The SARS Annual Report which includes the audited annual financial statements and the report of the Auditor General, was tabled in parliament today. The financial statements comprise two sets of financial records SARS Own Accounts and Administered Revenue.
For the first time since obtaining administrative autonomy in 1997, SARS has received an unqualified audit opinion from the Auditor-General in respect of Own Accounts for the 2000/2001 financial year. The unqualified audit opinion follows three successive disclaimer of audit opinion.
The financial statements for the period 2000/2001 were prepared in full compliance with Generally Accepted Accounting Practice (GAAP) and more specifically the accrual basis of accounting.
Furthermore, SARS financial statements in respect of Own Accounts were submitted in accordance with the due dates prescribed by the Public Finance Management Act (PFMA). The PFMA prescribes a due date of May 31 for submission of the Annual Financial Statements to the Auditor-General and August 30 for completion of the Audit Report. The two submission dates were successfully met for the first time since autonomy.
All the key historical problems in SARS Own Accounts that resulted in a disclaimer of audit opinion in previous years were successfully resolved in the financial year 2000/2001. Underpinning the successful migration from a disclaimer to an unqualified audit opinion were the following corrective measures:
In addition, controls over the Electronic Funds Transfer payment system has been significantly improved by eliminating human interference in the final stage of the payment process. Generally, security has been completely revamped with access to the various modules in the system restricted.
SARS is confident that the financial statements in respect of Own Accounts for the year ending March 2002 will be submitted in full compliance with the due dates as set by the PFMA. With all the key positions in the SARS finance department occupied by appropriately skilled staff, SARS will intensify the on-going drive of tightening the existing controls.
SARS received a qualified audit opinion in respect of Administered Revenue. The qualification relates to the perceived lack of internal controls over the assurance process and the impact thereof on the financial statements. The qualification is not a reflection of the appropriateness or otherwise of the underlying accounting records relating to Administered Revenue.
Three audit findings form the underlying basis for the Auditor-General's opinion:
During the year under review, considerable progress was achieved to redress the key historical problems in the area of Administered Revenue that resulted in a disclaimer of audit opinion for the three years since autonomy to March 2000. Previous reconciliation weaknesses over revenue collections and tax refunds between the core tax systems and the financial and banking records have now been resolved. These reconciliation problems, which are symptomatic of the lack of system integration, were the primary reason for the disclaimer of audit opinion for the last three financial years.
Both the SARS Act and PFMA require SARS to comply with generally accepted accounting practice in the preparation of its accounts. However, due to the absence of definitive norms and standards and the difficulties experienced by SARS in complying with these standards, an agreement was reached with the National Treasury and the Auditor-General on the application of the cash basis of accounting in terms of generally recognised accounting practice.
On 30 October 2001 the Minister of Finance, after consultation with the Auditor-General, promulgated the standards of generally recognised accounting practice for SARS Administered Revenue. These standards apply in respect of the 2000/2001, 2001/2002, and 2002/2003 financial years. This will allow SARS time to consolidate its financial accounting platform and further implement solutions to achieve an integrated financial management system.
The migration from the cash to the accrual basis of accounting has progressed to a significant extent with the successful completion of the first phase of the integrated financial management system (IFMS). This phase, which involved the automation of the Head Office general ledger and revenue accounting functions that were previously accounted for manually, creates the platform for further systems enhancements and decentralisation of functions.
The next phase of IFMS, which is planned for the 2002/2003 financial year, will concentrate on the decentralisation and the automation of the cash book, bank reconciliation, and revenue accounting function at branch office level. This phase forms part of the overall development of a SARS-wide common financial system platform, incorporating both revenue and expenditure accounting (revenue and expenditure accounting, budgeting, procurement, assets, and facilities management).
ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE