1. Annual report presentation October 2009
AGSA SCoAG 2009
Annual report presentation
October 2009

2. This is our 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.
This is our reputation promise.

3. Table of contents Overview Key highlights Simplicity
Visibility of leadership
Strengthen human resources
Funding
Lead by Example
Conclusion

4. Overview of AG Commitment
The AGSA remains committed to the following goals in order to impact positively on all aspects of public sector accountability:
ensuring simplicity, clarity and relevance of the messages contained in all our reports, including the quality, timeliness and deepening of stakeholders’ understanding of our reports
improving the visibility of our leadership through clear communication in championing the implementation of audit recommendations
strengthening the human resource strategy with particular emphasis on the comprehensive trainee auditor scheme
focusing on the funding model with a view to stabilising our margins and cash flow situation
leading by example on matters of risk management, internal controls and transformation

5. Key Highlights
Communication of audit report outcomes to key stakeholder through road shows
Annual quality results of category “excellent” exceeded and surpassed that of prior years
50% improvement in the timely submission of annual financial statements for PFMA organisations
36% improvement in the timely submission of annual financial statements for MFMA municipalities
Completion of audit reports within the statutory deadlines
PFMA organisations (99%)
Other PFMA organisations (98%)
MFMA organisations (92%)
Significant decrease in vacancies of 35% from 2007 (724) to 2009 (471)
Achievement of retention rate of 11% compared to industry average of 16%
AGSA hosted the AFROSAI 11th General Assembly in Pretoria from 13 to 17 October It was attended by delegates and observers from 51 countries

6. Simplicity and clarity of our reports
Key Achievements
Continued our efforts to influence the achievement of unqualified reports in all spheres of government, which is central to the realisation of our constitutional mandate
Communicated with simplicity, clarity and relevance to our stakeholders through road shows and door-to-door visits
Continued focus on the quality and timeliness of our products including audit reports
Streamlined performance auditing function
Continued our contribution in international auditing to the United Nations Board of Auditors
Tabled to Parliament 38 performance audits reports, 6 of national departments, 2 of public entities, 30 provincial departments.

7. Figure 1: Annual quality control results
Quality results summary
Figure 1: Annual quality control results
Overall Commentary:
Results of category “excellent” exceeded results of prior years
Results of category “poor” show improvement compared to prior years

8. PFMA and MFMA timeliness results
Table 1: The AGSA’s PFMA performance in meeting legislated reporting timelines (Results as at 31 July 2008)
Submission of AFS as prescribed by the PFMA
Completion of the audit within the statutory deadlines
Entities %
Number
PFMA organisations
95%
340
99%
338
Other PFMA organisations
90% 99
98% 97
Total
439
435
Table 2: The AGSA’s MFMA performance in meeting legislated reporting timelines (Results as at 31 November 2008)
Submission of AFS as prescribed by the MFMA
Completion of the audit within the statutory deadlines
Entities %
Number
Municipalities
84%
225
92%
206
Municipal entities
81% 42
98% 41
Total
267
93%
247

9. Simplicity and clarity of our reports
Key Challenges
Initiatives
Insufficient capacity to do performance audits
Regular reviews by the Performance Audit Advisory Committee

10. Actual performance versus target at 31 March 2009
Table 3: Summary of actual performance against targets
Main focus area
Sub-focus area
Target
Actual performance
Auditing
Quality
Excellent performance (C2 & C3): 80%
Good performance (R1): 20%
Poor performance (R2): 0%
Excellent performance (C2 & C3): 84%
Good performance (R1): 9%
Poor performance (R2): 7%
Timeliness
95%: PFMA organisations
95%: Other PFMA organisations
80%: MFMA organisations
99%: PFMA organisations
98%: Other PFMA organisations
92%: MFMA organisations
Auditing of Performance information
100% achievement of milestones set for the year
93%: PFMA
90%: MFMA

11. Visibility of Leadership
Key achievements
Engaged the media on the audit process so that they can appropriately communicate audit outcomes
Reviewed our vision, mission and values so as to drive a performance-driven culture
Trained and empowered our leadership to better understand their leadership communication role
Signed a Memorandum of Understanding (MoU) with the Public Protector and the Office of the Public Service Commission.
Auditor-General was appointed as the first vice-chair of INTOSAI and continued as President of AFROSAI
AFROSAI held its 11th General Assembly in Pretoria, South Africa from 13 to 17 October The assembly was hosted by the AGSA and was attended by delegates and observers from 51 countries.

