1. 2017/18 AUDIT ACTION PLAN PORTFOLIO COMMITTEE
13 March 2018

2. PRESENTATION OUTLINE Purpose Introduction
Improvement on Audit outcomes
Progress on alignment between APP AND MTSF
2018/19 MTSF aligned Programme Performance Measures (PPMs)
Recommendation

3. PURPOSE
To present a progress report to the Portfolio Committee on the implementation of the 2017/18 Audit Action Plan.

4. INTRODUCTION
The presentation outlines Audit findings for 2016/17, Action Plans and Progress made by the Department to address:-
Regularity Audit; and
Audit of the Annual Performance Report

5. IMPROVEMENT ON AUDIT OUTCOMES
To address the Audit outcomes on Regularity Audit, the Department has taken the following steps:
The department developed the Audit Action Plan and obtains progress from managers on a monthly basis
The Audit Action Plan is presented and reviewed by the Audit Committee
The Audit Action Plan was presented to AGSA during our workshop in September 2017
During the financial year Finance and ASIDI Team engaged intensively with Implementing Agents to obtain outstanding documents
Monthly meetings with Implementing Agents enhanced communication and monitoring of budget, projects, performance of IAs and expediting payments of contractors to reduce accruals

6. IMPROVEMENT ON AUDIT OUTCOMES
To address the Audit outcomes on Performance information, the Department has taken the following steps:
Developed MTSF aligned Customised Programme Performance Measures (PPMs) for inclusion in the Provincial Annual Performance Plans;
Improved regular engagements with Auditor-General (AG) for clarity on audit matters;
The Strategic Planning and Reporting and Internal Audit units work closely with the Branches on all performance information reported and for verification of evidence;
Regular engagements with Programmes through Quarterly Branch Reviews to improve planning and highlight misalignment and potential risks; and
Strategic Planning with Provincial Education Departments (PEDs) meet through the HEDCOM Sub-Committees to address gaps identified for MSTF alignment.

7. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
1. ASIDI: Commitment registers/schedules are not updated
Internal control deficiency
Inadequate review process on the monthly/quarterly commitment registers/schedules.
Commitment register be reviewed monthly/quarterly.
The process of recording commitments per school in the commitment register has been finalised and updates are done on a monthly basis. The Department conducts monthly meetings with IAs and financial reporting is a standing item on the agenda.
Additional informal engagements are held to resolve contract documents with Implementing Agents, Finance and ASIDI Team.
2. ASIDI: Understatement of accruals
Internal control deficiency.
The department reliant to the IAs for record keeping is compromised in ensuring that expenditure and accruals are complete.
Monthly reconciliation of accruals.
Accruals are recorded/reviewed on a monthly basis and submitted to Finance on a quarterly basis. The Department conducts monthly meetings with IAs and financial reporting is a standing item on the agenda.

8. PROGRESS: COMMITMENT REGISTER
There are monthly management reviews of the commitment register. Below is an indication of progress made since 31 March 2017
31 March 2017: Number of Projects with debit balances – 1,074. Rand value: R340m
31 December 2017: Number of Projects with debit balances – 606. Rand value: R227m
27 February 2018: Number of Projects with debit balances – 525. Rand value: R168m
 The remaining 524 schools can be broken down as follows and are being followed up with IAs:
94 Schools where we do not have the original contracts
430 Schools with other issues (outstanding VOs, incorrect expenditure allocations, more than one contract , etc.)
 Please see attached the list as at 31 December 2017 and the latest list of negative balances.
The outstanding cases are limited to specific IAs and specific batches. IA visits to address these issues is in progress

9. PROGRESS: ACCRUALS
Implementing Agents are compelled to provide details of accruals at the end of each quarter. These must be signed off as final on an IA letterhead.
This process was initiated before 31 March 2017 and submissions from IA’s for 31 March 2017, 30 June 2017, 30 September 2017 and 31 December 2017 have been received.
Substantive tests have not revealed any cases where an invoice paid subsequently, and dated before the end of the period, was not included in the accrual detail.
To date, there is no evidence of any invoices dated before 31 March 2017 and paid subsequently, that were not included in the accrual detail provided for 31 March 2017.
For the financial year end dated 31 March 2018, IA's have been requested to submit all the payment certificates issues by their Professional Service Providers. This will serve as a further test to determine if there is a matching invoice for said certificate.

