1. Briefing to the Portfolio Committee: Cooperative Governance and Traditional Affairs Audit outcomes of the portfolio for the financial year
October 2015

2. 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.

3. Purpose of the presentation
Annually oversight committees set aside time to focus on assessing the performance of departments. On completion of the process, portfolio committees are required to develop department-specific reports, namely budgetary review and recommendations reports (BRRR) which express the committee`s view on the department’s budget for recommendation to the National Treasury ahead of the following year`s budget period. Our role as the AGSA is to reflect on the audit work performed to assist the portfolio committee in its oversight role in assessing the performance of the departments taking into consideration the objective of the committee to produce a BRRR.

4. Content The scope of AGSA audits 5 Overall audit outcomes 6
Unauthorised/ irregular / fruitless and wasteful expenditure 10
4. Combined assurance
5. Root causes and recommendations

5. 1. The scope of the AGSA audits
What we do 
What we don’t do X
Provide assurance that AFS are free from misstatements that will affect users
Do not provide assurance on the appropriateness of the departmental budgets
Report on usefulness and reliability of the information in the annual performance report
Do not provide commentary on service delivery
Report on material non-compliance with relevant key legislations
Do not report on ALL legislations – only key selected requirements from relevant legislations are audited
Identifying the key internal control deficiencies to be addressed
We assess the risk of fraud, but we are not responsible for –
Fraud identification
Fraud prevention

6. 2. Overall audit outcomes – CoGTA Portfolio
Overall stagnation in audit outcomes
Assurance levels
Key controls
Senior management
First level
Accounting officer/authority
Executive authority
Second level
Internal audit unit
Audit committee
Third level
Portfolio committee
Unqualified with no findings
Unqualified with findings
Provides assurance
Provides some assurance
Provides limited/ no assurance
Vacancy
Not
established
Good
Concerning
Intervention required 1
To improve/maintain the audit outcomes … 2
… the key role players need to assure that … 3
… attention is given to the key controls and …
… the risk areas and … 4
… the root causes are addressed … 5 6
… and the commitments are honoured.
Risk areas
Root causes
Status of key commitments by minister
Quality of submitted financial statements
Quality of submitted performance reports
Supply chain management
Slow response by management (Accounting officer and senior management)
Quarterly audits will be performed in line with the community work programme (CWP) implementation manual. Non-compliance and/or matters of concern identified will be communicated on a quarterly basis to the accounting officer and the executive authority. Irregular expenditure reports will be compiled monthly by unit heads, who will declare if any irregular expenditure was incurred and sign off on the reports. Internal audit will validate the monthly reporting to the accounting officer.
Fully operational internal audit function at MISA and regular meetings with the chairperson of the audit committee.
DCoG, DTA, MISA, MDB
CoGTA, MISA, MDB
Internal and external audit findings will form part of DCoG’s SMS members performance agreements.
Instability or vacancies in key positions
Management will compile monthly financial statements with disclosure notes in order to improve on the quality of annual financial statements submitted for audit. These financial statements must be reviewed by the accounting officer and the internal audit function to ensure validity, completeness and accuracy of the financial statements.
Human resource management
Information technology
DCoG, MISA
Financial health
MISA, CRL , MDB
Lack of consequences for poor performance and transgressions
DCoG, MISA, CRL
CoGTA
Action plans to address repeat findings will be implemented and monitored in a timely manner.
Good
Concerning
Intervention required
Not implemented
In progress
Implemented
New

7. 2.1 Quality of submitted financial statements
Outcome if NOT corrected
Outcome after corrections
5 auditees
Legend:
Financially unqualified with/without findings
Financially qualified (qualified/ disclaimed with findings)
Avoided qualifications by correcting material misstatements
during audit process
Outcome if NOT corrected
Outcome after corrections
3 auditees

8. 2.2 Quality of annual performance reports
67%
of reports were reliable and useful compared with 40% in previous year.
of auditees that submitted information, did so in time for audit
auditees did not prepare annual performance report ( : 0%)
100% 0%
Legends:
With no findings
With findings
Improvement
Stagnant or limited progress
Regressed
Usefulness
Reliability

9. 2.3 Most auditees did not comply with legislation in following areas
Quality of annual financial statements submitted
Prevention of unauthorised, irregular and/ or fruitless and wasteful expenditure
Management of procurement and or contracts
Legends:
With no findings
Intervention required
With findings
Improvement
Stagnant or limited progress
Regressed
Management of strategic planning and performance
Human resource & consequence management
Internal audit & Audit committee

10. 3. U,I,FW expenditure Unauthorised expenditure Irregular expenditure
Fruitless and wasteful expenditure
Legends:
Decrease in incurred expenditure
No change
Increase in incurred expenditure
Finding not repeated
New finding
Repeat finding
Expenditure not in accordance with the budget vote/ overspending of budget or programme
Expenditure incurred in contravention of key legislation; goods delivered but prescribed processes not followed
Expenditure incurred in vain and could have been avoided if reasonable steps had been taken. No value for money!
Definitions
DCOG -
R155 375 000
DTA
R2 252 000
R6 518 000
MISA
R6 673 085
R73 228 840
R512 303
SALGA
CRL Rights Commission
MDB
R3 051 825
Totals R R R

11. 4. Combined assurance – complimentary mandate
Senior
management
Accounting
officers/
authority
Executive
Required assurance levels
Extensive
Management’s assurance role
Senior management – take immediate action to address specific recommendations and adhere to financial management and internal control systems
Accounting officers/ authority – hold officials accountable on implementation of internal controls and report progress quarterly and annually
Executive authority – monitor the progress of performance and enforce accountability and consequences
Management assurance
First level of assurance
Oversight assurance
Second level of assurance
Coordinating /
Monitoring
institutions
Internal
audit
Audit
committee
Extensive
Required assurance levels
Oversight’s assurance role
National Treasury/ DPSA – monitor compliance with laws and regulations and enforce appropriate action
Internal audit – follow up on management’s actions to address specific recommendations and conduct own audits on the key focus areas in the internal control environment and report on quarterly progress
Audit committee – monitor risks and the implementation of commitments on corrective action made by management as well as quarterly progress on the action plans
Independent assurance
Third level of assurance
Oversight
(portfolio
committees /
councils)
Public
accounts
committee
National Assembly
Extensive
Required assurance levels
Role of independent assurance
Oversight (portfolio committees) – review and monitor quarterly progress on the implementation of action plans to address deficiencies
Public accounts committee – exercise specific oversight on a regular basis on any report which it may deem necessary
National Assembly – provide independent oversight on the reliability, accuracy and credibility of National and provincial government

12. 5. Top three root causes and recommendations
Slow response by management (Accounting officer and senior management)
Regular monitoring of the action plans to ensure that the identified deficiencies are addressed to avoid repeat findings and continued non-compliance.
Although internal control processes exist, it must be consistently monitored and adhered to by all employees. Regular assessments of the status of internal controls, especially regarding financial statement preparation and implementation of the CWP, must be undertaken by management to address deficiencies as and when they arise.
Instability or vacancies in key positions
The accounting officers of DCoG and MISA should provide feedback to the executive authority on the progress made in filling of key vacancies at key management level on a quarterly basis.
Lack of consequences for poor performance
and transgressions
The accounting officers should intensify their focus on ensuring that transgressors are held accountable and that action is taken as required by the PFMA. Action taken against repeat transgressors should be done so in a timely manner, in order to eliminate repeat findings.

13. Questions