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COMPLIANCE MANAGEMENT FRAMEWORK - National …

COMPLIANCE MANAGEMENT FRAMEWORK Presenter: Sandiso Thutshini | Director: PFMA COMPLIANCE | 17 November 2016 PURPOSE To assist the Accounting Officers/ Authorities of PFMA Compliant institutions to improve the levels of COMPLIANCE by their respective Institutions with all applicable COMPLIANCE obligations. 2 LEGISLATIVE REQUIREMENTS Sec 51(1)(h) of the PFMA - AA must comply and ensure COMPLIANCE by their institutions with the provisions of the Act; TR (f) - the audit committee must, amongst others, review the institution s COMPLIANCE with legal and regulatory provisions; and TR (e) - The internal audit function must assist the accounting authority in maintaining efficient and effective controls by evaluating those controls to determine their effectiveness and efficiency, and by developing recommendations for enhancement or improvement.

CONSEQUENCE MANAGEMENT Sections 83(1) of the PFMA - An AA commits an act of financial misconduct if that AA wilfully or negligently—

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Transcription of COMPLIANCE MANAGEMENT FRAMEWORK - National …

1 COMPLIANCE MANAGEMENT FRAMEWORK Presenter: Sandiso Thutshini | Director: PFMA COMPLIANCE | 17 November 2016 PURPOSE To assist the Accounting Officers/ Authorities of PFMA Compliant institutions to improve the levels of COMPLIANCE by their respective Institutions with all applicable COMPLIANCE obligations. 2 LEGISLATIVE REQUIREMENTS Sec 51(1)(h) of the PFMA - AA must comply and ensure COMPLIANCE by their institutions with the provisions of the Act; TR (f) - the audit committee must, amongst others, review the institution s COMPLIANCE with legal and regulatory provisions; and TR (e) - The internal audit function must assist the accounting authority in maintaining efficient and effective controls by evaluating those controls to determine their effectiveness and efficiency, and by developing recommendations for enhancement or improvement.

2 The controls subject to evaluation include COMPLIANCE with laws, regulations and controls. 3 LEGISLATIVE REQUIREMENTS Regulation 14 of the revised Treasury Regulations Requires AA to ensure that sufficient capacity exists within their institutions to prevent, detect and mitigate any non- COMPLIANCE with the applicable financial MANAGEMENT regulatory FRAMEWORK ; How - by establishing a COMPLIANCE function with such roles and responsibilities as prescribed by National Treasury Instruction. King III COMPLIANCE structure and appointment of COMPLIANCE Officer to manage and monitor COMPLIANCE ; King IV To assist organizations to move beyond a mere COMPLIANCE ( COMPLIANCE with the letter of the law) to COMPLIANCE with the spirit of the law.

3 4 APPLICABILITY OF THE FRAMEWORK National and provincial departments; National and provincial trading entities; Constitutional institutions; and Schedule 3 (a) and 3 (c) public entities. 5 CONSEQUENCE MANAGEMENT Sections 83(1) of the PFMA - An AA commits an act of financial misconduct if that AA wilfully or negligently fails to comply and ensure COMPLIANCE with any provisions of the PFMA; and makes or permits an unauthorised expenditure, an irregular expenditure or a fruitless and wasteful expenditure; and Sections 83(3) of the PFMA - An official to whom a power or duty is assigned in terms of section 56 commits an act of financial misconduct if that official wilfully or negligently fails to exercise that power or perform that duty.

4 6 CONSEQUENCE MANAGEMENT Sections 51(1)(e) of the PFMA AA must take effective and appropriate disciplinary steps against any official who (i) contravenes or fails to comply with a provision of the PFMA; (ii) commits an act which undermines the financial MANAGEMENT and internal control systems of the institution; and (iii) makes or permits an unauthorised expenditure, irregular expenditure or fruitless and wasteful expenditure (UIF). 7 COST vs. BENEFIT COMPLIANCE FUNCTION In the past 4 years the Department of Health has incurred billion in legal costs relating to medical malpractice; A major airline in South Africa was fined R900 000 for failing to comply with the Employment Equity Act (EEA).

5 Big four banks fined 125 million for non COMPLIANCE with FIC Act, 8 COMMON NON- COMPLIANCE FINDINGS Supply Chain MANAGEMENT : Transgression of SCM prescripts; Asset MANAGEMENT : No proper control systems to safeguard and maintain assets; Material misstatements identified in: Non-current assets, current assets, liabilities, expenditure and disclosure items; AFS not prepared in accordance with the prescribed financial reporting FRAMEWORK ; Expenditure MANAGEMENT AA did not take effective steps to prevent irregular and fruitless and wasteful expenditure. 9 NON- COMPLIANCE AREAS Irregular Expenditure:- Supply chain MANAGEMENT (SCM); and Human resource MANAGEMENT practices.

