ISETT SETA in hot water

Johannesburg, 22 Sep 2006

The Information Systems, Electronics and Telecommunications Technologies Sector Education and Training Authority (ISETT SETA) is in hot water with the auditor-general`s (AG`s) office over irregular and incomplete accounting practises.

However, the SETA - tasked with developing SA "into an ICT knowledge-based society" - has put many of the AG`s comments down to system errors, and says it is on track to addressing the rest of the government auditor`s concerns.

The AG, in its commentary on the SETA`s financial results to the end of March this year contained in its annual report, said there were inconsistencies and holes in its financial reports. It also lambasted the SETA for not having an internal auditing system.

It was found there was "inadequate compliance" with regards to monitoring the internal audit function, as there was no internal audit function in place for the "entire period".

Nitasha Manik, on behalf of the AG, found that management could not provide "adequate" supporting documentation for purposes of auditing the National Skills Fund (NSF) income and expenditure of R20.3 million.

Manik also wrote that the SETA`s 2005/6 opening balances could not be relied upon. In addition, the AG`s office found the financial statements contain material errors. It said it could not reconcile R4.348 million in the cash flow statement.

Finger trouble

Chairman Lucky Masilela puts this down to systems errors in the accounting system. "It`s just an issue of allocation of what has been spent from one fund," he said, explaining that the SETA does not distinguish between sources of funding provided to stakeholders in its accounts. "It`s easy to reconcile."

The AG stated in its report that the difference of R1.18 million between the opening balance of NSF income received in advance and the 2005 closing balance could not be explained. "Furthermore, amounts recorded in the NSF general ledger account do not agree with supporting documentation."

This resulted in the AG being unable to reconcile these accounts.

Masilela said this can be put down to a systems error. "We had a bit of a finger problem with it," he said, adding there was confusion around the use of the Great Plains system the SETA uses for accounting purposes.

"It`s an issue of proper understanding of how to use the system." However, by the next internal audit, in about a week, this should be running properly, he said.

Painful procedures

Turning to the levy income, the AG stated the completeness of income and receivables could not be determined. This was because management did not make any estimates for levies to be received in the 2006/7 financial year relating to previous years.

Masilela said ISETT SETA wants to seek the SA Revenue Services (SARS) and treasury`s assistance in this matter because it is required to make provision for funds that will arrive at an indeterminate date. Sometimes an error by a stakeholder results in funds being attributed to the wrong SETA, he added, which then have to be paid back.

"It`s a bit of a mess. We need to engage SARS and treasury to find a means of making it work properly."

The AG stated the SETA has "no mechanism in place to record or keep track of related party transactions and relationships and no disclosure has been made in the financial statements as required by SA Statements of Generally Accepted Accounting Practice".

Masilela said the SETA is making progress in improving these issues, which he "takes delight in. We have accepted that issues are not properly addressed, but are confident that, with a new audit process in place, we should be able to turn the corner."

Once the financial matters have been sorted out, he concluded, the SETA could get on with developing skills in terms of its mandate.