Briefing to the Portfolio Committee on International Relations and Cooperation on the audit outcomes for the 2013/2014 financial year 15 October 2014

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.

To provide members of parliament with the necessary information/guidance on the audit outcomes for the portfolio to enable the Portfolio Committee to effectively execute their oversight function Purpose of presentation

Audit outcomes for the portfolio Financial statements Audits outstandingWith no findingsWith findings UnqualifiedQualifiedAdverse/disclaimer Overall regression in audit outcomes Performance report s Compliance with legislation Outcomes per audit area

Audit outcomes for the portfolio Provides assuranceProvides some assurance Provides limited/ no assurance Vacancy Not established Senior management Accounting officer/authority Executive authority Internal audit unit Audit committee Portfolio committee Third leve l First level Second leve l

Audit outcomes for the portfolio GoodConcerningIntervention requiredNot assessed Effective leadership Human resources controls ICT governance and controls020 Audit action plans Proper record keeping Daily and monthly controls Review and monitor compliance Key controls Performance reports Compliance with legislation Financial statements Audit areas

Audit outcomes for the portfolio GoodConcerning I ntervention required Quality of submitted financial statements Information technology Financial health Supply chain management Human resource management Risk areas Quality of submitted performance reports

Audit outcomes for the portfolio Most common root causes Slow response by managemen t A root cause at auditees 2 Improved UnchangedRegressed Slow response by political leadership A root cause at auditees 2 Lack of consequences for poor performance and transgressions A root cause at auditees 2

Audit outcomes for the portfolio (1)Implement proper oversight mechanisms over the ARF and ensure a governance framework over the activities of the entity is implemented; (2) Enhance performance and consequence management. Status of key commitments by minister (1) Follow up on the development of existing and new finance team to perform effective financial management including monthly reconciliations; (2) Monitor the compiling of monthly financial statements and reconciliations, including disclosure notes; (3) Perform a detailed root cause analysis for recurring asset issues despite new interventions being rolled out so that appropriate action can be taken; (4) CFO to commit resources to deal with timely update of fixed asset registers at head office; (5) Close monitoring of SCM compliance and HR management; (6) CIO to address identified IT deficiencies (1) The CFO was appointed; (2) The investigation into the ARF irregularities was finalised. (1)Improve the oversight provided by key role players over the corrective action taken to address repeat audit findings; (2) Close monitoring of asset task team progress. Implemented In progress Not implemented New

10 Identify desired impacts Assess and adjust Specify performance indicators Monitor and take Set targets corrective action and allocate resources End-year reporting Strategic Planning Implementation and in-year reporting Operational planning and budgeting Policy development INSTITUTION National department Provincial department Municipality Public entity Municipal entity INSTITUTION National department Provincial department Municipality Public entity Municipal entity OVERSIGHT: Parliament, provincial legislature or municipal council OVERSIGHT: Parliament, provincial legislature or municipal council Oversight model Accountability

11 consider, amend, approve or reject legislation (bills in its portfolio) 1. Legislation consider and approve budgets and monitor expenditure of the Departments and entities reporting to them 2. Budgets consider progress reports (monitoring) from line-function departments, and provincial and local government authorities and entities on their respective mandates 3. Mandates ensure that all appropriate executive organs of state in its portfolio are held accountable for their actions (oversight); and 4. Accountability conduct oversight over the executive authority and consult/liaise with any other executive organ of state and make recommendations 5. Oversight Role of Portfolio Committees (Rule 201) Oversight component - Portfolio committee mandate

12 Is the Strategic Plans and Annual Performance Plans for entities aligned to the National Development Plan Does the entity have adequate resources (human and financial) available to achieve predetermined objectives Are the targets realistic (can it be done) How are the entities ensuring that Strategic Plans and Annual Performance Plans will be achieved (performance contracts, quarterly monitoring, etc.) The Portfolio committee should review the quarterly progress of entities with regard to predetermined objectives and contributions to NDP The Portfolio committee should review annual achievement of predetermined objectives by entities (Annual Reports) The Portfolio committee should approve and track changes to strategic plans and annual performance reports Considerations for Portfolio Committees when dealing with performance monitoring

Senior management Senior management Accounting officers/ authority Accounting officers/ authority Executive authority Executive authority Required assurance levels Extensive Management’s assurance role Senior management – take immediate action to address specific recommendations and adhere to financial management and internal control systems Accounting officers/ authority – hold officials accountable on implementation of internal controls and report progress quarterly and annually Executive authority – monitor the progress of performance and enforce accountability and consequences Management assurance First level of assurance Management assurance First level of assurance Senior management Senior management Accounting officers/ authority Accounting officers/ authority Support oversight – complimentary mandate Oversight assurance Second level of assurance Oversight assurance Second level of assurance Coordinating / Monitoring institutions Coordinating / Monitoring institutions Internal audit Internal audit Audit committee Audit committee Extensive Required assurance levels Oversight’s assurance role National Treasury/ DPSA – monitor compliance with laws and regulations and enforce appropriate action Internal audit – follow up on management’s actions to address specific recommendations and conduct own audits on the key focus areas in the internal control environment and report on quarterly progress Audit committee – monitor risks and the implementation of commitments on corrective action made by management as well as quarterly progress on the action plans Independent assurance Third level of assurance Independent assurance Third level of assurance Oversight (portfolio committees / councils) Oversight (portfolio committees / councils) Public accounts committee Public accounts committee National Assembly Extensive Required assurance levels Role of independent assurance Oversight (portfolio committees) – review and monitor quarterly progress on the implementation of action plans to address deficiencies Public accounts committee – exercise specific oversight on a regular basis on any report which it may deem necessary National Assembly – provide independent oversight on the reliability, accuracy and credibility of National and provincial government

14 Creating a better and dignified life for the citizens of South Africa through timely effective, efficient and economical SERVICE DELIVERY How does clean administration improve service delivery

15 A common reaction to the general reports relates to the questions posed by many, including key role players in government, about the need for accountability and consequences and how these can be enforced. Legislation provides the answer to this question as it clearly defines accountability and the remedies. Details are available on pages 44 to 65 of our booklet: In Brief: The Auditor-General of South Africa Accountability and remedies to address transgressions and poor performance

16 This AGSA booklet highlights the legislation that enables remedies to be applied where national and provincial departments are guilty of transgressions and poor performance. It addresses the following typical matters reported in the general reports: Failure to comply with legislated obligations and responsibilities Unauthorised, irregular and fruitless and wasteful expenditure Possible fraud and corruption Poor work performance – officials and suppliers Other non-compliance with legislation Accountability and remedies to address transgressions and poor performance

17 Focus areas for Committee Exercise oversight over the asset management “clean up” exercise progress; Monitor the status of implementation of SADPA and the impact on the activities of the ARF; Meet the Chair of the Audit Committee at least bi- annually with a view that all levels of assurance have a common understanding of the issues within the portfolio.

Questions