1. WELCOME AGSA 5 TH PARLIAMENT CAPACITY BUILDING PRESENTATION 23 September 2014 1

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. 2

3. PURPOSE OF PRESENTATION To provide members of parliament with the necessary information/guidance on the role of the AGSA to enable them to effectively execute their oversight function. 3

4. CONTENT 1. Oversight role Oversight body Combined assurance model AGSA contribution to oversight 2.Audit mandate and process AGSA mandate & Legislative requirements AGSA aspiration to the public service 3. The work we do AGSA products Good administration 4. Briefing process 4

5. THE ROLE OF OVERSIGHT 5

6. The role of oversight Strategic planning Institution Department Public entity Implementation / in-year reporting Year-end reporting Budgeting / operational planning AG audits accountability information Identify the desired impacts Specify performance indicators Set targets & allocate resources Monitor & take corrective action Assess & adjust 6

7. Strategic planning Is the strategic plan in line with the legislative requirements / objectives? Ensure that the strategic plan and strategic initiatives are aligned with the government priorities, national plan of action and Medium Term Expenditure Framework (MTEF) Enquire about / identify: –challenges in meeting the strategic objectives –initiatives to address them Evaluate: –how success will be measured 7

8.  Budget preparation  Is the budget aligned with the strategic plan?  Have adequate resources been allocated to the priority areas?  Are there budget constraints and how have they been dealt with?  Focus on changes in the budget from one year to the other Budgeting 8

9.  Is departmental spending on the right track and in line with strategic plan priorities?  Does management evaluate monthly and quarterly reports?  Do action plans exist to address audit findings and improve financial management and accountability?  Are there designed, implemented and maintained internal controls (relevant to financial and non-financial information)?  Are procedures in place to identify, prevent and detect fraud?  Are adequate governance arrangements in place and are they effective (internal audit and audit committee)? Implementation/Monitoring 9

10. Reporting  Keeping management accountable and determining whether there is – Compliance with reporting responsibilities as set out in the PFMA Compliance with Parliament’s Appropriation Act Effective and efficient utilisation of resources  Review the annual report of the department / entity including the audit report, and consider both the financial and non-financial information presented. 10

11. Combined assurance model Senior management Senior management Accounting officers/ authority Accounting officers/ authority Executive authority Executive authority 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 Management assurance First level of assurance Senior management Senior management Accounting officers/ authority Accounting officers/ authority 11

12. AGSA contribution to oversight Provide briefings to committees: On audit reports before the portfolio committee compiles their BRRR (read with the annual report) Update on progress of current year audits. Sharing of audit risks & status of key controls Before the APPs is reviewed by the portfolio committee to discuss the findings identified from the pro-active audit of the PDOs of the department Acts as an expert witness during public hearings Road shows after tabling of the general report (PFMA & MFMA) Regular follow-up on the progress of implementation of resolutions Interactions with the chairpersons (quarterly) Assist in building capacity of members via APAC. 12

13. AUDIT MANDATE AND PROCESS 13

14. 1. Constitution of the Republic of South Africa (1996) Section 188 – must audit and report on accounts, financial statements and financial management of government institutions and report to Parliament / legislature that has a direct interest in the report. 2. Public Audit Act (Act No.25 of 2004) Sections 20 – Auditor-General must prepare audit report containing opinion/conclusion on: i.Financial statements and financial position ii.Compliance and financial management iii.Predetermined objectives AGSA Mandate and Legislative requirements 14

15. AGSA Mandate and Legislative requirements continues 3. Public Finance Management Act (Act No.1 of 1999) Accounting Officer: Section 40(1)(a) & (b) – Record keeping responsibilities by accounting officer and preparing financial statements for audit Section 40(1)(c) – Submission of financial statements to Auditor- General for audit Auditor-General: Section 40(2) – Audit financial statements and submit report to accounting officer 15

16. AGSA Mandate and Legislative requirements continues In addition to what is prescribed in Section 4(1) of the PAA and subject to any legislation the Auditor-General may audit and report on the account, financial statements and financial management of : Funded from the National Revenue or Provincial Revenue Fund or a municipal fund or Any institution authorised by legislation to receive funds for public purpose. 16

17. AGSA’S aspirations for the Public Service Robust financial and performance management systems Oversight and accountability Commitment and ethical behaviour by all Competent and value-adding Auditor General Independent and relevant reporting by the AG Value-adding input expressed by the AG Visible commitment by all players in the public service Demonstrated impeccable ethical behaviour and professionalism Reporting to enable effective oversight Applying consequences for transgressions and poor performance Transparent and stable reporting systems Budgeting and planning processes Focussed information management platforms Strong internal audit capabilities Professionalism Creating a better and dignified life for the citizens of South Africa through timely, effective, efficient and economical SERVICE DELIVERY 17

