1. Page 1 Audit Outcomes 2009-10 Department of Correctional Services

2. 2 Reputation promise/mission The Auditor-General has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

3. 3 Summary of audit opinions Audit OpinionDescription Unmodified An unqualified opinion is expressed when the auditor concludes that the financial statements give a true and fair view (or are presented fairly, in all material respects) in accordance with the applicable financial reporting framework. Unmodified (with emphasis of matter) The addition of such an emphasis of matter paragraph(s) does not affect the auditor’s opinion on whether the financial statements are fairly presented. Modified (Qualified) A qualified opinion is expressed when the auditor concludes that an unqualified opinion cannot be expressed but that the effect of any disagreement with management regarding departures from financial reporting framework, or limitation on scope is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion.

4. Audit OpinionDescription Disclaimer A disclaimer of opinion is expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor has not been able to obtain sufficient appropriate audit evidence to form an opinion and accordingly is unable to express an opinion on the financial statements. Adverse An adverse opinion is expressed when the effect of a disagreement with management regarding departures from the financial reporting framework is so material and pervasive to the financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the misleading or incomplete nature of the financial statements. 4

5. 5 Audit Outcomes 2009-10 Summary of audit opinions 3 Type of qualified audit opinion2009-102008-092007-08 Adverse000 Disclaimer000 Qualified111 Unqualified000

6. 6 Audit outcomes 2009-10 Audit qualification findings 3 Audit qualification findings 2009-102008-092007-08 DCS Tangible assets Yes

7. 7 CURRENT QUALIFICATION ISSUES Tangible assets Valuation, completeness and existence of tangible major assets could not be verified. Completeness and existence of minor tangible assets could not be verified. Included in the opening balance to tangible major assets are R129 million adjustments made to the opening balance of last year which management was unable to provide supporting documentation Recommendation Department should perform regular asset counts to confirm the existence and completeness of assets. The department must review the asset register to ensure that assets are valued at cost or fair value. Supporting documentation and a reconciliation must be provided for adjustments made to the opening balance.

8. 8 EMPHASIS OF MATTERS Unauthorised expenditure An amount of R483 000 000 incurred during 2008-09 financial year is still waiting approval from Parliament (overspend on budget mainly due to OSD’s) Material losses An amount of R9 000 000 was incurred as a result of losses of vehicles, claims and other sources.

9. 9 PRE DETERMINED OBJECTIVES Lack of effective, efficient and transparent systems Lack of a system in place which describes and represents how the department’s processes of performance planning, monitoring, measurement, review and reporting will be conducted, organised and managed. At correctional centre level, there are no adequate systems to capture performance information. Some information are recorded on loose registers or not recorded at all. Record keeping is also poor. Inadequate quarterly reporting on performance information The quarterly reports of the DCS did not track progress against targets as per the approved strategic plan and therefore did not facilitate effective performance monitoring and evaluation, as required by TR 5.3.1. Some regions submitted to Head office reports with some targets not reported on, or with actual information not consistent with the target in question. In addition, the quarterly reports are not prepared on cumulative basis such that one can evaluate the progress made from quarter to quarter.

10. PRE DETERMINED OBJECTIVES Reasons for major variances between planned and actual reported targets were not explained adequately Adequate explanations for major variances between the planned and the actual reported targets for the following programmes: corrections, security and facilities were not reported as required in terms of the relevant reporting guidance. In total 68% of the reported targets with major variances had inadequate explanations for those variances. The explanation of most of the major variances is about some regions that did not submit reports to head office as well as the budget constraints. Recommendation Implementation of adequate systems and controls for collecting and reporting performance information including quarterly reporting. Training staff in regions in respect reporting performance information. Implementation of monitoring controls to enforce compliance with NT on reporting performance information. 10

11. 11 PRE DETERMINED OBJECTIVES Inadequate content of strategic plan The strategic plan of the DCS did not include indicators (measures) that are linked to targets for all of the entity's programmes, as required by Treasury Regulation 5.2.3(d). The Department failed to link targets to corresponding indicators. A few indicators were listed per programme but could not be linked to corresponding targets. Inadequate presentation of reported information The reported performance information to be included in the annual report is not presented in a simple, accessible format, relevant and useful to the intended user, and/or in accordance with the relevant guidance applicable to reporting for the financial year-end. For Facilities and Corrections programme, in some instances the actual performance does not relate to the target or is in a different format such that it is not possible to evaluate the department’s level of achievement of its targets. Format for presentation of performance information as prescribed by National Treasury was not followed.

12. PRE DETERMINED OBJECTIVES Moreover, there are instances where reported actual information is not in the same format as the target or the reported information is irrelevant with regard to the target in question. Recommendation: Implementation of monitoring controls to enforce compliance with NT on compiling strategic plan and reporting on performance information. General Comment on the Audit Process of 2009-10 General lack of compliance to AOPI requirements. Adverse opinion was issued. Recommendation Management involvement in the process performance information reporting for monitoring purposes. Training of staff on collecting and reporting PI. Implementation of basic systems for performance information reporting.. 12

13. 13 REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Non-Compliance with laws and regulations Contrary to the requirements of TR 8.2.3 and sections 38(1) (f) of the PFMA, payments due to creditors were not always settled within 30 days from the date of receipt of an invoice.

14. 14 INTERNAL CONTROL Reporting itemLeadershipFinancial performance and management Governance Tangible assetsXXX

15. 15 INTERNAL CONTROL Leadership An effective organisational structure that places people with appropriate accounting skills especially at the regional level is not established. Human resource policies do not facilitate adequate training and disciplining of personnel as far as asset management is concerned. Actions are not sufficiently taken to address risks relating to the achievement of complete and accurate financial and performance reporting. Control weaknesses are not always analysed, and appropriate follow-up actions are not always taken that address the root causes. Financial and performance management Pertinent information is not always identified and captured in a form and time frame to support financial and performance reporting. Requested information was not always available and supplied within reasonable time period. Governance The entity does not identify all risks relating to the achievement of financial and performance reporting objectives. Internal controls are not carefully selected and adequately developed to prevent material misstatements in financial reporting and reporting on predetermined objectives.

16. OTHER REPORTS Investigations The departmental Investigation unit has submitted its report on 309 cases investigated during the year. Of the total cases, 256 have been finalised Performance audits A performance audit on the use of consultants was conducted during the year under review. The audit has not been finalised. 16

17. OTHER RELEVANT INFORMATION DSC has developed an action plan to address all audit findings. This action plan is monitored regularly at audit steering committee and audit committee meetings. The department has affected material adjustments to intangible assets as a result of non recognition of capitalised development costs. A material adjustment was passed to disclose non cash additions of tangible major assets. Vacancies in key management positions were filled post year end but suspensions still remain high, two CDC’s on suspension. The department has cut spending to ensure that there is no unauthorised expenditure. This has had an effect on services delivery as projects were put on hold. Possible fruitless and wasteful expenditure may arise if the department does not fulfil its obligations to fully reactivate the security system procured bid and ensure staff are trained to operate the system as intended. 17