12. PFMA audit outcomes (Source: AG presentation to Parliament on 18 November 2008)
Figure 2: PFMA audit outcomes
Overall Commentary:
Total number of Auditees increased from 361 in to 463 in
There has been 4% increase on disclaimers, 61% increase on adverse qualification , 80% increase on qualified and 24% improvement on financially unqualified with other matters and 65% without other matters
Note:
Includes following:
National departments (34)
National Public Entities (195)
Constitutional Institutions (9)
Provincial departments (119)
Provincial Public Entities (106)
Total = 463

13. MFMA audit outcomes as per general report on
MFMA audit outcomes as per general report on * (Source: General Report
Figure 2: MFMA audit outcomes
Overall Commentary:
Out of 239 municipalities whose audit outcomes are reported for , 74 entities improved and 22 regressed while the audit outcomes of 143 remain unchanged
There is a 13% reduction on disclaimers, 53% reduction on adverse qualification, 20% reduction on qualified and 73% improvement on unqualified with other matters
Note:
This excludes municipal entities and metros

14. Visibility of Leadership
Key Challenges
Initiatives
Quality and timely submission of annual financial statements to the AGSA
Leadership visibility prior, during and post auditing
Transparency accountability of governance structure
Compliance to financial accounting practices by auditees

15. Actual performance versus target at 31 March 2009
Table 5: Summary of actual performance against targets
Main focus area
Sub-focus area
Target
Actual performance
AGSA Leadership
Leadership effectiveness
100% achievement of milestones set for the year
Achieved 100% milestones of milestones set for the year
AGSA Reputation
Overall reputation index
Achieved 100% milestones set for the year

16. Strengthen Human Resources
Key Achievements
Entered into a temporary arrangement of management secondments to address vacancies, skills transfer and minimising reliance on contract work
Improved retention of staff i.e. 11% against an industry average of 16%
Reviewed our Human capital policies and procedures
Reviewed our performance management system so as to enable personal accountability
Repositioned the TA Scheme to ensure optimal ROI and introduced an audit clerk and audit supervisor positions for those trainees that are temporarily not studying
105 AGSA staff members received RGA qualification (65 qualified in )
30 passed SAICA and 30 passed IRBA examinations
Overall 35% decrease of vacancies from 2007 to 2009

17. AGSA establishment profile by level
Job Level
No. of Staff
Race
African
Indian
Coloured
White
Other
Auditor-General 1
Deputy Auditor-General
Head of Audit
Corporate Executives 6 3 2
Business Executives 27 10 12
Senior Managers
164 43 29 11 78
Managers
461
117 80 28
227 9
Assistant Managers
397
207 34 25
126 5
Trainee Auditors
952
824 50 38
Administrative Personnel
210 33 49
109 82 7
TOTAL
2,329
1,405
218
144
538 24

18. AGSA establishment profile by gender
Job Level
Male
Female
Auditor-General 1
Deputy Auditor-General
Head of Audit -
Corporate Executives 4 2
Business Executives 21 6
Senior Managers
113 51
Managers
247
214
Assistant Managers
199
198
Trainee Auditors
464
488
Administrative Personnel 36
174
Other 48 61
1,134
1,195

19. Overall AGSA vacancy stats
Figure 4 : Overall vacancy per band
Job Level
No. of Staff
Vacancies
Auditor-General 1 -
Deputy Auditor-General
Head of Audit
Corporate Executives 6
Business Executives 27
Senior Managers
164 15
Managers
461 88
Assistant Managers
397
133
Trainee Auditors
952
228
Administrative Personnel
210 7
Other
109
TOTAL
2,329
471
Overall commentary:
There has been a decrease in vacancy from 2007 to 2009 by
31% at Band D
17% at Band E and
43% at Band G
Overall decrease of 35% in vacancies from total of 724 in 2007 to 471 in 2009
Highest vacancies at the middle management and trainee auditor levels

20. Trainee auditors by qualifications and year of study
Figure 4: Trainee auditors by qualifications and year of study
Tot 4 21 1
824 46 16 15
928
Overall commentary:
Critical shortage of CTAs
Low pass rates

21. Strengthen Human Resources
Key Challenges
Initiatives
Ongoing vacancy challenge at Audit Assistant Manager and Audit Manager levels.
Continuously reviewing human capital policies and procedures
Implement and monitor trainee auditor scheme to focus on growing own talent
Retain and attract professionals
Exploring different sources to attract talent
Increase AGSA branding and visibility in the labour market
Continue with the DMS initiative, where appropriate
Ongoing review of remuneration practices
Unsatisfactory pass rate trainee auditors
Consistent application of academic progress study policies
Utilise DMS professionals for training and development of our trainee auditors
Continue to focus on mentoring and coaching as a key leadership skill
Continue to provide academic support
In future, AGSA will focus on CTAs

