1. Audit outcomes of the portfolio for the 2015-16 financial year
PFMA

2. The AGSA’s promise and focus
MFMA 1 1
The AGSA’s promise and focus 2 2

3. Role of AGSA in the BRRR process
Reputation promise
PFMA
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.
Role of AGSA in the BRRR process
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 entities taking into consideration the objective of the committee to produce a BRRR.
To provide the portfolio committee with applicable information and guidance on the Small Business Development portfolio’s audit outcomes so that they, the committee, can ensure effective oversight.
To enable oversight to focus on areas that will lead to good governance. 3 3

4. 1 2 3 Our annual audits examine three areas 2015-16 PFMA
FAIR PRESENTATION AND RELIABILITY OF FINANCIAL STATEMENTS 2
RELIABLE AND CREDIBLE PERFORMANCE INFORMATION FOR PREDETERMINED OBJECTIVES 3
COMPLIANCE WITH KEY LEGISLATION ON FINANCIAL AND PERFORMANCE MANAGEMENT 4 4

5. Unqualified opinion with no findings (clean audit)
Financially unqualified opinion with findings
PFMA
Auditee:
produced credible and reliable financial statements that are free of material misstatements; and
reported in a useful and reliable manner on performance as measured against predetermined objectives in the annual performance plan (APP); and
observed/complied with key legislation in conducting their day-to-day to achieve on their mandate.
Auditee produced financial statements without material misstatements but struggled to:
align their performance reports to the predetermined objectives they committed to in their APPs; and/or
set clear performance indicators and targets to measure their performance against their predetermined objectives; and/or
report reliably on whether they achieved their performance targets; and/or
determine which legislation they should comply with and implement the required policies, procedures and controls to ensure compliance. 5 5

6. Qualified opinion Adverse opinion Disclaimed opinion
PFMA
Auditee:
had same challenges as those that were unqualified with findings but, in addition, they could not produce credible and reliable financial statements.
had material misstatements on specific areas in their financial statements, which could not be corrected before the financial statements were published.
did not comply with key legislation in certain instances.
Adverse opinion
Auditee:
has so many material misstatements in their financial statements that we disagree with almost all the amounts and disclosures in the financial statements.
was unable to provide sufficient supporting documentation for amounts in the financial statements and achievements reported in the annual performance report.
did not comply with key legislation.
Disclaimed opinion
Auditee:
could not provide us with evidence for most of the amounts and disclosures reported in the financial statements, and we were unable to conclude or express an opinion on the credibility of their financial statements.
was unable to provide sufficient supporting documentation for amounts in the financial statements and achievements reported in the annual performance report.
did not comply with key legislation. 6 6

7. The 2015-16 audit outcomes and key messages
PFMA 2
The audit outcomes and key messages 2 7 7

8. Improvement in audit outcomes over 3 years
Compliance with key legislation
performance plans
annual performance reports
Overall improvement in audit outcomes
no findings
with findings
with findings
with findings
with finding
outstanding 1
outcomes, financial statements processes,
key legislation and…. 2 3
…. performance planning and reporting must be improved by….
The improvement at Seda is attributable to leadership ‘s response to implement and monitor action plans to address the findings raised in the previous years.
Financial statement preparation remains a concerns as material adjustments are effected to AFS submitted for audit;
Inadequate monitoring of SCM legislation resulted in non-compliance with SCM legislation.
Inadequate review of the strategic plan resulting in non-compliance with the Treasury Regulations.
At Seda, leadership implemented detailed reviews of AFS supporting schedules and rigorously monitored compliance with legislation.
Lack of adequate review .
Lack of policies and standard operating procedures at the department coupled with key vacancies . 8
PFMA
material findings
material findings
audits
late submitted 8

9. Assurance providers per level
Improvement in audit outcomes over 3 years - continued
Status of Key controls
Assurance providers per level
Senior management
First level
officer/authority
Executive authority
Second level
Internal audit unit
Audit committee
Third level
Portfolio committee
Provides assurance
Provides some assurance
no assurance
Vacancy
established
Not
Good
Concerning
Intervention required 4 5
… providing attention to the key controls by…
… the key role players as part of their role in combined assurance
There has been an improvement in the status of internal controls as evidenced by the clean audit. This is attributable to leadership who have maintained a strong internal control environment that is supported by experienced and skilled staff.
At the department, there was vacancies i.e. no CFO for the year under review. Furthermore monthly disciplines of record keeping and reconciling transactions to ensure the credibility of financial and performance reports presented to oversight committee are not fully effective.
The assurance provided by key role players has improved compared to previous years at SEDA, which is clearly reflected in the improved key controls, particularly those relating to reviewing and monitoring of compliance.
The assurance provided by key role players at the level of senior management and the accounting officer needs to be improved at the department. Internal control processes for financial and performance reporting as well as compliance are in place but not fully effective.
The Portfolio committee performed in terms of the legislative oversight requirements and it robustly engages the department on its role and mandate. 9
PFMA
Improved
Stagnant
Regressed 9

