1. Assessment of Annual Performance Plan 2014/15 Department of Rural Development and Land Reform 2 July 2014

2. 2 Reputation promise/mission The Auditor-General of South Africa 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 Topics for discussion BackgroundLegislative requirementsAudit strategy and approachWay forward

4. 4 Audits performed by AGSA Annual mandatory audits Financial statements Report on predetermined objectives Compliance with laws and regulations Discretionary audits Performance audits e.g. infrastructure

5. 5 Clean administration – from annual audits Unqualified financial statements* No findings on predetermined objectives No findings on compliance with laws and regulations *Not qualified, disclaimed or adverse opinion

6. Annual audit of reported actual performance against predetermined objectives, indicators and targets as contained in the annual performance report. Integral part of the annual regularity audit process, confirming the Compliance with laws and regulations Usefulness of performance reporting Reliability of performance reporting Integral part of the annual regularity audit process, confirming the Compliance with laws and regulations Usefulness of performance reporting Reliability of performance reporting Audit of predetermined objectives defined as:

7. An audit report must reflect an opinion or conclusion relating to the performance of the auditee against predetermined objectives Sections 20(2)(c) and 28(1)(c) of the Public Audit Act (PAA) Applicable to all spheres of government Legislative requirements - auditing

8. Public Finance Management Act (PFMA), 1999 (Act No.1 of 1999) Treasury Regulations issued in terms of the PFMA, 2002 Public Service Regulations (PSR), Part III B: (Only applicable to departments) Guidelines, instruction notes, practice notes, issued by National Treasury Framework for managing programme performance information (issued by the National Treasury in May 2007) Framework for strategic and annual performance plans (issued by National Treasury in August 2010) Framework for managing programme performance information (issued by the National Treasury in May 2007) Framework for strategic and annual performance plans (issued by National Treasury in August 2010) Legislative requirements for planning, budgeting & reporting of performance info

9.  Completed phased audit approach  Audit to the extent necessary to express an audit opinion  Audit opinion in the management report  Audit reports contain audit findings – not audit opinions  Completed phased audit approach  Audit to the extent necessary to express an audit opinion  Audit opinion in the management report  Audit reports contain audit findings – not audit opinions  Adopted a phased-in approach  Factual audit findings reported in both management and audit reports  No audit opinion in audit reports – only findings  Regular interaction with stakeholders (NT, Presidency, DPSA) to determine and test audit approach  Provided inputs to drafting of NT Frameworks (FMPPI)  Adopted a phased-in approach  Factual audit findings reported in both management and audit reports  No audit opinion in audit reports – only findings  Regular interaction with stakeholders (NT, Presidency, DPSA) to determine and test audit approach  Provided inputs to drafting of NT Frameworks (FMPPI) AGSA strategy to the audit of predetermined objectives

10. 10 Auditing the planning, budgeting and reporting cycle

11. Main criteria Sub-criteriaSub-criteria Existence Timeliness Presentation Measurability Relevance Consistency Validity Accuracy Completeness Compliance with regulatory requirements UsefulnessUsefulness ReliabilityReliability Audit criteria

12. Understand and test the design and implementation of the performance management systems, processes, and relevant controls Understand and test the design and implementation of the performance management systems, processes, and relevant controls 11 Test the measurability, relevance, presentation & consistency of planned and reported performance information 22 Conclude on the usefulness of the report on predetermined objectives 33 Conclude on the reliability of the reported performance for selected programmes or objectives Conclude on the reliability of the reported performance for selected programmes or objectives 55 Audit approach Test the reported performance information to relevant source documentation to verify the validity, accuracy & completeness of reported performance information Test the reported performance information to relevant source documentation to verify the validity, accuracy & completeness of reported performance information 44

13. Audit reporting – Management report An audit conclusion will be prepared and included in the management reports for all departments, constitutional institutions, trading entities, public entities, Parliament and provincial legislatures

14. Usefulness of information: Audit findings focus on the consistency, relevance, measurability & presentation of reported performance information. Reliability of information: Audit findings focus on the validity, accuracy & completeness of reported performance information REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Predetermined objectives COMPLIANCE WITH LAWS AND REGULATIONS Report non-compliance matters in relation to the performance management and reporting processes Audit reporting – Auditor’s report

15. 15 Assessment of 2014/15 APP – Department of Rural Development and Land Reform AGSA Approach for assessment of 2014/15 Annual Performance Plan The strategic plan and APP of 2014/15 approved by the Minister and was submitted to the AGSA in March 2014. The approved APP will therefore be audited in detail during the 2014/15 audit. From assessment of the 2014/15 APP we could verify the consistency of the APP to the overall 2014-2019 strategic plan and to the department’s mandate. It should be noted that although DRDLR did submit the 2014/15 APP for review no technical indicator descriptions was submitted with the 2014/15 APP and therefore the measurability and relevance of the APP could not be verified. This will only be verified once the technical indicator descriptions have been received. The 2014/15 interim audit of the final 2014-15 APP will focus on the following: –The process followed for the preparation, submission and approval of strategic plans (if relevant) and APP’s. –Assessment of the measurability and relevance of the indicators and targets planned for each selected programme/objective..

