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DOD ANNUAL REPORT FY 2005/06 PRESENTATION TO PORTFOLIO COMMITTEE ON DEFENCE ON DOD ANNUAL DOD ANNUAL REPORT FY 2005/06 PRESENTATION TO PORTFOLIO COMMITTEE ON DEFENCE ON DOD ANNUAL REPORT FY 2005/06 12 September 2006 1

DOD ANNUAL REPORT FY 2005/06 Scope • Introduction • Changes to reporting format • DOD ANNUAL REPORT FY 2005/06 Scope • Introduction • Changes to reporting format • Annual Report performance against plan • Report of the Auditor General FY 2005/06 • Discussion 3

DOD ANNUAL REPORT FY 2005/06 Introduction • Emphasis of presentation is on outputs, actual DOD ANNUAL REPORT FY 2005/06 Introduction • Emphasis of presentation is on outputs, actual performance and challenges • Presentation contains both programme performance and the Report of the Auditor General • Presentation on Annual Report performance • Chapter 1 - Strategic direction • Chapter 2 - Organisational Structure and Human Resources Management • Chapters 3 to 11 - Programme performance • Presentation on Report of the Auditor General 4

DOD ANNUAL REPORT FY 2005/06 Introduction (continued) • Inputs from the Ministry and Portfolio DOD ANNUAL REPORT FY 2005/06 Introduction (continued) • Inputs from the Ministry and Portfolio Committee on Defence during the period under review incorporated into Annual Report • Performance Information and Financial Regularity Audit related inputs from Office of Auditor-General also incorporated into Annual Report 5

DOD ANNUAL REPORT FY 2005/06 Changes to Format of Report • Reporting on “output DOD ANNUAL REPORT FY 2005/06 Changes to Format of Report • Reporting on “output details” changed from essay format to table format in line with DOD Strategic Business Plan • Further changes have been effected in Quarterly Report • Integrated report with both financial and non-financial information • Alignment of Programmes articulated in ENE and DOD Strategic Business Plan FY 2006/07 mandate and core business 6

DOD ANNUAL REPORT FY 2005/06 Performance Reporting per Programme 7 DOD ANNUAL REPORT FY 2005/06 Performance Reporting per Programme 7

DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration Outputs Policy Advice; DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration Outputs Policy Advice; Strategic Planning; Reports, general Ministerial services, and specific operational outputs for Services and Divisions in the Departmental Direction Achievements • Management related responsibilities have been carried out through out the period under review. • This includes the following: - inputs to the cabinet makgotla - Internal strategic advice and support - Defence Budget Vote - Representativeness of Military Legal Practitioners and within DOD SANDF Command control Achievements • Achieved objectives and targets • Readiness of military capabilities maintained ito guidelines • Operations successfully conducted • Detail in Chapters 3 – 10 8

DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) Policy and DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) Policy and Planning Achievements • Piloting of the Balanced Score Card • Defence Policy such as the White Paper on Peace-keeping Missions, Review of the regulation of Foreign Military Assistance Act, Progress report on Defence Update • Management of Cluster communication activities • DOD Planning Framework • DODW (restructuring) • Bi/Multilateral Agreements and memoranda of understanding (Defence Diplomacy) • Readiness of military capabilities Financial Services Achievements • Corporate Budget management, • Accounting and control • Preparation of financial statements 9

DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) Aqcuisition Services DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) Aqcuisition Services Achievements • DOD’s Acquisition and Procurement in conjunction with Armscor was instrumental in concluding disposal contracts • Management of Readiness of military capabilities • The procurement of goods and services: Payments to the value of RM 872 was made in favour of Government orders Inspection Services Achievements • The DOD audit process and the effective feedback to customers has improved. • The quality certification in terms of SABS ISO 9001: 2000 received from external auditors justifies the fact. • Amongst others, the DOD contributed and participated in the following: • South African and African Union task team to review 25 articles in the UN 10

DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) Equal Opportunities DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) Equal Opportunities and Affirmative Action Achievements • Participation in the revision of the United Nations Comprehensive and Integral International Convention on the Protection and Promotion of the Rights and Dignity of Persons with Disability • Launching and induction of the New Partnership for Africa’s Development (NEPAD) Gender Task Force • Hosting of African’s Women’s Peace Table Seminar to engender AU/NEPAD peace Agenda • Support rendered towards the Celebration of the International Day of Disabled Persons (IDDP) • Participation in profiling and creating visibility of the 16 Days of the Campaign on No Violence Against Women and Children 11

DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) Government Information DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) Government Information Technology Officer Achievements • Departmental Enterprise Information System (DEIS) Framework was completed and promulgated • Towards the Defence Information System Architecture (DISA), the following were completed: • Strategic studies in terms of MS Operating System vs. other Alternative and Advanced Encryption standards • Defence Information and Communication Technology Architecture • The DOD has registered with GARTNER for research regarding Information Systems • The first draft of CMIS Regulatory Framework was completed 12

DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) CORPORATE STAFF DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) CORPORATE STAFF DIVISION Strategy and Planning Achievements • Capacity building in accordance with Government’s Plan of Action, Cluster objectives, military cooperation activities in Region, African Standby Force, SADCBRIG • Participation in planning, reporting and budgeting process • Implementation of new planning enabler tool (GEJIMA) Military Legal Service Achievements • Improvement of representativeness in Military Legal Service appointed 3 black senior judges • Senior Military Judges for 1 st court case in DRC and the Sudan appointed • Training of Military Legal Practitioners improved Challenges and Interventions • Inadequate structures – to be addressed as part of DODW process • Lack of capacity and a loss of skills – utilise Reserve Force members, awaiting appointments of new members 13

DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) CORPORATE STAFF DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) CORPORATE STAFF DIVISION (continued) Religious Services Achievements • Support to deployed members and families. • Programmes in Burundi, DRC, the Sudan. • HIV programme within SANDF, training of SADC chaplains Defence Corporate Communication Achievements • • Alignment with national communication strategy. Facilitation of management of stakeholder relationships. Met growing demand for communication services and products. “SA Soldier” magazine won Government communication award 14

DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) CORPORATE STAFF DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) CORPORATE STAFF DIVISION (continued) Defence Corporate Communication(continued) Challenges and Interventions • Inadequate structures – addressed through the DODW process • Lack of capacity and a loss of skills awaiting appointment of new members Defence Foreign Relations Achievements • Placement of Defence Advisor at UN • 27 Defence Advisors at 24 Missions • Involvement in binational and multinational meetings Challenges and Interventions • Inadequate structures – addressed through the departmental restructuring process • Lack of capacity and a loss of skills- awaiting appointment of new members 15

DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) CORPORATE STAFF DOD ANNUAL REPORT FY 2005/06 Chapter 3: Programme 1: Defence Administration (continued) CORPORATE STAFF DIVISION (continued) Reserve Force Office Achievements • Implementation of Res F Strategy. • Actively engaged in facilitating Project PHOENIX with Services and Divisions Challenges and Interventions • Council for the Support of National Defence inactive – discussions with Chairperson of the Council and Chief of the SANDF 16

DOD ANNUAL REPORT FY 2005/06 Chapter 4: Programme 8: Force Employment (Joint Operations) Outputs DOD ANNUAL REPORT FY 2005/06 Chapter 4: Programme 8: Force Employment (Joint Operations) Outputs Operational direction; Special Operations; Regional Security; Support to the People; Defence Capability Achievements • • • All primary force employment commitments were met Promote Peace, Security and Stability in the Region and Continent – Continued to provide forces for peace missions mandated by UN and AU • SANDF forces deployed in DRC, Burundi, Ethiopia/Eritrea, Ivory Coast and Comoros with and expanded role of SANDF in the Sudan deployment • More than 3000 members deployed externally – Expertise of SANDF commended by MONUC Headquarters in DRC Support the People of South Africa – Continued disengagement from internal operations – Missions in support of SAPS • Borderline control • Rural safeguarding - Army Territorial Reserves continue to support during period of transfer to SAPS – Support to Depts of Home Affairs and Agriculture 17

DOD ANNUAL REPORT FY 2005/06 Chapter 4: Programme 8: Force Employment (Joint Operations) (continued) DOD ANNUAL REPORT FY 2005/06 Chapter 4: Programme 8: Force Employment (Joint Operations) (continued) Achievements • • To Enhance and Maintain Comprehensive Defence Capabilities – Conventional force preparation activity – Joint exercise INDLOVU, command post and field training exercises. – Multinational exercises DESEX, OXIDE, THOKGAMA Special Operations – Special Forces maintained its capability to react rapidly with flexibility Challenges and Interventions • • • Health } Rejuvenation - Military Skills Development System Lack of junior leaders } Sustainment of long-term Peace Support Operations due to lack of qualified personnel – Utilise Reserve Force members, rejuvenation through 18

DOD ANNUAL REPORT FY 2005/06 Chapter 4: Programme 8: Force Employment (Joint Operations) (continued) DOD ANNUAL REPORT FY 2005/06 Chapter 4: Programme 8: Force Employment (Joint Operations) (continued) External Force Employment Achievements 2005/06 Mission No of Troops Mandays No of Rotations/ Log Runs Average Cost of Operation 1 326 56 70 2 482 165 20 440 25 550 144 2 per year 4 log runs pm Rm 342 Rm 8 Rm 49, 6 R 507 000 940 342 635 2 per year Rm 316 Eritrea Ethiopia Op ESPRESSO 5 1 1 825 365 1 per year R 600 661 R 122 000 Liberia Op MONTEGO 2 365 1 per year R 153 600 The Sudan Op CORDITE 395 365 1 per year Rm 70 Ivory Coast Op PRISTINE 45 16 425 2 per year Rm 13 Comoros Op TRITON 372 5 475 Duration of election Rm 13 DRC Op MISTRAL Op TEUTONIC III Burundi Op FIBRE 19