10. 3 Performance management linked to programmes/ objectives tested 3
PFMA 3
Performance management linked to programmes/ objectives tested 3 10 10

11. Small Business Development Small Enterprise Development Agency
Quality of annual performance plan and quality of submitted annual performance reports unchanged
Outcomes of programmes selected for testing:
Auditee:
Movement:
Objectives
Usefulness
Reliability
Small Business Development
N/A
Programme 2: Cooperatives Development
Important targets were not consistent and specific; and
Important indicators were not well defined.
No material findings reported.
Programme 3: Enterprise Development and Entrepreneurship
Important targets were not specific; and
Small Enterprise Development Agency
Programme 1: Enterprise Development
Programme 2: Equitable access to support services
Programme 4: Seda technology programme
PFMA
Improved
Stagnant
Regressed
findings reported
findings reported 11

12.
PFMA 4 4
Financial management 12 12

13. Improvement in compliance with legislation and quality of financial statements
Figure 3: Quality of submitted financial statements
Figure 1: Findings on compliance with
key legislation – all auditees
during the audit process
annual financial statements
NOT corrected
50% (1)
after corrections
100% (1)
or contracts
50% (1)
SCM legislation – all auditees
NOT corrected
after corrections
With no material
misstatements
With material 13

14. Unauthorised, irregular as well as fruitless and wasteful expenditure increase over 3 years and follow up action
PFMA
Definition
UIF amounts incurred by entities in portfolio
Nature of U.I.FW expenditure R’million
Expenditure not in accordance with the budget vote/ overspending of budget or programme
Expenditure incurred in vain and could have been avoided if reasonable steps had been taken. No value for money!
Expenditure incurred in contravention of key legislation; goods delivered but prescribed processes not followed 14

15. Investigations of U.I.FW expenditure
Follow up action of unauthorised, irregular as well as fruitless and wasteful expenditure over 3 years
PFMA
Investigations of U.I.FW expenditure
2 auditees (100%) [ : 1 (100%)] lodged investigations to determine root cause and consequences of U.I.FW incurred.
The investigations have not resulted in the dismissal of any official yet as the outcomes /recommendations
2 Entities
1 Entity
1 Entity
Investigated
Not investigated 15

16. Root causes, follow up on commitments and proposed recommendations
PFMA 6
Root causes, follow up on commitments and proposed recommendations 6 16 16

17. Status of key commitments by minister
Root causes, follow up on commitments and proposed recommendations 1
… the following root causes must be addressed … 2
… through honouring the following commitments made by the executive authority……
Root causes
Status of key commitments by minister
in key positions
There are no Minister Commitment as the audit of the department is a first time audit and SEDA was previously under the Trade and Industry portfolio
Not implemented
In progress
Implemented
New
Compliance with legislation should be reinforced by enforcing consequences for unsatisfactory performance which exasperate the lack of sustained progress towards clean administration.
The minister requested that she would appreciate it if the audit team could continue with the quarterly engagements regarding the status of key controls in the portfolio.
PC must request quarterly feedback on the progress of filling vacancies at key management level.
PC must request management to provide quarterly feedback on status of key controls.
PC must request management to provide feedback on the implementation and progress of action plan during quarterly reporting. 3
… and implementation of the following proposed commitments by the Portfolio committee and management…
List of action taken against transgressors must be provided quarterly to PC for follow up. 17
PFMA 17

18. Small Enterprise Finance Agency (SEFA)
PAA (section 4(3) audit entities
PFMA
Three year audit outcome of auditees within the SBD portfolio which are not audited by the AGSA in terms of PAA section 4(3):
Auditee:
Three year Trend
Compliance
AFS
AoPO
Small Enterprise Finance Agency (SEFA) a
Improved
Stagnant
Regressed
legend
Unqualified with no findings
with findings
with findings
with findings
with finding
outstanding
No Material Findings a r
findings 18

19. Questions Questions 2015-16 PFMA 2015-16 PFMA
Auditor-General of South Africa
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