20 April 2015 Presentation to the Standing Committee on Appropriations (Introduction) Presented by: CE - Vusi Msibi 15 April 2016

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.

Sector auditing objectives The purpose is to provide a consistent, holistic and diagnostic approach to matters affecting government service delivery in each sector. Our vision is to provide a fuller picture by following a holistic approach that encompasses government’s strategic vision for the sectors and, in so doing, address the critical service delivery matters.

Determination of sector focus areas for audit Significance of amounts as per budget/actual expenditure of each focus areas Significance and relevance of the focus areas to the mandate of the departments Matters of national, community, public or media interest, MTSF and NDP Outputs of significant interest to the public such as those which impact on quality of service delivery

Regularity audit versus Sector audit Sector audits Mandatory audit in terms of the PFMA and the Public Audit Act (PAA) (section 188 of the Constitution and further regulated in the Public Audit Act, 2004 (Act No. 25 of 2004) (PAA) The sector approach forms an integral part of the audit of the financial statements, predetermined objectives, compliance with legislation, internal control and other AGSA focus areas such as human resource management, procurement and contract management. The sector focus areas and criteria are developed and updated for each audit cycle Reflects an opinion or conclusion on annual financial statements, predetermined objectives and compliance with laws and regulations Reporting is factual and does not include an audit opinion Reporting is done annually as part of the regularity audit process for all national and provincial departments, their entities and municipalities Focusing on identifying sector-specific risks within key service delivery departments identified, i.e. presently the health, education, public works, water and sanitation and housing sectors Reviews and confirms the assertions of the annual financial statements and the annual performance report Incorporates the evaluation of the 3 E’s at organisational, programme or project level. The audit team is an integrated team that includes performance auditors, information systems auditors and regularity auditor Reporting at entity level and tabled in the relevant Legislature/Parliament Reporting at either entity level i.e. standalone sector report and tabled at the relevant Legislature/Parliament or included in the annual general report which is tabled in the relevant Legislature/Parliament. The sector report summarises audit findings related to the selected service delivery focus areas

Xx Month xxxx Education sector focus areas audit outcomes 2014-15 Presented by: SM – Godfrey Diale

Discussion points History of audited education focus areas 2014-15 PFMA Discussion points History of audited education focus areas Education sector focus areas audit outcomes Root causes Sector challenges Summary of regularity audit outcomes

SECTOR FOCUS AREAS (History) 2014-15 PFMA SECTOR FOCUS AREAS (History)

FOCUS AREAS a 9 2014-15 PFMA Sector focus areas 2014-15 2013-14 2012-13 Infrastructure – quality education needs the right physical environment a Professional development of teachers – teachers need to be qualified and have a personal stake in their careers Learner transport – learners need to be able to get to schools safely, easily and regularly Information management – unreliable information as one of the causes for South Africa’s education challenges Education materials – quality education needs quality education materials School nutrition– hungry children cannot learn properly Workplace learning – contribution to the economy with skills and expertise School finance management – funds transferred to schools are used for the purposes intended 9

2014-15 PFMA 1 Focus area 1: Teacher professional development 1

Findings on Teacher professional development 2014-15 PFMA While WC has allocated funds to all its 8 education districts – GP only allocated operational expenses and LP managed training centrally which resulted in district specific training needs not addressed 2. All provinces are required to establish PTDI and only GP, LP and WC established these. However; the following shortcomings were identified in all three provinces audited: In Limpopo, there was limited budget impacting negatively on the implementation of training In Gauteng, the training budget was not timeously made available to the PTDI impacting negatively on planned training. In WC, the training provided by PTDI was not in all cases based on individual educators training needs NB: GP, LP and WC were the 3 provinces that had fully established PTDI in 2013-14 financial year thus these were the only provinces scoped for audit. With no findings With findings

2014-15 PFMA 2 Focus area 2: Learner Transport Scheme 2

Findings on procuring resourcing on LTS 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

Findings on delivering of quality LTS on time 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

2014-15 PFMA 3 3 Focus area 3: Information Systems

Findings on HEDCOM’s six priorities (EMIS) 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

