internal audit report: asset management - elrc

Internal Audit Report: Asset Management To: Chief Financial Officer Cc: Manager, Supply Chain Management

From: Senior Manager, Internal Audit

Audit Ref. IA-2021-10

Subject: Asset Management Audit Report

In terms of the approved Internal Audit Work Plan, an audit of the Asset Management was

conducted. The audit focused on determining if Supply Chain awarded, monitored, and closed

contracts in accordance with ELRC policies and applicable regulations. Additionally,

determine if the Supply Chain business unit maintained adequate and valid contract

management records to evidence the effectiveness of contract management.

The review was conducted in accordance with Generally Accepted Auditing Standards, the

International Standards for the Professional Practice of Internal Auditing and in line with the

Code of Ethics. The standards require that we plan and perform the audit to obtain enough,

appropriate evidence to provide a reasonable basis for our findings and conclusions based on

our audit objectives. We believe that the evidence obtained provides a reasonable basis for

our findings and conclusions based on our audit objectives.

Yours sincerely

----------------------------------------

Senior Manager, Internal Audit

18 December 2020

Internal Audit Report – Asset Management

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Internal Audit Report

Asset Management Internal Audit Reference: IA-2021-10


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SECTION A - EXECUTIVE SUMMARY

1. Introduction

1.1. As part of its annual work plan, the Office of Internal Audit conducted an audit of Asset

Management that focused on the period from 01 April 2020 to 30 November 2020. Activities

initiated by Management after 30 November onwards were noted in so far as they contribute in

their design to address the issues identified. At the time of the issuance of the report, however,

their operating effectiveness could not be tested and confirmed.

1.2. Assets are ELRC’s resources that are: (a) used to support its mandate; (b) issued to individuals

or units for official use; and (c) listed in the official asset register taxonomy.

1.3. Supply Chain Management (SCM) is responsible for developing cost-effective techniques and

procedures to ensure the ELRC’s fixed assets are adequately regulated, tracking of internal

movement of assets, properly safeguarded, maintained, tagging of assets and utilized. SCM is

responsible for maintaining accurate and complete records regarding the acquisition, status, and

disposal of all fixed assets and to comply with all applicable accounting and regulatory

requirements.

1.4. All ELRC officials are responsible for maintaining effective stewardship over all fixed assets in

regard to asset security, maintenance, and utilization.

2. Objective

2.1. The audit evaluated and tested the adequacy and effectiveness of the processes associated with the internal control components of asset management, namely,

• Adherence to asset management policy and procedures and other laws adopted as best practice by the ELRC.

• Integrity of asset management information.

• Safeguarding of fixed assets.

• Effectiveness and efficiency of processes over asset management 2.2. The audit assessed whether the SCM had exercised an effective oversight on management of

assets at ELRC regarding the recording, reporting, use and maintenance to ensure that they adhered to good practices.

2.3. This audit is part of the process of providing an annual and overall assurance statement to the Executive Committee on governance, risk-management and internal control processes.

3. Scope

3.1. The audit focussed on the frameworks, methods and approaches at SCM to oversee the management of assets at ELRC. The relevant processes, procedures and practices at a sample of fixed assets with regard to recording, reporting, use and maintenance were examined.

3.2. The audit covered the period from 01 April to 30 November 2020. Where necessary, transactions and events pertaining to other periods were reviewed. On-going and planned developments were also taken into consideration.

4. Approach and Methodology

4.1. Based on identified and assessed key risks and internal controls associated with the related

business processes, the methods used to gather audit evidence included:

• Reviewing asset management related policies and guidelines.

• Reviewing and analysing previous reviews and audits in relation to asset management.

• Reviewing selected contract files and related documentation.

• Conducting interviews with various levels of officers and managers; and

• Analysing non-financial information.


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5. Audit Results

We categorized the findings using the following keys:

Classification

Significant matter

The finding is a result of non-compliance with laws and regulations, internal policies, and requirements of the reporting framework; a misstatement that will have material impact in the financial statements

Area of improvement

The finding is a result of control deficiency or lack of control within the control environment.

Housekeeping matter

The finding has no impact but if not addressed in future might be significant.

Control rating

Inadequate control Laid down accounting and internal control procedures were either inadequate or non-

existent. This may indicate a residual risk exposure

Ineffective control Employees were performing their duties ineffectively based on the results of tests

performed, on a sample basis, for the period under review. This may indicate a lack of

performance to achieve objectives.

Audit finding risk rating

High risk

Immediately management attention is required, a serious internal control issue that if not mitigated,

may, with a high degree of certainty, lead to substantial losses, possibly in conjunction with other weaknesses in the control framework or the organisation or process being audited; serious violation

of corporate strategies, policies, or values; serious reputation damage, such as negative publicity in national media; significant adverse regulatory impact, such as loss of operating licenses or material fines.

Medium risk

Timely management attention is warranted, an internal control issue that could lead to financial losses;

loss of controls within the organisation or process being audited; reputation damage such as negative publicity in local or regional media; adverse regulatory impact, such public sanctions, or immaterial fines.

Low risk

Routine management attention is warranted, an internal control issue, the solution to which may lead to improvement in the quality and/or efficiency of the organisational entity or process being audited. Risks are limited.

Areas of concern for the internal auditor (observations for management’s attention):

Finding Description Control Rating

Management Response / Agreed Actions

Significant matters

1 Asset Management Policy and Standard Operating Procedure needs updating

Ineffective Management accept the finding. The process of reviewing the policy and procedure manual has started and concluded, however, in the light of the raised audit findings, it will be revisited to address the issues. The updated changes will be submitted to the CFO for final review by 05/01/2021 and to the GS by 31/01/2021.

2 Control measures for insuring assets are not properly monitored

Ineffective Management accept the finding.

• The service provider was provided with information on location of the office when insuring additional assets. The East London was partially updated and is indicated under page 4 of the schedule. The email has been sent to the Insurer to correct the addresses.

• The delays in insuring the items was due unclear classification issues and had to seek advice from the insurer. We have since agreed that we must seek clarity on procuring the items than wait for delivery.

3 Safeguarding of movable assets is compromised



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• The origins of the assets will be investigated, and the necessary action will be taken, that is physically dispose once all confirmed.

• Communication will be issued to the General workers to report such to SCM as soon as they have spotted any items lying in such places.

4 Assets could not be traced on the asset register or inventory list


• The assets were not verified as not indicated on the Location Inventory Lists and not cited by the official on the day. ICT will be contacted to clarify the origins of the Asset. The Storage space indicated has no assets allocated to it and SCM doesn’t include it in the verification process hence no knowledge of the item identified.

• Management confirms that assets that were on the location were indicated on the working as verified and those not verified were reported as such. Most of the items have since been verified as staff has returned to the office.

• There FAR has been migrated to evolution and being reconciled and from 01 January 2021 the Evolution FAR will be the official document to be used.

