1. Briefing to the portfolio committee on audit outcomes of Arts and Culture portfolio for the 2014-15 financial year 13 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, exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

3. Purpose of the presentation To provide the portfolio committee with applicable information and guidance on the Arts and Culture portfolio’s 2014-15 audit outcomes so that they, the committee, can ensure effective oversight. 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. X Provide assurance that AFS 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 legislations Do not report on ALL legislations – only key selected requirements from relevant legislations 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 The scope of AGSA audits

5. Content 1. Overall audit outcomes for Arts and Culture portfolio 6 - 10 2. Auditor-General’s six key focus areas 11- 19 3. Irregular and fruitless and wasteful expenditure 20 - 24 4. Combined assurance and assessment of assurance providers 25 - 26 5. Root causes and recommendations 27 6. Minister’s commitments to address root causes 28

6. 1. Overall audit outcomes for Arts and Culture portfolio Unqualified no findings Unqualified with findings Qualified with findings Adverse with findings Disclaimer with findings Audit outstanding 27 auditees 6

7. Auditee Annual Financial statements Audit of Performance informationCompliance Department of Arts and CultureXX Luthuli MuseumX Market Theatre FoundationX National Heritage CouncilXX SA Library for BlindX SA Resource Heritage AgencyX Ditsong Museum Of SAXXX Iziko MuseumXX KZN MuseumXX Msunduzi /Voortrekker MuseumXXX National Library of SAXXX Nelson Mandela National Museum XX South African State TheatreXX 7 1.1 Outcomes per auditee (excluding clean audits)

8. 8 National English Literary Museum XX William Humphreys Art Gallery XX Windybrow TheatreXX Pan South African Language Board XXX Performing Arts Council of Free State Audit not completed 1.1 Outcomes per auditee (excluding clean audits)

9. 1.2 Common qualification areas AuditeeHeritage assets Irregular expenditure Property plant and equipment Other long term liabilities PayablesContingencie s Ditsong Museums of SA X X X Iziko Museums of Cape Town X Kwa-Zulu Natal MuseumX Msunduzi/Voortrekker Museum XX National English Literary Museum XXX National Library of SAXXX Nelson Mandela National Museum X Pan South African Language Board XXXX 9

10. AuditeeHeritage assets Irregular expenditure Property plant and equipment Other long term liabilities PayablesContingencies South African State Theatre X William Humphreys Art Gallery X Windybrow TheatreX 1.2 Common qualification areas 10

11. 2. Auditor-General’s six key focus areas Quality of submitted financial statements Quality of submitted performance reports Compliance with legislation Financial healthHuman resource management Information technology Good Concerning Intervention required Improvement Stagnant or limited progress Regressed 11

12. 2.1 Quality of submitted financial statements Outcome if NOT corrected Outcome after corrections Avoided qualifications by correcting material misstatements during audit process 2014-15 Outcome if NOT corrected Outcome after corrections 2013-14 2 auditees (DAC and SAHRA) 6 auditees Financially unqualified with/without findings Financially qualified (qualified/ disclaimed with findings) 12

13. 2.2 Quality of annual performance reports 13 Auditee did not prepare annual performance report 1 13 With no findings With findings Outstanding audit 2014-15 PFMA Annual performance reports of were reliable and useful compared with 56% in the previous year 74 % Usefulness Reliability All auditees that submitted information, did so in time for audit Regressed Stagnant or little progress Improved

14. 2.2.1 Usefulness and Reliability of Annual Performance Reports AuditeeProgrammesNot UsefulnessNot Reliable Department of Arts and Culture Programme 3 : Arts, culture and development Programme 4 :Heritage Preservation and promotion N/AX Ditsong Museums of SAProgramme 2 : Business development XX Msunduzi /Voortrekker Museum Objective 1 :Administration Objective 2 : Business development Objective 3 : Public engagements XN/A National Heritage Council of SA Programme 2 : Heritage Promotions XN/A National Library of SAProgramme 2 : Business Development XX Programme 3: Community engagements XN/A Pan South African Language Board Objective 2 : Deliver language services and deliverables XX 14

15. 2014-15 PFMA 15 2.3 Most auditees did not comply with legislation in the following areas Quality of annual financial statements submitted Prevention of unauthorised, irregular and/ or fruitless and wasteful expenditure Good Concerning Intervention required Regressed Stagnant or limited progress Management of procurement and or contracts Management of strategic planning and performance Human resource & consequence management Internal audit & Audit committee Improvement

16. Auditee AFSIrregular expenditur eProcureme nt Management of Strategic Planning Human Resource Manageme nt Internal audit and Audit com Department of Arts and Culture XXXX Ditsong Museums of SA XXX Market Theatre Foundation X KZN MuseumX Iziko Museums of Cape Town X National Heritage Council XX National Library of SA XXXXX Nelson Mandela National Museum XXX Luthuli MuseumX Pan South African Language Board XXX 16 2.3.1 Non-compliance areas per auditee Legends: Concerning In progress

17. Auditee AFSIrregular expendit ureProcur ement Manageme nt of Strategic Planning Human Resource Manageme nt Internal audit and Audit com South African State Theatre XXXX National English Literary Museum XXX SA Heritage Resource Agency X Msunduzi/Voortre kker Museum XXXX William Humphreys Art Gallery X SA Library for the blind X Windybrow Theatre XXX 12118316 17 2.3.1 Non-compliance areas per auditee Legends: Concerning In progress