10. MONITORING IMPLEMENTATION OF PROJECTS
Meetings with the Director-General are held with all IAs where progress on each project is tracked. Minutes of these meetings are available:
DATES OF MEETINGS
11 May 2017
15 June 2017
16 August 2017
29 September 2017
8 November 2017
14 December 2017
12 February 2018

11. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
3. Misstatements on Guarantees
Internal control deficiency.
Compliance monitoring with DBSA to ensure that construction guarantees are renewed and evidence of legal proceedings exists did not take place by the department.
The reconciliation of contingent assets are not prepared and reviewed on a monthly basis and as a result monthly controls were inadequate to prevent and detect misstatements.
Guarantees should be regularly updated and kept for record keeping.
There is a schedule of guarantees which shows the status of guarantees, however the schedule does not have the guarantees of all contractors. An updated list of guarantees has been requested from the IAs.

12. PROGRESS: GUARANTEES
A guarantee will always be in the form of a policy paid for by the contractor or a retention percentage withheld on each payment made to the contractor.
Please see attached a schedule of retentions and guarantees compiled as at 31 December 2017 for Inappropriate Structures.
During this exercise, shortcomings were identified and instructions were issued to IAs to provide additional detail such as proof that the guarantee is still active and being serviced by the contractor
IAs have been requested to provide the information on a monthly basis as part of their monthly reporting requirements and follow ups are made on any outstanding information.

13. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
4. MOA with Implementing Agents not renewed/extended on time
Internal control deficiency
Non-compliance with the requirements of section 11(13)(a) of the Preferential Procurement Regulations.
Non-compliance with the requirements of TR16A6.4 regarding the approval of the deviation during the extension of contracts to implementing agents
by the department.
The reconciliation of contingent assets are not prepared and reviewed on a monthly basis and as a result monthly controls were inadequate to prevent and detect misstatements.
Review all MOAs before they expire
Existing MoAs with different Implementing Agents (IAs) on the ASIDI Programme have been extended till 31 March The process of renewing MoAs of those implementing agents beyond 31 March 2018 is in progress.

14. RENEWED MoAs Implementing Agents Date signed by DBE
Date signed by Implementing Agents
Expiry Date
DBSA
5 July 2016
12 July 2016
31 March 2018
IDT Free State
7 February 2017
IDT Eastern Cape
IDT KZN
1 July 2016
6 February 2017
Coega
21 July 2016
Eskom
3 August 2016
5 October 2016
The Mvula Trust –Eastern Cape
19 September 2016
The Mvula Trust -Limpopo
30 June 2016
26 September 2016

15. RENEWED MoAs Implementing Agents Date signed by DBE
Date signed by Implementing Agents
Expiry Date
The Mvula Trust - Mpumalanga
1 July 2016
19 September 2016
31 March 2018
Adopt- a- School
5 July 2016
7 July 2016
Mhlatuze Water
30 August 2016
DoE Western Cape
8 July 2016
DRPW: Eastern Cape
DoE : Northern Cape
Signed but no date indicated

16. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
5. The Department takes a long time to transfer the assets completed in terms of Section 42
Internal control deficiency.
Inadequate oversight by the department over Implementing Agents and Professional Service Providers to ensure final closure reports are received as agreed so that Section 42 certificates are issued and transferred to custodian departments.
The Department to ensure that completed assets are transferred to Provinces.
There are monthly meetings which are held with Implementing Agents where progress is reported and challenges are identified and discussed (See Slide 9).
Action Plans are followed up and monitored.