• The FAR will be reconciled and the discrepancies followed up with provincial managers.

5 Gaps over the performed mid-year asset verification process


• Management confirms that assets that were on the location were indicated on the working as verified and those not verified were reported as such. Most of the items have since been verified as staff has returned to the office.

• Management will prepare a list of all offices and mark those already attended to ensure non is missed. This will be effected before the year end verification.

6 An asset assigned with two tag numbers

Ineffective Management accept the finding. The item has since been identified and the correct tags attached.

7 Discrepancies between the inventory lists, asset register and assets on the floor

Ineffective Management partially accept the findings

• 7.1-7.2: not accepted. The asset was identified during the verification and was moved post the event. Management will continue with the tracing as carpets were cleaned after the verification and assets were moved out of the offices.

• 7.3: not accepted. The inventory list has been created and updated accordingly.

• 7.4-7.5: accepted. The items were not verified during the Bi-Annual verification and that has since been done and the FAR will be updated.

8 Assets identified for disposal not properly monitored


• Management will ensure that the asset disposal listing or attachments are included under the designated space upon reporting.

• The old information on condition to be scratched out if different to current condition on verification.

9 Tagging of assets not properly controlled

Ineffective Management accept the finding. The matters are being resolved, and the provincial ones will be discussed with provincial managers.

10 Prior audit agreed action plans not adequately implemented


• We will adopt common symbols and outline their meaning for easy reference. This will be implemented with the next verification at year end.

• Improvement have been made on the matter as recent procurement have the serial number indicated. The blank space


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will be indicated when information is not applicable, and SOP will be enhanced to indicate such.

11 Movement of assets not properly monitored

Ineffective Management accept the finding. • The inventory lists are being updated since the movement has

been completed. • There was no special approval granted for the move; but when

requesting approval for renovations this explained in the document.

Areas of improvement

12 Efficiency over monthly reporting and updating the asset register cannot be ascertained


• Management will review the SOP as the operational environment and requirement has changed. This will be done before year end.

• Management will ensure that all documents are dated upon capturing and signing of the documents. Management will review to see if the SCMO has signed and SCMM will also sign the document and include the date of signing)

The following issue was cleared and resolved prior the finalisation of the audit:

Description Corrective Action Implemented

Auditors Conclusion

1. Asset not marked as having been successfully verified and condition re-assessed, however, included in the Asset Disposal List

The working paper was provided to IA which indicates that the asset was verified.

The Symbols for verification should be clearly explained to avoid confusion in future. The finding is resolved.

2. The audit identified a chair on the floor without a tag number (Location reference: RM10120)

The chair is tagged on the side (not on the normal area where tags are allocated for chairs).

The audit successfully verified that the Chair is tagged. The finding is resolved.

3. Asset that could not be traced to the October 2020 FAR. Location Reference

Asset Number

Asset Description

RM10200 ELRCQ01628 Chair

RM10200 ELRCL00751 Mobiwire (cellphone)

A screenshot has been submitted to IA showing that the chair is part of the October FAR.

The information was successfully verified. The finding is resolved.

4. Evidence that conversion of windows structure was timely relayed to Guardrisk was not provided for audit purpose. The auditor requested this information from SCM on the 30/11/2020 and information was still outstanding on the 10/12/2020.

Communicate to the insurer has since been forwarded to Internal Audit.

The audit successfully verified that the window conversion information was submitted to the insurer. The finding is resolved.


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6. CONCLUSION

6.1. To assist management in using our reports we categorize our opinions according to our

assessment of the controls in place and the level of compliance with these controls.

Level System Adequacy and Control Application

(positive opinions)

Full assurance

Full assurance that the system of internal control meets the organization’s objectives and controls are consistently applied.

Significant assurance

Significant assurance that there is a generally sound system of control designed to meet the organization’s objectives. However, some weaknesses in the design or inconsistent application of controls put the achievement of some objectives at some risk.

(negative opinions)

Limited assurance

Limited assurance as weaknesses in the design or inconsistent application of controls put the achievement of the organization’s objectives at risk in some of the areas reviewed.

No assurance

No assurance can be given on the system of internal control as weaknesses in the design and/or operation of key control could result or have resulted in failure(s) to achieve the organization’s objectives in the area(s) reviewed.

Evaluation opinion:

6.2. Evaluation opinion: The internal controls for Asset Management as operated at the time of the

audit provided a Limited Assurance, that is, the control weaknesses were identified, which

resulted in recurring of previous audit findings.

6.3. Overall, we found negative aspects to the asset management, areas of non-compliance with

business policies and procedures, recurring audit findings, inefficiencies, and ineffectiveness of

administration of assets, weaknesses over the safeguarding of assets, integrity of the asset

register, the integrity of the inventory lists and monthly reconciliation reports being questionable.

The controls in place are not yielding the intended purpose.

7. DISCLAIMER

You are requested to treat the report with confidentiality. The distribution of the report to persons other

than staff and those on the distribution list should only be done after consultation with the Internal

Auditor.

Any queries relating to the interpretation/factual correctness of the findings within the report must be

routed to the Senior Manager, Internal Audit.

8. ACKNOWLEDGEMENTS

We appreciate the assistance of the staff of Supply Chain Management during the audit.

9. DISTRIBUTION LIST

Internal audit distributes the Final Audit Report to the following:

• General Secretary,

• Senior Managers,

• Managers / Supervisors, and

• Audit and Risk Committee.


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SECTION B: DETAILED FINDINGS

B.1 - Significant Matters

1. Asset Management Policy and Standard Operating Procedure needs updating Control Rating: Ineffective control

Criteria

Best practice tools include having and maintaining an effective, efficient, and transparent systems of

financial and risk management and internal control. The organization deploys control activities through

policies that establish what is expected and in procedures that put policies into action.

To ensure compliance with the Council’s regulatory framework in relation to contracting and

procurement, the ELRC has developed contract management policy and procedure guidelines

accessible to its staff in assisting with day-to-day contracting management needs.

It is important to review of policies and procedures because:

• The review ensures your policies are consistent and effective.

• Regular review keeps your organization up to date with regulations, technology, and industry

best practices.

Workplace policies and procedures establish boundaries for acceptable behaviour and guidelines for

best practices in certain work situations. They offer clear communication to employees as to how they

are expected to act.

Observation

The following issues regarding the asset management policy and procedures were noted: 1.1. The Asset Management Policy was last reviewed and updated in March 2017 and Standard

Operating Procedure in 2018, despite of implemented changes in business practices and processes.

1.2. The audit that due to no. 1.1 not efficiently performed, the following practices gaps exist between the business guidelines and the actual practices: 1.2.1. Proper maintenance of working papers generated during the asset verification. 1.2.2. Asset verification processes at provincial offices. 1.2.3. Timeframes for month end processes (preparation of monthly reconciliations and FAR

report) 1.2.4. Procedures over updating of inventory lists. 1.2.5. Procedures over administration of assets below R5000 1.2.6. Handling of unused asset tags (national and provincial offices) 1.2.7. Procedure for Asset Registration Form – used when adding an asset on the FAR 1.2.8. Procedure for removal of an asset line transaction on the FAR.