18. 2.4 Findings on Information technology AuditeeIT governanceSecurity management User access manual IT security continuity Nelson Mandela Museum XXXX DACXXXX Market Theatre Foundation X Freedom ParkX National Library of South Africa XXX Ditsong: Museums of South Africa XXX Windybrow TheatreXXXX National MuseumX PACOFSXXXX War Museum of the Boer Republics XXXX Luthuli MuseumXXXX 18 Legends: Concerning In progress

19. 2.4 Finding on information technology AuditeeIT governance Security management User access manual IT security continuity Msunduzi/Voortrekker Museum XXXX Pan SA Language BoardXXXX 19 Legends: Concerning In progress

20. 3. UIFW expenditure definitions 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, could have been avoided or was not value for money) 20

21. 3.1 Irregular expenditure per portfolio Auditee Irregular expenditure Movement Amount R 2015 Amount R 2014 1 Department of Arts & Culture 120,641,000 74,300,000 2 ArtsCape 2,383,145 0 3 Ditsong Museums of SA 821,077280,000 4 Market Theatre Foundation 604,2221,200,000 5 National Heritage Council 6,471,0002,600,000 6 National Library of South Africa 12,900,628267,130 7 Pan SA Language Board 8,662,36428,700,000 8 State Theatre 16,139,12767,700,000 9 Windybrow Theatre 1,797,18231,000,000 10 National Museum: Bloemfontein 556,0001,300,000 Decrease in incurred expenditure Increase in incurred expenditure Legends: 21

22. 3.1 Irregular expenditure per portfolio 11 Nelson Mandela Museum: Mthatha 309,365300,000 12 Robben Island Museum 030,000 13 The National English Literary Museum 271,9160 14 PACOFS 04,900,000 15 National Arts Council of South Africa 1,258,5902,500,000 16 Msunduzi / Voortrekker Museum 1,102,000650,000 17 Williams Humphrey Art Gallery 0550,000 18 The Afrikaanse Taal Museum 63,6930 19 South Africa Heritage Resources Agency 4,344,0678,400,000 20 Freedom Park 399,000215,155 TOTAL 178,724,376403,616,661 Auditee Irregular expenditure Movement Amount R 2015 Amount R 2014 Increase in incurred expenditure Decrease in incurred expenditure Legends: 22

23. 23 3.2 Fruitless and wasteful expenditure per portfolio Auditee Fruitless and Wasteful expenditure Movement Amount R 2015 Amount R 2014 1 Department of Arts & Culture330,0005,600,000 2 Ditsong Museums of SA207,70320,000 3 National Heritage Council954,000230,000 4 National Library of South Africa58,3311,249,384 5 Pan SA Language Board698,8621,500,000 6 State Theatre20,02460,000 7 Windybrow Theatre020,000 8 SA Library for the Blind010,000 9 National Museum: Bloemfontein11,0001,000 Increase in incurred expenditure Decrease in incurred expenditure Legends:

24. 24 14 Die Afrikaanse Taal Museum3,0990 15 Iziko Museums of South Africa 4,4210 16 South Africa Heritage Resources Agency 178,059260,000 17 Freedom Park669,061220,000 Total3,735,9899,243,632 10 Nelson Mandela Museum: Mthatha 24,3420 11 Performing Arts Centre of the Free State 10,000 12 Robben Island Museum460,24143,248 13 National Arts Council of South Africa 116,84620,000 Auditee Fruitless and wasteful expenditure Movement Amount R 2015 Amount R 2014 3.2 Fruitless and wasteful expenditure per portfolio Legends: Increase in incurred expenditure Decrease in incurred expenditure

25. 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 4. Combined assurance – complimentary mandate 25 Oversight assurance Second level of assurance Oversight assurance Second level of assurance Coordinating / Monitoring institutions Coordinating / Monitoring institutions Internal audit Internal audit Audit committee 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 Independent assurance Third level of assurance Oversight (portfolio committees / councils) Oversight (portfolio committees / councils) Public accounts committee 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

26. 4.1 Assessment of assurance providers for portfolio Provides assurance Provides some assurance Provides limited/ no assurance Vacancy Not established/ evaluated Improvement Stagnant or limited progress Regressed 26

27. 5. Root causes and recommendations Root causesRecommendation Lack of consequences for poor performance and transgressions Investigate and take disciplinary steps against non-performance and non- compliance with the prescribed laws and regulations including those relating to supply chain management. Slow response by management Adequate action plans should be developed and consistently monitored by senior management and those charged with governance to address significant deficiencies identified by internal and external audit. Implement adequate daily and monthly internal controls which are continuously reviewed and supervised Key officials lack appropriate competencies Provide relevant training to existing key officials and recruit adequately skilled personnel for all key positions. 27

28. 6. Status of Minister’s commitments to address toot causes To meet the AGSA more regularly, at least quarterly Filling of the DDG: Corporate Service and CFO post at DAC ImplementedIn progressNot implementedNew 28 To address the challenges faced by the portfolio to ensure achievement of clean audit and take internal measures to deal with the reasons that lead to the negative audit outcome throughout the portfolio Minister will strengthen shareholders compact and get assurance on skills and irregular expenditure To conduct investigation on irregular expenditure at DAC that resulted in a qualified audit opinion in the 2013/14 financial year.

29. Questions