Auditor-general knocks investors of public pensions

Johannesburg - The auditor-general has qualified the 2001 audit on the Public Investment Commissioners (PIC), which manages public pension funds of up to R240 billion, citing a host of compliance and control failures in its draft report.

The audit for the year to March 2001 has not yet been presented to the minister of finance, to whom the body is ultimately responsible.

A qualified audit signals serious concerns about the financial management of an organisation, including its risk management policies.

The draft report stated: "Even though management is attending to certain elements of these risks, they have not yet implemented formal financial risk management policies and procedures."

The audit identified various concerns about the PIC's processes following an assessment of the disclosures in the financial statements, the accounting principles used and the overall presentation.

Problems listed included the submission of the 2001 financial statements more than three months after the June 30 deadline.

Although the auditor-general had reported on the inadequacy of internal controls in previous years, the report said: "Despite the commitment of the board in the previous year to resolve these issues E the control environment is still inadequate. The internal control environment further deteriorated E when the financial manager went on study leave.

"Internal audit activities were halted during the year to address internal control weaknesses and because the PIC had been unsuccessful in establishing a permanent internal audit capacity."

The report said the lack of a formal investment performance management system had hampered the review of return on investment. Other problems included the lack of skilled staff.

The report dealt with the PIC's inadequate quality of bank reconciliation and the incorrect recording of the book values of a number of investment products.

While the audit recognised the PIC had undertaken measures to improve matters, the overall assessment of its success was negative.

Auditor-general chief executive Terence Nombembe said yesterday he could not comment as the report was not yet a public document. The PIC could not be reached for comment at the weekend.

Finance ministry spokesperson Logan Wort said yesterday it was difficult for the ministry to respond as it had not seen the report. He pointed out that the initial report would be debated by the PIC and the auditor-general. Following discussion over the previous year's audit, major revisions of the findings were made.