1. Briefing to the Portfolio Committee on Justice and Correctional Services Audit outcomes of the Justice and Constitutional Development portfolio for the financial year
October 2015

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.
Need to consider the following
All information to be included needs to have been audited and is accurate and correct
If information included is not audited then it needs to be specified as such or specified that this was based on a sample tested

3. Purpose of the presentation
Annually oversight committees set aside time to focus on assessing the performance of departments. On completion of the process, portfolio committees are required to develop department-specific reports, namely budgetary review and recommendations reports (BRRR) which express the committee`s view on the department’s budget for recommendation to the National Treasury ahead of the following year`s budget period. Our role as the AGSA is to reflect on the audit work performed to assist the portfolio committee in its oversight role in assessing the performance of the departments taking into consideration the objective of the committee to produce a BRRR.

4. Contents 1. Overall audit outcomes for Justice portfolio 6
2. Auditor-General six key focus areas 7
3. Unauthorised/ Irregular / Fruitless & Wasteful expenditure 14
4. Combined assurance and assessment of assurance providers 17
5. Drivers of key controls for portfolio 19
6. Root causes and recommendations
Minister’s commitments to address root causes 22
Section 4(3) entities (not audited by AGSA) 23

5.  X The scope of AGSA audits
Provide assurance that annual financial statements are free from misstatements that will affect users
Do not provide assurance on the appropriateness of the departmental budgets
Report on usefulness and reliability of the information in the annual performance report
Do not provide commentary on service delivery
Report on material non-compliance with relevant key legislation
Do not report on ALL legislation – only key selected requirements from relevant legislation are audited
Identifying the key internal control deficiencies to be addressed
We assess the risk of fraud, but we are not responsible for –
Fraud identification
Fraud prevention

6. 1. Overall audit outcomes for Justice and Constitutional Development portfolio
PFMA
Unqualified no findings
Unqualified with findings
Qualified with findings
Adverse with findings
Disclaimer with findings
8 auditees
8 auditees
8 auditees

7. 2. Auditor-General six key focus areas
PFMA
Quality of submitted financial statements
Quality of submitted performance reports
Compliance with legislation
Good
Concerning
Intervention required
Human resource management
Information technology
Financial health
Improvement
Stagnant or limited progress
Regressed

8. 2.1 Quality of submitted financial statements
PFMA
Outcome if NOT corrected
Outcome after corrections
3 auditees
Financially unqualified with findings
Financially qualified (qualified/ disclaimed with findings)
Avoided qualifications by correcting material misstatements
during audit process
Outcome if NOT corrected
Outcome after corrections
3 auditees 8

9. 2.2 Quality of annual performance reports
80%
PFMA
Annual performance reports of were reliable and useful compared with 80% in the previous year
With no findings
With findings
Improved
Usefulness
Reliability
Stagnant or little progress
Regressed
Auditees did not prepare annual performance reports ( : 0)
All auditees that submitted information, did so in time for audit 9

10. 2.3 Quality of submitted annual performance reports
PFMA
Outcome if NOT corrected
Outcome after corrections
Annual performance report not materially misstated
Annual performance report contained material misstatements
1 auditee
Avoided findings by correcting material misstatements
during audit process
Outcome if NOT corrected
Outcome after corrections
1 auditee 10

11. 2.4 Most auditees did not comply with legislation in the following areas
PFMA
Quality of annual financial statements submitted
Prevention of unauthorised, irregular and/ or fruitless and wasteful expenditure
Management of procurement and or contracts
Good
Concerning
Intervention required
Management of strategic planning and performance
Human resource & consequence management
Internal audit & Audit committee
Improvement
Stagnant or limited progress
Regressed

12. 2.5 Financial health of the portfolio
Good
Concerning
Intervention required
PFMA
Focus areas for financial health
Status
Comment
Going concern
Even though PPSA realised a surplus in the current year, PPSA is factually insolvent and there is therefore significant doubt on the constitutional institution’s ability to discharge its liabilities in the normal course of business.
Debtors’ recovery days
With respect to the SIU the debtor’s collection period is significantly long. This is mainly due to the challenges of recovering money due to the SIU by other state institutions.
Bank overdraft/ creditors payment days/ accruals adjusted deficit
The DoJ&CD’s bank account was in overdraft at year-end. Payment of creditors within 30 days has improved significantly over the years but is still an issue. The improvement could also have contributed to the overdraft as the payment days are normalising and historical backlogs in payments are being cleared. Furthermore, if year-end accruals (invoices unpaid), were included on the statement of financial position it would have resulted in liabilities exceeding assets.
Only to be included if going concern or accruals/payables or commitments have been included in the audit report. 12