2014-15 PFMA 4 Focus area 4: Learner Teacher Support Material 4

Findings on identifying the needs and planning for LTSM 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

Findings on procuring the LTSM according to budget and other regulations 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

Findings on prompt delivery of LTSM in the right quantities 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

2014-15 PFMA 5 Focus area 5: National school nutrition programme 5

Findings in identifying the needs and planning for NSNP 2014-15 PFMA No findings New findings Repeat findings FS, GP, LP, NW, WC Improved Stagnant or limited progress Regressed

Services delivery findings at provincial level in the NSNP 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

2014-15 PFMA 6 Focus area 6: School finance management 6

Findings on the management of school finance 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

2014-15 PFMA 7 Focus area 7: Basic education infrastructure 7

Basic education infrastructure 2014-15 PFMA Budget For the 2014-15 financial year, the infrastructure budget was R9,8 billion, which was segmented into: EIG R6,9 billion ASIDI R2,9 billion. 27

Basic education infrastructure 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

2014-15 PFMA 8 8 Root Causes

Root Causes Root causes should be addressed 2014-15 PFMA Inadequate attention to daily management disciplines Slow response by the political leadership and senior management Inadequate consequences for poor performance and transgressions Root causes should be addressed

Root causes should be addressed (top three) 2014-15 PFMA Root causes Recommendation Lack of consequences for poor performance and transgressions In order to improve the performance and productivity of officials, leadership should set the tone by implementing sound performance management processes, evaluating and monitoring officials’ performance and consistently demonstrating that poor performance has consequences. Daily disciplines Discipline of preparing accurate and credible monthly financial and performance reports to prevent non-compliance with laws and regulations Slow response by political leadership and senior management in addressing the root causes of poor audit outcomes Leadership and senior management should continue to equip themselves with knowledge and skills they need to perform their oversight and governance duties. Ensure that senior management addresses, in a sustainable manner, the weaknesses in key controls reported by the AGSA and internal auditors. Leadership should hold one another accountable.

2013-14 PFMA 9 Challenges facing the education sector 9

Challenges facing the education sector Lack of clean audit outcomes   It is of concern that only one department within the education sector achieved clean audit outcomes Action plans not always implemented and monitored Action plans do not always address root causes and recommendations provided Action plans do not include definite actions that need to be implemented to address the matters, with timelines and responsibilities assigned. Progress not reported to the audit committee.  

Challenges facing education sector (Cont…) Proper record keeping and availability of the evidence that supports all amounts and disclosures in the financial statements does not always take place   Not maintained throughout the year. Reliance on audit effort especially disclosure notes and PDO’s. Limited support provided by internal audit on proper record keeping for assurance to HODs. Policy and planning Some PEDs did not have approved and/or comprehensive policies and procedures for reporting on performance. No links between the performance agreements and APPs to hold staff accountable for poor performance. Human resource capacity, skills and competencies required to manage and report on performance of most PEDs were lacking.

Challenges facing education sector (Cont…) Internal audit   Staffing resources in terms of vacancies and or skills and experience contribute to the effectiveness of internal audit at some PEDs. Slow response by management in addressing the findings of internal audit at some PEDs rendering internal audit as ineffective. Budget management Findings still exist with regard to the extent of unauthorised expenditure / material underspending. The lack of financial management discipline particularly with regard to overspending on compensation of employees is not addressed (The latter significantly impacts the extent of unauthorised expenditure).

Challenges facing education sector (Cont…)   Infrastructure management Lack of monitoring and oversight by the education departments over implementing agents appointed resulting in delays ranging from four months to four years and poor-quality workmanship. The extent of irregular expenditure emanating from infrastructure projects.

10. Consolidated audit outcomes for the education sector Auditee Outcomes (2014/15) Outcomes (2013/14) Movement Audit Opinion PDOs Non-compliance with laws and regulations Eastern Cape Qualified Yes Free State Unqualified with findings Gauteng No KwaZulu-Natal Limpopo Disclaimer Mpumalanga Northern Cape North West Western Cape Unqualified without findings Basic Education

Financial statements areas qualified (uncorrected material misstatements) 2014-15 PFMA Finding addressed from previous year New findings Repeat findings 38