Department of Labour (DoL) Audit outcome for year ended 31 March October 2012 Doc Id:

2 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.

Purpose of the meeting To brief the Portfolio Committee on: DoL Portfolio SubjectSlide number 1.Portfolio Audit outcomes and key control status4 – 9 2.Progress on previous commitments10 3.Recommendation commitments for clean administration Key focus areas14 5. Other matters of interest15 6. Pyramid of Accountability16 7. Combined level of assurance17

1. Portfolio audit outcomes and key control status Opinions 2010/112011/12 Departme nt/Entity Financial Statements Predetermi ned Objectives ComplianceFinancial Statements Predetermined Objectives Compliance Departme nt of Labour Unqualified opinion with findings Qualified opinion Annual Financial Statements Management, Procurement and Contract Management, HR Management, Expenditure Management, Assets Management Unqualified opinion with findings Qualified opinion Annual Financial Statement management, Procurement and Contract Management, HR Management, Expenditure Management, Assets Management, Revenue Management CCMA Unqualified with no findings UnqualifiedNo findingsUnqualified with findings UnqualifiedProcurement and Contract Management

1. Portfolio audit outcomes and key control status Opinions 2010/112011/12 Departme nt/Entity Financial Statements Predetermine d Objectives ComplianceFinancial Statements Predetermined Objectives Compliance Compensa tion FundQualified opinion Annual Financial Statement management, Revenue and Receivable Management, Claims and Payable Management, Procurement and Contract Management, HR Management, Contingent Liabilities Qualified opinion Unqualified opinion Annual Financial Statement, Revenue and Receivable Management, Procurement and Contract Management, Assets Management, HR Management NEDLAC Unqualified opinion with findings Unqualified Annual Financial Statement Management Qualified opinion Ineffective Audit Committee,ineffective Internal Audit and Expenditure management

1. Portfolio audit outcomes and key control status Opinions 2010/112011/12 EntityFinancial Statements Predetermined Objectives ComplianceFinancial Statements Predetermined Objectives Compliance Productivity SA Unqualified with no findings UnqualifiedNo findings Unqualified with findings UnqualifiedAnnual financial statement and report on predetermined objectives Sheltered Employment FactoryQualified opinion AdverseAnnual financial statements, performance and annual reports, Expenditure Management, Revenue Management, Procurement and Contract Management Unqualified opinion with findings Qualified Annual Financial Statement management, Procurement and Contract Management, HR Management, Expenditure Management, Revenue Management Unemployment Insurance Fund Unqualified opinion with no findings Unqualified opinion No findingsUnqualified opinion with no findings Unqualified opinion No findings

7 1. Portfolio audit outcomes and key control status Dept/EntityKey control status (regression/ improvement/ unchanged) LeadershipFinancial and Performance Management Governance DoL CF CCMA NEDLAC

8 1. Portfolio audit outcomes and key control status Dept/EntityKey control status (regression/ improvement/ unchanged) LeadershipFinancial and Performance Management Governance Productivity SA SEF UIF

Further analysis on DoL portfolio key controls classified as causing concern

2. Progress on prior year commitments Commitment made DoL CF SEF Current Status Comment Maintain the unqualified report status and to address a number of policy- alignment issues. XInterventio n required overall Unqualified opinion was obtained, however the financial statements were not credible as material adjustments relating to disclosure notes were made to the AFS SCM policy was amended however, irregular expenditure was still incurred from procurement processes due to lack of understanding of TR requirements for deviations Commitment to address AOPO findings reported for 2010/11 XInterventio n required overall Still repeat findings. Management did not implement audit recommendations timely Focus quite intensively on the department’s ability to address the long- standing problems at the Compensation Fund XInterventio n required Still repeat findings noted in the current year except for improvement on predetermined objectives. This is due to the lack of timely decision making, ineffective leadership and poor performance of staff over day to day activities and lack of disciplinary actions over poor performance Focus quite intensively on the department’s ability to address the long- standing problems at the Sheltered Employment Factories (SEF). XInterventio n required Still repeat findings

3. Recommended commitments for clean administration CommitmentDolSEFUIFCFCCMAPSANEDLAC Consultants skills transfer to be monitored and evaluated monthly progress reports from consultants on skill transfer Effective implementation of approved organisational structure, taking into account the: skills gap identified and develop IT systems producing credible financial and non financial information bodies with skills relevant to finance, performance, compliance and information system Sustainability of in house Internal Audit Monitoring and compliance unit strengthened responsibility(compliance) Management self assessment using key control document. Revisit terms of reference and deliverables by Accenture to avoid duplication by Siemens in relation to UIF and Comp Fund

3. Recommended commitments for clean administration CommitmentDolSEFUIFCFCCMAPSANEDLAC Monitor compliance with policies and procedures and take decisive action on non compliance Monitoring of bad planning by entities resulting in an increase in non compliance with PFMA, Treasury Regulations etc. Identify and monitor strengths and weaknesses of the portfolio(Sustainability) Develop checks and balances to ensure credibility of all information. Monthly financial and performance reports that include disclosure items In line with best practice, update SCM policies to ensure that approval of requests to deviate from normal SCM process by the accounting officer/authority is based on recommendations by the bid adjudication committee based on their evaluation of the submission for such a request. V Effective utilisation of Internal Audit: review internal audit scope to include adequate coverage of AOPO and Compliance in their plans

3. Recommended commitments for clean administration CommitmentDolSEFUIFCFCCMAPSANEDLAC Training programs to incorporate: understanding of why AFS are prepared (for operational management purposes, eg analysis of financial performance ) understanding of why key controls are essential understanding of why service delivery reporting is critical Continuous professional and skills development for all staff and monitoring thereof Quarterly reinforcement of clean administration processes by Accounting Officer / Executive Authority

4. Key focus areas Auditee Supply Chain Management AOPOHRIT controlsMaterial errors in AFS submitted DoL No Improvement CF No ImprovementSome Improvement No Improvement CCMA No improvement No Matters NEDLAC No improvement No Matters No improvement PSA Some improvementNo improvement No Matters No improvement SEF No ImprovementSome Improvement No improvement UIF No Matter

5. Other Matters of interest AuditeeIrregular ExpenditureFruitless and Wasteful Movement 2010/112011/12 Movement 2010/112011/12 DoL 9,523,00015,688, CF 20,305,0006,504,0002,023,00012,109,000 CCMA 1,598,001,212,00000 NEDLAC 0979,54200 PSA ,000 SEF 29,713,00030,359,82513,070252,542 UIF 0000

16 PYRAMID OF ACCOUNTABILITY Speaker/ Legislature SCOPA/PC’s Executives Accountable Leadership Audit Committee Internal Audit Skills, competence ethics and integrity Daily, weekly, monthly financial and performance disciplines Embedded systems of IC underpinned by policies and procedures Monthly reporting on financial and performance/ Interim financial statements Understandin g of requirements as well as cause and effect Flow of credible information Re-enforcing accountability at all levels, escalation and robust communication Reporting and governance "Assurance Agents" Administration "First in of defence" Oversight "Public Accountability" Accountable and transparent government

17 Assurance Model

Thank You 17