1.3. Provisions contained in the Asset Management Policy but not practiced or implemented:

Policy requirement Actual practice

Section 13.1. Develop a maintenance strategy that will ensure that the organization’s assets are maintained at an adequate operational level or standard by ensuring that all statutory, technical, and operational objectives are achieved.

Not in place

Section 6.6. ensure that employees with delegated authority have been nominated to implement and maintain physical control over assets in their department

No one is nominated


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1.4. The assets estimated useful lives of the PPEs on the policy and operating procedure manual are not updated to be aligned with the current estimated lives used for reporting purposes: Asset Category Asset useful life per the Policy

and SOP Asset useful life used for reporting purpose

Office equipment 8 years 8 to 10 years

Application software Not listed 8 years

Root Cause

• The finalizing of the revised document was deferred to incorporate any possible inputs that could

arise from the audit process.

Risk/Consequence Finding risk rating – High risk

• With outdated Policy and SOP, there is no uniformity and consistency in decision- making and

application of operational procedures.

• Without clearly established business processes, there is high likelihood of exposure to undue

risk, such as fraud or identifying inappropriate conduct may go undetected.

• Old policies and procedures manuals may be non-compliant with new laws and regulations.

Recommendation Priority 1

• Supply Chain Management should update the policies and procedure to properly reflect what

management wished to have happen and how it happens, to ensure that the guidelines are

streamlined with operating activities; are timely reviewed, updated (if there are changes) and

submitted for approval. This will enhance the consistency in the application of daily procedures.

• The Chief Financial Officer should ensure that policies and procedures are timely reviewed and

submitted for approval.

• Any changes to the processes or practices which cannot be timely incorporated to the policy or

SOP are formally approved in a form of a Practice or Instruction Note, until duly embedded to the

policy and procedure guideline. This will ensure that implementation of these changes is deemed

valid and lawful.


Management accept the finding. The process of reviewing the policy and procedure manual has started

and concluded, however, in the light of the raised audit findings, it will be revisited to address the issues.

The updated changes will be submitted to the CFO for final review by 05/01/2021 and to the GS for

approval by 31/01/2021.

Responsible Person

Chief Financial Officer & Manager, Supply Chain Management

Ms. U Ndobeni & Mr. C Mokoena

Completion Date:

31 January 2021

Auditor’s Conclusion

The management action plan is noted, and the audit team will perform a follow-up in the subsequent

quarter to ascertain the implementation and effectiveness thereof.


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2. Control measures for insuring assets are not properly monitored Control Rating: Ineffective control

Criteria It is of sound practice for organizations to undertake an insurance cover for its assets and liabilities, as this is another form of business risk response, which assist the organization to cover the costs associated with assets and liabilities claims. It is pivotal that information for covered items is updated as and when changes or additions are made to ensure the validity of the insurance cover.

Para 8 (e) of the Asset Management Policy requires that each asset shall be insured within 5 days of accepting delivery. Building improvements are major repairs, renovations, or additions to a building that increase the future service potential of the building and benefit future periods. The buildings and the improvements become one and inseparable. Examples of building improvements include major repairs, renovations, or additions such as addition of a new wing or a new air conditioning system.

Observation

The internal control measures for ensuring that ELRC assets are insured always are not properly

administered, for example, the following issues were note:

2.1. According to the ELRC Policy Schedule (with Guardrisk) date 26/10/2020, the physical address of two provincial offices in not updated, namely, Provincial Chamber

Risk Address as per Policy Schedule

Actual Physical Address Audit Comments

KwaZulu Natal

1st Floor Thekwini FET College, 262 Daintree Avenue, Durban, 4001

146 Problem Mkhize Road, Morningside, Durban, 4001

The Chamber moved to the new office in February 2020, however, the schedule was not updated.

Eastern Cape

Block A, Unit 2, Bisho Business Village, Siwani Avenue, Bisho, 5606

12 Clifford Street, Quigney, East London, Second Floor, Suite 6

The Chamber moved office in April 2015, however, the schedule is not updated.

2.2. Improvements made to the building was not timely relayed to Guardrisk, see details below:

Asset Number

Asset Description

Amount Date of Delivery

Date Sent to Insurance

Difference in Working Days

ELRCX0033 Sensor taps R130 455.00 12/08/2020 25/08/2020 9

ELRCX0030 Network cabling R69 711.32 15/07/2020 25/08/2020 28

ELRCX0034 Dry walling and partitioning

R110 634.63 09/09/2020 01/10/2020 15

Root Cause

• Oversight, new address not communicated clearly to the service provider.

• There was confusion of whether the items are insurable as separate items or there were inclusive

to the building.


In the unfortunate event of an accident ELRC might be at risk of having complications and pitfalls when

filing for an insurance claim.

Recommendation

Priority 1

• SCM must make arrangements to get the physical addresses of these provincial offices updated

as soon as possible.


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• Going forward, any changes affecting the insured assets must be promptly communicated with

the insurer to ensure that the organisation is adequately always covered.


Management accept the finding.

• The service provider was provided with information on location of the office when insuring

additional assets. The East London was partially updated and is indicated under page 4 of the

schedule. The email has been sent to the Insurer to correct the addresses.

• The delays in insuring the items was due unclear classification issues and had to seek advice

from the insurer. We have since agreed that we must seek clarity on procuring the items than

wait for delivery.

Responsible Person



Completion Date:

31 December 2020


The management action plan is noted, and that SCM has since communicated the new premise address

for Eastern Cape to the insurer on the 07th December 2020. However, the audit findings will be retained

because findings relating to assets insurance have been previously raised by both the internal and

external auditor. Therefore, activities relating to insuring of assets will be monitored on a quarterly basis

and outcome will be reported accordingly.


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3. Safeguarding of movable assets is compromised Control Rating: Ineffective control

Criteria Sound practice requires the accounting officer to put in place control measures that will ensure the safeguarding of assets. The asset management policy and standard operating procedure requires that all assets shall be entered in the Fixed Asset Register and all barcoded assets shall be tracked by physical location through the Fixed Asset Register.

Observation

The audit identified two assets stored in unusual places: Asset Description Asset Number Asset location found by IA

Computers monitor Fujitsu ELRCL00709 the monitor was found by IA inside one of the cabinets, located at RM10116 (storeroom) used to store the SCM inventory, also used as a changing room by the general workers

Samsung microwave ELRCM01121 the microwave was found kept in the storage area opposite the kitchen, next to the toilet for disabled persons, located on the ground floor

The above is found to be irregular because these locations are not used as workstations nor storage

for assets isolated for disposal purposes.

