1. Overview of the Internal Audit unit of the Department
PRESENTATION TITLE
Presented by:
Name Surname
Directorate
Date
Overview of the Internal Audit unit of the Department

2. Structure of Internal Audit
Chief Director:
Internal Audit
Filled Posts: 0
Vacant Post: 1
Directorate:
Compliance
&
Performance
Audit
Filled Posts: 15
Vacant Posts: 2
Forensic
Investigations
and
Quality Assurance
Filled Posts: 8
Information
Technology
Filled Posts: 5
8 Senior Auditor positions were filled towards the end of the 2nd Quarter
2 Director posts were filled towards the end of the 3rd Quarter.
Interviews for the position of Chief Director: Internal Audit were held on 5 October 2017 and the appointment will be finalised within a month.

3. Purpose of the Unit
To provide an independent , objective assurance and consulting services to add value and improve department’s operations. It assists the Department to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance process.
To provide independent forensic investigations.
The Department’s Internal Audit Unit serves both the Main Account and the Water Trading Entity.

4. Purpose of the Unit
Internal Audit’s activities include the assessing and evaluating:
The reliability of financial and operating information and the means used to identify, measure, classify and report such information.
The systems established to ensure compliance with those policies, plans, procedures, laws and other prescripts relevant to the Department.
The means of safeguarding assets and, where appropriate, the verification of the existence of such assets.
The economic and efficient management of the Department’s financial, human and other resources relevant to the Department.
The operations and/or programmes to ascertain whether or not results are consistent with established objectives and goals and whether or not the operations are being carried out as planned.

5. Functioning of the Internal Audit Unit
Internal Audit Unit reports Administratively to the Director-General and Functionally to the Audit Committee;
The Audit Committee consists of three External Members;
The Three-Year Rolling Plans and Annual Operational Plans for the Main Account and the Water Trading Entity were approved by the Audit Committee;
Internal Audit reports quarterly to the Audit Committee on performance regarding the implementation of the Annual Operational Plans;
The Annual Operational Plans are risk-based with a clear alignment with the key risks, have adequate information systems coverage, and a good balance across the different categories of audits, i.e. risk-based, performance and computer audits.
Findings regarding the deficiencies in the system of internal control and deviations from policies and procedures were reported in the Internal Audit Reports and recommendations were made to management to address these deficiencies.

6. Functioning of the Internal Audit Unit
Management is implementing these recommendations as and when the reports are issued to them in order to improve the internal controls. A significant number of these findings have since been implemented by management. Follow-up audits will be conducted to confirm that these recommendations have been implemented.
Internal Audit, through its forensic investigation unit, conducted several forensic investigations into allegations against officials of the Department. These investigations were conducted at the request of the Director-General. The investigations resulted in recommendations for disciplinary and/or criminal proceedings to be instituted against the Department’s officials concerned. Internal Audit monitors the implementation of these recommendations to ensure that they are implemented timeously.

7. Table 1: Performance of the Internal Audit Unit COMPLIANCE MAIN ACCOUNT AUDITS CONDUCTED IN FINANCIAL YEAR No
Audit Name
Responsible Unit
Findings
Cleared
Outstanding
Not yet due
High Risk
Medium Risk
Low Risk 1
Review of Annual Financial Statements
CFO: Main Account 6 2
Audit of performance information Q4
DDG: PMU 7 3
Security and Facilities Management
DDG: Corporate Service 5 4
Water use Efficiency
DDG: Information and Planning
Water Use Authorisation
DDG: Regulation
Audit of performance information Q1
North West Regional Office
CD: North West 29 10 19 15 8
Mpumalanga Regional Office
CD: Mpumalanga 9
Budget Management
Asset Management 16 11
Supply Chain Management 12
Audit of performance information Q2 13
Local Government Support Programmes
DDG: NWRI 14
Audit of performance information Q3
TOTAL
120 47 54 73 31

8. Performance of the Internal Audit Unit COMPLIANCE & PERFORMANCE AUDIT MAIN ACCOUNT AUDITS CONDUCTED IN FINANCIAL YEAR
Table 1 indicates that 39% of the findings that have been issued by the Compliance & Performance Audit Directorate for the Main Account have been cleared, 16% are outstanding while 45% are not yet due

9. Table 2: Performance of the Internal Audit Unit COMPLIANCE WATER TRADING ACCOUNT PROJECTS CONDUCTED IN No
Audit Name
Responsible Official
Findings
Cleared
Outstanding
Not yet due
High Risk
Medium Risk
Low Risk 1
Southern Operations
DDG: NWRI 24 15 9 17 7 2
Eastern Operations 55 49 6 28 26 3
Review of Annual Financial Statements
CFO: WTE 4
Construction East 5
Construction South
Supply Chain Management 8
Revenue Management
Financial Accounting 13
TOTAL
110 64 31 69 39

10. Performance of the Internal Audit Unit COMPLIANCE WATER TRADING ENTITY AUDITS CONDUCTED IN FINANCIAL YEAR
Table 2 indicates that 58% of the findings that have been issued by the Compliance & Performance Audit Directorate have been cleared, 14% are outstanding while 28% are not yet due

11. Table 3: Performance of the Internal Audit Unit INFORMATION TECHNOLOGY MAIN ACCOUNT AUDITS CONDUCTED IN FINANCIAL YEAR No
Focus area / project activities
Unit
Findings
Cleared
Outstanding
Not yet due          
High Risk
Medium Risk
Low Risk 1
Data analysis on BAS
Finance: Main Account 3 2
Application audit on Hydstra
Policy and Information
Backup audit on WARMS
Corporate Services 4
Follow-up audit on UPS and Security surrounding the server rooms at all regional offices.
Regions 21 20 5
Data Analysis audit on WARMS data
Water Sector Regulations 10 6
Data analysis on PERSAL 7
Data analysis auditing of LOGIS 8
Disaster recovery and Business Continuity Plans audit on WARMS 9
General Controls on Laboratory Information System (LIMS)
General Controls Review on Geographic Information System (GIS)
Total 55 49 48

