Implementation of Audit Action Plans by HUMAN SCIENCES RESEARCH COUNCIL

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This presentation to Parliament on 16 February 2024 covers the implementation of Audit Action Plans agreed with AGSA by HUMAN SCIENCES RESEARCH COUNCIL. It includes details on AGSA Recommendations, HSRC Commitments, Material Irregularity, and progress on the Audit Action Plan. The presentation outlines actions taken to address internal control deficiencies, material irregularities, and debt recovery, showcasing the commitment to financial accountability and consequence management.

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HUMAN SCIENCES RESEARCH COUNCIL Implementation of the Audit Action plans as agreed with the AGSA Presentation to Parliament, Portfolio Presentation to Parliament, Portfolio Committee Committee 16 February 2024 16 February 2024 1

Presentation Overview 1.AGSA Recommendations 2.HSRC Commitments 3.Material Irregularity 4.Audit Action Plan Progress Report 2

AGSA Recommendations AGSA Budgetary review and recommendations report (BRRR) 2022-23 The HSRC board, with the support of the audit committee, should track the audit action plan to ensure that appropriate action is taken to resolve the internal control deficiencies noted. The board should take appropriate actions to fully address the material irregularity and implement consequence management where required. 3

HSRC Commitments AGSA Budgetary review and recommendations report (BRRR) 2022-23 The HSRC board, with the support of the audit committee, will track the audit action plan to ensure that appropriate action is taken to resolve the internal control deficiencies noted. The board shall continue taking appropriate actions to address the material irregularity fully management where required. This includes recovering the remaining potential losses, determining whether recovery is not feasible (cost-vs. benefit analysis) and taking the appropriate action under the PFMA when recovery is not possible, especially relating to the interest paid. and implement consequence 4

Material Irregularity All capital debt is in the process of recovery from current and former staff. As of 31 December 2023, 66,1% was recovered, 1.1% was written off due to deceased estates, and 32.7% is still outstanding. The investigation was completed regarding the root cause and responsible individuals. No current employee at HSRC is responsible for the interest portion of R2,6 million, which is classified as fruitless and wasteful expenditure. 5

Material Irregularity The Board applied its mind and concluded that the cost outweighed the benefit of recovering the interest from former employees. The Board approved the write-off of the fruitless and wasteful expenditure in November 2023. Circumstances leading to the MI no longer exist. The payroll system was corrected in September 2020. The Board approved a policy and procedure regarding Financial Consequence Management addressing reporting, investigation and debt recovery. 6

Audit Action Plan QUARTERLY updated Audit Action Plan served at: Internal Governance structures: External Governance structures: Audit & Risk Committee DSI quarter 3 Risk Management Committee Executive Committee 7

Audit Action Plan Progress Report TYPE OF AUDIT FINDINGS 7% MATTERS AFFECTING THE AUDIT REPORT 29% OTHER IMPORTANT MATTERS ADMINISTRATIVE MATTERS 64% 8

Audit Action Plan Progress Report Q3 100% 100% 100% 100% 100% 100% 87% 80% 80% 80% 80% 80% 80% 80% 60% 9

Audit Action Plan Progress Report 100% % ADDRESSED PER TYPE 80% 60% 100% 89% 80% 40% 20% 0% MATTERS AFFECTING THE AUDIT REPORT OTHER IMPORTANT MATTERS ADMINISTRATIVE MATTERS 10

Audit Action Plan Progress Report Matters affecting the audit report Other important matters Administrative matters Audit finding description Action plan description Timeframe Progress 1.Incomplete disclosure of Irregular, fruitless and wasteful expenditure The audit finding was subsequently addressed by updating the note to comply with the framework's requirements. 31 July 2023 100% 2.Differences identified in auditors recalculation of prepayments and advances 31 July 2023 100% The audit finding was subsequently addressed by passing a correcting journal. Management will perform rigorous reviews of the calculations to ensure all amounts are accurate going forward. 3.Research cost differences noted between payroll report and AFS amount for direct labour expense 4.Property plant and equipment depreciation calculated incorrectly Management will perform a monthly reconciliation between the General Ledger and the payroll reports going forward on a monthly basis. 31 May 2024 60% 31 May 2024 80% The entire population was revisited (periods 10 to 12), and the affected assets useful lives were corrected. The Fixed Asset Register will be diligently reviewed to ensure that errors are non-recurring. 5.Completeness of the fixed asset register 31 July 2023 100% The assets have since been allocated barcodes, and the asset register has been updated with a barcode. Management will implement more proactive measures to ensure the manual barcodes are always available to allocate, link to asset IDs, addition of assets in the FAR and ensure FAR is updated timeously. 11

