Department of Agriculture, Forestry and Fisheries (DAFF) Briefing to the Portfolio Committee on the 2012/13 audit outcomes 8 October 2013

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.

To brief the Portfolio Committee on audit outcomes of the department. Purpose of meeting

1.Audit outcomes Audit of predetermined objectives 3.Root causes 4.Clean administration 5.Pyramid of accountability 6.Conclusion and way forward Agenda

Audit outcomes

Financially unqualified with no findings Qualified, with findings Financially unqualified with findings Adverse, disclaimer, with findings Status improved from previous year (no material findings). Same status as previous year (with material findings). Same status as previous year (no material findings). Situation has deteriorated from prior year. Auditee Audit opinions Audit opinions Financial audit opinion Predetermined objectives Compliance with laws and regulations Financial audit opinion Predetermined objectives Compliance with laws and regulations Department 1 Department of Agriculture, Forestry and Fisheries (DAFF) Entities 2Onderstepoort Biological Products Ltd (OBP) 3National Agricultural Marketing Council (NAMC) 4Agricultural Research Council (ARC) 5Ncera Farms 6Marine Living Resources Fund (MLRF) 7Perishable Products Export Control Board (PPECB)

Key control assessment DAFF

Key control assessment OBP NAMC

Key control assessment ARC NCERA

Key control assessment MLRF PPECB

Key focus areas Human Resource Management includes the audit of consultants

Key focus areas Human Resource Management includes the audit of consultants

Commitments – Department only

NoCommitmentStatus 1. The HR plan for 2012/13 to be developed in accordance with enhanced policies and procedures. Complete. 2. Ensure monthly reporting that is complete and accurate for financial (including disclosure notes) and performance information. Not addressed. 3. Perform annual risk assessment to ensure an adequate and valued audit programme for the department. Not addressed. (Although the risk assessment was presented at a special audit committee on 18 March 2013, the risk assessment was not effective during the 2012/13 financial year.) 4.Capacitate the internal audit function to be fully effective and functional.Not addressed. 5. Align performance agreements of senior management with the department’s goals. In progress. 6. Revise the staff establishment specially to ensure there is sufficient staff to carry out the monitoring and evaluation function (AoPO). In progress. 7.Manage deviation from the procurement process in a transparent manner.In progress. Status of implementation of commitments

Audit of predetermined objectives

Audit outcomes Compliance with regulatory requirements Compliance with regulatory requirements Usefulness Reliability ExistenceExistence ExistenceExistence TiMeliness€TiMeliness€ TiMeliness€TiMeliness€ PresentationPresentation PresentationPresentation ConsistencyConsistency ConsistencyConsistency MeasurabilityMeasurability MeasurabilityMeasurability RelevanceRelevance RelevanceRelevance AccuracyAccuracy AccuracyAccuracy CompletenessCompleteness CompletenessCompleteness ValidityValidity ValidityValidity Additional matter paragraphs included in the audit report: >20% of targets not achieved due to indicators and targets not being suitable developed during the strategic planning process and material adjustments were made to the annual performance report submitted for audit. No matters reported Reported in audit report

s Performance information must be presented using the National Treasury Annual reporting guidelines. Reasons for major variances between planned and actual performance must be explained and should be supported by corroborating evidence. 39% of reasons for variances not reported; and 24% of reasons for variances not supported by supporting documentation. 39% of reasons for variances not reported; and 24% of reasons for variances not supported by supporting documentation. Objectives, indicators and targets must be consistent between planning and reporting documents. No material findings reported. Indicators should be well-defined and verifiable. Targets should be specific, measurable and time-bound. No material findings reported. The indicators relate logically and directly to an aspect of the institution’s mandate, and the realisation of strategic goals and objectives. No material findings reported. Requirement Conclusion Presentation Consistency Measurability Relevance Usefulness of annual performance report Audit of predetermined objectives

Reliability of annual performance report Qualified opinions (error rate >20%) reported in the Management Report.

Audit of predetermined objectives Reliability of annual performance report Disclaimer of opinion (error rate >50%) reported in the Management Report.

Audit of predetermined objectives Key issues on the DAFF’s budget Intervention required in order to enhance service delivery.

Root causes

Root causes and focus to achieve clean administration Management did not exercise sufficient oversight over reporting and internal controls. Although action plans were implemented, limited or no progress was made to address root causes, with the result that repeat findings were raised. (AoPO; compliance) Management did not exercise sufficient oversight over reporting and internal controls. Although action plans were implemented, limited or no progress was made to address root causes, with the result that repeat findings were raised. (AoPO; compliance) Monthly and quarterly financial (disclosure notes) and performance reports are not accurate and complete. Management did not ensure that key functions (internal audit, regional offices and various senior manager positions) within the department are properly skilled and resourced. No risk assessment conducted in terms of Treasury Regulations and no risk management strategy which includes the fraud prevention plan. Critical components within finance, performance information and compliance were not covered by the internal audit function due to inadequate resources and skills (insufficient positions and ineffective leadership). Insufficient oversight Lack of regular, accurate and complete reports Lack of skill and resources No risk assessment conducted Internal audit ineffective ROOT CAUSES

Clean administration

Clean Audit No material findings on Predetermined Objectives No material findings on Compliance Financially Unqualified AFS

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 Understandin g of requirements as well as cause and effect Flow of credible information Accountable and transparent government Accountable and transparent government Re-enforcing accountability at all levels, escalation and robust communication

Conclusion and way forward

The above assessment indicates that there is still work to be done in the movement towards clean administration however if focus is placed on addressing the root causes through implementation of the recommendations in the way forward, clean administration can be achieved. Overall assessment Supply Chain Management (SCM) at regional offices; Predetermined Objectives (AoPO); Misstatements in AFS (Completeness of disclosure notes); and Capacitating internal audit. Focus Areas Adequate preparation of complete Monthly AFS with full disclosure notes; Preparation of quarterly Key Controls by auditees; Focussed quarterly key controls assessments and discussions; Action against transgressors (consequence management); and Timely implementation of action plans to address root causes and not findings. Way forward Conclusion and way forward

Thank You