The National Skills Fund (NSF) failed to provide audit evidence showing that the skills development funding for 2023-24 and prior years was properly accounted for.
This was Auditor-General Tsakani Maluleke’s finding after she audited the finances of the NSF, which obtained a qualified audit opinion, saying that evidence that services had been received could not be provided.
“I was unable to confirm the skills development funding by alternative means,” Maluleke said.
“Consequently, I was unable to determine whether any adjustments relating to skills development funding stated at R1,784,654,000 (2022-23: R1,182,657,000) disclosed in note 20, as well as the related deferred expenditure stated at R1,370,063,000 (2022-23: R1,221,194,000) disclosed in note 9 to the financial statements were necessary,” she said.
On top of this, the institution's report, tabled in Parliament this week, showed that the NSF underspent by R3 billion during the period under review.
The expenditure for education and training programmes totalled R2.626 billion and capacity building initiatives were underspent by R542 million.
CFO Zama Kubheka said there were factors that have contributed to underspending, such as delays in the approval of new projects, contracting process, project registration and payment of initial tranche payments.
“The NSF is working hard in ensuring that SDPs receive the funds to allow for service delivery to occur,” Kubheka said.
In her audit report, Maluleke said the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records.
“Material misstatements of investments, deferred expenditure, provisions related to skills development funding and related parties identified by the auditors in the submitted financial statements were corrected, but the uncorrected material misstatements and supporting records that could not be provided resulted in the financial statements receiving a qualified opinion.”
Maluleke blamed the state of finances at NSF on significant internal control deficiencies, with management not implementing adequate internal controls relating to project monitoring and reporting.
“The leadership did not exercise adequate oversight, specifically regarding reporting on the skills development funding expenditure, performance and compliance, resulting in material misstatements and instances of noncompliance identified during the audit,” Maluleke added.
Audit committee chairperson Professor Daniel van der Nest concurred with Maluleke that the system of internal control was not entirely effective during the year under review on matters of project reporting, financial statements and performance information.
Van der Nest also said the timely availability of sufficient and appropriate supporting information for NSF operations was critical to resolve the qualified audit opinion and material findings.
“Dependence on source documentation from skills development providers and manual reporting and consolidation processes increases the risk of human error. The implementation of the integrated ERP system will assist in improving the quality of both performance and financial reporting,” said Van der Nest.
NSF’s acting CEO DK Mabusela said they unfortunately maintained a qualified audit opinion from previous year’s material misstatements.
Mabusela said one of the weak areas of the NSF was sufficient human resource capacity, which has been linked to low levels of systems digitisation, automation, and information technology presence.
“On the audit front, we will pay more attention on developing effective and efficient audit action plans based on the management report from AGSA, largely to conclusively address the prior year’s material findings, which was an albatross around our neck,” he said.
In her report, Maluleke was unable to obtain sufficient appropriate audit evidence that disciplinary steps were taken against officials who had incurred irregular expenditure.
“This was because investigations into irregular expenditure were not performed,” she said.
Disciplinary action could not be taken in cases of fruitless and wasteful expenditure because investigations were not performed, Maluleke said.
Higher Education Minister Nobuhle Nkabane said tightening the controls of the NSF-funded programmes should receive the utmost attention.
“This has become a necessary intervention to address the shortcomings highlighted by AGSA in the NSF’s 2023-24 audit and to demonstrate that the NSF is moving in the right direction,” Nkabane said.
Cape Times