18. Accountability and reporting The AGSA is accountable to the National Assembly and has to report on its activities and performance of its functions in terms of section 10 of the Public Audit Act (PAA). The main accountability instruments are the AGSA's budget and strategic plan, as well as the annual report, both of which are tabled annually in the National Assembly. The Standing Committee on the Auditor-General (SCoAG), established in terms of section 10(3) of the PAA, oversees the performance of the AGSA on behalf of the National Assembly. The AGSA is accountable to the National Assembly and has to report on its activities and performance of its functions in terms of section 10 of the Public Audit Act (PAA). The main accountability instruments are the AGSA's budget and strategic plan, as well as the annual report, both of which are tabled annually in the National Assembly. The Standing Committee on the Auditor-General (SCoAG), established in terms of section 10(3) of the PAA, oversees the performance of the AGSA on behalf of the National Assembly. 18

19. The AGSA provides the oversight committees in parliament and all legislatures with briefings on root causes and recommendations on corrective measures to improve audit outcomes before the entity hearings. Developing required leadership competencies through mentoring, coaching and leadership programmes and processes for effectively managing change. The AGSA consults widely with the stakeholders in the executive and legislatures prior to tabling the General Reports that consolidate the audit outcomes of National, provincial and municipalities The General Reports are tabled in Parliament & Legislatures Visibility of the AGSA beyond the mandate 19

20. THE WORK WE DO 20

21. Verify whether there is no omitted information on financial statements Consists of – Financial, Compliance, PDO and Internal control Full application of international auditing standards Verify whether there is no omitted information on financial statements Consists of – Financial, Compliance, PDO and Internal control Full application of international auditing standards AGSA Products 21 Regularity Audit - Mandatory Regularity audit are supported by: ISA focus on the assessment of the information systems environment, use of Computer Assisted Audit Techniques (CAATs) in audits and data analytics DISCRETIONARY (Section 20(3) of the PAA) 1. Evaluate measures to ensure economic procurement of resources and efficient and effective application of the same 2. Effect of policy implementation (not policy evaluation) 3. Reporting is factual and does not include an audit opinion 4. Audit is conducted by performance auditors and may include subject matter experts 5. Focuses on a specific government programme, project or management project DISCRETIONARY (Section 20(3) of the PAA) 1. Evaluate measures to ensure economic procurement of resources and efficient and effective application of the same 2. Effect of policy implementation (not policy evaluation) 3. Reporting is factual and does not include an audit opinion 4. Audit is conducted by performance auditors and may include subject matter experts 5. Focuses on a specific government programme, project or management project DISCRETIONARY An independent process to prevent or detect fraud/ crime in the public sector Specific focus area of financial misconduct maladministration & impropriety DISCRETIONARY An independent process to prevent or detect fraud/ crime in the public sector Specific focus area of financial misconduct maladministration & impropriety Information systems audit Performance Audits Investigations DISCRETIONARY Agreed upon procedures, i.e. donor funding certificates DISCRETIONARY Agreed upon procedures, i.e. donor funding certificates Special Audits

22. AGSA products (service types and value add) Performance Auditing: Focuses on a specific government policy or management process Performance Auditing: Focuses on a specific government policy or management process BEST RESOURCE BASED ON NEED BEST RESULTS USING WHAT WE HAVE GOAL REACHED 22

23. The regularity audit – what we do & what not X Provide assurance that AFS are free from material misstatements Provide assurance that all applicable laws and regulations have been complied with Report on usefulness and reliability of the information in the annual performance report Identification of fraud Report on material non- compliance with relevant laws and regulations Provide assurance that service delivery has been achieved Identify key internal control deficiencies to be addressed 23

24. Timelines of regularity audit cycle 31 March Year end (PFMA) 31 July Audits complete (PFMA) (AGSA ) Last quarter of current year / First quarter of following year General reports (PFMA) published 24

25. Audit of financial statements and specific focus areas Financial statements Required in terms of the Constitution and the Public Audit Act The auditor forms an opinion on whether the financial statements are prepared in all material aspects in accordance with the specific applicable financial reporting framework. Predetermined objectives Service-delivery issues with focus on the reliability and usefulness of performance information which includes the measurement of targets as set out in the beginning of the financial year, were actually achieved. Compliance with laws and regulations Reporting on material non-compliance with key legislation. 25

26. Good Administration / Clean audit Financially Unqualified AFS (free from material misstatement) No material findings on Compliance with laws and regulations No material findings on the Performance Report (Predetermined Objectives) Good Administration / Clean audit 26

27. 27 The effect of any disagreements with management re departures from financial reporting framework, or limitation on scope is not so material and pervasive (unqualified opinion cannot be expressed ) Financial statements give a true and fair view (or are presented fairly, in all material respects) in accordance with the applicable financial reporting framework. Different types of audit opinion Unqualified/ unmodified 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 Unmodified with emphasis of matter Qualified

28. 28 There is lack of sufficient appropriate audit evidence to express an opinion. Different types of audit opinion continues Disclaimer Adverse The auditor disagrees with the representation made by management in the financial statements to the extent of confirming that it’s not a fair reflection of the financial position, performance and cash flow.

