SCoAG BRIEFING ON AGSA MANDATE AND METHOD OF WORK 5 Sept 2014

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.

PURPOSE OF PRESENTATION To provide SCOAG members the necessary information on the role of the AGSA to assist them in executing their oversight function.

INDEX 1.AGSA mandate, role and functions 2.AGSA Strategic Plan 2014 – SCOAG and AGSA working relationship 4.Issues requiring immediate attention

AGSA MANDATE, ROLE AND FUNCTIONS - Chapter 9 of the Constitution of the Republic of South Africa (1996) establishes the institution of the Auditor-General as one of the institutions supporting constitutional democracy - The constitution recognises the importance of the AG and guarantees its independence (AG is subject only to Constitution and the law) - Furthermore the Constitution requires that AG must be impartial and exercise its powers and perform its functions without fear, favour and prejudice.

The AG’s functions are described in: Section 188 of the Constitution – mandates constitutional and other functions stating the AGSA must audit and report on accounts, financial statements and financial management of government institutions Section 4 of the Public Audit Act, 2004 (Act No.25 of 2004) (PAA) differentiates between mandatory and discretionary constitutional functions or audits AGSA MANDATE ROLE AND FUNCTIONS (cont.)

AGSA functions are described in: Section 5 of the PAA which regulates other functions (audit-related services and support to legislatures) Sections 20 of the PAA – Auditor-General must prepare audit report containing opinion/conclusion on: o Financial statements and financial position o Compliance and financial management o Predetermined objectives AGSA MANDATE ROLE AND FUNCTIONS (cont.)

AGSA’s operational network

STAFF PROFILE 68% Generation Y 43 Masters degree 43 Masters degree 4.8 Average years of service 4.8 Average years of service 57 CISA 57 CISA 88% occupancy rate 460 CA(SA ) 25 ACCA 25 ACCA Average age 33 years 336 RGA 336 RGA 1135 employees on TA scheme 3249 employees

Organogram of AGSA 10

AGSA PRODUCTS REGULARITYPERFORMANCEINVESTIGATIONSSPECIAL MANDATORY Verify whether there is no omitted information on financial statements Consists of : o Financial o Compliance o Predetermined objectives (PDO) o Internal control Full application of ISA DISCRETIONARY Section 20(3) of the PAA Evaluate measures to ensure economic procurement of resources and efficient and effective application of the same Effect of policy implementation (not policy evaluation) Reporting is factual & does not include an audit opinion Audit is conducted by performance auditors & may include subject matter experts Focuses on a specific government programme, project or management project DISCRETIONARY An independent process to prevent or detect fraud/ crime in the public sector Specific focus area of financial misconduct, maladministration & impropriety DISCRETIONARY Agreed upon procedures, i.e. donor funding certificates

Audit of financial statements and specific focus areas Financial statements Required in terms of the Constitution and the Public Audit Act The auditor forms an opinion on whether the financial statements are prepared in all material aspects in accordance with the specific applicable financial reporting framework Predetermined objectives Service-delivery issues with focus on the reliability and usefulness of performance information which includes the measurement of targets as set out in the beginning of the financial year, were actually achieved Compliance with laws and regulations Reporting on material non-compliance with key legislation

Unqualified with no findings / Clean audit Financially Unqualified AFS (free from material misstatement) No material findings on Compliance with laws and regulations No material findings on the Performance Report (Predetermined Objectives) Unqualified with no findings / Clean audit

AUDIT WORK ALLOCATION TO PRIVATE FIRMS (CWC) Size of firmsBudget 2014 Actual allocation 2014 Allocation target 2014 Actual allocation 2014 R mil % Big and large %32% Medium236 40%35% Small %33% Total %

STRATEGIC PLAN 2014 – 2015 SUMMARY OF STRATEGIC GOALS AND OBJECTIVES Improving the lives of SA citizens through executing our constitutional mandate of strengthening our country’s democracy Commitments Strategic objectives Simplicity, clarity and relevance of our messages Funding Strengthen our human capital Visibility of leadership Lead by example Make value-adding recommendations to auditees Maintain excellent quality of auditing Make certain that our messages reach all stakeholders Establish, maintain and own stakeholder relationships to encourage clean administration Execute the organisational mandate economically, efficiently and effectively Ensure sufficient funding for the achievement of the mandate while maintaining our independence Build a motivated, high-performing and diverse workforce. Create access to the relevant skills and knowledge required for our work Adhere to standards of excellence for clean administration Continually improve the timeliness of AGSA reports Maximise the AGSA’s contribution to transformation Impact Sustainable organisational practices 15