In the previous year, the audit team found a CPU kept in the toilet for disabled persons and reported

the matter to SCM for investigation, and now we have identified the same but in a different location.

Root Cause

• The assets are old and not in any register, therefore were not detectable.

• Areas not checked as no assets are listed or stored in the areas.

• Gaps within the asset verification process, leaving assets to be exposed to theft .


Possible misappropriation of assets.

Recommendation Priority 1

• Management should investigate these issues, and based on the outcome, should take necessary

disciplinary step.

• The established controls for safeguarding of assets seems to be weak, and management is

recommended to strengthen them.


Management accept the finding. The origins of the assets will be investigated, and the necessary

action will be taken, that is physically dispose once all confirmed. Furthermore, communication will be

issued to the General workers to report such to SCM as soon as they have spotted the any items

lying in such places.

Responsible Person


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Completion Date

31 January 2021





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4. Assets could not be traced on the asset register or inventory list Control Rating: Ineffective control

Criteria The asset management policy and standard operating procedure requires that all assets shall be entered in the Fixed Asset Register and all barcoded assets shall be tracked by physical location through the Fixed Asset Register.

Observation

4.1. The audit identified the following assets on the floor but could not trace then on the asset register

or inventory list or bi-annual verification working papers: Asset Description Asset Number Location

Computers monitor Fujitsu ELRCL00709 RM10116 - storeroom

Samsung microwave ELRCM01121 Storage space next to RM10125

4.2. The audit identified assets on the floor that could not be traced to the October 2020 FAR. See

examples below: Asset Description Asset Number Location

Acer Laptop ELRCD05705 RM10115

Printer Xerox ELRCC04603 Removed from RM10115 to storage for disposal

4.3. Assets denoted on the inventory list and working papers as physically verified during the mid-

year verification process, however, these assets could not be traced to the October 2020 FAR. See details below: Asset Description Asset Number Location

Chair high back swivel & tilt ELRCH00447 RM10112

Chair high back swivel & tilt ELRCW02392

Chair high back swivel & tilt ELRCF07583

Chair high back swivel & tilt ELRCH08546

Bookshelf ELRCL00604 RM10119

Steel 4 drawer ELRCM00992

High back swivel ELRCE06755

High back swivel ELRC00593

Visitors chair ELRCE0637 RM10120

Visitors chair ELRC06667

4.4. From a sample of 5 transaction per province (total 45), at least 10 (22%) of the assets could not be traced from the Inventory Lists to the October 2020 FAR. See details below:

Asset Description Asset Number Location Condition

Reception desk wood ELRCI09480 RM10157

Good

Pedestal 3 drawer mobile ELRC109489 Good

Microwave Samsung ELRCI09819 Good

Photocopy machine Xerox ELRCB04031 Open Plan Reception & Boardroom (Free State)

Normal

Chair visitor arm ELRCB03666 Normal

Computer Monitor Acer ELRCG07926 RM10047 Poor

Dell Desktop ELRCD05784 RM10024

Normal

Desk ELRCX02429 Normal

Chair visitor arm ELRCK00507 RM10051 Normal

Fridge ELRCK00446 Good

Root Cause

• Laptop asset number ELRCD05705 was captured as ELRCD05787 the error was corrected. But

it seems the old number was re-instated and will correct the error. The item was previously

approved for disposal at JHB office and HR requested temporary use of the item while waiting

for a printer.

• The Excel FAR can be changed without the administrator being aware due to the size of the

document.


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• Different FAR can be submitted with using an older version resulting in incorrect information.

• The reception desk Cape Town was assigned several tags that a tag per piece and these were

consolidated into one tag in the FAR which was communicated to the office. We revisit the issue

to check what has since changed.

• Microwave will not be in the FAR as an Inventory item.

• The Fridge not capitalized therefore not in the FAR. FAR (The assets if under R5000 and can

operate independently will not be capitalized and the assets noted are prior of taking this

decision)

Risk/Consequence

Finding risk rating – High risk

• Completeness of the FAR cannot be vouched. If the completeness of the FAR is compromised

or could not be vouched, this impairs the reliability and integrity of the financial statements.

• Safeguarding of assets is compromised.

• Possible misappropriation of assets.

Recommendation

Priority 1

• Management should investigate these issues, and based on the outcome, should take necessary

disciplinary step.

• Manager, Supply Chain Management should strengthen controls over reconciling of the assets

on the floor to the Inventory Lists and the FAR, this to ensure the integrity and reliability of the

FAR and its completeness.

• The Manager, Supply Chain Management should sample assets from the floor to the Inventory

Lists and the FAR to confirm existence and vice versa for completeness, this will at least reduce

the error rate of completeness and existence.



• The assets were not verified as not indicated on the Location Inventory Lists and not cited by

the official on the day. ICT will be contacted to clarify the origins of the Asset. The Storage

space indicated has no assets allocated to it and SCM doesn’t include it in the verification

process hence no knowledge of the item identified.

• Management confirms that assets that were on the location were indicated on the working as

verified and those not verified were reported as such. Most of the items have since been

verified as staff has returned to the office.

• There FAR has been migrated to evolution and being reconciled and from 01 January 2021 the

Evolution FAR will be the official document to be used.

• The FAR will be reconciled and the discrepancies followed up with provincial managers.

Responsible Person



Completion Date

31 January 2021



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Management root cause that items such as microwaves and fridges are not capitalised and therefore

will not appear in the Fixed Asset Register is noted, however, we disagree with this view because the

audit identified microwaves and fridges capitalised and recorded in the Fixed Asset Register. See

example below: Asset No. Description Purchase

Date Location Building Cost Price at

01/04/2020

ELRCD05852 Microwave Samsung

2018/04/14 RM10101 - kitchen ELRC building head office

R1 699.00

ELRCC04794 Microwave Defy 2019/05/27 RM10125 -kitchen ELRC building head office

R3 999.00

ELRCP01442 FRIDGE DEFY 2014/03/31 RM10123 - Storeroom

ELRC building head office

R1 034.87

Furthermore, Management should take into account that items that are less than R5 000.00 but meets

the criteria for assets and when combined does meet the R5 000.00 threshold are capitalised and

included in the FAR, as applied in other instances.




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5. Gaps over the performed mid-year asset verification process Control Rating: Ineffective control

Criteria The Asset Management Policy and Standard Operating Procedure gives guidelines of what, how, when and who should be done during the asset verification process to ensure completeness, existence, accuracy, consistency, uniformity, compliance, efficiency, and effectiveness of the asset management process.

