1. 02 May 2017
Briefing to the Portfolio Committee on Telecommunication and Postal Services Review of the APP

2. 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. 2

3. Purpose of the briefing and Index
To provide the Portfolio Committee (PC) with audit insights on the interim review of the Department’s and entities’ draft annual performance plan (APP) in order to add value to oversight.
Index
1. Overview of the performance reporting process
2. Audit outcomes of the portfolio
3. Annual Performance Plans (APPs) 2017/18 review of the portfolio
4. Overview of key findings of the 2017/18 APP review
5. Budget analysis
6. Key matters for noting
7. AGSA improved audit methodology
8. Key recommendations for improvements 3

4. Overview of the performance reporting process1

5. 1. Overview of the performance reporting process5

6. 1. Overview of the performance reporting process (cont.)
ANNUAL PERFORMANCE PLAN (APP) 6

7. Service delivery matters linked to NDP
1. Overview of the performance reporting process (cont.)
Service delivery matters linked to NDP
National Development Plan:
The point of departure in sector planning.
Provide a fuller picture by implementing the value chain approach in sector planning and auditing.
Too few people work
Quality of school education for black people is poor
Infrastructure is poorly located, inadequate and under-maintained
Spatial divides hobble inclusive development
The economy is unsustainably resource intensive
The public health system cannot meet demand or sustain quality
Public services are uneven and often of poor quality
Corruption levels are high
South Africa remains a divided society. 1 2 3 4 5 6 7 8 9 7

8. Audit outcomes of the portfolio2
Audit outcomes of the portfolio 8

9. 2. Audit outcomes of the portfolio
Audit outcomes over three years – Telecommunication and Postal Services portfolio
Unqualified with no findings
Unqualified with findings
Qualified with findings
8 auditees
8 auditees
8 auditees 9

10. 2. Audit outcomes of the portfolio (cont.)
Quality of performance information over 2 years
Usefulness of annual performance information
Reliability of performance information
With no material findings
With material findings
Usefulness
The most common findings on the usefulness of information were the following:
Indicators/measures not well defined
Performance targets not measurable
Reasons for variance not supported
Reliability
The most common findings on reliability of information were the following:
Reported information not complete
Reported information not valid
Reported information not accurate 10

11. Annual Performance Plans (APPs) 2017/18 review of the portfolio3 11

12. 3. APPs 2017/18 review of the portfolio
Structure of Department and entities in the portfolio
DTPS
The South African Post Office (SAPO)
Universal Service and Access Agency (USAASA)
Universal Service and Access Fund (USAF)
State Information Technology Agency (SITA)
National Electronic Media Institute of South Africa (NEMISA)
Broadband Infraco (BBI)
ZA. Domain Name Authority

13. Scope of the 2017/18 APP review
3. APPs 2017/18 review of the portfolio (cont.)
Scope of the 2017/18 APP review
The interim review provides an early warning where concerns with regards to the measurability and relevance of the indicators and targets have been identified
The interim review does not entail the performance of detail procedures where underlying systems and supporting documentation is inspected to give assurance on the verifiability of indicators and targets
The interim review is only performed on a selection of significant programmes 13

14. 3. APPs 2017/18 review of the portfolio (cont.)
Scope of the 2017/18 APP review
Review process
Assessed the process followed by departments to prepare and submit strategic plans and APPs.
Assessed the measurability and relevance of the final draft indicators and targets planned for selected programmes
Reporting
Findings from the review are communicated in the interim management report to enable changes to be made.
Findings relevant to the interim review do not have an impact on the audit conclusion on usefulness or reliability of the selected programmes for the PFMA year end audit. 14

15. 3. APPs 2017/18 review of the portfolio (cont.)
Key considerations when reviewing the APP
Does the APP align with MTSF?
Are indicators relevant and complete?
Is there a logical link between objectives, indicators and targets?
Are the targets realistic i.e. SMART?
Are adequate resources (human and financial) available to achieve APPs?
How can the APP be achieved e.g. Performance contracts/ monitoring
Review quarterly progress against APP targets
Review annual achievement against APP targets
Review and track changes to strategic plans and annual performance reports. 15