INTOSAI committee involvement Engage on / develop international standard-setting and audit best practices, that serve as benchmark for SA audit methodology Involved in financial, performance and compliance streams, as well as internal control Professional Standards Committee (PSC) Engage on professional development and capacitating of SAIs and auditors SAI SA appointed as chair in 2013, convening first international committee meeting in Lima, Peru in September 2014 See new value proposition formulated Capacity-building Committee (CBC) Participate in knowledge-sharing and development of guidance o topical issues facing SAIs in an attempt to be pro-active and relevant to stakeholder Involved in streams on public debt, IT audit, key national indicators, procurement, extractive industries, etc. Knowledge-sharing Committee (KSC) Deals with internal finance and administrations Provides portal to INTOSI donor-funding community, which is a critical enabler for the CBC activities Finance and Administration Committee (FAC)

WORKING RELATIONSHIP The AGSA is accountable to the National Assembly and has to report on its activities and performance of its functions. The Standing Committee on the Auditor-General (SCOAG), established in terms of section 10(3) of the PAA, oversees the performance of the AGSA on behalf of the National Assembly. AGSA’s main accountability instruments are the Strategic plan and budget and the Integrated annual report, both of which are tabled annually in the National Assembly.

WORKING RELATIONSHIP Public Audit Act statutory provisions: s3(d): The AGSA is accountable to the National Assembly s10(1): The AG is also accountable to the National Assembly and has to submit an annual report on his/her activities and performance of his/her functions s2(c): SCOAG is the entity through which the National Assembly fulfills its role in terms of the PAA s30(2): The AG is in overall control of and accountable for the administration of the AGSA.

WORKING RELATIONSHIP Public Audit Act statutory provisions: S5(2)(b): Provision is made for advisory and other structures with no details as to composition, mandate, etc. – Advisory structure and Remuneration Committee are currently in place s40(1): Provision is made for audit committee to be appointed by the DAG in consultation with the Auditor-General with specific functions and governance requirements

WORKING RELATIONSHIP Public Audit Act statutory provisions (cont.): s32(1): DAG is head of administration and is responsible for management of administration (s32(3): Subject to directions from the AG) s43(1): DAG is the accounting officer in the administration s32(2): DAG must carry out decisions of the AG, perform duties delegated by AG and report on these aspects s48: Provision for delegation of powers by AG and DAG

WORKING RELATIONSHIP The current modus operandi consists of: Meeting on the Annual Report after its tabling – early September Meeting on the Strategic Plan and Budget – mid October Other PAA required interactions Meetings are led by AG (or DAG), depending on availability

Constitutional/Legislative Responsibilities – as per PAA. Section 2(c)(i) - Constitutional requirement to protect the independence, impartiality, dignity and effectiveness of the AG in terms of Section 181(3) of the Constitution Section 2(c)(ii) – Provide advice to the National Assembly Section 31(1) - Give opinion on appointment of Deputy-Auditor- General Section 52(2 ) - Give opinion on Regulations Section 10(3) - General Oversight Requirement in terms of Sec. 55(2)(b)(ii) of the Constitution. SCoAG RESPONSIBILITIES

Performance of the Office – as per the PAA Annual Report-Related Matters o Sections 41(5 ) (and refer to sec 10(1) & (2)) - Consider the annual report, the financial statements and the audit report on these statements o Section 38(4) - Agree on the retention of the surplus. o Section 40(6)(b)(iii ) - Consider concerns raised by the audit committee o Section 39(1) - Appointment of external auditor SCoAG RESPONSIBILITIES

Performance of the Office (cont.) Budget-related Matters Sec. 38 2(a) & 38 (3 ) - Consider the budget and business plan of the AG and make recommendations to be forwarded to the Speaker for tabling in NA and to National Treasury Section 23(1) - Give opinion on audit fees Section 43(5)(b) - Consider reports from DAG on any actual or impending under-collection of revenue, shortfalls in budgeted revenue and overspending of the budget or expenditure not in accordance with the budget. SCoAG RESPONSIBILITIES

Performance of the Office (cont.) Budget-related Matters o Section 45(3) - Consider report from DAG on decision of AG to incur irregular expenditure. SCoAG RESPONSIBILITIES

Audit-related Matters – as per PAA Section 13(1)(a),(b),(c) - Give opinion on standards to be applied to audits, nature and scope of such audits and procedures for the handling of complaints when performing such audits. Section 12(3)(b) - Consultation by the AG in respect of the Code of Conduct for authorised auditors SCoAG RESPONSIBILITIES

Integrated Annual report Strategic plan and budget External Auditor – annual confirmation Retention of surplus Audit directive Outstanding debt ISSUES REQUIRING IMMEDIATE ATTENTION

28 Debt escalation and debt profile R mil Total Local government National government & other

Local government debt by province

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