12. Performance of the Internal Audit Unit INFORMATION TECHNOLOGY MAIN ACCOUNT AUDITS CONDUCTED IN FINANCIAL YEAR
Table 3 indicates that 11% of the findings that have been issued by the Information Technology Audit Directorate have been cleared, 0% are outstanding while 89% are not yet due

13. Table 4: Performance of the Internal Audit Unit INFORMATION TECHNOLOGY WATER TRADING ACCOUNT AUDITS CONDUCTED IN FINANCIAL YEAR No
Focus area / project activities
Unit
Findings
Cleared
Outstanding
Not yet due
High Risk
Medium Risk
Low Risk 1
Interface Audit between SAP and WARMS
Finance: WTE 3 2
Data analysis on SAP and PERSAL 7
Disaster Recovery Plan and Business Continuity Plan for SAP
Corporate Services 4
IT Governance Review
Ad Hoc projects
Value for money audit on the BCX 5
Value for money audit on E – Wulaas
 Regulation
Revenue management CAATS reports 13 8
Total 40 16 24 23

14. Performance of the Internal Audit Unit INFORMATION TECHNOLOGY WATER TRADING ACCOUNT AUDITS CONDUCTED IN FINANCIAL YEAR
Table 4 indicates that 40% of the findings that have been issued by the Information Technology Audit Directorate have been cleared, 0% are outstanding while 60% are not yet due

15. 17 of the investigations were for the Main Account
Performance of the Internal Audit Unit FORENSIC INVESTIGATION DIRECTORATE REGARDING INVESTIGATIONS CONDUCTED IN FINANCIAL YEAR
41 Forensic Investigations were completed during the 2016/17 financial year. These relate to both the Main Account and the Water Trading Entity. Their details are as follows:
17 of the investigations were for the Main Account
24 of the investigations were for the Water Trading Entity

16. Performance of the Internal Audit Unit FORENSIC INVESTIGATION DIRECTORATE REGARDING INVESTIGATIONS CONDUCTED IN FINANCIAL YEAR
Internal audit monitors the implementation of the recommendations arising from Forensic Investigations. The status is as follows:
Main Account:
1 recommendation from 2013/14 financial year has not been implemented, 0 is in progress and 2 have been implemented.
All recommendations from the 2014/15 financial year have been implemented.
4 recommendations from the 2015/16 financial year have been implemented, 3 are in progress and 2 have not been implemented.
6 recommendations from the 2016/17 financial year have been implemented, 3 are in progress and 1 has not been implemented.
Water Trading Entity:
16 recommendations from the 2015/16 financial year have been implemented and 6 are in progress.
16 recommendations from the 2016/17 financial year have been implemented, 7 are in progress; and 7 have not been implemented.

17. IMPLEMENTATION OF RECOMMENDATIONS FROM FORENSIC INVESTIGATION REPORTS
MAIN ACCOUNT

18. IMPLEMENTATION OF RECOMMENDATIONS FROM FORENSIC INVESTIGATION REPORTS WATER TRADING ENTITY

19. The number of officials who faced disciplinary action during 2016/17
Main Account
Category of Employees
Number of employees
Officials in salary level 1 to 12 and OSD 31
Senior Managers (Level 13 and above)- 3
Total 34
Water Trading Entity
Category of Employees
Number of employees
Officials in salary level 1 to 12 and OSD 36
Senior Managers (Level 13 and above)- 4
Total 40

20. Sanctions The following sanctions were handed during 2016/17
Main Account
Sanction
No of sanctions
Dismissals 6
15 days suspension without pay and final written warning 1
one month suspension without pay and final written warning 2
two months without pay and written warning
three months without pay and final written warning
3 months Suspension and the pay back of R78 
Final Written Warning Letter
Warning Letter 4
Resignation
Total 26
Water Trading Entity
Sanctions
N0 of Sanctions
Dismissals 2
one month suspension without pay and final written warning 1
three months without pay and final written warning 4
Final Written Warning Letter
Warning Letter
Resignation
Total 11

21. Achievements
Improved communication with management of the Department leading to implementation of recommendations and improvement of Internal Controls.
Internal Audit has assisted management with consequence management by investigating allegations of irregularities and presenting such evidence in disciplinary hearings. Most of the cases were finalised in favour of the Department. Some of the cases of case resulted in civil claims and criminal cases being opened.
The Unit has skilled people with Internationally Recognised Qualifications:
5 Senior Auditors obtained Internal Audit Technician (IAT) Designations from the Institute of Internal Auditors;
2 IT Auditors obtained Certified Information Systems Auditor (CISA) designations from the Information Systems Audit and Control Association (ISACA);
4 Forensic Investigators obtained Certified Fraud Examiner (CFE) Designations from the Association of Certified Fraud Examiners (ACFE).
1 Auditor obtained a Certified Internal Auditor (CIA) Designation from the Institute of Internal Auditors;

22. Challenges
The Department’s Internal Audit Unit is faced with a capacity challenge. It services both the Main Account and the Water Trading Entity whereas the capacity is only sufficient to service only the Main Account. As a result of this constraint in resources, Internal Audit managed to complete only 67% of the operational plan for the 2016/17 financial year. This constraint will however be addressed during the Department’s structure review.
Timeous implementation of recommendations by management as some of the recommendations are not implemented within the agreed timeframes and some of the disciplinary cases take long before finalisation. The status is reported to Top Management and the Audit Committee and the responsible managers are held accountable.

23. Thank you