DOD ANNUAL REPORT FY 2005/06 Chapter 5: Programme 2: Landward Defence Outputs Capabilities in DOD ANNUAL REPORT FY 2005/06 Chapter 5: Programme 2: Landward Defence Outputs Capabilities in infantry; armour; artillery; air defence artillery engineer; operational intelligence; general training; command control Achievements • • Project VISION 2020 Rejuvenation of SA Army – Military Skills Development System Met Short-term Force Employment requirements Provided 2 Reserve Force companies for deployment in DRC Challenges and Interventions • • • Affordablility of SA Army – reprioritise vs operating budget increase – Will table a paper in 2006 indicating the requirement for additional funds/reprioritisation State of facilities – DOD/PWD repair and maintenance programme (RAMP) to be executed Prime mission equipment –Investigation in terms of priority needs underway Ammunition - Investigation underway to revitalise Defence Related Industry support Revitalisation of SA Army’s Technical Support Corps capability – Utilise Reserve Force members and considering allowances and incentives still to be approved Outflow of skilled personnel - Engineer Corps – Utilise Reserve Force members and considering allowances and incentives still to be approved 20

DOD ANNUAL REPORT FY 2005/06 Outputs Chapter 6: Programme 3: Air Defence Operational direction; DOD ANNUAL REPORT FY 2005/06 Outputs Chapter 6: Programme 3: Air Defence Operational direction; Helicopter capability; Air transport and maritime capability; Air combat capability; Operational support and intelligence; Command control capability; Command post; Base support capability; Education, training and development capability; and Technical support services capability Achievements • • • Met majority of Short-term Force Employment requirements HR transformation - increased numbers of black candidates for training, MSDS Participated in silver anniversary of Zimbabwean Air Force Challenges and Interventions • • • Deteriorating aircraft systems – knock on effect - reduced flying – reduced training, motivations for additional funding Critical skills and experience shortages – incentive schemes for technical personnel instituted Significant levels of under-funding – Applied for additional funding Impact of delay in A 109 and temporary withdrawal of Hawk – Extended use of Alouette helicopters SAAF force preparation and force employment funded at cost of longer term needs – air base maintenance, aircraft spares purchases, vehicle renewal, infrastructure maintenance – Applied for additional funding, Internal repriotising of funds, consideration of outsourcing basic helicopter training 21

DOD ANNUAL REPORT FY 2005/06 Chapter 7: Programme 4: Maritime Defence Outputs Capabilities in DOD ANNUAL REPORT FY 2005/06 Chapter 7: Programme 4: Maritime Defence Outputs Capabilities in Maritime combat; Maritime Logistic Support; Maritime Training; and Maritime Base Support Achievements • • • Met Short-term Force Employment requirements Received 1 st frigate SAS AMATOLA Operational Boat Squadron prepared to become Naval Reaction Force Integration of Strategic Defence Packages progressing well SA Navy unique codification capability – interim measure Challenges and Interventions • • Current funding level - maintained only facilities required force preparation – In process of upgrading facilities Loss of technical skills and expertise, (SAN Dockyard) – Recruitment of personnel 22

DOD ANNUAL REPORT FY 2005/06 CHAPTER 8: PROGRAMME 5: MILITARY HEALTH SERVICE Outputs Military DOD ANNUAL REPORT FY 2005/06 CHAPTER 8: PROGRAMME 5: MILITARY HEALTH SERVICE Outputs Military Health Support; Specialist/tertiary Health Service; Product Support capability; Product and Base Support capabilities; Military Health Training capability Achievements • • • Surgeon General’s intent gave new direction Met most of Short-term Force Employment requirements Supported all operations (402) and exercises 1 Military Hospital for UN/AU and VIPs Improvements: Internal patient care and treatment. Reduced referrals to private sector. Use of Essential drug list, reduced costs Execise WAYSIDE Chemical, Biological Radiation defence exercise with Tshwane Emergency Service 23

DOD ANNUAL REPORT FY 2005/06 CHAPTER 8: PROGRAMME 5: MILITARY HEALTH SERVICE (continued) Challenges DOD ANNUAL REPORT FY 2005/06 CHAPTER 8: PROGRAMME 5: MILITARY HEALTH SERVICE (continued) Challenges and Interventions • • Lack of health care professionals on all levels, particularly operational emergency care practitioners – recruitment of professionals, MSDS Institute for Aviation Medicine – funding for health equipment – Centrifuse addressed with assistance of SA Air Force, replacement being addressed 24

