Chapter 2 - P rogramme 1 - Department of Defence

| 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)
Related parties
12.
I could not reach a conclusion on the completeness, valuation, existence and rights and obligations
assertions on contingent liabilities in respect of housing guarantees as disclosed in note 22 and
annexure 3A due to inadequate monitoring and insufficient supporting documentation for audit
purposes.
No alternative audit procedures could be performed due to inadequate systems for identification
and recording of contingent liabilities.
The department did not disclose all related parties and related party transactions as required by the
modified cash basis of accounting prescribed by National Treasury. The completeness, accuracy,
classification and disclosure of related parties and related party transactions for 2007-08 and the
comparative year could not be confirmed due to the absence of a system in place for the identification
and recording of related parties and related party transactions.
Accruals: R145.0m (2006-07: R272m)
13.
The modified cash basis of accounting as prescribed by National Treasury stipulates that goods
and services received for which an invoice had not been received at year-end should be included in
accruals. The accruals disclosed for both 2006-07 and 2007-08 financial years did not include goods
and services received for which an invoice had not been received at year-end. This resulted in an
understatement of accruals by an unquantifiable amount.
No alternative audit procedures could be performed due to inadequate systems for the identification
and recording of accruals.
Lease commitments: R3.3m (2006-07: R1.6m)
14.
•
With reference to paragraph 14 on page 191 of the 2006-07 report, the existence, rights and
obligations, completeness and valuation, and allocation of lease commitments as disclosed in note
25 to the financial statements could not be confirmed. This year there was again no efficient and
effective system of control over the recording of operating lease commitments on which I could rely
for the purpose of our audit, and the auditing procedures performed could not provide reasonable
assurance that all operating lease commitments were properly recorded and disclosed.
Furthermore, the department did not disclose any finance lease commitments despite the fact that
the department used transversal contracts RT3 of 2000, RT3 of 2003 and RT3 of 2006 entered into
by National Treasury for the supply of photocopiers. This resulted in a material non-compliance with
the accounting framework as irregular expenditure incurred on these lease contracts is omitted from
the disclosure of irregular expenditure.
Departmental revenue: R551.9m (2006-07: R492.8m)
15.
As reported in paragraph 19 on page 191 of the 2006-07 report, again this financial year sufficient
appropriate audit evidence could not be obtained as to the completeness of departmental revenue.
249 Annual Report FY 2007 - 2008
| Financial Performance |