1. PFMA 2013-2014 Audit Outcomes of the Water Portfolio National D 14 October 2014

2. Our reputation promise/mission The Auditor-General of South Africa (AGSA) 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.

3. Purpose of the presentation To provide members of parliament with the necessary information/guidance on the audit outcomes for the portfolio of Police to enable the Portfolio Committee to effectively execute their oversight function: Audit outcomes Drivers of internal controls Root causes Assurance provided by key role players Key recommendations Oversight model

4. Unqualified with no findings Unqualified with findings Qualified with findings Adverse or disclaimer with findings Audits outstanding 4 2013-14 PFMA Regression in overall audit outcomes over the past three years 3 auditees

5. 5 2013-14 PFMA Improved UnchangedRegressedOutstanding Unqualified with no findings Unqualified with findings Qualified with findings Department of Water and Sanitation Water Trading Account Water Research Commission Adverse or disclaimed with findings Movement Audit outcome 0 0 Movement in audit outcomes 0 0 1 1 2 2

6. 2013-14 PFMA Unqualified Qualified Adverse or disclaimer 6 Three-year trend – financial statements 3 auditees WRC

7. 2013-14 PFMA 7 Outcome if NOT corrected Outcome after corrections Avoided qualifications by correcting material misstatements during audit process 2013-14 Outcome if NOT corrected Outcome after corrections Financially unqualified (clean audit/ unqualified with findings) Financially qualified (qualified/ adverse/ disclaimed with findings) 2012-13 3 auditees Quality of submitted financial statements

8. Quality of annual performance reports With no findings With findings Annual performance reports of of the auditees were useful and reliable No movement over 2013-14 0 8 2013-14 PFMA

9. 2013-14 PFMA Most common material findings on usefulness and reliability Improved Regressed Stagnant or little progress 9 Usefulness Measurability of planned targets and indicators could not be assessed No reason for variances between planned and actual achievements could be provided Performance targets were not specific and well defined Reliability Completeness of reported information could not be tested against supporting evidence Validity of reported information could not be tested against supporting evidence Accuracy of reported information could not be tested against supporting evidence

10. 2013-14 PFMA 10 With no findings With findings Significant non-compliance with legislation by of the auditees Stagnation over 2013-14 3 Status of compliance with legislation 3 auditees

11. 2013-14 PFMA 11 Most common areas of non-compliance 2013-14 2012-13 Management of strategic planning and performance Procurement and contract management Revenue management Quality of financial statements submitted for auditing DWS, WRC & WTE DWA & WTE WTE WRC WTE DWS DWS & WTE Improved Regressed Stagnant or little progress Human resource management

12. 2013-14 PFMA 12 Irregular expenditure incurred R8 170 million (21 067 instances) Decrease in irregular expenditure Non-compliance with SCM legislation Main areas of non- compliance Required number of quotations were not obtained for procurement under R500 000 Awards were made to suppliers who did not submit declarations Interest not declared Goods and Services were procured without inviting competitive bids Preference point system was not applied Quotation were awarded to bidder that did not score the highest points Nature R 51 191 million Identified by auditees Identified during audit R 68 275 million DWS R10 901 WTE R5 791

13. 2013-14 PFMA 13 Fruitless and wasteful expenditure incurred Nature R651 million (80%) 140 auditees (64%) R164 million (20%) 83 auditees (38%) Increase in fruitless and wasteful expenditure Accommodation VAT paid to Non-VAT vendor Training not attend Telephone system Overdue accounts paid to Eskom & Municipalities Penalties and interest paid to SARS Deviation from scope of contract Legal services cost due to case lost Failed to notify Travel Administrator for cancellation of booking Identified by the auditees Identified during the audit R 2 165 million + R20 592 million DWS – R182 WTE – R24

14. 2013-14 PFMA 14 Drivers of internal controls should improve Good Concerning Intervention required

15. 2013-14 PFMA 15 Root causes should be addressed Lack of consequences for poor performance and transgressions A root cause at 3 of the auditees (2012-13: 3 auditees) Instability or vacancies in key positions A root cause at DWS and WTE (2) of the auditees (2012-13: 2 auditees) Key officials lack appropriate competencies A root cause at DWS and WTE (2)of the auditees (2012-13: 2 auditees) Slow response by management (Accounting officer and senior management) Held senior officials accountable for non-compliance with laws and regulations DWS and WTE (2)of the auditees (2012-13: 2 auditees)

16. 2013-14 PFMA 16 Assurance provided by key role players should improve Provides assurance Provides some assurance Provides limited/no assurance Not established Improved assurance Less assurance Limited progress on assurance

17. 2013-14 PFMA 17 Key recommendations for improvement Strengthen the following controls to create a control environment that supports reliable financial and performance reporting and compliance with legislation: Increase stability within the portfolio by filling key vacant positions (DWS & WTE) (DWS, WRC and WTE) Increase competence of employees by encouraging continuous learning and training. (DWS, WRC and WTE) (DWS, WRC and WTE) Increase continuous monitoring and improvement of business processes (DWS, WRC and WTE) (DWS, WRC and WTE) Hold senior officials accountable for non-compliance with laws and regulations. (DWS, WRC and WTE) Implement adequate systems/processes to support accurate and reliablefinancial (DWS, WRC and WTE) and performance information (DWS, WRCand WTE) reporting. Implement adequate systems/processes to support accurate and reliable financial (DWS, WRC and WTE) and performance information (DWS, WRC and WTE) reporting. Implementing adequate systems/processes to focus on overall compliance and include consequence management where necessary. Financial (DWS, WRC and WTE) and performance management (DWS, WRCand WTE) – enhance the “checks and balances” during the year to ensurethat all reconciliations are done on a daily / monthly basis. Financial (DWS, WRC and WTE) and performance management (DWS, WRC and WTE) – enhance the “checks and balances” during the year to ensure that all reconciliations are done on a daily / monthly basis.

19. 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

20. 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

21. 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

22. 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 report 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