16. 3. APPs 2017/18 review of the portfolio (cont.)
Criteria used to assess the draft APP
Measurability of indicators and targets
Indicators are well-defined
Indicators are verifiable
Targets are specific, measurable and time-bound.
Relevance of indicators and targets
Indicators and targets are relevant to the mandate and realisation of strategic goals and objectives
Well-defined = clear, unambiguous definition so that data will be collected consistently and will be easy to understand and use.
Verifiable = it must be possible to validate the processes and systems.
Specific = the nature and the required level of performance can be clearly identified
Measurable = the required performance can be measured
Time bound = the time period or deadline for delivery is specified
The performance measure/ indicator and target relates logically and directly to an aspect of the entity’s mandate and the realisation of its strategic goals and objectives. 16

17. 3. APPs 2017/18 review of the portfolio (cont.)
Overview of entities within DTPS portfolio where a review was performed on the 2017/18 APP’s
ENTITY
APP reviewed
Findings noted on usefulness
Recommendations effected prior tabling of APP at Parliament
The Department of Telecommunications and Postal Services (DPTS)
Yes
Universal Service and Access Agency (USAASA)
Partly
Universal Service and Access Fund (USAF) No
State Information Technology Agency (SITA)
n/a
The South African Post Office SOC Ltd (SAPO)
National Electronic Media Institute of South Africa (NEMISA)
Broadband Infraco (BBI)
ZA. Domain Name Authority
No findings
Findings noted

18. 3. APPs 2017/18 review of the portfolio (cont.)
Strategic alignment of portfolio – DTPS (APP 2017/18)
National Development Plan (Chapter 4)
Information and communications infrastructure
MTSF: (Outcome 6)
FUNCTIONS
DTPS
CORE
ICT policy review
National e-Strategy
E-Government
Unlocking the potential of SMMEs
Make high-speed broadband internet universally
available at competitive prices.
Programme 3: Policy, Research and Capacity Development
Programme 4 : ICT Enterprise Development and SOE Oversight
Programme 5 : ICT Infrastructure Support 18

19. 3. APPs 2017/18 review of the portfolio (cont.)
Key objectives per ENE vs Targets – DTPS (APP 2017/18)
Programme 3: ICT Policy, Research and Development
Key Objective per ENE
Key objective per APP
Performance target
Comment/Observation
•Develop and implement ICT Policy and legislation aimed at improving access to and the affordability of ICT by:
Developing, amending and implementing draft ICT legislation in line with the 2016 White Paper on National Integrated ICT Policy by March 2020
Develop and implement ICT Policy and legislation aimed at improving access and affordability of ICTs.
Draft ICT Legislation developed in line with the National Integrated ICT Policy White Paper
Included in the 2017/18 APP
Develop a national e-strategy that will give priority to e-government services by:
Establishing a national e-skills council by March 2019
Establishing the rapid deployment coordinating committee by March 2019
Launching the national ICT forum by March 2018
Facilitating, monitoring and reviewing the implementation of the national e-strategy by March 2020
Facilitating, monitoring and evaluating the implementation of the integrated e-services programme by March 2020
Develop a National e-Strategy that will give priority to e-Government Services.
Promote the growth and sustainability of ICT SMMEs through the development and implementation of the ICT SMME Strategy.
ICT SMME Strategy approved
National e-Strategy approved
e-Government Strategy approved 19