DOD ANNUAL REPORT FY 2005/06 CHAPTER 9: PROGRAMME 6: DEFENCE INTELLIGENCE Outputs Defence intelligence DOD ANNUAL REPORT FY 2005/06 CHAPTER 9: PROGRAMME 6: DEFENCE INTELLIGENCE Outputs Defence intelligence and counter intelligence Achievements • • Achieved objectives and targets as planned Publication of Defence Intelligence Estimate as a major input to National Intelligence Estimate Positive feedback from national clients – Defence Intelligence supports national intiatives on African continent, level of assessment – national benchmark Support to SANDF operations/exercises as required Challenges and Interventions – Lack of personnel – recruitment within the SANDF – Defence Intelligence Headquarters facility – Discussions with Chief of Logistics 25

DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT Outputs Joint Logistic DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT Outputs Joint Logistic Service; Command Management information Systems; Human Resource Support Centre; Joint Training; Military Police; Service Corps; British Peace Support Training Team Joint Support Office converted to Chief of Human Resources Office Command management Information Systems Achievements • Met Short-term Force Employment requirements • Participation in joint/multinational exercises, Exercise Combined ENDEAVOUR • 2 Signals Regiment maintained HF radios donated to Mozambique and Swaziland Challenges and Interventions • Changing organisation – Part of DOD restructuring exercise (DODW) • ICT obsolescence and new legislation with inadequate funds • Lack of funds to replace and sustain operational ICT capability 26

DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) DOD Logistic DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) DOD Logistic Agency Achievements • • Good progress with migration of fragmented log info systems to OSIS Training of MSDS members in all logistic related fields Land claims - Walmansthal and Boschoek land returned 600 tons unserviceable ammo demolished at Vastrap Weapon Range Good progress with capturing of assets in register Succesful purchasing of material handling equipment Successful verification of handing and taking over process between old/new SA contingents in DRC (Op MONUC/MISTRAL) Challenges and Interventions • • • Maintenance backlog of facilities – addressing backlog with available funds Asset accounting management system not fully compliant with GRAP – working towards compliance Backlog in disposal of redundant and unserviceable ammo, disposal plant – dispose as current facilities can manage Training Insitutions – non-alligment with SAQA, lack of competent ETD practitioners, deteriorating facilities – Alignment of training and registering in process DOD Air Supply Unit – deteriorating facilities and lack of equipment – Unit to be transferred to the SA Army DOD restructuring process – DODW process to finalise matter of Materiel/Logistics 27

DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) Land Restitution DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) Land Restitution by the DOD FY 2005/06 Land restored Land to be restored Claimants requested alternative compensation Claimants accepted alternative land Court ruled that land should not be restored Information on new claims 104 657 hectares 53 578 hectares 413 hectares 5 485 hectares 158 000 hectares 3 705 hectares 28

DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) Human Resources DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) Human Resources Support Centre Achievements • • Administration of MEM candidates Recruitment of 14 548 candidates for 6 MSDS intakes Administration to transfer 146 SANDF members to SAPS NSF pension project : 11 558 application forms forwarded to GEPF, Administration of Military Veterans: 5 000 names verified Challenges and Interventions Departmental restructuring – DODW process Joint Training Achievements • • Compliance with SAQA Skills Development Act progressing well in DOD Youth Foundation – 243 learners with 98% pass rate. 238 learners employed in DOD Training Institutions presented 118 programmes for 2 276 learners, 89% learners completed – SA National Defence College – 72 learners from 75 – SA National War College – 96 learners from 100 – Military Acadamy – 306 learners from 350 29

DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) Military Police DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) Military Police Agency Achievements • Met Short-term Force Employment requirements • Establishment of a nodal point on Anti-criminality Challenges and Interventions • Procurement of main equipment – Procurement process commenced Service Corps Achievements • • MOD instruction halted migration of Svc Corps, awaiting final decision on mandate and role Assisted Project MILITARY VETERANS (national and regional level) Centre for Advance Training facility. Accommodation built for 94 using German Donor funding Conversion training for SANDF members to transfer to SAPS 30

DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) Service Corps DOD ANNUAL REPORT FY 2005/06 CHAPTER 10: PROGRAMME 7: JOINT SUPPORT (continued) Service Corps (continued) Challenges and Interventions • • Termination of German donor funding and training assistance impact on techinal training – Budget re-prioritisation for FY 2006/07 Closing of Mankwe base and transfer to SAPS necessitate a regional office in Potchefstroom – Investigation underway British Peace Support Training Team Achievements • • • Support to Joint Operation Division/Joint Training Mission ready training to all rotating forces UK Funding of class room facilty at Mobilisation Centre and Peace Mission Training Centre according to the Memorandum of Understanding 31

