Environmental Affairs portfolio audit outcomes 2010-11 28 September 2011

Environmental Affairs portfolio audit outcomes 2010-11 Audits conducted by the AGSA Department Public entities 2010-11 2009-10 Financially unqualified with no findings on predetermined objectives or compliance with laws and regulations 1 2 3 Financially unqualified with findings on predetermined objectives and/or compliance with laws and regulations Financially unqualified financial statements 100% Qualified opinion Adverse opinion Disclaimer of opinion Financially qualified financial statements 0% Total number of audits reported on 5 Number of audit reports not issued by 31 August 2011 Total number of audits Total number of auditees in which findings arose from the AGSA's other legal reporting responsibilities: Predetermined objectives findings only Compliance with laws and regulations findings only Findings on both predetermined objectives and compliance with laws and regulations 2010/11: Unqualified with no compliance and/or PDO findings DEA SAWS iSimangaliso Unqualified with compliance and/or PDO findings SANBI – only compliance findings SANParks – only compliance findings (Compliance findings are mainly due to material misstatements corrected and SCM issues) 2009/10: SANParks iSimangaliso – SANBI – PDO findings

Audit outcomes comparison with 2009-10 to 2010-11 Department and public entities 2010/11: Unqualified with no compliance and/or PDO findings (3 out of 5 audits = 60%) DEA SAWS iSimangaliso Unqualified with compliance and/or PDO findings (2 out of 5 audits = 40%) SANBI – only compliance findings SANParks – only compliance findings (Compliance findings are mainly due to material misstatements corrected and SCM issues) 2009/10: Unqualified with no compliance and/or PDO findings (4 out of 5 audits = 80%) SANParks iSimangaliso – Unqualified with compliance and/or PDO findings (1 out of 5 audits = 20%) SANBI – PDO findings

Movement in audit outcomes from 2009-10 Department and Public Entities Movement in audit outcome over 2009-10 - Department and Public entities Audit opinion Improvement Unchanged Regressed Total reported on Prior year opinion on audits outstanding 2010-11 Financially unqualified with no findings   3 4 Financially unqualified with findings 2 1 Qualified Disclaimer / Adverse Total 5 3 1 1 Unchanged: Unqualified with no compliance and/or PDO findings DEA SAWS iSimangaliso Unqualified with compliance and/or PDO findings SANBI Regressed: SANParks – was previous year unqualified with no compliance and/or PDO findings

Areas of material misstatements in financial statements No material misstatements: Department DEA Public entities SAWS iSimangaliso Misstatements corrected during the audit: Capital assets (2 out of 4 entities = 50%) SANBI SANParks Other disclosure items (2 out of 4 entities = 50%)

Corrections of material misstatements identified by auditors No material misstatements (3 out of 5 audits = 60%): DEA SAWS iSimangaliso All material misstatements corrected (2 out of 5 audits = 40%): SANParks SANBI

Predetermined objectives (PDO) findings Departments and public entities No predetermined objective findings were reported in the various audit reports of the department and the public entities Some of the findings included in the management reports are: Inconsistencies between ENE and strategic planning Under-performance in relation to set targets Consistency of planned and reported pre-determined objectives Improvement of process and controls for the planning and reporting on predetermined objectives Reason for variance was not included in the Performance Report Performance targets not measurable or specific Annual performance misstated Performance information controls Management report items: Inconsistencies between ENE and strategic planning DEA Under-performance in relation to set targets Consistency of planned and reported pre-determined objectives SANParks Improvement of process and controls for the planning and reporting on predetermined objectives Reason for variance was not included in the Performance Report iSimangoliso Performance targets not measurable or specific SANBI Annual performance misstated Performance information controls

Areas of findings on non-compliance with laws and regulations Annual financial statements and annual report SANBI Expenditure management SANParks

Unauthorised, irregular, and fruitless and wasteful expenditure Department and public entities* 2009/10: No unauthorized expenditure (DEA), irregular expenditure and fruitless and wasteful expenditure disclosed 2010/11: SANParks irregular R2 101 000 (current year); R3 202 851 was indentified in the current year in respect of previous year [correction made in the 2010/11 financial statements] * Amounts are actual (no extrapolation of errors)/Based on actual disclosures and samples tested

