2. Contents 1.Submissions received : Departments 2. Summary of Audit Outcomes 2015-16 –AFS –Predetermined Objectives –Compliance to Laws and Regulations 3. Accounting matters for 2016/17

3. Departments and entities : Submission received on 31 July 2016 List of departments consolidated for the 2015/2016 financial year (FINAL) ConsolidatedComments Audit Report Audit Sign _ Off (Annexure 1) Audited AFS submitted? Central Cluster 8/9  Parliament still outstanding and not consolidated  Cooperative Governance and Home affairs consolidated with draft AFS 6/9 Economic Cluster 15/15  Environmental Affairs and Transport consolidated using draft AFS 13/15 Finance Cluster 8/8 100% Audited AFS 8/8 Justice Cluster 8/8 100% Audited AFS 8/8 Social Cluster 7/7 100% Audited AFS 7/76/77/7

4. Summary of audit outcomes – 2015/16 Audit of AFS : Departments as at 11 August 2016 No. of Departments47 No. of Audit reports received43 Unqualified39 Qualified4 Adverse0 Disclaimer0 Awaiting finalisation4

5. Summary of audit outcomes – 2015/16 Departments with “clean” audit outcomes on all 3 areas: Social Development Sports and Recreation Planning, Monitoring and Evaluation Statistics South Africa GCIS Public Service Innovation DPSA Communications Tourism Energy

6. Summary of audit outcomes – 2015/16 To date 4 departments received a qualified audit opinion: [International Relations and Cooperation; Civilian Secretariat for Police; Military Veterans; Environmental Affairs] Qualification matters: –Accruals: The department could not provide sufficient appropriate audit evidence and therefore the adjustments could not be justified. –The department did not have adequate systems in place to maintain records of accruals where goods have been received or services have been rendered. –Receivables: Department did not present receivables in accordance with the MCS some amounts did not meet the definition of receivables resulting in overstatement. –Movable Tangible Capital Assets: The department could not provide sufficient appropriate audit evidence that the department had accounted for all movable tangible capital assets due to limitations in the asset register.

7. Summary of audit outcomes – 2015/16 Qualification matters: (continued) - Heritage assets: Comprehensive assessment of all works of art and painting not done impacting the classification of Heritage Assets - Movable Tangible Capital Assets and Minor assets: Did not maintain updated asset register for tangible capital assets and minor assets.

8. Summary of audit outcomes – 2015/16 Predetermined Objectives Material findings raised: Material misstatements identified on the Annual Performance Reports submitted for auditing on the reported performance information Significantly important targets not specific Performance of significantly important targets could not be measured Significantly important indicators not well defined. Significantly important indicators not verifiable. Significantly important targets not reliable when compared to the source information or evidence provided. Adequate and reliable corroborating evidence could not be provided for a significantly important target to assess the reliability of the reported performance information.

9. Summary of audit outcomes – 2015/16 Predetermined Objectives (continued) Targets not reliable due to lack of sufficient appropriate audit evidence Reported objectives and targets not consistent with those in the approved strategic plans and annual performance plan.

10. Summary of audit outcomes – 2015/16 Compliance to Laws and Regulations Material findings raised: Employees were appointed without following a proper process to verify the claims made in their applications in contravention of Public Service Regulation 1/VII/D.8. Lack of effective, efficient and transparent systems of risk management and internal controls within the departments. Effective steps not taken to prevent unauthorised, irregular and fruitless and wasteful expenditure. Effective and appropriate disciplinary steps not taken against officials who made or permitted the above expenditure. AFS submitted for auditing not prepared in accordance with prescribed financial reporting framework.

11. Summary of audit outcomes – 2015/16 Compliance to Laws and Regulations (continued) Goods and services with a transaction value below R500 000 procured without obtaining the required price quotations Goods and services of a transaction value above R500 000 procured without inviting competitive bids, TR16A6.1 Contracts were awarded to bidders who did not submit a declaration of past supply chain practices such as fraud Quotations awarded to bidders who did not submit a declaration on whether they are employed by the state or connected to a person employed by the state which is not in compliance with Treasury regulation 16A8.3. Invitations for competitive bidding were not always advertised for a required minimum period of 21 days Sufficient appropriate audit evidence could not be obtained that contracts and quotations were awarded to bidders based on points given for criteria that were stipulated in the original invitation for bidding and quotations

12. Summary of audit outcomes – 2015/16 Compliance to Laws and Regulations (continued) Lack of effective internal controls for payment approval and processing. Contractual obligations and money owed by the department not settled within 30 days or an greed period. Effective and appropriate steps not taken to collect all money due to the department Proper control systems to safeguard and maintain assets not adequately maintained. Expenditure for programmes not monitored in accordance with the framework for allocation as required by Dora. Money was borrowed through a commercial bank forex settlement account without the approval of the Minister of Finance or an official authorised by the Minister, in contravention of sec 66(1)(a) of the PFMA.

13. EMERGING MATTERS REQUIRING ATTENTION OF DEPARTMENTS MATTERS REQUIRING ATTENTION SUMMARY OF ACCOUNTING IMPACTS Readiness to report on Inventory in the AFS Inventory moving to Disclosure notes and subject to audit 1 April 2017 The following needs to be addressed in near future: -Reliable opening balances as at 31 March 2017 -Transitional provisions being developed for sectors (i.e Health) – these will be issued last quarter 2016 -Departments on Logis to check ICN’s between Inventory and consumables -Proper assessment BEFORE department decides it is “Inventory Department” or not -OAG Support available to assist with any Inventory decisions – also for provincial departments

14. EMERGING MATTERS REQUIRING ATTENTION OF DEPARTMENTS MATTERS REQUIRING ATTENTION SUMMARY OF ACCOUNTING IMPACTS Transfer of funds to public entities acting as agents NT Guide on Agency/Principal activities refers – disclosure and accounting requirements. Consider guide when entering into SLA’s with public entities. Changes to Treasury Regulations and possible new Cost Containment measures NT will inform departments of new developments Comments of 2016/17 MCS and AMD and Departures/Exemptions Extremely important to comment on any changes required on the MCS and AMD going forward Need to minimise departures and exemptions and issue only when Fair Presentation is enhanced or achieved via departures

15. EMERGING MATTERS REQUIRING ATTENTION OF DEPARTMENTS MATTERS REQUIRING ATTENTION SUMMARY OF ACCOUNTING IMPACTS Provisions and ContingentsNumerous clarifications required FAQ’s for 2015/16 provided guidance Also Accruals vs Payables issue and disclosure clarified IFMSCFO should expect more regular feedback from the Treasury on progress Documents issued and current projects by the Accounting Standards Board (ASB) Accounting by Principals and Agents (MCS chapter effective, GRAP 109 still to be approved) Accounting framework for Government Business Enterprises – Directive 12 Housing Arrangements and Recognition and Derecognition of Land Project on Living and Non-living resources

16. Summary of audit outcomes – 2015/16 THANK YOU 16