Presentation to the Portfolio Committee on Transport Consolidated audit outcomes of Department of Transport and its entities for 2009-10 19 October 2010 1

Reputation promise of the Auditor-General of South Africa (AGSA) “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 constitutional democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.” 2

Summary of 2009-10 Audit outcomes – Department of Transport and entities Public entities 2009-10 2008-09 Opinion on financial statements:   Disclaimer Adverse 1 Qualified Financially unqualified with findings on predetermined objectives and/or compliance with laws and regulations 7 9 Financially unqualified with no findings on predetermined objectives or compliance with laws 2 Total number of audits reported on 11 * 11 ** Entities with findings arising from AGSA other legal reporting responsibilities: Predetermined objectives 6 8 Compliance with laws and regulations * Autopax Passenger Services (Pty) LTD included in analysis for the first time in 2009-10 **The Urban Transport Fund was included in the analysis for 2008-09. This entity ceased to exist effective 31 March 2009 3

Department of Transport and entities – PFMA audit outcomes 2009-10 Drivers of improved audit outcomes Leadership Auditees who have improved/ maintained previous good practice Auditees where Improvements are required Department Public entities Provision of adequately skilled resources capable of implementing the financial reporting framework and performance management requirements, as well as adequate evaluation of the performance of existing staff : Financial Statements * Predetermined objectives 1 5 - 6 Ensuring that proper actions are taken to address audit findings; key controls are implemented to mitigate risk of misstatement of financial statements and report on predetermined objectives: 8 3 7 Leadership monitoring and nurturing of public entities N/A 4. Leadership’s implementation of action plans to address user access control deficiencies (Information Systems) *** Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work. Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit * Includes Autopax Passenger Services (Pty) LTD – Autopax Passenger Services excluded from analysis of predetermined objectives as this is included in PRASA ***Information systems audits done at only 5 entities. The IT audit of the department is at the reporting stage at the date of this presentation.

Department of Transport and entities – PFMA audit outcomes 2009-10 Drivers of improved audit outcomes Financial and performance management Auditees who have improved/ maintained previous good practice Auditees where Improvements are required Department Public entities Appropriate systems are in place to support the preparation of financial statements and performance reports: Financial Statements * Predetermined objectives 1 7 - 4 5 Review of the financial statements and other information by management for completeness and accuracy prior to submission for audit: 6 Proper record keeping and management, ensuring that supporting documents are properly filed and easily retrievable: 3 4. Application systems susceptible to compromised data integrity (Information Systems) *** User access control Security management Business Continuity 2 Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit * Includes Autopax Passenger Services (Pty) LTD – Autopax Passenger Services excluded from analysis of predetermined objectives as this is included in PRASA ***Information systems audits done at only 5 entities. The IT audit of the department is at the reporting stage at the date of this presentation.

Department of Transport and entities – PFMA audit outcomes 2009-10 Drivers of improved audit outcomes Governance Auditees who have improved/ maintained previous good practice Auditees where Improvements are required Departments Public entities Maintaining effective risk assessments and strategies including fraud prevention plans to address identified weaknesses: Financial Statements * Predetermined objectives 1 5 - 6 4 Ensuring effective internal audit functions that monitor the adequacy and implementation of internal control: 7 3 Establishment of functioning audit committees that promotes independent accountability and service delivery: An IT governance framework that directs the positioning of IT, resource requirements, risk and internal control management (Information Systems).*** Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit * Includes Autopax Passenger Services (Pty) LTD – Autopax Passenger Services excluded from analysis of predetermined objectives as this is included in PRASA ***Information systems audits done at only 5 entities. The IT audit of the department is at the reporting stage at the date of this presentation.