20. 3. APPs 2017/18 review of the portfolio (cont.)
Key objectives per ENE vs Targets – DTPS (APP 2017/18)
Programme 4: : ICT Enterprise Development and SOE Oversight
Key Objective per ENE
Key objective per APP
Performance target
Comment/Observation
Improve the performance of state-owned companies through proactive and stringent oversight.
Improve performance of SOCs through proactive and stringent oversight.
Implementation of the SOE Rationalisation Report focusing on the State ICT Infrastructure Company and State IT Company.
Corporatisation of the Postbank and licensing Facilitated.
Service delivery performance and compliance of SOC against strategic plans and relevant prescripts monitored and evaluated and quarterly state of the SOC reports developed.
Included in the 2017/18 APP
Programme 5: Programme 5 : ICT Infrastructure Support
Key Objective per ENE
Key objective per APP
Performance target
Comment/Observation
Coordinate broadband connectivity through contributing to the achievement of 100 per cent population coverage by:
Managing the rollout of phase 1 of the broadband connectivity implementation plan towards connecting identified sites by March 2018.
Coordinate the Broadband connectivity to achieve 100% population coverage.
Develop and implement ICT Policy and legislation aimed at improving access and affordability of ICTs.
Project Manage the roll-out of he Broadband Connectivity Implementation Plan Phase 1 towards connecting 2700 identified sites.
Preliminary technical and regulatory studies conducted to inform Draft SA’s position for WRC-19.
Included in the 2017/18 APP 20

21. 3. APPs 2017/18 review of the portfolio (cont.)
Strategic alignment of portfolio – SITA (APP 2017/18)
National Development Plan (Chapter 4)
Information and communications infrastructure
MTSF: (Outcome 6)
FUNCTIONS
DTPS
CORE
National e-Strategy
E-Government
Programme 1: Service Delivery
Programme 2 : Infrastructure 21

22. 3. APPs 2017/18 review of the portfolio (cont.)
Key objectives per ENE vs Targets – SITA (APP 2017/18)
Programme 1: Service Delivery
Key Objective per ENE
Objective included in APP
Performance target
Comment/Observation
Promote investment in robust, reliable, secure and affordable ICT infrastructure that supports the provision of a multiplicity of applications and services.
Enhance efficiency of government business process.
Number of e- Government service deployed.
Included in the 2017/18 APP
Audio-Visual and Digital Content Bill for South Africa submitted to Cabinet for approval.
Level of maturity of ICT security.
Compile Socio Economic Impact Assessment System report on the Audio-Visual and Digital
Customer satisfaction level % Performance against measured contracted SLA metrics
95% performance against signed SLA metrics
Programme 2: Infrastructure
Key Objective per ENE
Objective included in APP
Performance target
Comment/Observation
Promote investment in robust, reliable, secure and affordable ICT infrastructure that supports the provision of a multiplicity of applications and services.
Consolidate and modernise data centres
Number of Government private cloud services available.
Included in the 2017/18 APP.
Improvement of ICT Insfrastructure : Disaster recovery Plan
Number of disaster recovery services provided.
Included in the 2017/18 APP 22

23. 3. APPs 2017/18 review of the portfolio (cont.)
Strategic alignment of portfolio – SAPO (APP 2017/18)
National Development Plan (Chapter 4)
Information and communications infrastructure
MTSF: (Outcome 6)
FUNCTIONS
DTPS
CORE
National e-Strategy
E-Government
Programme 2: Operational efficiencies 23

24. 3. APPs 2017/18 review of the portfolio (cont.)
Key objectives per ENE vs Targets – SAPO (APP 2017/18)
Programme 2: Improve operational efficiencies
Key Objective per ENE
Objective included in APP
Performance target
Comment/Observation
Promote investment in robust, reliable, secure and affordable ICT infrastructure that supports the provision of a multiplicity of applications and services.
Meet Postbank Service level Agreement
98% uptime for ATM and POS transaction
Included in the 2017/18 APP
Improve internal customer satisfaction level
Manage IT risks throughout
Build resilience into SAPO’s IT connectivity.
Customer’s satisfaction index
It should be noted that SAPO is a schedule 2 public entity, the recent challenges the entity experienced (declining revenues, a deteriorating cash flows, labour unrest etc.) necessitated the entity to relook at their strategies, the corporate plan and the strategic themes of the entity are tailored to increase and diversify its revenue streams and forster a modern and performance driven organisation which will result in the entity being self sustaining. 24

