MERSETA

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• MERSETA
• PRESENTATION TO PORTFOLIO COMMITTEE ON LABOUR
  (PCL)
• Presentation on the 2005/06 SETA Annual Report
• 2006/07 Auditor Generals Interim Management
  Letter
• 21 June 2007

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CONTENTS

• Auditor Generals Finding on 05/06
• No approval from Treasury for acquisition of
  outsourced service provider (Section 54(2) of
  PFMA.)
• Promotion of Access to Information Act (Act 2 of
  2000) not adhered to.
• Tenders were not obtained for significant
  contracts without documenting reasons. Also
  documentation for verification of company details
  could not be found (Treasury regulation 16A6.4
  16A9.1 respectively).
• Supporting documents for certain success
  indicators relating to performance information
  could not be found. Differences between reported
  information and supporting documentation was
  found (Section 20(2)(c) of the PAA).

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CONTENTS (CONTINUED)

• INTERIM MANAGEMENT LETTER 2006/07
• Non compliance with Treasury Regulations 16A
  procedures for threshold values
• Non compliance with Treasury Regulations 16A6.1
  incorrect threshold values per supply chain
  management policy
• Non submission of compliance reports
• Report is now submitted quarterly to the
  department of Labour.
• Approval for acquisition of significant asset not
  obtained from Treasury.
• Inadequate investment policy
• Unclaimed mandatory grant not swept to
  discretionary reserve on a regular basis

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AUDITOR GENERALS REPORT 2005/06

• An unqualified report was issued with the
  following emphasis of matter
• No approval from Treasury for acquisition of
  outsourced service provider (Section 54(2) of
  PFMA.)
• Promotion of Access to Information Act (Act 2 of
  2000) not adhered to.
• Tenders were not obtained for significant
  contracts without documenting reasons. Also
  documentation for verification of company details
  could not be found (Treasury regulation 16A6.4
  16A9.1 respectively).
• Supporting documents for certain success
  indicators relating to performance information
  could not be found. Differences between reported
  information and supporting documentation was
  found (Section 20(2)(c) of the PAA).

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CORRECTIVE MEASURES ON AUDITOR GENERALS REPORT
2005/06

• An unqualified report was issued with the
  following emphasis of matter
• Finding
• No approval from Treasury for acquisition of
  outsourced service provider (Section 54(2) of
  PFMA.)
• Managements Action
• Letter requesting ex-post facto approval has been
  submitted to the Minister of Labour. Merseta is
  awaiting a response .
• Finding
• Promotion of Access to Information Act (Act 2 of
  2000) not adhered to.
• Managements Action
• A Company Secretary has been appointed who acts
  as the Deputy Chief Information Officer. The
  Merseta is now fully compliant with the Act.

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CORRECTIVE MEASURES ON AUDITOR GENERALS REPORT
2005/06

• An unqualified report was issued with the
  following emphasis of matter
• Finding
• Tenders were not obtained for significant
  contracts without documenting reasons. Also
  documentation for verification of company details
  could not be found (Treasury regulation 16A6.4
  16A9.1 respectively).
• Supporting documents for certain success
  indicators relating to performance information
  could not be found. Differences between reported
  information and supporting documentation was
  found (Section 20(2)(c) of the PAA).
• Managements Action
• Treasury regulations now being adhered to and the
  procurement policy has been revised and
  implemented

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INTERIM MANAGEMENT LETTER 2006/07

• INTERIM MANAGEMENT LETTER 2006/07
• Finding
• Non compliance with Treasury Regulations 16A
  procedures for threshold values
• Management action
• Treasury regulations now being adhered to and the
  procurement policy has been revised and
  implemented.
• Finding
• Non compliance with Treasury Regulations 16A6.1
  incorrect threshold values per supply chain
  management policy
• Management action
• Treasury regulations now being adhered to and the
  procurement policy has been revised and
  implemented .

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INTERIM MANAGEMENT LETTER 2006/07

• Finding
• Non submission of compliance reports
• Management action
• Report is now submitted quarterly to the
  department of Labour.
• FindingApproval for acquisition of significant
  asset not obtained from Treasury.
• Managements Action
• Letter requesting approval has been submitted.