Financial sustainability (going concern) Public entities SANBI: Although SANBI has prepared financial statements on a going concern basis, events or conditions have identified which, individually or collectively, cast significant doubt on SANBI’s ability to continue as a going concern, unless additional sources of funding can be obtained. Management have disclosed in note 21 of the financial statements, relating to going concern, that they are engaged in various initiatives to ensure the sustainability of SANBI. The initiatives are mainly premised on obtaining additional funding from National Treasury. At the date of the financial statements, the request has not formally been communicated to National Treasury and there is thus uncertainty as to the outcome thereof. The following going concern indicators were identified during the audit: National Treasury has emphasised that SANBI should not depend on project funding to finance day to day running costs. SANBI has a net current liability position. Government grants are not sufficient to cover the expenses incurred by SANBI. Additional sources of income are via donors, sponsorships, admission fees and other grants and this has been declining due to a decrease in economic activity. SANBI needs to seek new sources of finance or dispose of substantial assets to generate more income. Financial support from government underlies the going concern assumption for SANBI. Deficits have been reported since the 2008 financial year. There is evidence of postponement of the payments to creditors on due dates. Some suppliers are paid as and when funds become available. There is evidence of slowing collections from debtors. There is excessive reliance on transactions with related parties as funding is primarily received from the government, particularly DEA. SANBI has difficulty obtaining financing for necessary new project developments or other necessary investments. There has been or is likely to be reduced funding from the government. The government grant has remained in line with prior years, whilst expenditure is on the increase due to inflation.

Four focal points (based on prior audit, risk assessment) Procurement/SCM Increase in irregular expenditures Uncompetitive and/or unfair procurement processes Inadequate controls HR Management HR planning and organization Predetermined Objective Reporting Credibility of reporting on achievements Alignment of 12 National goals to strategic plans and delivery agreements Usefulness of reported information (No PDO findings reported in the various audit reports) IT Management Security and user access management controls lacking Program change management lacking IT service continuity not adequate Procurement / SCM: Increase in irregular expenditure SANParks Uncompetitive and/or unfair procurement processes SANBI Inadequate controls HR Management: HR planning and organization DEA – organizational structure not aligned to strategic plan Predetermined objective reporting: No risk areas that needs to be addressed. No findings on predetermined objects were reported in the audit reports of DEA, SANBI, SAWS, SANParks and iSimangoliso IT management: Security and user access management controls lacking DEA SAWS Program change management lacking IT service continuity not adequate

Progress in addressing high risk areas   Concern rating scale Number of auditees Status of interventions proposed after 2009-10 audit cycle Current year impact 5 Partially implemented Neutral (60%) 4 3 1 2 -1 -2 Improved (40%) -3 -4 -5 No concern from previous audit cycle = 2 auditees Higher Lower

Summary of findings on supply chain management Uncompetitive or unfair procurement processes (2 out of 4 audits [PE] = 50%) SANBI SANParks Inadequate controls (1 out of 4 audits [PE] = 25%) In comparison to National (departments and public entities) the portfolio had more findings around competitive and unfair procurement processes and inadequate controls Action plans should be put in place to address the findings

Findings on HR management focus areas HR planning and organization DEA: organisational structure not aligned to strategic plan No HR finding at public entities SANParks SAWS SANBI iSimangoliso

Progress made in implementing key controls Key controls that need attention Leadership Oversight responsibility SANParks Financial – in progress Compliance – in progress SAWS SANBI HR Management DEA Performance – intervention required Policies & procedures Action plans Performance – in progress IT governance Financial and performance management Proper record keeping Financial – intervention required Reporting Compliance IT Systems controls Governance Internal audit

Findings on IT control focus areas Security Management DEA SANParks User Access Control SAWS Program Change Management IT Service Continuity

Assessment of monitoring capacity and effectiveness at the time of the audit Role players Assessment of monitoring capacity and effectiveness at the time of the audit Supply chain management Predetermined objectives Financial management Turnaround plans IT Controls HR management Governance structures Oversight Accountability Executive leadership (Minister)   Legislative oversight (NCOP, NA Portfolio Committees) The following should be addressed for the portfolio: SCM In comparison to National (all national and public entities) the portfolio had more findings around uncompetitive and unfair procurement processes and inadequate contract management PDO A concern is that there was inadequate presentation of information and reliability of information identified. Turnaround plans Going concern issues relating to SANBI Portfolio committees can request quarterly reports on performance and areas of non compliance. Actions taken to address the issues around this area should be reviewed