1. Audit Outcomes
Social Security Cluster 11 October Presented by: Abrie Adendorff Senior Manager AGSA

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.

3. PART 1
Introduction
The purpose of the briefing note is to provide an insight by the Auditor-General South Africa into the issues resulting in the audit opinion on the financial statements of the Department of Social Development (DSD), the South African Social Security Agency (SASSA) and the National Development Agency (NDA).
The mission of the Department is to ensure the provision of comprehensive social protection services against vulnerability and poverty within the constitutional and legislative framework, and create an enabling environment for sustainable development. The Department further aims to deliver integrated, sustainable and quality services, in partnership with all those committed to building a caring society.

4. The Activities of the Department
The activities of the department are organised under the following five programmes:
Programme:
Budget
09/10
R’000
Expenditure
10/11
1. Administration
2. Comprehensive social security
3. Policy development, review and implementation support for welfare services
4. Community development
5. Strategy and governance
65 903
61 447
TOTAL

5. The Social Development portfolio consist of the following entities:
Department of Social Development (DSD) – Vote No. 18
South African Social Security Agency (SASSA)
National Development Agency (NDA)
Funds under the umbrella of DSD
Disaster Relief Fund
Social Relief Fund
Refugee Relief Fund
State President fund
High School Vorentoe Disaster Fund (closed 26 August 2010)

6. Funding of the entities
Department of Social Development – Budgeted amount 10/11 – R
(included in this amount is the amount for households – R , programme 2 :
Comprehensive social security, that is transferred to households by SASSA on behalf
of the Department)
National Development Agency – R (transferred from DSD)
SASSA – R (transferred from DSD)
Funds – these funds are dormant and no funds are transferred to it

7. Summary of audit opinions
Description
Unmodified
An unqualified opinion is expressed when the auditor concludes that the financial statements give a true and fair view (or are presented fairly, in all material respects) in accordance with the applicable financial reporting framework.
Unmodified (with emphasis of matter)
The addition of such an emphasis of matter paragraph(s) does not affect the auditor’s opinion on whether the financial statements are fairly presented.
Modified (Qualified)
A qualified opinion is expressed when the auditor concludes that an unqualified opinion cannot be expressed but that the effect of any disagreement with management regarding departures from financial reporting framework, or limitation on scope is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion.

8. Audit Opinion
Description
Disclaimer
A disclaimer of opinion is expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor has not been able to obtain sufficient appropriate audit evidence to form an opinion and accordingly is unable to express an opinion on the financial statements.
Adverse
An adverse opinion is expressed when the effect of a disagreement with management regarding departures from the financial reporting framework is so material and pervasive to the financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the misleading or incomplete nature of the financial statements.

9. Type of qualified audit opinion
Audit Outcomes
Summary of audit opinions
Type of qualified audit opinion
Adverse
Disclaimer 1
Qualified
Unqualified 7 6 8

10. Audit qualification findings
PART 2 Audit outcomes
Audit qualification findings
The Department of Social Development
Transfers to Households
Yes No
Tangible and intangible assets
Employee compensation
Leases
Revenue and Receivables
Commitments and Accruals
Liabilities
Goods and services

11. Audit qualification findings
Audit outcomes continues
Audit qualification findings
South African Social Security Agency
Revenue No
Assets
Yes
Expenditure
Liabilities
Property Plant and Equipment
Compensation of employees

12. Audit outcomes 2010-11 - continues
The other entities within the Social Security Cluster had no audit qualifications
in the prior two years:
- The National Development Agency
- Disaster Relief Fund
- Social Relief Fund
- Refugee Relief Fund
- State President fund
- High School Vorentoe Disaster Fund

13. 2010-11 QUALIFICATION ISSUES
The Department of Social Development
The Department has been qualified on Transfers and Subsidies due to limitations placed on the audit by its agent, SASSA.
Transfer to Households:
2762 Grant beneficiary files were selected for audit purposes.
42 Files representing 1.52% of the sample were not presented for audit or did not contain sufficient information necessary for the beneficiary to receive the grant..
This extrapolated to the population based on grant type and province amounted to a total scope limitation on the audit of R ,09. ( – R10.5 billion)

14. 2010-11 QUALIFICATIONS The South African Social Security Agency
SASSA received an unqualified audit opinion for the financial year.
SASSA has had a disclaimer audit opinion for financial year and had an unqualified audit opinion for the financial year.
The National Development Agency
The NDA has had an unqualified audit opinion for the prior 2 years and for the financial year.
The 5 DSD Funds
All the funds have had unqualified audit opinions for the prior 2 years and for the financial year.

15. Other Audit Report Matters
Emphasis of Matter
Department of Social Development
Emphasis of matter issues were included regarding the flow of funds model between the department and SASSA.
South African Social Security Agency
Emphasis was brought to the attention of users that various financial statement items were restated due to the correction of prior period errors. It was further emphasised that SASSA had material impairments of debtors to the amount of R , (2009/10 – R ). The prior year impairment was done as part of the restatement of corresponding figures.
National Development Agency
Emphasis was brought to the attention of users that the accumulated surplus for 31 March 2010 has been restated as a result of an error discovered during the year ended 31 March 2011 in the financial statements of the NDA.

16. REPORT ON OTHER LEGAL AND REGULATORY REQUIRMENTS
The following findings were identified on PREDETERMINED OBJECTIVES:
Criteria per Audit
Presentation
Consistency
Relevance
Measurability
Validity
Accuracy
Completeness
Timeliness
Existence
DSD X
SASSA
NDA

17. REPORT ON OTHER LEGAL AND REGULATORY REQUIRMENTS
The following findings were identified on COMPLIANCE WITH LAWS AND REGULATIONS:
Department of Social Development
The PFMA:
s43(3): Virement not approved.
s40(1)(a): Full and proper records not maintained.
s40(3)(a): The audited financial statements were not fairly presented resulting in a qualified opinion.
Treasury regulations:
TR 4.1.2: Investigation into irregular/fruitless expenditure not within 30 days.
TR 9.1.2: Irregular expenditure not reported to National Treasury.
The Regulations to the Social Assistance Act:
Regs 2 & 3: Beneficiary eligibility criteria not complied with.
Regs 11, 18 & 19: Documentation to accompany applications not maintained.
South African Social Security Agency
No material non-compliance identified.
National Development Agency
The PFMA: s51(1)(b)(ii): No effective steps taken to prevent irregular expenditure.

18. INTERNAL CONTROLS Department of Social Development
Leadership
Due to the legislative reporting lines, the oversight responsibility fulfilled by the Department does not focus on the detail of the operational function performed by its agency, SASSA, which cascades down to the management of SASSA and its operational staff.  
Management did not ensure proper guidance to ensure that there’s a logical link between reported objectives, indicators and targets to ensure that reported performance targets are specific and measurable.
Financial and performance management
Management did not ensure that there was sufficient oversight over the tabled strategic plan to ensure that it complied to Treasury Regulation 5.2.2(d) and Framework for managing programme performance information (FMPPI)
South African Social Security Agency
Management did not implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information is accessible and available to support financial and performance reporting.
National Development Agency
The performance of the entity is not measured against predetermined objectives, indicators and targets as required by the PFMA.

19. OTHER REPORTS
Department of Social Development
A performance audit is being conducted on the readiness of Government to report on it’s performance.
The findings thereof, will be reported in a separate report.