DOD ANNUAL REPORT FY 2005/06 CHAPTER 11: PROGRAMME 9: Special Defence Account Outputs Acquisition, DOD ANNUAL REPORT FY 2005/06 CHAPTER 11: PROGRAMME 9: Special Defence Account Outputs Acquisition, procurement and project Management; Armour systems; Artillery systems Achievements: - Successful participation and certification of 4 Rooikat armoured car systems in operational tests and evaluation of systems Successful handing over, naming and commissioning of SAS Amatola Successful preparation for the handing over of: SAS Isandlwana; SAS Spioenkop and SAS Mendi Delivery of multi-purpose harbour tenders to the SA Navy Timeous upgrade of 85% of the vehicles Successful identification of preferred bidder and approval as well as initiation of negotiations with regards to the acquisition plan for Tactical Intelligence Systems 32

DOD ANNUAL REPORT FY 2005/06 CHAPTER 11: PROGRAMME 9: Special Defence Account (continued) Challenges DOD ANNUAL REPORT FY 2005/06 CHAPTER 11: PROGRAMME 9: Special Defence Account (continued) Challenges and Interventions • • The problem experienced on the upgrade of C 130 aircraft fleet had a fundamental impact on the project EBB timescale Revision of requirements at a late stage delayed closure of project ENLACE 33

DOD ANNUAL REPORT FY 2005/06 Concluding Remarks • Re-organising of programmes • Reporting format DOD ANNUAL REPORT FY 2005/06 Concluding Remarks • Re-organising of programmes • Reporting format is currently undergoing some improvements so as to further inculculate good corporate governance rooted in efficiency, effectiveness and value for money 34

DOD ANNUAL REPORT FY 2005/06 QUESTIONS 35 DOD ANNUAL REPORT FY 2005/06 QUESTIONS 35

DOD ANNUAL REPORT FY 2005/06 Annual Report FY 2005/06 Report of the Auditor-General 36 DOD ANNUAL REPORT FY 2005/06 Annual Report FY 2005/06 Report of the Auditor-General 36

DOD ANNUAL REPORT FY 2005/06 Aim Presentation on the audit qualifications and emphasis of DOD ANNUAL REPORT FY 2005/06 Aim Presentation on the audit qualifications and emphasis of matter items on the annual report for FY 2005/06 37

DOD ANNUAL REPORT FY 2005/06 Scope Findings FY 05/06: GDA: Qualifications. Findings FY 05/06: DOD ANNUAL REPORT FY 2005/06 Scope Findings FY 05/06: GDA: Qualifications. Findings FY 05/06: GDA: Emphasis of Matter. Findings FY 05/06: SDA: Emphasis of Matter. Qualifications: Functional and User Breakdown. Emphasis of Matter: Functional and User Breakdown. Root Causes. Clean Audit Strategy. Strategic Corrective Measures. Operational Corrective Measures. Findings FY 04/05: Action Plans. 38

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Qualifications: FY 05/06 Unqualified Audit DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Qualifications: FY 05/06 Unqualified Audit Reports: FY 99/00 , FY 00/01 & FY 01/02 Qualified Audit Reports from FY 02/03 to FY 05/06 {Refer Slides 4 & 5 for qualifications} 39

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Emphasis of Matter (Eo. M): DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Emphasis of Matter (Eo. M): FY 05/06 40

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M (Continued) 41 DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M (Continued) 41

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M (Continued) GDA 01/02 DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M (Continued) GDA 01/02 02/03 03/04 04/05 05/06 Information systems audit - - EOM EOM Intellectual property - - EOM EOM Personnel expenditure: Commuted overtime EOM - Personnel expenditure: Employment equity - - - EOM - 42

DOD ANNUAL REPORT FY 2005/06 Findings: Special Defence Account Eo. M 43 DOD ANNUAL REPORT FY 2005/06 Findings: Special Defence Account Eo. M 43

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Qualifications: Functional & User Breakdown DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Qualifications: Functional & User Breakdown GDA 05/06 System Owner System User Nature of Finding Travel and Subsistence Q CFO Serv & Divs System deficiency in the FMS Departmental Revenue Q CFO Serv & Divs Insufficient reconciliation, review procedures and noncompliance with policies and procedures Housing Loan Guarantees Q C HR Serv & Divs Lack of independent management reconciliation and review Rank Review Audit Q C HR Serv & Divs Re-ranking was granted without the predetermined criteria being met, leading to irregular expenditure 44

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User Breakdown D = Deviations received from National Treasury 45

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User Breakdown 46

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User Breakdown 47

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User Breakdown 48

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User Breakdown 49

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Functional & User Breakdown 50

DOD ANNUAL REPORT FY 2005/06 Findings: Special Defence Account Eo. M: Functional & User DOD ANNUAL REPORT FY 2005/06 Findings: Special Defence Account Eo. M: Functional & User Breakdown 51

DOD ANNUAL REPORT FY 2005/06 Analysis: Root causes attributed to the qualification - Non-compliance DOD ANNUAL REPORT FY 2005/06 Analysis: Root causes attributed to the qualification - Non-compliance with policies and procedures (internal controls). - Lack of independent review and reconciliations (internal controls). - Lack of skilled, competent and trained staff. - The lack of an appropriate integrated computerized system, which if implemented, will enable the DOD to be more efficient in the management of the department. In addition, an integrated computerized system will ensure compliance with the requirements set by Treasury. 52

