1. BRIEFING TO THE PORTFOLIO COMMITTEE ON AUDITOR-GENERAL MATTERS 1

2. TABLE OF CONTENTS Audit findings on the Audit Report Actions taken 2

3. Audit findings on the Audit Report a) Significant Uncertainties This was a contingent liability in respect of a building leased through the Department of Public Works (DPW) for office accommodation. The department had not occupied the building as it still needed to be refurbished by the lessor. The department had not paid lease payments as it had not occupied the buildings while DPW continued invoicing the department. Total amount is R22.4 million. 3

4. Audit findings on the Audit Report b) Material Under-spending of the budget The department materially under spent the budget on programme 4, sub programme: Rural Household Infrastructure Grant. As a consequence, the department has not achieved on certain of its objectives of providing sanitation services to the rural communities. The total adjusted budget was R340 625 000. The amount of R135 060 000 had been spent and R126 011 000 related to payments made in the last month. 4

5. Audit findings on the Audit Report c) Incomplete proper supporting records for financial statements The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and not supported by full and proper records. This was in respect a fixed asset register for toilets built during the period under review. 5

6. Audit findings on the Audit Report d) Material misstatements Material misstatements of expenditure for capital assets, contingent liabilities, prepayments, lease commitments, accruals and immovable assets disclosure items identified by the auditors in the submitted financial statement were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion. 6

7. Audit findings on the Audit Report e) Short comings on performance information Adequate and reliable corroborating evidence could not be provided on all major variances as disclosed in the annual performance report. About 38% of the reported indicators and targets are not consistent or not complete with the indicators and targets as per the approved annual performance plan. About 25% of indicators did not relate logically and directly to an aspect of the institution’s mandate. and realisation of strategic goals and objectives as per the three year strategic 7

8. Audit findings on the Audit Report f)Transfers and subsidies A business plan for utilisation of the Human Settlements Development Grant allocation made to all nine provinces was not approved prior to the start of the financial year. g)Asset management Proper control systems for the safeguarding and maintain assets were not implemented, as required by section 38(1)(d) of the Public Finance Management Act and Treasury Regulations 10.(1).(1).(a). 8

9. Audit findings on the Audit Report h ) Human resource management and compensation Persons in charge at pay points did not always certify that the employees receiving payment were entitled thereto as required by Treasury Regulation 8.3.4. Funded vacant posts were not filled within 12 months as required by Public Service Regulation 1/VII/C.1A.2. 9

10. Audit findings on the Audit Report i) The Auditor General thus concluded that the department did not have or /and did not maintain an effective, efficient and transparent system of internal control regarding performance management. 10

11. Actions Taken to address the audit findings To exercise oversight and ensure compliance with performance reporting prescripts, the Department has introduced an ongoing system of exception letters where there is poor performance and non compliance. The Department has also introduced a system of information packs and assessment questionnaires The Department has introduced a system of compulsory performance review sessions. 11

12. Actions Taken to address the audit findings The Department has ensured compulsory training of all SMS members in areas M&E; Strategic Planning, Governance and Accountability. In addition the Department has developed the Enterprise Operations Performance Assessment Framework (EOPAF) as well as guidelines on Enterprise Architecture. The Department has also introduced a system of tracking outstanding Targets. 12

13. Actions Taken to address the audit findings The department requested DPW in writing to reverse the lease charges and issue a credit note. DPW is currently processing the request. The landlord commenced with the refurbishment project at 260 JMS Building as of Monday, the 03 rd February 2014. The landlord submitted a Preliminary Implementation Plan, outlining various stages of the refurbishment process including projected timelines for approval by the Department of Public works. 13

14. Actions Taken to address the audit findings The Project Steering Committee has been established to monitor the refurbishment process with a view to ensure that the project timelines are met. In terms of the Preliminary Project Implementation Plan, it is anticipated that the project will be finalized at the end of May 2014. 14

15. Actions Taken to address the audit findings A request for a rollover has been approved by National Treasury. Incorrect gazzeting to municipalities which are not Water Service Authorities has been corrected Business plans have been received from all municipalities and twenty (20) have been approved while three (3) are still being assessed. Funds have been transferred to the twenty municipalities amounting to 50% of the total allocation (R41 million) All invoices for materials are checked and delivery notes are attached for payments purposes 15

16. Actions Taken to address the audit findings The department held one on one discussion with the respective provinces i.e. Mpumalanga, Free State and Limpopo. As a result of the above initiative, the Department has for the 2013/14 financial year complied with the DoRA regulations and the National Plan and 8 provincial plans with the exception of Limpopo was approved on 31 March 2013 by the Director General which was before the start of the new financial year. 16

17. Actions Taken to address the audit findings The Director General approved the plans but in some cases plans were approved with reservations. The provinces where the DG had reservations were requested to re-submit a revised Business Plan. These plans including Limpopo was received and noted by the DG. A letter of approval signed by the DG was sent to National Treasury. The letter included the approval of Limpopo's Business Plan. 17

18. Actions Taken to address the audit findings A work study was done which recommended creation of an asset management unit. A new asset management unit has been created and appointments will be finalised this month. The department has reviewed the Financial delegations in order to ensure proper certification of payrolls. The Department has taken a decision to fill all the vacant positions before the end of financial year and the process of recruitment has been enhanced to address all the bottleneck e.g veficiation process 18

19. THANK YOU 19