SAPO audit outcomes 23 FEB 2016

Our 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. 2

1 The results of the three areas examined by the AGSA 2 The internal control chart 3 Key focus areas to improve audit outcomes and recommendations The audit on the South African Post Office 3

1 The results of the three areas examined by the AGSA 4

Determined whether the financial statements were fair and reliable Determined whether the performance reports were reliable and credible Determined whether the auditee complied with key legislation The AGSA examined three areas Findings Qualified Findings Regressed 5

Property, plant and equipment (including depreciation and impairment) Heritage assets Retirement benefit obligation Irregular, fruitless and wasteful expenditure Taxation (income tax and deferred tax) Improved Regressed Stagnant or limited progress Financial statements: areas of concern 6

Strategic goal Audit criteria UsefulnessReliability Current year Prior year Current year Prior year Strategic goal 1: Attain financial sustainability while delivering on the government’s social mandate 0% 60%0% Strategic goal 2: Remain customer centric by effectively and efficiently fulfilling customer wants and needs 67%0%100%0% Strategic goal 4: Provide innovative, affordable and relevant services that meet the needs of our customers 0% 50%0% Strategic goal 6: Maintain good corporate governance principles to continuously improve as a trusted corporate citizen 33%0%66%0% Performance reports: areas of concern 7

Strategic planning/AOPO Internal audit Shareholder compact Liability management Improved Regressed Stagnant or limited progress Compliance: areas of concern 8

Opening balance under investigation R R Under investigation Current Year R R Under investigation Prior Year (identified in the current year) R TotalsR R Expenditure incurred in contravention of key legislation, prescribed processes not followed Irregular, fruitless and wasteful expenditure Irregular expenditure Fruitless and wasteful expenditure Expenditure incurred in vain and could have been avoided if reasonable steps had been taken. No value for money! Legends: Decrease in incurred expenditure No change Increase in incurred expenditure Definitions 9 Note these balances were qualified

2 The internal control chart 10

Internal control dashboard as per July 2015 Effective leadership culture Oversight responsibility HR management Policies and procedures Audit action plans IT governance Proper record-keeping Processing and reconciling controls Regular reporting Compliance monitoring IT system controls Risk management Internal audit Audit committee GovernanceLeadership Financial and performance management GoodConcerning Intervention required Improved Regressed Unchanged 11 Intervention required but unchanged

3 Key focus areas to improve audit outcomes and recommendations 12

Key focus areas to improve audit outcomes LeadershipHuman resources Going concern/ cash flow Policies and procedures IT environment and infrastructure 13

Recommendations: leadership Stable leadership Effective governance structures and committee charters Adequate oversight over financial, compliance and performance reporting Adequate oversight over the STP and cash flow forecast Effective organisational structure Effective and appropriate HR plan A strong company secretary unit A comprehensive and appropriate IT strategy An up-to-date policy register Action plans that are tracked and met Accountability for non-performance 14

Recommendations: financial and performance management Structured and appropriately capacitated finance function Entrenched internal control disciplines/checks and balances A focus on reconciliation of suspense accounts Centralised procurement process Formal controls over IT systems in all areas Proper record-keeping in all areas Standard operating procedures for performance reporting Systems and processes to monitor compliance Effective financial systems A complete set of half-year financial statements 15

Recommendations: governance Effective governance structures internal audit reports taken seriously Adequately capacitated oversight units Effective risk management process 16

17 Thank you