1. Page 1 Portfolio Committee on Social Development Overview of the 2008/09 Audit on the portfolio of Social Security 10 November 2009 AGSA

2. 2 Reputation promise/mission The Auditor-General 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. 3 Portfolio of the Minister of Social Development –Department of Social Development –South African Social Security Agency –National Development Agency –Disaster Relief Fund –Social Relief Fund –Refugee Relief Fund –State President Fund –High School Vorentoe Disaster Fund

4. 4 Portfolio summary Total Budget 2008/09 ‘000 Total Expenditure 2008/09 ‘000 Total Surplus / (Deficit) 2008/09 ‘000 Department of Social Development (excluding social assistance grants)611 146605 3115 835 Social Assistance Grants 71 175 80970 724 173451 636 South African Social Security Agency 4 630 2925 030 967(400 675) National Development Agency 166 267198 829(32 562) 76 583 51476 559 28024 234

5. 5 Portfolio summary (cont.) Approved establishment Total filled posts Total vacancies Department of Social Development 68460975 South African Social Security Agency * 18 6537 84810 805 National Development Agency1079710 19 4448 55410 890 * All these posts are not funded, but are included in the annual report as part of the approved establishment of SASSA

6. 6 Audit Report of the Department of Social Development 2008/09 – page 123-126 –Unqualified audit opinion –Emphasis of matter paragraphs It was emphasised that despite the fact that grant expenditure being reported in the annual financial statements of the Department of Social Development, a dual accountability relationship exists between the Department of Social Development and SASSA over the grants. SASSA had an impact on the audit report of the Department of Social Development regarding matters concerning grant expenditure.

7. 7 Audit Report of the Department of Social Development 2008/09 – page 123-126 –Other matters Social assistance grants The responsibility for grant administration and the payment of grant reside in the South African Social Security Agency. –Social relief of distress grants »Documentation critical to the application for the grant was not complete »Could not be confirmed that the correct person received the correct amount of relief aid at the correct time and place »Effective controls in respect of food vouchers and aid purchased to be distributed were not implemented »Applications were captured offline, which could have resulted in unnoticed erroneous duplications of payments »Distribution of relief aid was not performed in a standardized manner in all provinces »Supply chain management requirements were not adhered to in the procurement of relief aid

8. 8 Audit Report of the Department of Social Development 2008/09 – page 123-126 –Other matters Social assistance grants The responsibility for grant administration and the payment of grant reside in the South African Social Security Agency. –Social assistance grant debtors »Repayments made by the grants debtors originated from multiple sources »A single dedicated financial debtor system did not exist for the management of grant debtors »Many of the recorded debtors may not be recoverable or recovery may not be cost-effective

9. 9 Audit Report of the Department of Social Development 2008/09 – page 123-126 –Other matters Key governance responsibilities –Financial statements were subject to material amendments resulting from the audit. –Annual report was not submitted for consideration prior to the issuing of the auditor’s report

10. 10 Audit Report of the South African Social Security Agency 2008/09 – page 101-105 –Unqualified audit opinion –Emphasis of matter paragraphs Basis of accounting –Entity specific basis of accounting –Exception from having to prepare financial statements in accordance with South African Statements of Generally Accepted Accounting Practice and Generally Recognized Accounting Practice was granted by National Treasury on 31 March 2009 Irregular Expenditure –Irregular expenditure of R64 304 000 was incurred, as a proper tender process had not been followed. –R69 719 000 irregular expenditure was condoned during the financial year. (Include last year’s irregular expenditure)

11. 11 Audit Report of the South African Social Security Agency 2008/09 – page 101-105 –Other matters Asset register –Existence of various assets could not be verified –The Asset register was not updated when assets were moved from one location to another –Assets were described incorrectly in the asset register –In certain instances barcode numbers were duplicated –Some assets were duplicated in the asset register –Damaged, and redundant assets were not disposed –SASSA is migrating to an accrual based accounting system and this will require a physical stock take of all its assets to be undertaken re-valued, and taken into the new asset register

12. 12 Audit Report of the South African Social Security Agency 2008/09 – page 101-105 –Other matters Key governance responsibilities –Significant difficulties were experienced during the audit concerning delays or the availability of requested information –Financial statements were subject to material amendments resulting from the audit –Significant deficiencies in the design and implementation of internal control in respect of financial and risk management. –Number of findings: »Department of Social Development: 199 »South African Social Security Agency:48 Investigations –Forty mobile office units were purchased at an amount of R49 686 665 and an additional amount of R32 833 630 was separately contracted to the same supplier for maintenance, bandwidth and branding –Non-compliance with the service level agreement –Might result in fruitless and wasteful expenditure –A comprehensive internal investigation by SASSA will be conducted

13. 13 Audit Report of the National Development Agency 2008/09 – page 46- 48 –Unqualified audit opinion –Emphasis of matter paragraphs Irregular expenditure –Irregular expenditure to the amount of R2 583 251 was incurred –Proper procurement processes had not been followed. –Other matters Non compliance with the NDA act –NDA board does not consist of five members that represent government as requested by the NDA act –Two out of the eleven appointed board members were still employed full time in government

14. 14 Audit Report of the National Development Agency 2008/09 – page 46 - 48 –Other matters Key governance responsibilities –Financial statements were subject to material amendments resulting from the audit.

15. 15 Relief Funds –All 5 relief funds received unqualified audit reports with nothing emphasised and no other matters were included –Closure of funds to be addressed urgently. This can only be done if the Social Relief of Distress Bill is tabled in Cabinet. There is a probability that this process will not be dealt with during 2009/10 financial year.

16. 16 Audit of Performance Information Purpose: PI indicates how well an institution meets its aims and objectives and which policies and processes are working – the measure of predetermined targets against achieved targets reported - Facilitates accountability and enables tracking of progress and decision-making Role Players Responsibilities: Executive: Policy development, strategic planning and Budget. Management/Internal Audit: Implementation, Monitoring, Corrective action and Reporting

17. 17 Audit of Performance Information Auditor-General Review and Confirm Validity, Accuracy and Completeness of Reported Performance Information Report material variances in the Management Report 2009/10 Express and Audit opinion in the Audit Report 2010/11