INTERNAL AUDIT AND INVESTIGATION SERVICES PRESENTATION TO THE PORTFOLIO COMMITTEE ON THE UNIT’S ACTIVITIES FOR THE YEAR ENDING 31 MARCH 2006 Z MXUNYELWA, CIA CHIEF AUDIT EXECUTIVE 13 TO 15 MARCH 2006

INTERNAL AUDIT AND INVESTIGATION SERVICES CONTENT 1.AUDIT COMMITTEE 2.UNIT CAPACITY 2.CO-SOURCING ACTIVITIES 3.RISK MANAGEMENT AND FRAUD PREVENTION 4.SYSTEMS OF INTERNAL CONTROL 5.FRAUD AWARENESS AND INVESTIGATIONS

INTERNAL AUDIT AND INVESTIGATION SERVICES AUDIT COMMITTEE The Department has a fully functional Audit Committee with an approved Charter. The Audit Committee is effectively ensuring that the Internal Audit is fully functional and management actions are adequate to effectively address the risks, controls and corporate governance processes in the Department. The Management has resolved that the committee will only be composed of only external members in order to enhance its independence, in line with the recommended best practices by National Treasury.

INTERNAL AUDIT AND INVESTIGATION SERVICES UNIT CAPACITY The Internal Audit and Investigation Services’ establishment has been Increased to adequately address the challenges of the Department. All permanent employees of the unit possess relevant professional qualifications. The current establishment has 37 Auditing staff and 6 investigation staff Members. The current challenge is the increase in resignations, due to external audit firm recruiting its professionally developed staff, as a result of an increased demand in the private sector of qualified internal auditors. The Minister approved in 2005, the building of permanent capacity in the Unit, over a period of three-years ending 31 March The unit has already achieved 80% of its target for capacity building, in terms of quantities and staff development.

INTERNAL AUDIT AND INVESTIGATION SERVICES CO-SOURCING ACTIVITIES The unit is currently engaging professional audit firms on a co-sourcing basis to address its capacity while phasing in the permanent professional staff. Both the capacity building and transfer of skills by the co-sourced audit and forensic firms is envisage to end by 31 March The main challenges in the unit are computer auditing skills and capacity for forensic investigations, hence there is a need for the co-sourcing. The current co-sourced audit firms have a 40% to 45% BEE component.

INTERNAL AUDIT AND INVESTIGATION SERVICES RISK MANAGEMENT AND FRAUD PREVENTION The Department has an approved Risk Management and Fraud Prevention strategy, facilitated by Internal Audit and Investigation Services. The Risk Management plan and Fraud Prevention strategy has served as a basis for focusing the Department’s resources to ensure that the Department objectives are achieved with minimum impact of risks. Both Risk Management plan and Fraud Prevention strategy are revised annually to ensure that, previous risks are effectively addresses and emerging risk are identified.

INTERNAL AUDIT AND INVESTIGATION SERVICES SYSTEMS OF INTERNAL CONTROL The Department has effective Audit Steering Committee that ensure that both Auditor General and Internal Audit findings are effectively addressed. The Chief Audit Executive is monitoring the effectiveness of the Regional Audit Steering Committees and Top Management members attend the Department’s Audit steering committees. There has been a significant improvement in the Region’s internal control systems and financial management with the decentralization of Internal Audit function to the Regions of the Department.

INTERNAL AUDIT AND INVESTIGATION SERVICES FRAUD AWARENESS AND INVESTIGATIONS The Department conducted workshops on Fraud and corruption awareness in all its Head office units and Regional offices. These workshops resulted in the Department’s officials aware of their role in identifying, reporting and detecting fraud and corruption activities in their environment. The Department experiences an increase, by employees of the Department, in reporting fraud, corruption and irregularities to the Department’s Chief Audit Executive. All the cases are successfully investigated by the unit. The Department adopted an integrated strategy to deal with fraud and corruption with the memorandum of understanding between Top management ; Internal Audit and Investigation Services; and Labour Relations processes.

INTERNAL AUDIT AND INVESTIGATION SERVICES UNIT CHALLENGES & FUTURE PLANS CHALLENGES Audit Beyond Compliance. Risk Management plan not fully addressing service delivery initiatives IIA International Standards on Quality Assurance. Staff turnover. Increase in allegations of fraud & corruption Delays in processes dealing with fraud & corruption. Future plans Conduct performance audits- Service delivery. Facilitate training of Management on risk assessment. Conduct Internal & External QA by 1 September Conduct Workshops & Develop MOU with HR –Labour relations Unit. Ongoing Co-Source of forensic services from private sector audit firms. Improve Internal Control environment through Regional I/A Sections.