17. PROGRESS ON SECTION 42
The Department has completed final accounts for some of the projects to be transferred before the financial year end.
70 Basic Services projects have been submitted to Public Works; and
27 Basic Services and 12 Inappropriate projects are in the process of being transferred to Provincial Public works.

18. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
6. Reconciliation/ update of Immovable Assets
Internal control deficiency.
Management did not ensure that the annual financial statements are supported by accurate and reliable schedules.
The immovable asset register is not prepared and reviewed on a monthly basis and as a result monthly controls were inadequate to prevent and detect misstatements.
Monthly update/reconciliation be done and reported quarterly
The monthly reports of IAs are reviewed by the ASIDI PSU Team Leaders who then submit them to the ASIDI Project Managers for approval.

19. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
7. Limitation of Scope on ASIDI projects
Internal control deficiency.
The department did not effectively maintain its archiving system to ensure that all documents were safely stored and retained. Not providing information to the Auditor-General of South Africa for audit purposes is a contravention of the Public Finance Management Act.
All documentation should be kept and stored for record keeping.
There are supply chain documents in place. However, such documents reside with the IAs. The Department has made an arrangement with IAs to avail tender documents for audit purposes. The DBE has also initiated a document management system to address this matter.

20. PROGRESS: ADDRESSING LIMITATION OF SCOPE
A Document Management System (DMS) is being finalised based on the Infrastructure Delivery Management System (IDMS) & the Standard for Infrastructure Procurement and Delivery Management (SIPDM)to ensure compliance and address the shortcomings related to information residing in implementing agents.
The Document Management Plan entails:
Filing Structure
Document Classification process
Importing of documents from the current systems to the DBE network (I-drive)
Communicate the DMS structure and process to all involved
The process to import data has commenced with information imported and filed on the new system and 70% of DMS work has been done on:
FS IDT
FS DBSA
FS DoE
DBSA 49
DBE 61
DBE 32
DBE internal documentation.

21. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
8. Overstatement of recoverable expenditure and non-compliance with National Treasury Regulation for claims recoverable (EU Donor Projects)
Internal control deficiency.
Compliance with the requirements of Accounting Manual for departments in respect of the classification of expenditure and National Treasury Regulation was not adhered to. Furthermore controls in place regarding budget and debtors management do not prevent and detect non-compliance.
Ensure that EU projects are approved by the correct structure prior to implementation.
Four (4) projects which were incorrectly processed as Donor projects were moved to departmental appropriation funds.
9. Non-compliance with the SCM process by various Implementing Agents
Controls over record keeping ensuring the retrieval of documents necessary to verify compliance with supply chain management prescripts were inadequate.
The Department to strengthen oversight responsibilities.
The Department’s Infrastructure Officials are appointed to IAs BID committees to ensure that IAs follow the SCM prescripts
The IAs Supply Chain policies are being reviewed to verify alignment with National Treasury prescripts

22. PROGRESS: OFFICIALS ON IA BID COMMITTEES
DBE/PSU Official IA
Sub-programme
Dates of BEC/ BAC
 Takalani Sidimela
 TMT Limpopo
 Batch 4 Water and Sanitation
 10 October 2017
Takalani Sidimela
 11 October 2017
 18 October 2017
 20 October 2017
 21 October 2017
 1 November 2017
 2 November 2017
 8 November 2017
Pusetso Mabetoa
 NDPW (IDT)
 NDPW Batch I Inappropriate structures
18 -19  Dec 2017, 5-6 Feb 2018
Thabang Lekoa
DBSA
DBSA Batch 3 inappropriate structures
18 -19  Dec 2017
TMT EC
Batch 4 water and Sanitation
20 Dec 2017
Joyce Modipa
DBSA Batch 3 Inappropriate structures
18 Jan 2018, 25 Jan 2018

23. PROGRESS ON OVERSTATEMENT OF RECOVERABLE
Projects (4 projects) which were previously paid under EU have been corrected. In the current financial year there are no EU projects affected by the recoverable account. Projects are as follows:
National Teacher Awards;
Operation Phakisa;
Release of Matric results; and
Historical School Restoration.

24. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
10. Understatement of intangible assets LURITS, SA-SAMS, NIEMS and NSC
Internal control deficiency
Invoices submitted by SITA must split Development costs and Maintenance costs
All invoices received from SITA are reviewed before processing to ensure that costs are split between development costs and maintenance costs.
11. HR: Vacant key positions in the SCM and other organogram related matters
Internal control deficiency.
Implement effective HR management to ensure that adequate and sufficiently skilled resources are in place.
The shortlisting process for the SCM director’s post has been completed and the interviews will be held soon.
12. Non-compliance with the requirements of Public Service Regulations, Part VII D.8 (a) during the appointment of employees
Employees files are not complete as it does not include all the necessary supporting documentation required
monitoring compliance with the requirements of the PSR regulations in respect of the appointment of employees
The Department requested verification reports from SSA and SAQA and they are often delayed because of the heavy workload at these institutions. Due to delays in receiving reports from SAQA and the SSA, the Department has

25. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
to confirm compliance with regard to vetting as required.
Monitoring compliance with the requirements of the PSR regulations in respect of the appointment of employees.
drafted letters of appointment indicating that officials who have falsified qualifications will be summarily dismissed and charges of fraud may be instituted against them.
13. Departmental policies and procedures are not reviewed
Management failed to maintain and communicate policies and procedures to enable and support understanding and execution of internal control objectives, processes and responsibilities.
The Department to review policies regularly
Policies were reviewed during the current financial year. (Expenditure Policy, Policy and procedures for Inventory, Policy on Special Leave, Telephone policy, Banking and cash management policy, Recruitment and Selection Policy, Petty Cash policy etc.)
14. Written quotations were not obtained when procuring for goods and services
Internal control deficiency.
There was inadequate oversight by the department over SAB&T with regard to compliance with the requirements of the SCM policy.
Ensure that the service provider appointed to manage Kha Ri Gude programme follow the necessary SCM prescripts
The Department is confident that this will not happen at all in the department as proper procedures in procuring goods and services are being monitored and adhered to.

26. DEPARTMENTAL POLICIES REVIEWED
The Department’s existing policies were reviewed:
POLICY
DATE REVIEWED
Expenditure management and fraudulent transactions
November 2017
Special Leave policy
February 2017
Telephone policy
August 2017
Banking and cash management policy
Recruitment and Selection policy
March 2017
Petty Cash policy
June 2016
SCM Policy
October 2017

27. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
15. HR: Approval not obtained for performing remunerative work outside the employment of the department
Internal control deficiency.
The non-disclosure of other remunerative work is important in terms of ethical business practices and good governance, protecting and enhances the interests of the department.
Compliance with the requirements of the PSR in respect of additional remunerative work not approved was inadequate to detect the non-compliance.
The disclosure of other remunerative work is important in terms of ethical business practices and good governance .
Letters ("Letter of Acceptance of Post and Assumption of Duty" ) to newly appointed staff have a section whereby officials are requested to declare any outside remunerative work engaged in, even before they are appointed at the DBE.
The DG has issued letters to officials concerned informing them of the need to declare any outside remunerative work. Officials have responded to these letters. Furthermore a circular has been issued informing officials to declare any outside remunerative work.
The DBE has also formulated a Policy dealing with Financial Disclosures for Interest.

28. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
ROOT CAUSE
RECOMMENDATION
PROGRESS
16. SCM: Suppliers in which persons in service of other state institutions have an interest
Compliance with the requirements of the PSR in respect of additional remunerative work not approved was inadequate to detect the non-compliance.
Compliance with the requirements of the PSR in respect of additional remunerative work not approved be strengthened
SCM practitioners can now access the DTI website (CIPRO Database) and Central Supplier Database to check if the owner/ director of the company is also employed by the state.
17. Risk Management
Internal control deficiency.
Risk assessment not conducted and no risk management committee meetings.
Management did not monitor compliance with the requirements of Section 38 (1) (a) (i) of the PFMA and Treasury Regulation as no risk assessment was conducted in the current year.
Management should monitor compliance with the requirements of Section 38 (1) (a) (i) of the PFMA and Treasury Regulation as no risk assessment was conducted
The Risk Assessment per Branch is being conducted for the 2017/18 financial year. Risk Registers were updated.
Three (3) risk committee meetings were held in the financial year for monitoring of the progress made and the process of risk management.

