Department of Basic Education Audit outcomes for year ended 31 March 2012 9 October 2012

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

To brief the Portfolio Committee on: DBE Portfolio Purpose of the meeting To brief the Portfolio Committee on: DBE Portfolio Subject Slide number 1.Portfolio audit outcomes and key control status 4 - 6 2.Progress on previous commitments 8 - 10 3.Recommended commitments for clean administration 11 -12 4. Key focus areas 13 5. Other matters of interest 14 6. Sector audit outcomes and focus areas 15-16 6. Pyramid of Accountability 17 7. Combined level of assurance 18 3

1. Portfolio audit outcomes and key control status Opinions 2010/11 2011/12 Entity Financial Statements Predetermined Objectives Compliance Basic Education Unqualified with findings Adverse Expenditure management, Financial and performance management HR Management, Transfer payments Unqualified opinion with findings Expenditure management, Financial and performance management, HR Management Umalusi Unqualified opinion with no findings Unqualified with no findings No findings SACE 4

1. Portfolio audit outcomes and key control status Opinions 2010/11 2011/12 Entity Financial Statements Predetermined Objectives Compliance ELRC Unqualified opinion with findings Unqualified Expenditure Management, Procurement and contract management, Revenue Management, Strategic planning and performance management Unqualified opinion with findings Expenditure Management, Procurement and contract management, Revenue Management, Strategic planning and performance management and Audit Committee 5

1. Portfolio audit outcomes and key control status Dept/Entity Key control status (regression/ improvement/ unchanged) Leadership Financial and Performance Management Governance DBE UMALUSI SACE ELRC 6

Supply Chain Management Material errors in AFS submitted 4. Key focus areas Auditee Supply Chain Management AOPO HR IT controls Material errors in AFS submitted DBE Some improvement No improvement UMALUSI No matters Regress SACE ELRC No matters 13

5. Other matters of interest Auditee Irregular Expenditure Fruitless and Wasteful Movement 2010/11 2011/12 DBE R81.7m R74.8m UMALUSI SACE ELRC R2.5m R644K R116K R87K 14

Further analysis on DBE key controls classified as causing concern 7

2. Progress on prior year commitments Commitment made DBE UMALUSI SACE ELRC Current Status Comment The department committed to account for all loans and assets received form the “old department of education” in the financial statements for the 2011-12 as per advice from National Treasury X Addressed The department accounted for these loans in its financial statements. Supporting source documentation were presented for audit review and the existence and valuation of these assets were positively confirmed Review and awareness of procurement policies and procedures to ensure compliance with laws and regulations relating to procurement Action plan to address this was implemented effectively. No repeat findings were reported in the current year Compliance with human resources regulations relating to leave management In progress Still in progress Enforce compliance with government procurement regulations by service provider appointed to assist on the Kha Ri Gude project 8

2. Progress on prior year commitments Commitment made DBE UMALUSI SACE ELRC Current Status Comment Follow-up on control deficiencies identified at PEDs reported on the sector service delivery focus areas: LTSM, NSNP, LTS Education Infrastructure HIV/ Aids life skills education X Intervention required No progress made Still repeat findings The entity committed to sustain its current performance and continue to achieve clean audit outcomes Adverse conclusion on performance information in the 2011-12 Management committed to perform the risk assessment to identify all risks affecting the entity Risk assessment not performed Non compliance reported in the audit report Commitment to address shortcomings relating the management of performance against pre-determined objectives In progress Still in progress 9

2. Progress on prior year commitments Commitment made DBE UMALUSI SACE ELRC Current Status Comment Commitment to address shortcomings relating the management of performance against pre-determined objectives. X In progress Finding reported in the audit report 10

3. Recommended commitments for clean administration DBE Umalusi ELRC SACE Monitor compliance with policies and procedures and take decisive action on non compliance a Monitoring of bad planning by entities resulting in an increase in non compliance with PFMA, Treasury Regulations etc. Identify and monitor strengths and weaknesses of the portfolio(Sustainability) Develop checks and balances to ensure credibility of all information. Monthly financial and performance reports that include disclosure items In line with best practice, update SCM policies to ensure that approval of requests to deviate from normal SCM process by the accounting officer/authority is based on recommendations by the bid adjudication committee based on their evaluation of the submission for such a request. Effective utilisation of Internal Audit: Review internal audit scope to include adequate coverage of AOPO and compliance in their plans 11

3. Recommended commitments for clean administration DBE Umalusi ELRC SACE Training programs to incorporate: understanding of why AFS are prepared (for operational management purposes, eg analysis of financial performance ) understanding of why key controls are essential understanding of why service delivery reporting is critical Continuous professional and skills development for all staff and monitoring thereof a Quarterly reinforcement of clean administration processes by Accounting Officer / Executive Authority 12

6. Sector audit outcomes Summary of audit outcomes (Comparison between 2011-12 and 2010-11 15

6. Sector focus areas Sector focus areas for 2011-12 HIV and Aids life skills education National school nutrition programme Technical secondary schools re-capitalisation Learner teacher support material (LTSM) Learner transport scheme (LTS) Allocation of funds to schools Education infrastructure Sector report in finalisation stage 16

7. PYRAMID OF ACCOUNTABILITY Speaker/ Legislature SCOPA/PC’s Executives Accountable Leadership Audit Committee Internal Audit Skills, competence ethics and integrity Daily, weekly, monthly financial and performance disciplines Embedded systems of IC underpinned by policies and procedures Monthly reporting on financial and performance/ Interim financial statements Understanding of requirements as well as cause and effect Accountable and transparent government "Public Accountability" Oversight Flow of credible information Re-enforcing accountability at all levels, escalation and robust communication Reporting and governance "Assurance Agents" The bottom layer of the pyramid illustrates the foundation for the first line of defence in administration (that ensures credibility of information) being skills, competence, etc; embedded systems of IC; understanding of requirements, cause and effect. Daily, weekly monthly financial and performance disciplines (including reporting will be fully supported and fit into this environment easily. For the reporting and governance layer, the foundation is effective and accountable leadership and effective internal audit and they support the audit committee with credible information for them to be effective in carrying out their functions. With both layers functioning properly, credible information will be submitted and reported to oversight committees. "First in of defence" Administration 17

8. Assurance Model The assurance model mirrors the accountability model. 18

Thank You 19