Observation

The following gaps were identified from the outcome of the mid-year assets verification process

performed during September and October 2020:

5.1. Insufficient evidence that all assets were verified during the mid-year verification process. The audit team noted that the Asset Officer sent an email to staff on the 14/10/2020, requesting them to confirm the tag numbers of computers/laptops allocated to the. However, there is no evidence of confirmation received from some of the officials nor follow-up done by the Asset Officer. For example, the following officials’ confirmation is outstanding:

Finance SCM DMS Executive CBS ICT

Finance Officers x3

SCM Manager SCM Officer

DMS Senior Manager DMS Officers x2

Executive PA (on behalf of GS)

CBS Manager CBS Officer

ICT Manager ICT Officer

It came to our attention that a follow-up with the above officials was only done on the 26/11/2020 after we raised the exception. The mid-year review was done, and report issued, without verifying the computer equipment assigned to the above officials.

5.2. There is no evidence that assets located in the Guardhouse (RM10200) were physically verified

during the mid-year verification process. Assets located in the Guardhouse are: Asset Number Asset

Description Condition Further Comments

ELRCQ01628 Chair Poor The chair no longer balances properly.

ELRCT0194 Chair Poor The fabric of the chair is torn, and its no longer balances properly. The asset tag is broken; hence the asset number is incomplete.

ELRCG07716 CPU Acer Good The asset is in a good condition.

ELRCD05890 Samsung monitor

Good The asset is in a good condition.

ELRCY02543 Locker Good The asset is in a good condition.

ELRCY02542 Locker Good The asset is in a good condition.

ELRCL00751 Mobiwire (cellphone)

Good The asset is in a good condition.

5.3. The location reference number for the Guardhouse as recorded in the FAR is incorrectly captured as RM10201, but when the audit team performed the physical verification, we noted that the reference number is RM10200.

Root Cause

• 5.1:The emails were not received at the given response time. However, the items were

subsequently verified as staff has since been coming to the office.

• The assets were not on site at the time of verification since most staff was still working from

home. The item has since been verified. The condition is poor, and ICT will be engaged to confirm

possible disposal. Listing is provisional and upon confirmation, a submission to approve the list

will be prepared.

• Verification was conducted on all assets and those not found were marked with an X and noted

for further investigations. items used at home; End users were later requested to confirm.

• 5.2 to 5.3 The room was erroneously skipped during the process. Not keeping record of offices

already verified and outstanding


18

Risk/Consequence


• The accuracy and completeness of the cannot be vouched for.

• Possible misappropriation of assets might not be timely detected and prevented.

Recommendation

Priority 1

• This is concerning because the findings raised are recurring. SCM Manager should get to the

bottom of the recurring findings and address them accordingly. If the problem is due to poor

performance then an improvement plan must be put in place, executed and monitored frequently.

If the problem is the controls in place, then management should consider relooking them and

improve.

• Control mechanisms should be enhanced to ensure that the assets are all verified during the

verification processes, this includes verification of assets of Senior Management staff.

• The guardhouse should be included as an area where assets are also verified and working

papers should be conducted as well.

• Management should strengthen safeguarding of assets as it has now raised a red flag to IA where

assets are found on storeroom and other areas, and they are not accounted for.



• Management confirms that assets that were on the location were indicated on the working as

verified and those not verified were reported as such. Most of the items have since been verified

as staff has returned to the office.

• Management will prepare a list of all offices and mark those already attended to ensure non is

missed. This will be effected before the year end verification.

Responsible Person



Completion Date:

31 January 2021


The audit notes that some of the issues have been corrected however, these are recurring issues,

and therefore, to close them off on the report will be premature.

The audit team will perform a follow-up in the subsequent quarter to ascertain the implementation and

effectiveness thereof.


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6. An asset assigned with two tag numbers Control Rating: Ineffective control

Criteria The Asset Management Policy requires that ELRC assets must be barcoded or tagged.

The system used for tracking assets in ELRC is through the assignment of unique asset tags in the

form of bar code labels for each asset recorded in the asset management database. When an asset is

received at the designated receiving location, responsible staff members assign a bar code label on the

item, which is then recorded in the asset register, thereby allowing for the tracking of an asset.

Observation

6.1. During the physical verification test, the audit team noted an asset with two tag numbers, namely, Asset description: Lenova Laptop Assigned to: Manager, Collective Bargaining Services Tag numbers: ELRCC04714 and ELRCB03728

6.2. The audit team traced the above tag numbers to the FAR and noted that they do exist but

assigned to different assets, at different locations. See detailed below: Asset Number

Serial Number Asset Description Location Reference Cost Price as at 31st October 2020

ELRCC04714 R90G4B66 Laptop Lenovo Yoga RM10110 R10 714.69

ELRCB03728 None Lenovo E540 RM10111 R11 861.06

The above implies that ELRCB03728 was attached to the wrong asset and Lenova E540 is

without a tag number or is attached to a wrong tag number.

6.3. The additional tag number was removed by the Asset Officer on the 08/12/2020 without informing

the audit team (an act of dishonesty) and not in the presence of the Manager CBS. This act is

almost the same as attaching the wrong asset tags to asset identified without tags by the external

auditors.

Root Cause

• The assumption is that the tag fell from one laptop and was erroneously affixed to the wrong item.

The asset was not on site during the bi-annual verification.

• End user not raising alarm (informing ICT or SCM) on duplicate barcodes on his or her equipment

upon receiving it from ICT.

Risk/Consequence


Since bar coding of assets is a control measure against safekeeping of assets and accountability, then

these two elements are compromised.

Recommendation

Priority 1

• We recommend the revisiting of the existing controls, assess its adequacy and put additional

controls.

• Manager must ensure one tag is attached to one asset, not asset should have two tags attached

on them.

• Act of dishonest is strongly reprimanded and must be disciplined accordingly because it

compromises the control system.


20


Management accept the finding. The issue was discussed in detail during the meeting and was

explained to IA and how these will be handled going forward. The item has since been identified and

the correct tags attached.

Responsible Person



Completion Date:

Immediately


The audit notes that the issue has been corrected however, issues related to weaknesses over the

handling of tag number have been raised previously, therefore, closing the finding as resolved will be

premature. A follow up will be conducted in the subsequent quarter on actions taken going forward to

avoid such instances.


21

7. Discrepancies between the inventory lists, asset register and assets on the floor Control Rating: Ineffective control

Criteria Paragraph 9.3 of the Asset Management Policy state that “Departments must reconcile and motivate discrepancies between the fixed asset register and the physical inventory count results”. Fixed Asset Management Standard Operating Procedures state that:

• Para 5.3.2: “the Fixed Asset Officer must compile an inventory list of assets located in each office, and that inventory list must be updated within one month after asset verification.

• Para 5.3.3: “an inventory list must be signed by an official occupying the verified office, in the open plan offices the Managers shall appoint an individual to be responsible for the control of those assets within the office.

• Para. 5.5.2.3. requires that if misplaced items are identified, the new location must be recorded.

• Para. 5.5.2.4 further deliberate that SCM should obtain a confirmation from the previous location if the item must be permanently relocated and if Yes, the AMCF must be completed and signed by relevant parties and submitted to the Asset Officer.