29. RISK MANAGEMENT MEETINGS
DATES OF RISK MANAGEMENT MEETINGS
20 April 2017
22 August 2017
17 January 2018

30. PROGRESS ON FRUITLESS AND WASTEFUL EXPENDITURE
KHA RI GUDE
R’000
Opening balance
44 333
Less: Prior period error
(42 755)
As Restated (new balance)
1 578
Less: Amount recovered
(282)
Balance
1 296
Add: Fruitless and Wasteful expenditure for 2016/17
11 157
Closing balance as 31 March 2017
12 453
(7 208)
Balance as at 31 January 2018
5 245

31. DETAILED EXPLANATION ON FRUITLESS AND WASTEFUL EXPENDITURE
Narrative explanation of fruitless and wasteful expenditure
During the 2015/16, the Auditor-General declared R million as fruitless and wasteful expenditure on payment of stipends for volunteers utilising the sliding scale rates.
During the 2016/17 financial year, the Department appointed an independent audit service provider to investigate the fruitless and wasteful expenditure that incurred on Kha Ri Gude. It was discovered that from R44 million declared as fruitless and wasteful expenditure in 2015/16 financial year, R1.578 million was fruitless and wasteful expenditure.
The report was presented and discussed with the Auditor-General. It was agreed that the R million be adjusted by R million.
From the R1.578 million R was recovered. The Volunteers implicated on the matter did not participate in the 2016/17 financial year.
In the last quarter of 2016/17 financial year, the Director-General appointed an Internal Investigation Committee to look into the matter of fruitless and wasteful expenditure. The Committee identified fruitless and wasteful expenditure amounting to R million. The amount was disclosed in the books of the Department.
From the R million disclosed as fruitless and wasteful expenditure in 2016/17 financial year, R million has been recovered to date.
The Department opened a case with SAPS and Special Investigating Unit and the matter is currently under investigation.

32. PROGRESS ON ALIGNMENT BETWEEN APP AND MTSF
Indicator
Root Cause
Progress
Proportion of principals who have signed performance agreements
MTSF indicators and targets not included in the approved APPs for DBE/PEDs
An agreement has not been finalised by the Education Labour Relations Council.
Job descriptions are currently used for reporting purposes.
DBE provided PEDs with a template for recording principals who have signed job descriptions
Percentage of learners who completed the whole curriculum
A new MTSF aligned PPM was developed for inclusion in PEDs APPs for 2018/19 as PPM 219
The DBE is currently collaborating with UNICEF to develop a standardised Curriculum Coverage Solution to address this Indicator.
Percentage of learners in schools that are funded at a minimum level
Indicator crafted as PPM 223 for inclusion in the PEDs APPs, it was adopted at the HEDCOM Sub Committee on PME on October and presented at HEDCOM on 16 October 2017

33. PROGRESS ON ALIGNMENT BETWEEN APP AND MTSF
Indicator
Root Cause
Progress
Percentage of schools with full set financial management responsibility on the basis of assessment
MTSF indicators and targets not included in the approved APPs for DBE/PEDs
The indicator crafted as a PPM 222 for inclusion in the PEDs APPs, adopted at the HEDCOM Sub Committee on PME on October and presented at HEDCOM on 16 October 2017
Percentage of schools visited at least twice a year by District officials (including subject advisors) for monitoring and support purposes
The indicator was crafted as a PPM 104 for inclusion within the PEDs APPs was adopted at the HEDCOM Sub Committee on PME on October
Complete and consistent post provisioning policy and regulation in place and proceed with implementation and monitoring.
The Indicator is included in the DBE APP as Indicator 3.5.1
Number of PEDs that had their post provisioning process assessed for compliance with the post- provisioning norms and standards.

