INTERNAL AUDIT REPORT

TO: MR

FROM: MS

DATE: 21 MAY 2021

ENTITY: XXXXX D

SUBJECT: SYSTEMS AND COMPLIANCE AUDIT: IRREGULAR EXPENDITURE INCURRED AS A

RESULT OF THE REQUEST TO UTILIZE FUNDS CLASSIFIED AS “AVAILABLE FOR
SALE FINANCIAL ASSETS”

REFERENCE: P

INTRODUCTION
This report 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 report 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 by the Chief Financial Officer for determination and or
investigation in line with the irregular expenditure framework prior to the submission to National Treasury.
The review was undertaken during May 2021.

BACKGROUND

An irregular expenditure amounting to R 5 million was raised as a result of Letter written the minister of
Department of Energy to request approval to utilise funds classified as “Available for Sale Financial
Assets” to pay for the XXXXX Financial Obligation.

OBJECTIVES

The objectives of our internal audit review is to:

 Conduct a determination test or analyse particulars of the non-compliance to establish the facts and
losses, if any, related to the transaction in terms of Section 19 of the Irregular Expenditure
Framework.

SOURCES OF INFORMATION

Discussion were held with management and documentation reviewed.

AUDIT RESULTS

During our review of the approval for the withdrawal of funds amounting to R 5 million, the following
outcome were identified:
 A letter to urgently request to utilize funds classified as “Available for Sale Financial Assets”
Reference No [dated 24 January 2020 was compiled and signed by (Chairman of the XXXXX Board).
 The letter was submitted to and received by the office of the Minister of Energy on the 28 January
2017.
 The letter was written “Approved” was not an adequate evidence of approval by the Minister
 The approval was not made on the Department of Energy letterhead and signed by the Minister as
evidence of approval therefore the authenticity of the approval by the Minister could not be confirmed.

CONCLUSION
Based on the audit work performed, it should be noted that the word “Approved” on the letter to urgently
request to utilize funds classified as “Available for Sale Financial Assets” Reference No dated 24 January
2020 was not an adequate approval from the Minister of Energy and thus an amount of R 5 million
resulted in irregular expenditure. The irregular expenditure is therefore as a result of failure to obtain
appropriate and acceptable approval from the Minister of Energy. XXXXX did not suffer any loss as a
result of the irregular expenditure as the funds were utilised to pay for XXXXX’s financial Obligation.
Consequences management should have been instituted against the board however it should be noted
the former board has since left the employ of XXXXX.