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Justin Scharneck EOH Government CIO Summit Operation Clean Audit 2014: Governance of ICT: Contribution to the reduction of ICT costs and improved service.

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Presentation on theme: "Justin Scharneck EOH Government CIO Summit Operation Clean Audit 2014: Governance of ICT: Contribution to the reduction of ICT costs and improved service."— Presentation transcript:

1 Justin Scharneck EOH Government CIO Summit Operation Clean Audit 2014: Governance of ICT: Contribution to the reduction of ICT costs and improved service delivery 1 Date: 30 th May 2013 Using innovative technology solutions to reduce audit risk and improve service delivery

2 Overview ICT Governance – Extracting Business Value What is Operation Clean Audit 2014 (OCA -2014)? OCA -2014: Progress to-date AG Audit Opinion Types + Risk Areas EOHPSAS Response to OCA Our approach - Leveraging Technology Achievements in support of OCA

3 ICT Governance – Extracting Business Value 3 ICT Governance GITO - Responsible Corporate Governance of ICT HoD - Accountable Corporate Governance MEC – Political LeadershipHOD – Strategic Leadership PeopleProcessesTechnologyInformation

4 GITO - Considerations 4 Moratorium on Systems (IFMS) Value for Money (3 E’s) Pressure to reduce use of 3 rd Parties (Consultants) Cost of Compliance (CGICTF) vs Reduction of ICT Costs Clean Audit Requirement Inherent Limitations of Transversal Systems

5 What is Operation Clean Audit 2014 (OCA -2014) ? OCA-2014 is a clarion call to all municipalities, national and provincial departments to achieve clean audits by Launched in 2009 by ex Minister of COGTA (Sicelo Shiceka) This bold initiative is aimed at sustaining quality financial statements and management information. Its core objective is the improvement of service delivery, in pursuance of further building public confidence in government. “There can be no compromise on the basic principles of sound financial management in ensuring that resources are mobilised efficiently to serve our people” – Pravin Gordhan (12/13 Budget Speech) 5

6 AG Audit Opinion Types 6 Audit Report Framework Regularity Clean Audit UnqualifiedQualifiedAdverseDisclaimer Report on other Legal and Regulatroy Requirements Predetermined Objectives (Performance Information) UsefulnessReliability Compliance : Law & Regulation CGICTF Internal ControlLeadership Financial & Performance Mngt Governance -ICT -Other Unqualified with No Emphasis of Matter/Control Findings  Supported Variance Analysis  Consistency Strategic Plans & App  Performance Indicators & Targets o SMART Criteria  Validity, Accuracy, Completeness of Performance Reporting in Annual Report  Audit Evidence  Phase 1 – March 2014  Phase 2 – March 2015  Phase 3 – March 2016

7 OCA -2014: Progress to-date (Based on 12/13 Outcomes)* *2012/13 CONSOLIDATED GENERAL REPORT on NATIONAL and PROVINCIAL audit outcomes 7 Fewer and fewer clean audits since the launch in 2009 of OCA- 2014! Central Government and Public Entities Gradual decline from the 152 clean audits achieved in , to 132 in , to only 117 in Slightly more regressions than improvements 50 of these entities were unable to maintain the clean audit reports they received in prior year.

8 OCA -2014: Progress to-date (Based on 12/13 Outcomes)* *2012/13 CONSOLIDATED GENERAL REPORT on NATIONAL and PROVINCIAL audit outcomes 8 Main Risk Areas and Controls “Even though I have stressed for the past three years the urgent need to address the quality of the financial statements submitted for audit and weaknesses in supply chain management, human resource management and information technology controls, there has been minimal improvement” – Terence Nombembe (Auditor General)

9 PeopleProcessesTechnologyInformation Differing Needs ManualEvolvingDisparate Transversal Systems vs Disclosure Requirements 9 BASLOGIS PERSALMEDSAS Transversal Systems Cash – Based SystemsModified - Cash Accounting Disclosure Note Items Commitments Accruals Irregular, Fruitless & Wasteful Expenditure Movable Assets Leases ?

10 EOHPSAS Clean Audit Response 10 EOH has conceptualised several pioneering solutions, incorporating specialist consulting services, underpinned by bespoke-developed, custom software These innovative and practical solutions enable our clients to respond to challenges such expenditure management, project accounting and movable asset management. We have devised a unique, cost-effective engagement model whereby we provide a specialist service and work with public service officials in a co- sourced environment. Our approach to delivering projects and improving the internal control environments of our clients through our commitment to skills transfer, technical advice, audit evidence and reconciliation.

11 EOHPSAS Technology Solutions 11 Project Accounting Multi-year MIS Commitments register Disclosure notes Lead schedules, Working papers Audit evidence BI Reporting for the above… Movable Asset Management National Treasury format Asset record capturing SCOA classification Major / Minor Consolidation Gap analysis Digitised audit evidence Inventory sheets Duplication elimination Disclosure Expenditure Review Reduce material and inherent expenditure misallocation and misclassification risk Audit trail of expenditure review Segregation of duties Internal controls consistently in place Digitised audit evidence Automated journal functionality

12 So how do we do this? 12

13 Movable Asset Management 13

14 Typical Movable Asset Management Challenges Additions not in AR Assets not Bar-coded Misclassification: Minor Vs Major Manual Journals – Time Consuming Insufficient Supporting Docs FAR not in Treasury Format (Excel) Physical Verification Lack of Reconciliation to BAS Inaccurate Asset Data in AR Incorrect SCOA application Leases

15 Key Information Required in Movable Asset Register 15

16 ART – Asset Register Toolset Browser-based, hosted solution Asset Additions reconciled to BAS National Treasury format Asset record capturing SCOA classification Major / Minor Gap analysis Digitised audit evidence

17 ART – Screenshots

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19 Local Government Experience Over 300 Projects in Public Sector JHBELDBNBLMCT PE Typical Clients, Products & Services Project Accounting Reconciliations Commitments IPA Audit Interventions Monitoring of Implementing Agents Movable Asset Management Activity Based Costing Expenditure Management Budgeting Expenditure Review SCOA Management Account Reporting Project Management Services PPM Implementation PMO Mobilisation Supply Chain Management Supplier Management ECM Records Management Document Management Business Process Management Audit Evidence Web Content Management Imaging Performance Information Support EOHPSAS Services

20 Achievements in support of OCA  ERA has enabled the review of R8billion worth of provincial government expenditure over the last three years, fully supported by digitised evidence, at the click of a button.  eWIP produces an automated commitments register at a project level.  An MEC can now use their tablet or smartphone to access reconciled project information to support reporting on service delivery to community members.  ART - Recently, we have supported a Department of Health to account for its movable assets across 1200 health facilities, in accordance with the requirements of National Treasury.

21 AG Finding – R6,3million Misclassified as Transfer Payments Full audit trail of review provided to AG from ERA RESULT: AG audit finding mitigated Case Study - DPW

22 2009/10 Audit Opinion – Qualified: Misclassification of Expenditure 2010/11 –7500 Transactions Review with Full Audit Trail –2500 Journal – 1500 Consolidated –R475 million worth of adjusting journals Audit Opinion - Unqualified Case Study - DORT

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