13. 2.6 Information technology
PFMA
PFMA
Status on the information technology focus areas
Constitutional institutions/ Public entities and Funds
Department
Security management
Good
Concerning
Intervention required
User access management
IT service continuity
Improved
Stagnant or little progress
IT governance
Regressed

14. 3. UIFW expenditure definitions
PFMA
Unauthorised expenditure
Expenditure not in accordance with the budget vote
Irregular expenditure
Expenditure incurred in contravention of key legislation
Fruitless and wasteful expenditure
Expenditure that should not have been incurred (incurred in vain that could have been avoided and no value for money) 14

15. 3.1 Irregular expenditure for portfolio
PFMA
Identified by auditees
Identified by auditors 15

16. 3.2 Fruitless and wasteful expenditure for portfolio
PFMA
Identified by auditees
Identified by auditors 16

17. 4. Combined assurance – complimentary mandate
Senior
management
Accounting
officers/
authority
Executive
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
Oversight assurance
Second level of assurance
Coordinating /
Monitoring
institutions
Internal
audit
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
Oversight
(portfolio
committees /
councils)
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

18. 4.1 Assessment of assurance providers for portfolio
PFMA
First level
Improvement
Stagnant or little progress
Second level
Regressed
Please note that no assessment for PC. This can however be discussed with chair one-on-one to start preparing them for next year when this will be included
Provides assurance
Provides some assurance
Provides limited/ no assurance
Vacancy
Not
Established/ Evaluated 18

19. Drivers of internal control
5. Driver of key controls for portfolio
PFMA
Drivers of internal control
Department & Entities
Leadership
Financial & performance management
Governance
Effective leadership culture
Oversight responsibility
HR management
Policies and procedures
Action plans
IT governance
Proper record keeping
Processing and reconciling controls
Reporting
Compliance
IT systems controls
Risk management
Internal audit
Audit committee
Justice and Constitutional Development
Guardian’s Fund
Legal Aid South Africa
President's Fund
South African Human Rights Commission
Special Investigating Unit
The Public Protector of South Africa
Third Party Funds
Good
Concerning
Intervention required
Improvement
Stagnant or little progress
Regressed

20. 6. Root causes should be addressed (top two)
PFMA
Lack of consequences for poor performance and transgressions
Staff not always held accountable by leadership for poor performance and transgressions – creates perception these are accepted and tolerated
Slow response by management in addressing the root causes of poor audit outcomes
Improved
Stagnant or little progress
Management does not address audit findings with a sense of urgency. This leads to corrections not addressed timeously and late implementation of correcting measures.
Action plans are inadequate and implementation is not monitored adequately
Regressed

21. 6.1 Root causes & Recommendations (top two)
PFMA
Root causes
Recommendation
Lack of consequences for poor performance and transgressions
The leadership of the entity should communicate policies and consequences clearly to the employees of the entity. A no tolerance approach should be enforced where situations of non-compliance, fraud and corruption are identified. A formal disciplinary process should be in place and enforced.
Performance assessments should be conducted on a more frequent basis and staff compliance closely monitored. Employees that do not improve should be identified and corrective measures put in place to assist struggling employees.
Slow response by management
Management should have clear processes and delegations in place to ensure timeous response to various findings. Outstanding findings should be flagged and followed up by a delegated official to ensure prompt corrective action.
Adequate action plans must be implemented within strict timelines. The implementation of action plans should be reviewed at least quarterly by the audit committee. Internal audit should assess if implementation has achieved the required outcome. 21

22. 7. Minister’s commitments to address root causes
PFMA
Status of key commitments by minister
The performance information management system will be utilised effectively to facilitate collation and consolidation of information from the various line functions and regions.
Ageing and redundant GFS (Guardian’s Fund) IT system to be prioritised for upgrading
and/or replacement in order to ensure proper financial reporting and preparation of credible financial statements
The chief financial officer of the department to take control of supply chain and asset management reporting functions and report on progress to the accounting officer on a monthly basis for investigation and corrective action.
Support to be provided to the department to fill vacancies as soon as they arise, especially at senior management level.
IT system with respect to Third Party Funds to be prioritised for replacement in order to ensure proper financial reporting and preparation of credible financial statements.
Reporting on quarterly performance against predetermined objectives will be strengthened with the involvement of internal audit to ensure credibility of reported information.
Not implemented
In progress
Implemented
New

23. 8. Section 4(3) entities: Not audited by AGSA
South African Board for Sheriffs
PFMA
Unqualified no findings
Unqualified with findings
Qualified with findings
Adverse with findings
Disclaimer with findings

24. Questions