate monitoring functions performed by management, there was a scope limitation
resulting in sufficient appropriate audit evidence not being obtained to confirm the completeness,
valuation, existence and rights and obligations of the amount of R865 390 000 disclosed in the
disclosure notes to the financial statements. No alternative audit procedures could have been
performed due to limitations on the information system.
Contingent liabilities: R504.8m (2006-07: R1.5m)
11.
Contingent liabilities as disclosed in note 22 to the financial statements are misstated due to the
following:
•
The completeness of contingent liabilities as disclosed in note 22 and annexure 3B, in respect of
the National Environmental Management Act, 1998 (Act No. 107 of 1998) (NEMA) could not be
confirmed as the department does not have a process in place to identify and quantify contingent
liabilities resulting from NEMA. Furthermore, the nature of the department’s operations resulted
in land being damaged without any liability disclosed for the rehabilitation thereof.