Financial statement qualification areas Completeness of penalty income (revenue) - CBRTA Completeness and existence of accounts receivable - CBRTA Transactions of Road Traffic Infringement Agency (RTIA) included in the records of Road Traffic Management Corporation – resulting in overstatement of Trade and other receivables/Cash and cash equivalents/Trade and other payables/Income/Operating expenditure/Staff costs/Property, plant and equipment - RTMC

Financial statement areas Department of Transport and entities– PFMA audit outcomes 2009-10 Transversal material misstatements corrected Financial statement areas Entities impacted Capital Assets PRASA/RSR/DLCA/CBRTA/RTMC Current Assets Liabilities PRASA/RSR/DLCA/CBRTA/RTMC/SAMSA Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit

Financial statement areas Department of Transport and entities– PFMA audit outcomes 2009-10 Transversal material misstatements corrected Financial statement areas Entities impacted 4. Revenue PRASA/CBRTA/PORTS Regulator/RTMC 5 Expenditure PRASA/RSR/DLCA/SAMSA/CBRTA/RTMC 6. Other disclosures DLCA/CBRTA/ PORTS Regulator Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit

Department of Transport and entities– PFMA audit outcomes 2009-10 Fruitless and wasteful expenditure Entity and Reasons Amount – 2009/10 Road Traffic Management Corporation – employees paid after resignation/interest/discontinued system R 17 520 706 Ports Regulator of South Africa – interest on late payment of suppliers R 6 219 Cross Border Road Transport Agency – inadequate planning and project management of office renovations R 535 314 Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit

Department of Transport and entities– PFMA audit outcomes 2009-10 Fruitless and wasteful expenditure Entity and Reasons Amount – 2009/10 Road Accident Fund – sheriff and interest costs as a result of the delay in payment of claims expenditure R 23 206 674 Driving Licence Card Account – contracts and bank account not properly managed R 127 000 South African Civil Aviation Authority – officials reinstated after suspension R 1 625 685 Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit

Department of Transport and entities– PFMA audit outcomes 2009-10 Fruitless and wasteful expenditure Entity and Reasons Amount – 2009/10 Passenger Rail Agency of South Africa – interest on overdue supplier accounts R 3 723 279 National Department - Accommodation and flight tickets not cancelled in a timely manner/interest on delay in payment of bus subsidies R 101 000 TOTAL R 46 845 877 Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit

Department of Transport and entities– PFMA audit outcomes 2009-10 Irregular Expenditure Entity and Reasons Amount – 2009/10 National Department of Transport – Contracts extended without prior approval/Procurement procedures not followed/services rendered after expiry of tax certificate R 951 000 South African Maritime Safety Authority – expenditure incurred prior to budget being approved R 37 000 000 Cross Border Road Transport Agency – non compliance with supply chain management prescripts R 872 184 Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit

Department of Transport and entities– PFMA audit outcomes 2009-10 Irregular Expenditure Entity and Reasons Amount – 2009/10 Road Traffic Management Corporation – tender process not followed/transaction fee owed to Department of Transport used irregularly R 360 879 704 TOTAL R 399 702 888 Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit

Department of Transport and entities– PFMA audit outcomes 2009-10 Unauthorized Expenditure Entity and Reasons Amount – 2009/10 National Department of Transport – Overspending on Public Transport Program to pay bus subsidies – funds made available by National Treasury to make payment, however due to the fact that this was not part of the original appropriation to the Department, it was considered as unauthorized expenditure R 362 000 000 Note: 3 separate slides dealing with (1) Leadership, (2) Financial and performance management and (3) Governance. This includes issues addressed and to be addressed. (previously slides #4 and #15) Details of the ‘Key leadership matters addressed/to be addressed ’ should be drawn from management reports Reflect on how well stakeholder engagements / key control review have been done and why things may not have moved / commitments didn’t work Notes to the slides should be specific when an entity is the main reason for the issues or when there are specific reasons for the matters reported. Notes to include discussion on commitments made that did not address the problems or that were not actioned. Note those entities who avoided qualifications by correcting material misstatements in financial statements identified during the audit