29. Audit of Predetermined Objectives Definition: Annual audit of reported actual performance against predetermined objectives, indicators and targets as contained in the annual performance report of departments and their entities. Audit consists of the following Main Criteria: Compliance with regulatory requirements Usefulness Reliability 29

30. Audit report structure a)Report on the financial statements  Introduction  Accounting officer/authority’s responsibility  Auditor-General’s responsibility  Opinion  Emphasis of matters  Additional matters b)Report on other legal and regulatory requirements  Predetermined objectives  Compliance with laws and regulations ( Treasury regulations, PFMA, etc.) c)Internal control  Leadership  Financial and performance management  Governance d) Other reports  Investigations  Performance audits  Agreed up procedures 30

31. Emphasis of matter/additional matters Why? – to draw the users of financial statements attention, i.e. Going concern Internal control weaknesses Financial management DoRA Fraud or suspected fraud Unauthorised, irregular and fruitless and wasteful expenditure Emphasis of matter Additional matters to draw users’ attention to a matter presented or disclosed in the financial statements which is of such importance that it is fundamental to their understanding of the financial statements to draw users’ attention to any matter other than those presented or disclosed in the financial statements which is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report 31

32. BRIEFING PROCESS 32

33. Briefing process State of the Nation Address/ Budget speeches Estimates of National Expenditure Accounting officer and audit committee ’s Reports AGSA Briefing Notes Annual Report including Audit Report & Performance Report Annual Report including Audit Report & Performance Report TOOLS 33

34. Briefing process continues - Reliable, accurate and complete Annual Reports by entities - AGSA review of annual reports critical in ensuring complete, reliable and accurate reporting - Reliable, accurate and complete Annual Reports by entities - AGSA review of annual reports critical in ensuring complete, reliable and accurate reporting - AGSA briefing of Root causes of audit outcomes - Root causes are linked to the Key Focus Areas - Analysis and understanding of the Root causes of the audit outcomes by oversight - AGSA make recommendations to oversight in addressing the deficiencies reported - AGSA briefing of Root causes of audit outcomes - Root causes are linked to the Key Focus Areas - Analysis and understanding of the Root causes of the audit outcomes by oversight - AGSA make recommendations to oversight in addressing the deficiencies reported Reporting by departments and entities Actual Briefing process - Oversight committees must obtain an understanding of the entity - The Annual Report of the entity must be studied prior to the briefing and hearing - Oversight committees must obtain an understanding of the entity - The Annual Report of the entity must be studied prior to the briefing and hearing Understanding Mandate of entities by Oversight - Oversight committees issues their findings and must make recommendations which address the deficiencies identified by way of resolutions - Recommendations must have milestones and conform to the “SMART” principles -Send reports to executives for implementation. - Oversight committees issues their findings and must make recommendations which address the deficiencies identified by way of resolutions - Recommendations must have milestones and conform to the “SMART” principles -Send reports to executives for implementation. Recommend- actions by oversight committees -Entities must compile an action plan to address the deficiencies - Action plans must have deliverable milestones and also conform to the “SMART” principles - Progress on implementation of action plan and measures to improve the audit outcomes must be reported to oversight for monitoring. -Entities must compile an action plan to address the deficiencies - Action plans must have deliverable milestones and also conform to the “SMART” principles - Progress on implementation of action plan and measures to improve the audit outcomes must be reported to oversight for monitoring. Action plans by entities and progress monitoring EFFECTIVE BRIEFING PROCESS 34

35. Department of Environmental Affairs (DEA) & its entities performance (2012/13) 35

36. DEPARTMENT OF ENVIRONMENTAL AFFAIRS Overview of the Annual Report 36 The Annual Report of the department consists of the following: 1.General information - Minister’s foreword, Deputy Minister’s statement, Overview of the Accounting officer, Strategic overview, Legislative mandate of the department, Organisational structure, Public entities and statutory bodies reporting to the Minister. 2. Information on predetermined objectives and programme performance - Audited in terms of the audit work performed on predetermined objectives. 3. Human resources (HR) management - Includes statistical information on the HR elements of the department.

37. DEPARTMENT OF ENVIRONMENTAL AFFAIRS Overview of the Annual Report 37 The Annual Report of the department (Continued) 4. Annual Financial Statement Sections (DEA and it’s entities) - Includes the following: 4.1) Report of the Audit committee 4.2) Report of the Accounting Officer 4.3) Report of the Auditor-General 4.4) Financial Statements Appropriation Statement, Statement of financial performance, Statement of Financial Position, Statement of Net Assets, Cash flow statement, Notes The financial statements are prepared in accordance with the Modified Cash Standards for DEA and SA GRAP for the entities. In terms of the modified cash basis of accounting a transaction is only recognised when it is initiated by the receipt of payment of cash.

38. 2012/13 audit outcomes breakdown 38

39. 2012/13 audit outcomes breakdown 39 AUDIT OPINIONS08/0909/1010/1111/1212/13 Department of Environmental Affairs N1 South African National Parks South African Weather Service South African National Biodiversity Institute iSimangaliso Wetland Park

40. THANK YOU 40