25. National Development Plan (Chapter 4)
3. APPs 2017/18 review of the portfolio (cont.)
Strategic alignment of portfolio – USAASA and USAF (APP 2017/18)
National Development Plan (Chapter 4)
Information and communications infrastructure
MTSF (Outcome 6)
FUNCTIONS
USAASA & USAF
CORE
E-Government
National e-Strategy
Make high-speed broadband internet universally
available at competitive prices.
Strategic Goal: Increased connectivity to underserviced and unserved areas. 25

26. 3. APPs 2017/18 review of the portfolio (cont.)
Key objectives per ENE vs Targets – USAASA & USAF (APP 2017/18)
Strategic Goal: Increased connectivity to underserviced and unserved areas
Key Objective per ENE
Strategic Objective in included APP
Performance target
Comment/Observation
Coordinate broadband connectivity through contributing to the achievement of 100 per cent population
coverage by:
Managing the rollout of phase 1 of the broadband connectivity implementation plan towards connecting identified sites by March 2018
Establishing a cybersecurity hub by March 2020.
Increased digital literacy through the establishment of smart communities
Increased roll out of electronic communication infrastructure in underserviced areas
Increased access to digital broadcasting services
Number of underserviced areas with access to electronic communication infrastructure.
Included in 2017/2018 APP
Number of public institutions utilised as anchor clients to the broadband networks.
Number of free public Wi-Fi hotspots deployed.
Number of existing sites with connectivity maintained.
Number of existing sites (ICT centres, clinics, educational institutions.) with connectivity maintained.

27. Overview of key findings on the review of the 2017/18 APPs4 27

28. 4. Overview of Key findings on the review of the 2017-18 APPs
Note: Review was done on the draft APP – for the DTPS, USAASA and USAF
Technical Indicator Description (TIDs) = provide further information e.g. the short definition, calculation type, source, purpose/ importance, indicator responsibility, data limitations, desired performance, etc.
Programme
Indicators not well defined
Technical indicator descriptions (TIDS) incomplete/incorrect
Targets were not specific and measurable
Source to be included in the TIDS not always correctly identified – indicators not verifiable
DTPS X
USAASA X 
USAF
NOTE: Despite the mutual agreement reached in the signed engagement letters for SAPO to perform the interim review on the APPs of the entity, the APP was not submitted on time to facilitate the performance of the review, per enquiry with management it was noted that the Accounting Authority approved the APP late and they wanted to provide an approved plan. NEMISA, BBI and ZA Domain are section 4(3)/contracted out audits and review not performed by audit firm. As such no feedback is included with regard to the measurability and relevance of the key programmes/strategic objectives of the APPs of these entities.
These will then only be tested as part of the normal audit processes. 28

29. 4. Overview of Key findings on the review of the 2017-18 APPs
Department of Telecommunications and Postal Services
Programme
Total no. of indicators included in the APP
Targets not Specific
(draft APP) - to be corrected based on recommendatio ns from the review
Targets not Measurable
(draft APP)- to be corrected based on recommendations from the review
Targets not Time bound
(draft APP) - to be corrected based on recommendations from the review
Programme 3 – Policy, Research and Capacity Development 7
3(43%)
Programme 4 – ICT Enterprise Development and Oversight 6
4(27%)
Programme 5 – ICT Infrastructure Support 3
1(33%) 29

30. 4. Overview of Key findings on the review of the 2017-18 APPs
Universal Service and Access Agency
Programme
Total no. of indicators included in the APP
Targets not Specific
(draft APP) - to be corrected based on recommendation s from the review
Targets not Measurable
(draft APP)- to be corrected based on recommendations from the review
Targets not Time bound
(draft APP) - to be corrected based on recommendations from the review
Programme 1 : Business Support 26
9(34.6%)
10(38.5%)
Programme 2 : Business Intelligence 10
Use slide if interim review was performed and findings were raised. 30

31. 4. Overview of Key findings on the review of the 2017-18 APPs
Universal Service and Access Fund
Programme
Total no. of indicators included in the APP
Targets not Specific
(draft APP) - to be corrected based on recommendation s from the review
Targets not Measurable
(draft APP)- to be corrected based on recommendations from the review
Targets not Time bound
(draft APP) - to be corrected based on recommendations from the review
Programme 1 : Business Operations 8
2 (25%)
3 (37.5%)
Use slide if interim review was performed and findings were raised. 31