34. PROGRESS ON ALIGNMENT BETWEEN APP AND MTSF
Indicator
Root Cause
Progress
Percentage of school principal rating the support service being satisfactory
MTSF indicators and targets not included in the approved APPs for DBE/PEDs
Indicator in the DBE APP 2017/18 is based on an Improvement Plan, for 2018/19 the MTSF indicator is included, also crafted as PPM 107 for inclusion in the PED APPs
Percentage of district managers whose competency has been assessed against criteria
The Indicator is included in the DBE APP as Indicator 4.5.3
(Percentage of District Managers assessed against developed criteria)
Clear roles and functions for district offices and minimum competencies for district officials
Collective Agreement No. 4 of 2017 has been signed in the ELRC clarifying the job descriptions of office based educators.
The a) Roles and Responsibilities; and b) Recruitment and Selection Criteria for District Officials will now be used as a guide by provinces.

35. 2018/19 MTSF ALIGNED PPMs PPM NO. INDICATOR TITLE PPM 104
Percentage of schools visited at least twice a year by District officials for monitoring and support purposes.
PPM 216
Percentage of learners who are in classes with no more than 45 learners.
PPM 105
Percentage of 7 to 15 year olds attending education institutions.
PPM 217
Percentage of schools where allocated teaching posts are all filled.
PPM 106
Percentage of learners having access to information through
(a) Connectivity (other than broadband); and
(b) Broadband
PPM 218
Percentage of learners provided with required textbooks in all grades and in all subjects per annum.
PPM 107
The percentage of school principals rating the support services of districts as being satisfactory.
PPM 219
Number and percentage of learners who complete the whole curriculum each year.
PPM 210
The average hours per year spent by teachers on professional development activities.
PPM 220
Percentage of schools producing a minimum set of management documents at a required standard.
PPM 211
Number of teachers who have written the Self-Diagnostic Assessments.
PPM 221
Percentage of SGBs in sampled schools that meet minimum criteria in terms of effectiveness every year.
PPM 212
Percentage of teachers meeting required content knowledge levels after support.
PPM 222
Percentage of schools with more than one financial responsibility on the basis of assessment.
PPM 213
Percentage of learners in schools with at least one educator with specialist training on inclusion.
PPM 223
Percentage of learners in schools that are funded at a minimum level.
PPM 214
Number and percentage of Funza Lushaka bursary holders placed in schools within six months upon completion of studies or upon confirmation that the bursar has completed studies.
PPM 503
Number and percentage of Grade R practitioners with NQF level 6 and above qualification each year.
PPM 215
Number of qualified Grade R-12 teachers aged 30 and below, entering the public service as teachers for the first time during the financial year.

36. IMPROVEMENT ON AUDIT OUTCOMES
AUDIT FINDING
RECOMMENDATION
PROGRESS
Lurits Denominator: Indicator
Completeness of learner
numbers on LURITS; integrity
of Denominator/ Master list
DBE to strengthen monitoring control to ensure information is complete and accurate
Data is uploaded on a quarterly basis from confirmed databases of provinces.
DBE is currently conducting audit to verify data in Provinces and schools.
Inadequate monitoring control
Build exception reporting mechanism within LURITS, SA-SAMS and in EMIS Data management to improve the control environment in detecting exceptions
DBE has strengthened or built validation controls (rules) to identify exceptions from SA-SAMS to LURITS
Exceptions identified were communicated to Provincial Educations Departments
Provincial Education Departments report quarterly on the quality of data.
Integrity of LURITS data
Build exception reporting mechanism within LURITS to improve the control environment in detecting exceptions
DBE collaborating with Home Affairs for verification of learner ID numbers. Automated link with national Population register active.
Verified ID numbers of learners sent to PEDs and corrected on the source system.

37. RECOMMENDATION
It is recommended that the Portfolio Committee discusses the progress report on the implementation of the 2017/18 Audit Action Plan.