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INTERIM MANAGEMENT LETTER 2006/07

• Finding
• Inadequate investment policy
• Managements Action
• Policy has been revised and has been submitted to
  the Executive Committee for approval
• Finding
• Unclaimed mandatory grant not swept to
  discretionary reserve on a regular basis
• Managements Action
• Currently being debated as not practical to sweep
  on a regular basis due to the size of seta. It is
  swept at year end.

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INTERIM MANAGEMENT LETTER 2006/07

• Finding
• Internal audit deficiencies - Three year rolling
  plan and budget not updated
• Managements Action
• The three year rolling plan and budget has been
  approved by the Executive Committee.
• Finding
• Risk assessment not done annually
• Managements Action
• The risk assessment has been completed. An action
  plan to address risks will be implemented in the
  current financial year.

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INTERIM MANAGEMENT LETTER 2006/07

• Finding
• The Merseta strategic plan not submitted
  timeously to Department of Labour.
• Management action
• The report was submitted on 30 November 2006.
  This fact was verified by the Department of
  Labour.

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AUDITOR GENERALS FINDING ON 05/06

• Special investigation
• As a result of the emphasis of matter expressed
  by the Auditor General in the 05/06 audit the
  MERSETA Board appointed an audit firm in November
  2006 to conduct an Audit Investigation into the
  opinions expressed by the AG with specific
  reference to the violation of the Supply Chain
  Management function
• The following matters were investigated
• The irregular manner in which contracts were
  awarded.
• Awarding of significant contracts without going
  on tender or providing reasons for deviating from
  inviting competitive bids in accordance with
  Treasury Regulations 16 A 6.4
• Beneficial payments to staff or board members.
• In the absence of proper bid process being
  followed a financial investigation of the
  officials who participated in the awarding of the
  contract be investigated
• Relationships between contract beneficiaries and
  MERSETA
• Related party transactions.

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THE PURPOSE OF THE AUDIT INVESTIGATION

• The purpose of the Audit Investigation was to
• Review and identify potential fraud risk that
  MERSETA was exposed to.
• Performed a detailed investigation into the
  process followed in the awarding of the STEP
  project
• Review the Procurement policies and procedures of
  the MERSETA
• Review the awarding of contracts to Employer
  Associations (RMI, SEIFSA, PLASFED) who have
  representatives on the Board

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FINDINGS OF THE AUDIT INVESTIGATION

• The findings of the final report indicated that
• The Treasury Regulations on procurement was not
  followed by MERSETA.
• The internal procurement policies and procedures
  manual of 2002 developed by the MERSETA was in
  contravention with the PFMA
• Governance problems existed at the SETA
• Internal controls were fundamentally weak
• No fraud has been committed and no material loss
  of revenue was suffered by the MERSETA.

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CORRECTIVE ACTIONS ON THE AUDIT INVESTIGATION

• INTERNAL CONTROLS
• MERSETA has corrected its procurement policies to
  be inline with that of the PFMA and Treasury
  Regulations
• The contracts investigated

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• CORRECTIVE ACTIONS ON THE AUDIT INVESTIGATION

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GOVERNANCE

• The MERSETA Board has appointed KPMG to conduct
  a capacity building of the Board on 27 28 June
  2007.
• The programme will focus on
• Board responsibilities and accountability
• Fiduciary responsibilities
• Role of the Audit Committee
• Understanding of the Legislation (PFMA, Treasury
  Regulations, SDA, SDLA)
• The role of the Chair and Exco
• MERSETA operates on a Board approved delegation
  of Authority and policies
• Minute taking, signing and recording of
  resolutions has been improved via dedicated
  secretaries
• Procurement processes in accordance with the
  PPPFA and the procedure have good built in
  controls

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INTERNAL CONTROLS

• A supply chain management division has been
  created within the MERSETA.
• Internal controls has been strengthened.
• A corporate governance division has been created.
• The top structure of MERSETA has been appointed
  (CEO was appointed in October 2006)
• Internal controls have been improved within the
  SETA through development of policies and Quality
  Management manual,
• strong audit committee and internal audit
  function exist within the SETA.

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CONCLUSION

• The MERSETA Board wishes to reiterate its
  commitment to ensuring clean governance and
  adherence to PFMA in discharging its fiduciary
  duties. The Board will ensure that no stone is
  left unturned in its quest for above-board
  conduct by all the MERSETA staff, service
  providers and stakeholders, the Board will not
  hesitate to relentlessly pursue all avenues at
  its disposal.

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• THANK YOU