Audit Action Plan Progress Report Matters affecting the audit report Other important matters Administrative matters Audit finding description Action plan description Timeframe Progress 6.Inconsistent application of evaluation criteria 31 May 2024 80% Management should ensure adequate controls are in place to prevent non-compliance with SCM processes and regulations. The bid evaluation committee must ensure through proper reviews that the evaluators comply with the score criteria approved when awarding the bidder s points. Training to all BEC members on the evaluation of the tenders received according to the evaluation criteria set in the advertised bid. 7.Incompleteness of tender register 31 May 2024 80% Internal control regarding the compilation and review of the bid register to be removed from the SCM practitioner to the Demand Manager for completion, to be reviewed by the Head: SCM. An appointment was made of a service provider to develop and implement a new Supply Chain Management e-Procurement System in June 2023. The system will assist with the electronic capture of the bid register. 8.Inconsistencies noted between scoring sheet and approved evaluation criteria 31 May 2024 80% An appointment was made of a service provider to develop and implement a new Supply Chain Management e-Procurement System in June 2023. The system will assist with electronically transferring scoring criteria from the approved TOR to the scoresheet. If there is any discrepancy between the scoresheet and the approved TOR, new scoresheets will be issued in line with the approved TOR criteria. 12

Audit Action Plan Progress Report Matters affecting the audit report Other important matters Administrative matters Audit finding description Action plan description Timeframe Progress 9.Calculation differences noted for functionality 31 May 2024 80% Internal control regarding the compilation and review of the file is to be implemented and signed off by responsible officials. An appointment was made of a service provider to develop and implement a new Supply Chain Management e-Procurement System in June 2023. The system will assist with the electronic capture and calculation of scores. SCM Policy and Procedures were reviewed and are now aligned to applicable NT Legislations. 10.SCM policy not aligned to National Treasury instruction note 2 of 2021/22 SCM Policy and Procedures were reviewed and are now aligned to applicable NT Legislations. 31 July 2023 100% 11.Contract management Not all performance reviews were done 31 May 2024 80% An appointment was made of a service provider to develop and implement a new Supply Chain Management e-Procurement System in June 2023. The system has an electronic module for contract management. Responsible officials will implement internal control regarding quarterly contract performance reviews. 13

Audit Action Plan Progress Report Matters affecting the audit report Other important matters Administrative matters Audit finding description Action plan description Timeframe Progress 9.Deviations not reported to National Treasury within 14 days 31 May 2024 80% The Demand Manager has been assigned the responsibility to review the deviation register to track any deviation that might have been omitted in the register and for their reporting within 14 days to the National Treasury following their approval. The Contract Officer has been tasked with registering all deviations following every BAC seating and liaising with the Manager in the Office of CFO regarding all approved Sole Supplier type of deviations. 10.Inconsistent application of functionality scoring criteria for quotations Internal Training on the application of scoring criteria has been offered to both SCM Team members and HSRC Staff members responsible for projects. Over and above our internal efforts, a bid committees training workshop was arranged by National Treasury whereby all of our BSC, BEC and BAC members attended and were taught on how to discharge their responsibilities or functions within their roles in the respective committees. 31 August 100% 2023 11.Employees doing other remunerative work and having interest in other institutions 31 May 2024 80% Running an electronic system for employees to declare . Reminders are being sent and we are targeting 100% compliance. Those who do not comply will be flagged and instructed to comply. Investigating the cost of or running the Computer Assisted Audit Techniques (CAAT) report to identify any possible conflicts of interest once or twice a year. Those who do not comply will be flagged and instructed to comply. Ensuring that Employees know the Declaration of Interest is mandatory per the Policy. This will be emphasised, and employees will be made aware of the consequences of non-compliance with the HSRC s Policies. 14