DOD ANNUAL REPORT FY 2005/06 Clean Audit Strategy END No Qualifications / Matters Emphasised DOD ANNUAL REPORT FY 2005/06 Clean Audit Strategy END No Qualifications / Matters Emphasised WAYS Clear Significant Findings Avoid Matters Emphasised Clear Matters Emphasised Avoid Qualifications Effective - Detects - Prevent Ineffective CONTROL Pro-Active - Risk Identified - Strategy - Discover - Correct Re-Active PROBLEM - Adverse Finding - Corrective Plan 53

DOD ANNUAL REPORT FY 2005/06 Clean Audit Strategy Measures MEANS Legally Enforceable Prescripts - DOD ANNUAL REPORT FY 2005/06 Clean Audit Strategy Measures MEANS Legally Enforceable Prescripts - Directives - Instructions - Publications Supportive Information System - Enhance Legacy Modules - Integrate Legacy Modules - IFMS 54

DOD ANNUAL REPORT FY 2005/06 Clean Audit Strategy Measures (Continued) MEANS Supportive Capacity - DOD ANNUAL REPORT FY 2005/06 Clean Audit Strategy Measures (Continued) MEANS Supportive Capacity - Structure - Establishment - Delegations - Training Compliance / Accountability - Control System Reviews - Enforce Compliance* - Accountability Letters - Financial Misconduct Procedures 55

DOD ANNUAL REPORT FY 2005/06 Clean Audit Strategy Measures (Continued) MEANS * Audit Committee DOD ANNUAL REPORT FY 2005/06 Clean Audit Strategy Measures (Continued) MEANS * Audit Committee ICS Internal Audit Findings Focus on Risks and 56

DOD ANNUAL REPORT FY 2005/06 Strategic Corrective Measures Divs Fin Pers ICS Proc Log DOD ANNUAL REPORT FY 2005/06 Strategic Corrective Measures Divs Fin Pers ICS Proc Log Info Servs/ ICS ICS Prescripts Info System Capacity Internal Control Compliance Accountability 57

DOD ANNUAL REPORT FY 2005/06 Operational Corrective Measures - Detailed corrective measures per control DOD ANNUAL REPORT FY 2005/06 Operational Corrective Measures - Detailed corrective measures per control system - Detailed corrective measures per budget authority for compliance 58

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Qualifications: Corrective Measures GDA 05/06 DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Qualifications: Corrective Measures GDA 05/06 Responsibility Time Frame (Months) Travel and Subsistence Q CFO 12 Departmental Revenue Q Serv & Divs 36 Housing Loan Guarantees Q C HR 12 – 24 Rank Review Audit Q C HR 12 59

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Corrective Measures GDA DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Corrective Measures GDA 05/06 Responsibility Time Frame (Months) Regional Services Council levies Eo. M CFO 12 Land buildings Eo. M C Log 60 Gifts, donations and sponsorships Eo. M Serv & Divs 12 - 24 Compensation of employees – Schedule name lists Eo. M Serv & Divs 12 - 24 Personnel expenditure: Unrealistic establishment Eo. M C HR 60 IGDOD – No reliance on audit work Eo. M IGDOD 36 60

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Corrective Measures (Continued) DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Corrective Measures (Continued) GDA 05/06 Responsibility Time Frame (Months) Operating lease commitments Eo. M C Acq & Proc 12 - 24 Prepayments and advances Eo. M CFO 12 Local and foreign aid received in kind Eo. M CPP 12 -24 National Conventional Arms Control Committee Eo. M Sec. Def (DCAC) 12 Service Corps Eo. M CCS 12 Information systems audit Eo. M CCMIS 60 61

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Corrective Measures (Continued) DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Eo. M: Corrective Measures (Continued) GDA 05/06 Responsibility Time Frame (Months) Operating lease commitments Eo. M C Acq & Proc 12 - 24 Prepayments and advances Eo. M CFO 12 Local and foreign aid received in kind Eo. M CPP 12 -24 National Conventional Arms Control Committee Eo. M Sec. Def (DCAC) 12 Service Corps Eo. M CCS 12 Information systems audit Eo. M CCMIS 60 Intellectual Property Eo. M C Acq & Proc 60 62

DOD ANNUAL REPORT FY 2005/06 Findings: Special Defence Account Eo. M: Corrective Measures SDA DOD ANNUAL REPORT FY 2005/06 Findings: Special Defence Account Eo. M: Corrective Measures SDA 05/06 Responsibility Time Frame (Months) Classification of the SDA Eo. M CFO 12 Cash and bank management weaknesses Eo. M CFO 12 Compliance Programme – no signed constitution Eo. M Sec Def (DCAC) 12 No control for amendments to the suppliers master file Eo. M CFO 12 63