• 5.5.2.6, it requires the Officer to update the FAR accordingly.

Observation

The following discrepancies between the inventory lists, asset register and assets on the floor were

noted:

7.1. Asset number ELRCF07517, a chair visitor arm, located in RM10105 is on the inventory list but

not on the floor.

7.2. Furthermore, there is no asset transfer form for this asset, in case it was moved to another

office or space.

7.3. There is not inventory list for assets in the Guardhouse (RM10200).

7.4. Discrepancies in the asset locations recorded in the FAR versus the actual location of the assets verified on the offices:

Asset Number Asset Description Location as per FAR Actual Location Physically Verified by IA

ELRCG07716 CPU Acer RM10124 RM10200

ELRCY02543 Locker RM10124 RM10200

ELRCY02542 Locker RM10124 RM10200

ELRCL00874 HP Laptop RM10116 RM10119

7.5. There is no evidence to document the proper approval of the asset movement from the location

on the FAR to the actual location. Root Cause

• 7.1 to 7.2 - The asset was moved post verification (there’s no proof, this is based on analysis to

what could have transpired).

• 7.3 - Location was erroneously omitted from the process.

• 7.4 - The office was provided with loan assets and the list was not updated. These assets were

erroneously omitted during the verification.

Risk/Consequence


• Poor administration of assets increases the risk of assets going missing without timely

detection and prevented.

• Accountability, safeguarding of assets & compliance could be compromised.


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• Accuracy and completeness of the FAR is compromised.

• Physical location identification might be a challenge during physical verification.

Recommendation

Priority 1

• The Asset Management officer and the Manager, Supply Chain Management should strengthen

controls over reconciling of the assets on the floor to the Inventory Lists and the FAR, this to

ensure the integrity and reliability of the FAR and its completeness.

• The Manager, Supply Chain Management should sample assets from the floor to the Inventory

Lists and the FAR to confirm existence and vice versa for completeness, this will at least reduce

the error rate of completeness and existence.

• The Asset Management Officer and the Manager, Supply Chain Management should ensure that

the Inventory Lists are pasted in all locations, including the guardhouse.

• The Inventory List should be reconciled to the assets on the floor and updated as and when there

are movements.

• Consequence management should be duly enforced where deemed appropriate.

• SCM should improve controls over the reconciling items in the FAR to that on the floor, to ensure

that discrepancy is noted, followed up and timely resolved.


Management does not accept the findings (7.1 – 7.2)

• The asset was identified during the verification and was moved post the event. Management

will continue with the tracing as carpets were cleaned after the verification and assets were

moved out of the offices.

• The inventory list has been created and updated accordingly. (7.3)

Management accept the findings (7.4 – 7.5)

• The items were not verified during the Bi-Annual verification and that has since been done and

the FAR will be updated.

Responsible Person



Completion Date:

Immediately


7.1 – 7.2: The finding is based on the Inventory Lists updated after the verification process and signed

off by the Asset Management Officer and the SCM Manager, the is no evidence that asset number

ELRCF07517 found at RM10105. This was confirmed with the Asset Management Officer, and during

the discussion of the draft report the Asset Officer promised to look into the issue to find out what could

have transpired. However, at the time of issuing the final report, nothing was brought forward to Internal

Audit as evidence of addressing the issue and management have not revised their responses.

As for the issues resolved after discussion with the auditee, will remain as findings because they are

recurring (previously identified by IA), and indication that SCM resolve issued at that time but fails to

monitor the corrected issues to ensure they remain effective. Therefore, reporting them as resolved

will be prematurely. The audit team will perform a follow-up in the subsequent quarter to ascertain the

implementation and effectiveness thereof.


23

8. Assets identified for disposal not properly monitored Control Rating: Ineffective control

Criteria

Asset Management Policy, section 6, Functional Responsibilities, paragraph 6.4.1 states,

“The Supply Chain Management Department shall with regards to acquisitions and disposals of assets:

c. Ensure that a record is kept of all obsolete, damaged, and unused assets received from departments

d. Compile a list of the items to be disposed in accordance with their guidelines.

e. Ensure that all obsolete or damaged assets are disposed of as per the requirements of the SCM

Policy; and

j. Ensure that location changes are made timeously, and location/ room information are updated regularly.

Fixed Asset Management Standard Operating Procedure makes the following provisions regarding the identification of assets for disposal: 5.7.1. Assets that are no longer fit to be used will be identified for disposal and be removed from the

Asset Register. This includes items that are damaged beyond repairs, have become obsolete or redundant.

5.7.2. The Asset Officer will list these items request approval to dispose and must include motivations as why the item or group of assets must be disposed. The list will be reviewed and recommended by the SCM Manager, through the CFO to the General Secretary to approve the Submission.

Observation

According to the mid-year asset verification working papers and inventory lists the following areas of

concern were noted:

8.1. There are assets identified as broken or scrap or poor, however these are not included in the disposal list. The following is a list of such assets:

Location Ref. Location Description

Asset Number

Asset Description Condition

RM10115 Open plan office ELRCC04808 Printer Xerox Normal - the description column is marked as “Dispose”

RM10157 Reception area: ELRCE06402 Machine photocopier Poor

RM10159 Provincial Managers Office

ELRCE06430 Pedal 3 drawer mobile Poor

ELRCE0641 Pedal 3 drawer mobile Poor

RM:10 Boardroom ELRCE060 V50 Shredder Damaged

RM:06 Provincial Secretary

ELRC109213 Refrigerator Damaged

RM:07 Reception ELRCE06120 Fax machine Damaged

ELRCE06143 Comb binding machine Damaged

Open plan reception and boardroom

Open plan reception and boardroom

ELRCB03624 Typist chair Not normal

Kitchen Kitchen ELRCB04004 Fridge Defy Not normal

ELRCR01790 Typist chair Not normal

Storeroom Storeroom ELRCB04006 Machine shredder Rexel Not normal

ELRCG07925 Computer CPU Acer Not normal

RM10047 Reception ELRCF06891 Table boardroom Poor

ELRCG07926 Computer monitor Acer Poor

ELRCI09607 Chair high back leather swivel and tilt

Poor

RM10135 Printing, server & storeroom

ELRCF06934 Machine book binder Poor

RM10030 Provincial Secretary

ELRCD05742 Acer aspire E1 Series Notebook

Broken

8.2. An asset verified as normal condition but included in the disposal lists, with condition

recorded/changed to poor or broken:


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Location Ref. Location Description

Asset Number Asset Description

Asset Number

Condition as per Working Paper

Condition as per Updated Inventory List

Condition As per Disposal List

RM10102 Kitchen Kettle Mellerware Optic

ELRCF07592 Normal Normal Broken

Root Cause

• (8.1) The Disposal list was not finalised and still to be consolidated for approval

• (8.2) In terms of physical condition they may seem good/ normal and according to technical

reporting or operation is malfunctioning.