6 The of non- COMPLIANCE relate to irregular expenditure as a result of transgressions of the SCM prescripts as follows: Procurement without following competitive bidding processes; Procurement without obtaining quotations; Non- COMPLIANCE with procurement processes; and Non- COMPLIANCE with legislation on contract MANAGEMENT . 10 COMPLIANCE IMPLEMENTATION PLAN 11 No Key Activities Year 1 Year 2 1 Approved COMPLIANCE structure/ organogram X 2 Approved COMPLIANCE job descriptions/ specifications X 3 Capacitate COMPLIANCE MANAGEMENT function X 4 Approved COMPLIANCE risk MANAGEMENT policy X 5 COMPLIANCE policy statement X 6 Approved COMPLIANCE risk MANAGEMENT FRAMEWORK / manual X 7 Approved COMPLIANCE charter X 8 Approved COMPLIANCE risk MANAGEMENT plan X 9 Include COMPLIANCE matters in the performance agreements of the top MANAGEMENT X 10 Appoint risk champions/ Risk Committee X 11 Inclusion of the

7 COMPLIANCE responsibilities into the auditor other committee charter X 12 The formats, structure and content of COMPLIANCE report X 13 Training and Awareness X IMPLEMENTATION OF COMPLIANCE FUNCTION COMPLIANCE MANAGEMENT function - New concept in the public sector; Budget constraints - Phased approach to COMPLIANCE implementation; COMPLIANCE function matures over time; Information sessions National Treasury; and Formal COMPLIANCE qualification UJ, UCT & COMPLIANCE Institute of SA. 12 THREE LINES OF DEFENCE 13 MANAGEMENT COMBINED ASSURANCE 14 King III Audit committee should ensure that a combined assurance model is applied to provide a co-ordinated approach to all assurance providers.

8 Internal Assurance Providers External Assurance Providers Combined Assurance Risk MANAGEMENT -Conduct legislative risk prioritization -Facilitate completion of COMPLIANCE risk registers with ratings and mitigating actions -Ensure awareness on the part of MANAGEMENT & board on risk consequences of non COMPLIANCE ASSURANCE PROVIDERS 15 Internal Audit -Assess adequacy & Effectiveness of COMPLIANCE processes; -Systems & Structure, highlight key weaknesses and associated risks noted and make recommendations COMPLIANCE MANAGEMENT -Maintain & update CU. -Educate MANAGEMENT & Board -Facilitate legislative risk prioritization -Maintain CRMP -Assist business with implementations of operational COMPLIANCE -Monitor & Report COMPLIANCE FUNCTION The concept of independence involves four related elements.

9 Firstly - Should have a formal status within the institution; Secondly - there should be Head of COMPLIANCE with overall responsibility for co-ordinating the MANAGEMENT of the COMPLIANCE risk; Thirdly - Staff and Head should not be placed in a compromised position where there is perceived or actual conflict of interest; and Fourthly - Staff with appropriate number of competency with sufficient independence to fulfil their role objectively. 16 COMPLIANCE FUNCTION External & internal audit focus mainly on financial MANAGEMENT ; Identify all applicable laws and regulations, and prioritise them COMPLIANCE Universe Training and awareness - to MANAGEMENT and staff; Research and update the institution on upcoming legislative changes; Develop CRMP s and monitor implementation; and Assess the institutions COMPLIANCE with applicable laws and regulation.

10 17 ANNUAL COMPLIANCE PLAN 18 HEALTH INDUSTRY REGULATORY UNIVERSE LEGISLATION 19 Health Proffesions ActDental Technicians ActHazardous Substance ActChoice on Termination of Pregnancy Ammendment ActSterilization ActAllied Health Proffessions ActGenetically Modified Organisms ActNational Health ActTraditional Health Practitioners ActParmacy ActMedicaNursing ActPublic Health ActSouth African Medical Research Council ActHealth and Wellfare Matters ActMedical Schemes ActMental healthcare ActMeasurement Standards ActCouncil for medical Schemes levies ActFoodstuffs, cosmetics and disinfectants ActInternational Health Regulations ActGenetically Modified Organisms ActMedical University of Southern (Private)


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