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Qualification: Action Plans GDA Departmental DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Qualification: Action Plans GDA Departmental revenue 01/02 02/03 03/04 EOM Q 04 -05 Q Summary of Findings Completeness of revenue could not be confirmed due to: • Insufficient independent management reconciliation / reviews • Non-compliance with policies & procedures Action Plans 1. Revenue Management Forum under control of Director Budgeting established w. e. f. 1 Feb 05. 2. DOD busy benchmarking with National Treasury and other government departments on tariff management. 3. Level 4 commanders are continuously trained to comply with the Revenue Management DODI by FMD (CDAcc). 4. DOD is budgeting for revenue other than the vote, focusing currently on disposal of equipment. 5. Improvement objective for 1 Apr 06 is to include all other income, e. g. flights against Repayment. 64

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Qualification: Action Plans GDA Receivables DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Qualification: Action Plans GDA Receivables 01/02 02/03 03/04 04/05 - - - Q Summary of Findings • Validity and accuracy of amount could not be confirmed • Original amounts of debtors were amended when new FMS: Debtors Subsystem was implemented • Weaknesses in internal controls over management of receivables Action Plans • Department in the process of addressing the system error and the adjustments will be followed up in the next audit cycle. 65

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Qualification: Action Plans GDA Irregularities DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Qualification: Action Plans GDA Irregularities and losses 01/02 02/03 03/04 - - Q 04/05 Q Summary of Findings Inconsistent application of policies and procedures resulting in: • Internal control weaknesses and • Inability to verify completeness & accuracy of the amount disclosed Action Plans 1. DOD Instruction is in the process of being reviewed to enhance accountability. 2. Monthly forum has been established for cash losses w. e. f. 1 Jan 05. 3. A computerized loss control process being investigated to ensure complete reporting. 4. Staff visits are conducted by FMD and C Log to ensure that losses are properly administrated. 66

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA Accruals 01/02 02/03 03/04 04/05 EOM Q D Summary of Findings • Understatement of Accruals according to approved NT policy. • Amount only included goods & services for which invoices were received but were unpaid at year-end. Action Plans 1. DOD met with NT on 2005 -07 -14 to discuss matter 2. NT suggested Govt. Depts. have full time staff to deal with: 1. Asset Management and 2. Conversion from cash to accrual basis of accounting 3. Workshops to start end of August 4. Structure and plans should be in place by 2005 -12 -31 67

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA 01/02 02/03 03/04 04/05 Physical asset and software and other intangible asset movement schedules - EOM Q D Summary of Findings • Details were limited to additions. Action Plans 1. DOD met with NT on 2005 -07 -14 to discuss matter 2. NT suggested Govt. Depts. have full time staff to deal with: 1. Asset Management and 2. Conversion from cash to accrual basis of accounting 3. Workshops to start end of August 4. Structure and plans should be in place by 2005 -12 -31 68

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA Goods & services 01/02 02/03 03/04 04/05 - - - D Summary of Findings • This amount included capital expenditure iro machinery and equipment • Capital expenditure on machinery and equipment was not disclosed Action Plans 1. DOD met with NT on 2005 -07 -14 to discuss matter 2. NT suggested Govt. Depts. have full time staff to deal with: 1. Asset Management and 2. Conversion from cash to accrual basis of accounting 3. Workshops to start end of August 4. Structure and plans should be in place by 2005 -12 -31 69

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA 01/02 Management of inventories, machinery and equipment 02/03 03/04 04/05 EOM Q EOM Summary of Findings 1. Internal control weaknesses as policies & procedures not adequately complied with 2. Lack of supervision at operational and unit level 3. Failure to submit stock-taking certificates 4. Unapproved discrepancy vouchers 5. Disposal plans for excessive stock not on schedule 6. Deficient security & internal controls over administration of vehicles and weapons 7. Documents not submitted for audit as ASB Jhb. burnt down 8. Control weaknesses iro 5 foreign operations Action Plans 1. Responsibility and accountability for Asset Management in process of being transferred back to the Service Chiefs. 2. C Log is currently negotiating the handing and taking over with Service Chiefs. 3. A Resource Management Programme has been implemented to properly train Officers Commanding at level 4 regarding their responsibilities. 70

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA 01/02 02/03 03/04 Land buildings EOM EOM 04/05 EOM Summary of Findings • • Facility register incomplete Deterioration of buildings Uninhabitable buildings were occupied Insufficient supporting documents Action Plans 1. Responsibility and accountability for Asset Management in process of being transferred back to the Service Chiefs. 2. C Log is currently negotiating the handing and taking over with Service Chiefs. 3. A Resource Management Programme has been implemented to properly train Officers Commanding at level 4 regarding their responsibilities. 71

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA 01/02 02/03 03/04 Gifts, donations and sponsorships - - EOM 04/05 EOM Summary of Findings • Completeness of gifts /donations made/received in kind could not be verified. • Policies and procedures pertaining to these items were not followed Action Plans • DODI approved in Dec 04 for implementation on 1 Apr 05. • System Owners were tasked to ensure compliance. 72

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA 01/02 Personnel expenditure: Leave credits and administration 02/03 03/04 04/05 EOM Q EOM Summary of Findings Internal controls are inadequate • Conversion of leave credits from calendar days to working days on PERSOL for SANDF members • Leave application forms not captured & filed timeously • Non-submission of leave files for audit purposes • Leave registers not kept as prescribed Action Plans 1. New computerised leave system was implemented for PSAP in 2004. New system for DAP to be fully implemented by 1 Sep 05. 2. Leave credits will now be calculated programmatically, thus ensuring more accurate figures. 3. Controls were built in to prevent members from exceeding their annual leave entitlement. 4. Responsibilities and accountability for leave administration is in the process of being handed back to Service Chiefs. 73

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA Personnel expenditure: Commuted overtime 01/02 02/03 03/04 EOM - EOM 04/05 EOM Summary of Findings • • Internal control weaknesses Management policies and procedures not followed / adequate Supporting documents not on file Overtime incorrectly recorded in attendance registers Action Plans • CSANDF instructed SG in Mar 05 to comply with the prescripts. • DODI 66/2002 (revision) is at the Military Bargaining Council where after it will be implemented. • DOD is considering implementing a non-pensionable allowance. 74

DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Emphasis of Matter GDA Personnel DOD ANNUAL REPORT FY 2005/06 Findings: General Defence Account Emphasis of Matter GDA Personnel expenditure: Employment equity 01/02 02/03 03/04 04/05 - - - EOM Summary of Findings • Lower structure of the DOD is predominantly African • Senior and Middle Management and professional staff are predominantly White Action Plans • Each Service / Divisional Chief to adhere to Departmental plans 75

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA 01/02 02/03 03/04 04/05 Personnel expenditure: Unrealistic Establishment - - - EOM Summary of Findings • Achievement of the HR Strategy 2010 goal of 70 000 employees is not realistic • There has been an increase of 1056 employees to 76 969 members Action Plans • MEM has been implemented effective July 2005 76

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA Operating lease 01/02 02/03 03/04 04/05 - - - EOM Summary of Findings • Completeness of operating lease commitments could not be confirmed • Insufficient reconciliation between DOD registers and suppliers Action Plans • C Log to implement controls 77

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA Foreign aid received in kind 01/02 02/03 03/04 04/05 EOM EOM Summary of Findings • No system for recording & collation of such assistance • Completeness & accuracy of AFS cannot be confirmed Action Plans • DODI on Donations approved, awaiting DODD to be signed. • DOD in process of implementing the control systems required by the policy. 78

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA 01/02 National Conventional Arms Control Committee 02/03 03/04 04/05 - EOM EOM Summary of Findings • • • Uncertainty regarding access to third party information No Constitution in place No Inspectorate in place yet DCAC on suspension pending an investigation Unable to complete the compliance audit, placing a limitation of scope on the audit Action Plans 1. Ex post facto delegation by Minister still outstanding. 2. No Constitution or Term of Reference in place yet – NCACC decided not to compile a constitution or term of reference. 3. Act DCAC confirmed that they are in the process of establishing the Inspectorate. 79

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA Service Corps 01/02 02/03 03/04 04/05 - EOM EOM Summary of Findings 1. MOD reconsidering the intended migration of the Service Corps based on the formulation of alternatives to be presented to the COD for approval 2. Conclusion of the issue is important as it has remained outstanding for 6 years. 3. SCOPA also raised a concern iro the progress Action Plans • Minister indicated that Service Corps. will not migrate 80

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA Information systems audit 01/02 02/03 03/04 04/05 - - EOM Summary of findings 1. 2. 3. 4. 5. Lack of control over database administrators No reliance placed on general controls iro CALMIS Significant control weaknesses that could compromise data integrity were found Inadequate process control design & non-adherence to approved procedure Weaknesses iro the SLA between DOD and SITA due to lack of policies and supporting documents Action Plans • GITO confirmed that controls over and passwords for database administrators were implemented. • Compliance by Services will be monitored. 81

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA Intellectual property 01/02 02/03 03/04 04/05 - - EOM Summary of Findings • DOD scrutinising the promulgated policy to determine process to be implemented • Until implementation of the processes, it is not possible to perform an audit in this area Action Plans • Policy was promulgated w. e. f. 1 Apr 05. • System will be audited by AG in 05/06 financial year. 82

DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans DOD ANNUAL REPORT FY 2005/06 Findings: GDA: FY 04/05 Emphasis of Matter: Action Plans GDA 01/02 03/04 04/05 - Rank review audit 02/03 - - EOM Summary of Findings • Unavailability of supporting documents led to the audit of the rank adjustment process not being completed Action Plans • D Fac to respond to AG request for information 83