SCOAG Aug 2008 Annual Report Presentation : Auditor-General of SA Key Highlights – Finance & Operations Kimi Makwetu 20 August 2008

Index 1.Key Interventions 2. Challenges 3. Financial Results 4. Commentary 5. Actual Performance vs Targets for 2007/08 6. Conclusion

Key Interventions Reconstituted and focused Audit business Head of Audit Audit Development & Innovation All CE’s on board More streamlined support services Chief Operations Officer Chief Financial Officer

Challenges Ongoing vacancy challenge at Supervisory and Managerial Level. Stability at Senior Levels More attention still required at Managerial and Supervisory level. –Grow our own leadership

Result Key focus areas Financial Highlights Revenue –Local –International Net Deficit 2008 R’m 2007 R’m 1, (8.3) (1.8) 1,087875

3. Key financial indicators – performance vs budget. Actual (R'000) Budget (R'000) Variance (R'000)% Revenue 1,130,405 1,025, ,424 10% Audit income 1,114,195 1,013, ,965 10% Own Hours647, ,722 (53,359) -8%Note 1 Contract work423, , ,767 69% Subsistence & Travel43,540 61,983 (18,443)-30% Other income 16,210 12,751 3,459 27% Note 1 This variance is made up of the following: Additional vacancies(64,711) Higher recovery rates28,354 Lower utilisation(19,701) Net other recoveries2,700 (53,359)

Commentary Includes substantial increase in debt provisions Write offs of balance sheet items accumulated over time. Detail shared with committee at time of discussing the funding model. (vacancies, contract work, tariff capping) Implementation of funding model recommendation will alleviate improvements in margin recoveries. Achievements of clean audit report key priority at all times. Stronger governance gaining heightened level of attention.

Environment in which Financial Statements are produced Leadership in Finance Standards of internal control Funding model and Balance sheet clean-up ( R3.9m, Note 21) Commentary

Primary focus area Main focus areaSub-focus areasTargetActual performance 1. Auditing1.1 Quality Excellent performance (C2 and C3): 75% Good performance (R1): 25% Poor performance (R2): 0% Excellent performance (C2 and C3): 70% Good performance (R1): 20% Poor performance (R2): 10% 1.2 Cost of auditingAdditional 1% on the projected efficiency ratios of 33% 25% efficiency ratio 1.3 Timeliness 100% achievement of all audit deadlines: 100%: PFMA organisations 100%: other PFMA organisations 100%: MFMA organisations 45%: PFMA organisations 75%: other PFMA organisations 48%: MFMA organisations Summary of Actual Performance vs Targets 31 March 2008

Main focus areaSub-focus areasTargetActual performance 1.4 Audit of performance information 100% achievement of milestones set per annum 85%: PFMA 70%: MFMA 1.5 Performance auditing At least 8% of total audit resources allocated to performance audit, including value for money focus areas 8% of total audit resources 1.6 International audits Not more than 5% of total audit income Income from international audits makes up 2% (R22m) of total audit income, which is within the target’s range.

Summary of Actual Performance vs Targets 31 March 2008 Main focus areaSub-focus areasTargetActual performance 3. Broad-based black economic empowerment (BBBEE) 100% compliance with BEE criteria per annum 100% compliance with BEE criteria 4. Leadership4.1 Leadership effectiveness 2 – 3% increase from baseline 1% increase from baseline of 14% Actual Performance = 15% 5. Reputation5.1 Overall reputation index 1% increase from baseline 3% decrease from baseline of 19% Actual Performance = 16%

Summary of Actual Performance vs Targets 31 March 2008 Main focus areaSub-focus areasTargetActual performance 6. People6.1 Learning and growth Minimum 20 qualified audit professionals per annum 32 Chartered Accountants (CA) 65 Registered Government Auditors (RGA) 3 Certified Information System Auditors (CISA) 2 Association of Chartered Certified Accountants (ACCA) 6.2 Retention of staffLess than 12% staff turnover rate 20% staff turnover rate

Summary of Actual Performance vs Targets 31 March 2008 Main focus areaSub-focus areasTargetActual performance 7. Process7.1 Operational excellence Level of maturity of business process at least: 0% at level 1 75% at level 2 25% at level 3 Level of maturity of business process at least: 6% at level 1 81% at level 2 13% at level 3

Summary of Actual Performance vs Targets 31 March 2008 Main focus areaSub-focus areasTargetActual performance 8. Financial performance 8. 1 Efficiency gains (net surplus) Additional 3% on projected efficiency gains 0% on efficiency gains Deficit amounting to R8 million: 8.2 Debt collectionNational and provincial not more than 30 days Local government not more than 90 days National = 10 days Provincial = 34 days Local government = 111 days

Conclusion Funding bottleneck addressed Ongoing capacity and leadership Skills pipeline through the profession continue to shrink Private audit firms remain a key stakeholder for delivery Growth and retention of key skills priority Substantial development & growth of key processes