PEMPAL IACOP PUBLIC INTERNAL CONTROL: MANAGEMENT AND CONTROL OF THE PUBLIC ENTITIES Presenter: Malapateng Teka; National Treasury| March 2016

OUTLINE Importance of Control (Slide 3) Components and Benefits of Internal Control (Slide 4) Legislative and Governance Framework (Slide 5) Combined Assurance on Internal Control (Slide 6) Oversight Instruments (Slide 7, 8) Role of Oversight Statutory Bodies (Slide 9,10,11) Drivers of internal control (Slide 12)

Importance of Internal Control The Constitution of the RSA requires public resources to be managed efficiently, effectively and economically; RSA has enormous social and development challenges which demands that Government institutions: –Deliver on their mandates and objectives –Report timeously and accurately on their use public funds –Comply with laws and regulations –Exercise responsible stewardship Constitution empowers the National Assembly with the power to scruitinize and oversee the executive action; and Government acknowledges the positive relationship between proper control and successful outcomes of government actions .

Components and Benefits of Internal Control Components of Internal Control: The risk assessment process – this relates to the process for identifying the business risks relevant to the financial reporting objectives; Control activities – these are the policies and procedures that ensure controls are in place to achieve internal control objectives; and Monitoring of controls – this is the process which the entity has in place to assess the effectiveness of internal controls over time. Benefits of Internal Control: adherence to management policies pertaining to the activities of the Public Entities; the safeguarding of the Public Entities’s assets; the prevention and detection of fraud and error; the accuracy and completeness of the accounting records; and the timely preparation of reliable financial and other information

Legislative and Governance Framework SOC enabling Legislation Companie Act Memorandum and Articles of Association / MOI Public Finance Management Act,1 of 1999 * Treasury Regulations * Shareholders Compact * Significance and Materiality Framework * Corporate Plan Sector legislation and policies (e.g. Electricity Act, Electronic Communications Act) Public Audit Act , Auditing Profession Act, IRBA (code of professional Conduct of Registered Auditors) Other general legislation, guidelines and policies (e.g. tax, labour, environmental laws) * King Codes

Combined Assurance on Internal Control

Oversight Instruments to ensure effective control of Public Entities – Strategic Plan Treasury Regulations (TRs) imposes that, the accounting authority for a public entity must: annually conclude a strategic plan and annual performance plan for tabling in Parliament; setting out performance measures and targets; indicating what funds are required to implement strategic plans; and Legislatures approve the budget, and so appropriate funds for the implementation of the strategic plans. In terms of the Money Bills Amendment Procedure and Related Matters Act 9 of 2009, after the adoption of the fiscal framework: the relevant members of Cabinet must table updated strategic/corporate plans for each department, public entity or institution, which must be referred to the relevant committee for consideration

Oversight Instruments to ensure effective control of Public Entities- Annual Reports In terms of the Public Finance Management Act (PFMA): The Accounting Officer must submit within five months of the end of the financial year to the Minister responsible for that Department an Annual Report; the Minister responsible for a department must table the annual report in the relevant legislature within one month; and a Minister who fails to table an annual report for an entity by 30 September (6 months after year end) must table a written explanation in the legislature setting out the reasons why the report was not tabled and indicating when the report will be tabled. The annual reports indicate how the executive has used appropriated funds to implement strategic plan; TR, requires that the accounting authority of a public entity must establish procedures for quarterly reporting to the executive authority; and Quarterly reports measure the achievement of performance indicators that have been determined with regard to the delivery of their respective mandates.

Role of Parliament Committees : Standing committee on public accounts SCOPA fulfils the responsibility of reviewing audit reports; In fulfilling this role the Committee focuses on the following: Issues raised in the report of the AGSA; Compliance with PFMA, TRs, the audit committee and management report. Functioning of risk management systems; Interrogation of instance of overspending unauthorised expenditure; Interrogation of instance of irregular, fruitless and wasteful expenditure; and Corporate governance issues.

Portfolio Committees Portfolio Committee fulfils the responsibility of reviewing nonfinancial information contained in the annual reports; These committee exercise oversight as to whether entities have delivered on service delivery commitments; The focus areas on the annual report are as follows: The technical quality of the annual reports; The economic, efficiency and effectiveness of service delivery; Explanation on underperformance; and Table above shows inconsistency in terms of the composition and development of KPIs. The oversight process provide a complete picture of an PE’s performance, encompassing finances, systems, corporate governance and service delivery performance.

Role of Auditor General and National Treasury The Auditor General is a state institution accountable to the National Assembly. AG audit and report on the accounts, financial statements and financial management AG must submit audit reports to the relevant legislature National Treasury as s protector of the NRF and sovereign credit rating is to exercise oversight through Setting reporting guidelines to enforce transparency of assets, liabilities, expenditure and income Oversight over the funding of public entities Controlling the utilisation of contingent liabilities

Drivers of Internal Control

Thank you