Risk/Consequence



• Theft or loss of assets not timely detected and rectified.

• Disposing of assets that are still in good condition.

• FAR may be misstated as assets recorded do not match assets on the floor.

Recommendation

Priority 1

• The working papers for the asset verification should be used as a source document to formulate

the Disposal Lists, where all assets that are indicated to be disposed are consolidated in the Lists

and are properly reviewed for approval by the respective structures.

• The Consolidated Asset Disposal List should take into considerations assets identified for

disposals from both National Office and the Provincial Chambers.



• Management will ensure that the asset disposal listing or attachments are included under the

designated space upon reporting.

• The old information on condition to be scratched out if different to current condition on verification.

Responsible Person



Completion Date:

Immediately (Year End Verification)





25

9. Tagging of assets not properly controlled Control Rating: Ineffective control

Criteria The Asset Management Policy provides that all movable assets shall be bar-coded to exercise control with a unique asset number. Best business practices provide that official entrusted with the responsibility of assets management should implemented asset safeguarding controls that are generally adequate relative to the safeguarding of moveable assets. All barcoded assets shall be tracked by physical location through the asset register.

Observation

The following areas of concern were noted during the audit physical verification of assets:

9.1. Assets on the floor which were not tagged: Location Ref. Location

Description Asset Description Audit Comments

RM10122 Dining hall Chair The chair is marked “FU000151”

Chair The chair is marked with B439

Chair The chair is marked with 5.2.23

9.2. Odd asset numbers on the Inventory Lists and the Bi-Annual Asset Verification Working Papers

that could not be traced to the asset and/or FAR. Location Reference Asset Number Asset Description

RM10107 ELRCC0462 HP CPU

RM10159 ELRCE0641 Pedestal 3 drawer mobile

RM:06 ELRC109213 Refrigerator

RM10024 ELRC08610 Boardroom table

RM10030 ELRC08412 Desk workstation

Root Cause

• 9.1 - The tags have fallen; new tags were assigned to the chairs and will be attached urgently.

(there was a delay in identifying which chairs were affected, but this has since been resolved).

• 9.2 - The first item was the unit used by the intern and was located at Kopanong. Item has since

been moved to ICT stores. The other items relate to provinces and being followed up with

respective offices and will provide clarity shortly.

Risk/Consequence



• Theft or loss of fixed assets could go undetected.

• Without a unique ELRC identification number, fixed assets are not easily identifiable/ traceable.

• Possibility exists of inability to locate the actual asset, that is, one cannot provide assurance that

the asset register represents what is physically present.

Recommendation

Priority 1

The tag number is the primary identifier in the asset record. Therefore, the Manager, Supply Chain

Management should ensure that proper and good controls exists over the monitoring of asset number.


26


Management accept the finding. The matters are being resolved, and the provincial ones will be

discussed with provincial managers.

Responsible Person



Completion Date:

31 January 2021





27

10. Prior audit agreed action plans not adequately implemented Control Rating: Ineffective control

Criteria

Best practice requires management and staff to influence the organization’s culture of maintaining a

strong, effective and sustainable control environment. All staff have a role to play in ensuring that

internal controls operate effectively to achieve the organization’s objectives and services.

As relevant to the area being reviewed, Line Management is responsible for providing a timely,

responsive corrective action plan to Internal Audit that adequately addresses all report

recommendations. The responsible Line Manager is to provide timely updates on the status of

corrective actions outstanding to Internal Audit. If line Management has not adequately addressed

corrective actions and an unacceptable level of residual risks to the Council is the result, this is to be

discussed with the General Secretary. Management are held responsible for the implementation of the

agreed management corrective action plan to minimise and address the finding(s) agreed upon with

the Internal Auditor. As such, the corrective action plan should clearly describe measures that have

been taken to effectively resolve each audit finding.

Observation

Prior audit recommendations and agreed action plans are not adequately and effectively implemented,

this included the following findings identified as recurring: Audit Report Ref.

Finding #

Finding Current Audit Observation

09-2018/19 1.2 Legends used to describe the condition of the asset not explained: We noted that SCM used legends to describe the condition of the assets verified however there are no descriptions to explain what the legends mean. For example, one cannot tell the difference between an asset identified as “Good” or “Normal” and “Poor” or “Scrap”. Thus, resulting in inconsistencies in the identification of assets for disposal or revaluation where you have more than 1 person conducting the verification process.

Management Corrective Action Plan Management will look at getting additional resources to assist during the Asset Verification Process which will be overseen by the SCM Manager to ensure consistency and compliance to set procedures.

Legends used to describe the condition of the asset not explained 10.1. As noted in the Bi-Annual Asset Verification

Working Papers, SCM used legends during the verification process, however, the descriptions of these legends are not provided, making it difficult for the third party to determine which assets were verified to be in existence and which one are not/meaning of the legends. E.g., there working papers would have a tick marks, and in other instances a name of the user appears next to the class description (no tick mark), with no descriptors.

10.2. Furthermore, there is no indication that the conditions of the assets were re-assessed during the verification process.

08-20/19 (2)

3 Gaps in recording of assets in the asset register The FAR does not detail all the elements (details of asset) as required by the SCM SOP, for each asset type. For example, the following elements are not included in the register: • Computer – type code, class code, class description, location, asset user • Vehicle – type code, class code, class description, asset user • Furniture – type code, class code, class description, make/model, asset user • Software – type code, class code, class description, location, asset user Management Corrective Action Plan

• SCM Officer is advised to ensure all relevant columns are populated accordingly.

10.3. Upon inspection of the September and October 2020 Fixed Asset Registers provided to IA for audit purposes, we noted that the FARs are not always populated with the required information in line with provision 5.3.1 of the Fixed Asset Management SOP, such as;

• asset number,

• serial number,

• make/model,

• location reference,

• location description building description,

• asset user/custodian and

• condition.

[where the information is not applicable ta certain column, IA expected that this would be clearly indicated as it is done in the other fields (consistency)]


28

• The SOP and Policy will be amended to reflect the useful information as per the FAR template.

• Consequence management to be implemented to address poor performance- related issues.

Root Cause

• 10.1 – Oversight not explaining the legends used as we thought symbols are understood.

• 10.2 - The condition on the FAR is updated.

• 10.3 - SOP not detailing the process where information is not applicable. (The SOP does not say

if not applicable; what to do or indicate)

Risk/Consequence


• Non-compliance with Management Corrective Action Plan policy

• Recurring of audit findings.

• Partial implementation is encouraged as progress toward a recognized goal. So, if attempts are

not done to implement it raises concerns of responsible personnel not working towards achieving

the goals of the organisation.

• If agreed management action plans are not implemented, there is increased risk of ineffective

control environment and governance risk.

• The legends used in the working papers should be clearly defined/a narrative description should

be recorded, to enable the reviewer to understand the work performed and the conditions of the

assets.