32. 4. Overview of Key findings on the review of the 2017-18 APPs
Key changes in the planning process for (DTPS)
New indicators were included in the APP as follows to ensure that there’s alignment with the national development plan:
Programme 3- Policy, Research and Capacity Development = 6 indicators and targets
Programme 4 - ICT Enterprise Development and Oversight = 1 indicators and target 32

33. 4. Overview of Key findings on the review of the 2017-18 APPs
Key changes in the planning process for (USAASA & USAF)
New indicators were included in the APP as follows:
USAASA
Programme 1 – Business Support = 14 indicators and targets
 Programme 2 – Business Intelligence = 8 new indicators and targets
USAF
Programme 1 – Business Operations = 5 indicators and targets
4 Indicators which were on USAASA’s 2016/17 APP were removed. These indicators do not relate to the entity’s core mandate and/ or do not relate to service delivery either through the NDP, MTSF, SONA, or any other key documents.
No indicators were removed from USAF’s 2016/17 APP. 33

34. 5
Budget analysis 34

35. 5. DPTS Budget analysis
Comparison between current year and prior year budget
% Budget increase
% Budget decrease 35

36. 5. USAASA &USAF Budget analysis
Comparison between current year and prior year budget
% Budget increase
% Budget decrease 36

37. 5. DTPS Budget analysis (budget per Economic classification 2017/18)
Department of telecommunications and postal services- R’000
Remaining Budget – R’000
Note: Please populate graph with information relevant to specific auditees

38. 5. DTPS Budget analysis
Note: Please populate graph with information relevant to specific auditees. 38

39. 6
Key matters for noting 39

40. 6. Key matters for noting – Status of key positions
Entity
Status – 31 March 2017
SAPO
Group Chief Operating Officer (COO) - Vacant
Company Secretary – Vacant
Chairperson of the board – Vacant
Group Chief Financial Officer has been appointed
Vacant as at 31 March 2016
USAASA/USAF
Chief Financial Officer has been appointed
NEMISA
Chief Executive Officer has been appointed
Sentech
SITA
Deputy Chief Executive Officer (DCEO) (Support & Governance) - Vacant
Chief Internal Audit – Vacant 40

41. AGSA Improved audit methodology7 41

42. 7. AGSA improved audit methodology
1. Risk-based audit approach (minimising audit areas where auditees are now mature or are changing socio-politically, and addressing auditee-specific risk).
2. Allows for an approach that supports full integration between:
(a)financial reporting, performance reporting and reporting on compliance, and
(b) regularity audit and the work of specialists (users of reports should not perceive these as separate, unrelated products).
3. Formal approach for repeat disclaimers. 42
Auditing to build public confidence

43. 7. AGSA improved audit methodology
We have improved our audit methodology and audit report
Delivering a valuable and relevant product focusing on the things that matter 43
Auditing to build public confidence

44. Key recommendations for improvements8 44

45. 8. Key recommendations for improvements in the portfolio
Auditees that submitted financial statements of poor quality for auditing should strengthen their processes and controls ,to create and sustain a control environment that supports reliable reporting
We recommend that the following best practices be implemented by all auditees to prevent material misstatements and non -compliance with legislation:
Leadership should prioritise filling all vacant managerial and key official positions that have remained vacant for extended periods
Leadership should develop a training programme to ensure that all staff are up to date with the requirements of their jobs and relevant legislation
Implement an effective performance management system, which ensures that consequence management is implemented
Auditees should implement daily and monthly processing and reconciling controls over the areas where material misstatements were identified in the submitted financial statements
The information for the secondary financial information should not be prepared only when compiling the year-end financial statements, but regularly, and reviewed monthly
Auditees should identify the root cause of the material misstatements identified during the audit and ensure that adequate and immediate action is taken to address them 45

46. QUESTIONS 46

47. How to get in touch with the AGSA