INTERNAL AUDIT MEMORANDUM

TO: BOARD

FROM:

DATE: 20 OCTOBER 2020

ENTITY: LIMITED

SUBJECT: SYSTEMS AND COMPLIANCE AUDIT: VERIFICATION OF THE APPOINTMENT

REFERENCE:

INTRODUCTION

This memorandum sets forth our understanding of the general terms and objectives of our engagement
and the nature and scope of the services we have provided.

This memorandum does not seek to limit our professional responsibilities or compromise the standards
set for Internal Audit.

MANDATE

An audit was performed in terms of a request received from the Chairperson of the Board for Internal
Audit to confirm whether the contract entered into

The review was undertaken during October 1990

AUDIT RESULTS

During our review of the Purchase Order No made out to the company ZZZ to the value of R 965  9000
the following weaknesses were noted.
- The Supply Chain Management process was not followed to acquire the services of ZZZ. All
order above the value of including vat is to follow a tender process. In this case of one supplier
was considered.
- The memorandum for the approval of the appointment of ZZZ was drafted by Ms dated 2018. The
deviation for not following the Supply Chain management Process was not approved as per the
Supply Chain Management Process. The memorandum was approved by the former Chief
Executive Officer XXXX on the 14/06/2018. Deviations to value of R 100 000 to R 1 000 000 are
approved by the Group Executive. Deviation to the value of R1 000 000 to R 20 000 000 are to
be authorised by the Bid Adjudication Committee as per the Procedure for the Supply Chain
Management Process.
 - During our review of the Procurement workflow, it was noted that the Acting Senior Manager:
Supply Chain Management only noted the order as they were not involved in the process of
appointing the service provider.
- It was further noted that the Director of ZZZ. The company was registered on the 22/10/2018
however the Purchase Order was awarded to the company on the 25/07/2018 as per the
Companies and Intellectual Property Commission website. Refer to the attached Purchase order
and Registration information
- An amount of R 540 000 and R 117 000 totalling R 657 000 was paid to ZZZ in the 2018/2019
and 2019/2020 financial year respectively. All the acceptance certificate of work, service and/ or
project rendered was signed off by Ms as acknowledgement of receipt of service rendered.

CONCLUSION

Based on the audit work performed, it appears that the Supply Chain Management Process was not
followed to acquire the services of the ZZZ, appropriate approval process were also not followed and the
company was only registered after the Purchase Order was awarded to the organisation. Internal Audit
would like to recommend that further investigations be conducted.

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