Recommendation

Priority 1

• Prior audit reports agreed management action plans should be implemented as per the target

date. If a finding or MAP is no longer relevant, then IA should be timely notified with reasons, and

where possible a new MAP must be determined and implemented accordingly.

• Challenges to implementation should be timeously reported to internal audit to enable updating

of the audit issues log.

• The asset working papers should be adequate. That is, legends are explained, the working paper

is referenced and verified by the Manager, Supply Chain Management.

• There should be uniformity in the asset verification process, and that should clearly be stated and

visible in the working papers in terms of the assessment of the condition of the assets.



• We will adopt common symbols and outline their meaning for easy reference. This will be implemented with the next verification at year end.

• Improvement have been made on the matter as recent procurement have the serial number

indicated. The blank space will be indicated when information is not applicable, and SOP will be

enhanced to indicate such.

Responsible Person



Completion Date:


29

Immediately





30

11. Movement of assets not properly monitored Control Rating: Ineffective control

Criteria According to para. 9.1 of the Asset Management Policy, all changes must be reported to the SCM within 10 working days to maintain accuracy of the Fixed Asset Register. Accurate information in the system is dependent upon the completion by Departments of appropriate AMC forms for additions and transfers to other departments. Best practice as adopted by the ELRC provides that an official is responsible for the management, including the safeguarding, of the assets within that official’s area of responsibility.

Observation

11.1. According to the documents provided to IA for movement of assets, there is no evidence of supporting documentation for movement of assets as per the table below, and a s a result, the audit could not verify whether movement of these assets was reported to SCM within 10 working days:

Asset Number Asset Description Location as per FAR Location as per Inventory List and/or Working Paper

ELRCH00447 Chair high back swivel & tilt Not on the FAR RM10112

ELRCW02392 Chair high back swivel & tilt Not on the FAR RM10112

ELRCF07583 Chair high back swivel & tilt Not on the FAR RM10112

ELRCH08546 Chair high back swivel & tilt Not on the FAR RM10112

ELRCK00586 Screen Dell RM10131 (Finance) RM10112 (SCM Open Plan)

ELRCK00530 CPU Dell RM10131 (Finance) RM10112 (SCM Open Plan)

ELRCW02361 Chair high back swivel & tilt RM10112 RM10114 (Kopanong)

ELRCX02417 Chair high back swivel & tilt RM10112 RM10114 (Kopanong)

ELRCC04603 Printer Xerox Not on the FAR Removed from RM10115

ELRCL00604 Bookshelf Not on the FAR RM10119

ELRCM00992 Steel 4 drawer Not on the FAR RM10119

ELRCE06755 High back swivel Not on the FAR RM10119

ELRC00593 High back swivel Not on the FAR RM10119

ELRCE0637 Visitors chair Not on the FAR RM10120

ELRC06667 Visitors chair Not on the FAR RM10120

The above is a sample, more transactions of this nature are noted in the working papers

11.2. The audit noted assets on the working paper that are scratched and not included in the updated

Inventory Lists, however, the whereabouts of these assets are not clearly indicated, and there is no asset movement forms:

Location Reference

Asset Number Asset Description

RM10112 ELRCK00420 Chair typist

ELRCC04672 CPU HP

ELRCM01123 Cabinet 3 drawer wooden

ELRCD05826 Laptop HP

ELRCX02504 Chair high back swivel & tilt

Root Cause

The movement of personnel and assets was done under urgency due COVID regulations and moves

were only noted on the inventory lists as they were deemed temporary at that time.

Risk/Consequence


• Misappropriation of assets

• Theft or loss of assets not timely detected and rectified.

• Failing to monitor movement of assets exposes the Council’s assets to the risk of loss, fraud,

waste and abuse.


31

Recommendation

Priority 1

• SCM and line management should ensure that every movement of assets is properly

administered, documented in the Asset Transfer/Movement form.

• The movement should be timely reported to SCM to enable updating the FAR.

• SCM Manager should sample transactions now and then to verify the existence and

completeness of asset from the Asset Movement form to the FAR.



• The inventory lists are being updated since the movement has been completed.

• There was no special approval granted for the move; but when requesting approval for

renovations this explained in the document.

Responsible Person



Completion Date:

31 January 2021





32

B.2 – Areas of Improvement

12. Efficiency over monthly reporting and updating the asset register cannot be ascertained Control Rating: Ineffective control

Criteria Para 5.5.1 of the Fixed Asset Management SOP requires that:

• Capturing of assets will close by 25th of the month to enable month end processes. Items received after this date will be deemed to be received in the following month.

• The Asset Officer must do a reconciliation of the Fixed Asset Register on a month-to-month basis to track any changes and confirm additions or disposals.

• The FAR will be submitted to the SCM Manager to review and submitted to the CFO to approve and incorporate into monthly reports.

Para 5.3 of the Fixed Asset Management SOP requires that all assets received must be entered into

the ELRC Asset Register. This applies in both situation where a manual or automated register is kept.

Best practice requires that fixed asset transactions be properly accumulated, classified and recorded in

the accounting records (as appropriate) at the time of acquisition or disposal.

Observation

12.1. The monthly reconciliation reports for PPE are not date signed by the preparer, reviewer, and

approver. This makes it difficult for the audit team to test and confirm the efficiency of performing the processes. This related to reports from April 2020 to September 2020.

12.2. Efficiency over recording of asset additions in the FAR cannot be determined. We noted that the Asset Registration Forms (which were completed when registering the asset additions in the FAR) are not dated, as to when they were prepared and approved by the Asset Management Officer and the SCM Manager. Therefore, we could not determine whether the new additional assets were recorded in the FAR efficiently.

Root Cause

Adjusting operational requirements without updating the Standard Operating Procedure. Failure to date

the forms upon capturing, thinking the invoice date will suffice.

Risk/Consequence

Finding risk rating – Low risk

• Compliance with regulated timeframes cannot be ascertained.

• Misstatement in the accounting records, for a particular period.


Recommendation

Priority 1

• The date for preparation, review and approval of the PPE Summary Notes should be clearly

stated, and this should be used to measure compliance with the Fixed Asset Management SOP.

• Where applicable, reasons for failure to adhere to timeframes should be appropriately assessed

and where necessary, consequence management implemented as this area not only affects SCM

but plays a huge role in the financial statements of the Council.

• The Asset Registration Form should be updated to make provision for date of additions of the

assets, date of preparation of the form and date of approval of addition of the asset.

• The files should be properly inspected before they are filed and closed for the month.


33



• Management will review the SOP as the operational environment and requirement has changed.

This will be done before year end.

• Management will ensure that all documents are dated upon capturing and signing of the

documents. Management will review to see if the SCMO has signed and SCMM will also sign the

document and include the date of signing)

Responsible Person



Completion Date:

31 January 20201





34

internal audit report: asset management - elrc

Documents