16. 16 Performance information must be presented using the National Treasury Annual reporting guidelines. Actual performance information in tables and narrative in annual report must be consistent. Reasons for major variances between planned and actual performance must be explained and should be supported by corroborating evidence. Presentation Objectives, indicators and targets must be consistent between planning and reporting documents. Consistency Measurability Indicators should be well-defined and verifiable. Targets should be specific, measurable and time-bound. Relevance The indicators relate logically and directly to an aspect of the institution's mandate, and the realisation of strategic goals and objectives Audit of Predetermined Objectives No material findings identified No material findings identified. No material findings identified Conclusion Requirement Conclusion Requirement Usefulness of 2013/14 Annual Performance Report No material findings identified. No material findings identified.

17. 17 Expected 2013/14 Audit Outcomes Compliance with regulatory requirements Usefulness Reliability Audit of Predetermined Objectives No matters reported Reported in audit report Additional Matter paragraphs included in audit report: Material adjustments were made to the annual performance report submitted for audit

18. 18 Performance information must be presented using the National Treasury Annual reporting guidelines. Actual performance information in tables and narrative in annual report must be consistent. Reasons for major variances between planned and actual performance must be explained and should be supported by corroborating evidence. Presentation Objectives, indicators and targets must be consistent between planning and reporting documents. Consistency Measurability Indicators should be well-defined and verifiable. Targets should be specific, measurable and time-bound. Relevance The indicators relate logically and directly to an aspect of the institution's mandate, and the realisation of strategic goals and objectives Audit of Predetermined Objectives Changes to objectives, indicators and targets not approved. Reported targets not consistent with planned targets Changes to objectives, indicators and targets not approved. Reported targets not consistent with planned targets No material findings reported. 21% of the performance indicator is not well defined Conclusion Requirement Conclusion Requirement Usefulness of 2012/13 Annual Performance Report Not all variance explanations could be supported with supporting documentation

19. 19 2012/13 Audit Outcomes Compliance with regulatory requirements Usefulness Reliability Audit of Predetermined Objectives No matters reported Reported in audit report No Additional Matter paragraphs included in audit report.

20. 20 Audit finding from the 2013/14 audit - Department of Rural Development and Land Reform FindingsRoot cause Recommendations 1Duplication of actual target achieved reported on the Annual performance report Financial and performance management Implement controls over daily and monthly processing and reconciling of transaction The department did not perform reconciliation of the listing to actual source document to ensure that the listing supporting the performance reported in the annual performance report is free from any duplications, listing were not properly validated against duplication errors All information or portfolio of evidence obtained from different provinces or branches should be reviewed by the sevice delivery coordinators and monitoring and evaluation official at both the regional and national office to ensure that they are valid and accurate A standard policies and procedures and templates should be developed on the process of collating and evaluating the portfolio of evidence.

21. 21 Audit finding from the 2013/14 audit – Department of Rural Development and Land Reform FindingsRoot causeRecommendations 2 Inconsistenci es between target as per APP and target as per quarterly reports Leadership Exercise oversight responsibility regarding financial and performance reporting and compliance and related internal controls This is as a result of lack of monitoring review of the quarterly report prepared and submit to confirm for accuracy before they are submitted to the National Treasury. Management should ensure that all reports submitted to the National Treasury are reviewed and are accurate. Evidence that supports the approval of changes and reasons for the adjustments should be provided for all objectives, indicators and targets in order to comply with the relevant regulations requirement.

22. 22 Audit finding from the 2013/14 audit - Department of Rural Development and Land Reform FindingsRoot cause Recommendations 3 Inadequate information systems to enable monitoring of the progress made towards achieving the goals Leadership: Design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information. The Planning, Monitoring and Evaluation Directorate (PM&E CD) did not have an effective information or IT systems and formal controls over those systems designed and implemented to ensure the reliability and protection of data used for reporting on progress against targets in the annual performance plan. Management should ensure that the necessary and appropriate information system is established, operational and used in the management of performance information in the department.

23. 23 Audit finding from the 2013/14 audit – Department of Rural Development and Land Reform FindingsRoot causeRecommendations 4 Quarterly report not submitted within 60 days to National Treasury Leadership Exercise oversight responsibility regarding financial and performance reporting and compliance and related internal controls This is as a result of lack of monitoring and adherence to the National Treasury Preparation guide and their policy and procedures when preparing and submit ting the quarterly performance report. The department should adhered to their Programme Performance Monitoring Guidelines and Policy for Planning, Monitoring and Evaluation that addresses the National Treasury reporting requirements

24. Common root causes Monitoring controls To ensure adequate oversight over performance info Capacity and Skills Inadequate training of staff

25. 25 Recommendations and way forward Key driver of internal control Recommendations for improvement LeadershipExercise oversight responsibility regarding performance reporting and compliance and related internal controls Action plans to address internal control deficiencies should be specific, time bound and progress should be monitored Training and development of relevant performance management staff

26. 26 Recommendations and way forward Key driver of internal control Recommendations for improvement Performance management system Develop and implement standard operating procedures Management to ensure clear definitions and technical standards for indicators and targets are developed Supporting documentation (data definitions) Ensure adherence to FMPPI Clearly defined roles and responsibilities Individual performance contracts should be aligned to the organisational objectives Continuous monitoring and reporting of performance

27. 27 Recommendations and way forward Key driver of internal control Recommendations for improvement Governance The audit committee should report on the acceptability of the quarterly reports submitted to National Treasury and should also ensure that internal audit provides assurance on a quarterly basis and monitors implementation of the action plans Internal audit should monitor the reporting against predetermined objectives on a regular basis Reporting on predetermined objectives should be included in risk management strategy and practices

28. THANK YOU Questions??