Type of audit conclusion Report on predetermined objectives Indication of audit conclusions not included in audit report General ■ Phase-in approach by the AGSA since 2005-06 together with National Treasury ■ Stakeholder engagements to clarify approach and essence of auditing of predetermined objectives have taken place and will continue throughout 2010-11 ■ In 2010-11 departments and entities will need to take decisive action to address the areas requiring improvement in order to position themselves for a positive audit outcome on predetermined objectives Type of audit conclusion Department Public entities Disclaimer 1 Adverse 2 Qualified Unqualified 5 Total number of audits reported on 10 The total number of audits must be equal to one less than the number on slide # 3,since predetermined objectives do no apply to the Revenue Fund There is no reporting on predetermined objectives in Autopax Passenger Services (Pty) LTD as this is included in PRASA 16 16

Department of Transport and entities Findings on reporting of predetermined objectives 2009-10 Category of finding Department Public entities 2009-10 2008-09 Non-compliance with regulatory requirements 100% 0% 40% 63% Reported information not useful 50% 27% Reported information not reliable 30% 18% Information not submitted for audit by 31 May 2010 Total number of audits reported on 1 10 11 ** Findings for 2009-010 are available on the AS: MIS 2008-09 findings to be extracted for the provincial General Report **The Urban Transport Fund was included in the analysis for 2008-09. This entity ceased to exist effective 31 March 2009 There is no reporting on predetermined objectives in Autopax Passenger Services (Pty) LTD as this is included in PRASA 17 17

Top categories of prohibited actions/non-adherence Department of Transport and Entities Findings on compliance with laws and regulations 2009-10 Top categories of prohibited actions/non-adherence Number Percentage Department SCM issues that resulted in irregular expenditure 0% Payments not done within 30 days HR Management General/ fiduciary and reporting responsibilities of accounting officers and internal audit not operating effectively throughout the year Public entities * 2 18% General/ fiduciary and reporting responsibilities 6 54% Internal audit 3 27% Audit committee and strategic/ corporate plans 4 36% This data to be drawn from ‘compliance workbooks’ completed by ABUs Limited to non-compliance issues included in audit reports *Analysis includes Autopax Passenger Services (Pty) LTD 18 18

Top 5 findings on procurement and contract management Transport and entities 2009-10 Findings on procurement and contract management Top 5 findings on procurement and contract management Number Percentage Public entities * 3 price quotations not invited - reasons not recorded and approved 4 36% The fraud prevention plan did not include specific measures for preventing and detecting fraud in the procurement process. 5 45% R500 000 with no competitive bidding - reasons not recorded and approved 2 18% A list of prospective suppliers from whom to invite price quotations was not in place. SCM policies and procedures were not in place for the acquisition of goods and services. *Analysis includes Autopax Passenger Services (Pty) LTD This data to be drawn from ‘Procurement and contract management workbooks’ completed by ABUs. 19 19

Schedule 3 and other entities Department of Transport and Entities audit outcomes 2009-10 Audits not conducted by the Auditor-General of South Africa Summary of audit outcomes Audit outcomes Schedule 2 entities Schedule 3 and other entities Opinion on financial statements:   Disclaimer Adverse Qualified Financially unqualified with findings on predetermined objectives and/or compliance with laws and regulations Financially unqualified with no findings on predetermined objectives or compliance with laws and regulations 2 Total number of audits reported on Entities with findings arising from AGSA other legal reporting responsibilities: Predetermined objectives Compliance with laws and regulations Sources and guidance for this slide are as for corresponding slide for audits conducted by the AGSA

Type of audit conclusion Schedule 3 and other entities Department of Transport and Entities Audits not conducted by the Auditor-General of South Africa Report on predetermined objectives - Indication of audit conclusions 2009-10 General ■ Phase-in approach by the AGSA since 2005-06 together with National Treasury ■ Stakeholder engagements to clarify approach and essence of auditing of predetermined objectives have taken place and will continue throughout 2010-11 ■ In 2010-11 entities will need to take decisive action to address the areas requiring improvement in order to position themselves for a positive audit outcome on predetermined objectives Type of audit conclusion Schedule 2 entities Schedule 3 and other entities Disclaimer Adverse Qualified Unqualified 2 Total number of audits reported on Sources and guidance for this slide are as for corresponding slide for audits conducted by the AGSA 21 21