22. Actual performance versus target at 31 March 2009
Table 7: Summary of actual performance against targets
Main focus area
Sub-focus area
Target
Actual performance
People
Learning and growth
Retain 30% of trainees that qualified
Since the implementation of the trainee auditor programme in 2001, we have cumulatively retained 55% of our qualified trainees
Retention of staff
Less than 16% staff turnover rate
11% staff turnover rate

23. Funding Key achievements Completed financial turnaround plan
Amended AGSA funding model

24. Financial Highlights 2009 R’000 2008 R’000 Revenue 1,375,925 1,108,899
Direct audit cost
(1,069,668)
(829,829)
Gross Profit
306,257
279,070
Other Income
54,277
14,020
Expenses
(376,631)
(301,391)
Net deficit for the year
(16,097)
(8,301)
Overall Commentary:
Revenue is up by 24%
Gross profit margin 22% (2008: 25%)
Operating expenses is maintained at 27% of revenue.

25. Financial Highlights Revenue Analysis 2009 R'000 2008 R'000
Own Hours Revenue
824,304
691,152
Contract Work Revenue
551,621
417,747
Total Revenue
1,375,925
1,108,899
Less Direct cost
(1,069,668)
(829,829)
Gross Profit
306,257
279,070
Gross Profit % on Own Hours Revenue
37%
40%
Gross Profit % on Total Revenue
22%
25%
Own hours revenue increased by 19% due to increased in number of audit staff.
Contract work revenue is up by 32% due to scarcity of audit professionals.
There is no mark- up on contract work allocated.
Note:
Own hours revenue is made up of
Own hours revenue local, Own hours revenue International and Subsistence and Travel revenue

26. Revenue Analysis cont. 06’07 R’000 07’08 R’000 08’09 R’000
Total Revenue
893,750
1,108,899
1,375,925
Own hours (includes Subsistence & Travel)
593,878
691,152
824,304
Contract Work
299,872
417,747
551,621
Own hours billed
2,012,113
2,071,254
2,221,462
Audit staff
1,628
1,767
2,103
Average charge out hours/ Audit Staff
1,235
1,172
1,056

27. Comparison of actual results with the approved budget (08’09)
Indicator
Actual R’000
Budget R’000
Variance R’000
Variance %
Revenue
1,375,925
1,292,642
83,283 6%
Own hours
824,304
924,340
(100,036)
-11%
Contract work
551,621
368,302
183,319
50%
Direct cost
(1,069,668)
(901,273)
(168,395)
19%
Gross profit
306,257
391,369
(85,112)
-22%
Other Income
42,082
2,916
39,166
1343%
Expenses
(376,631)
(391,354)
14,723
-4%
Net interest received
12,195
5,428
6,767
125%
Net (deficit) surplus for year
(16,097)
8,359
(24,456)
-293%

28. Comparison of actual results with the approved budget (08’09) cont.
Overall commentary:
Own hours revenue is under budget by R100 million due to the following;
Vacancies (R135 million)
Higher recovery rate R35 million
Volume variance R4 million
Other recoveries R11million
Subsistence and Travel decreased by (R15 million)
Contract work revenue is above budget due to scarcity of audit professionals.
Net interest received had a favourable variance due to a positive bank balance and higher than budget interest rates prevailing during the reporting year.

29. Sources of revenue Figure 8: Sources of revenue (R’000)
Overall Commentary:
Average tariff for 2008 was R313/hour and it increased to R347/hour in 2009
Contract work as a % of total revenue was 38% for 2008 and 40% for 2009

30. Financial Highlights Total cost is R1. 446 billion
Financial Highlights Total cost is R1.446 billion. The major cost drivers for AGSA are Contract work - R million (38%), Recoverable staff cost – R million (32%) and Support staff cost – R million (14%)

31. Analysis of other key cost drivers The other key cost drivers for 08’09 in relation to budget are as follows:
Actual R’000
Budget R’000
Variance
Subsistence and travel irrecoverable
10,555
7,350
3,205
Contract work irrecoverable
12,062
18,329
(6,267)
Accommodation
51,907
42,322
9,585
Internal audit fees
3,163
2,200
963
Provision for impairment of receivable
4,710 -
Technological services
21,814
25,023
(3,200)
Stakeholder relations
7,846
8,325
(479)
Recruitment costs
10,208
12,749
(2,541)
Stationery and printing
5,658
5,759
(101)
Other operating costs
20,122
20,662
(540)
Total
148,045
142,719
5,326
Overall commentary:
S& T variance is due to reorganisation in Eastern cape
Contract work irrecoverable due to saving on projects not rolled out as planned.
Accommodation variance is due to straightlining of leases on premises as per IAS 17.
Technological services variance was due to saving on license fees and 3G cards costs lower than budget
Recruitment costs saving was due to changes in recruitment approach from using agents to online recruitment.

32. Cash flow statement Analysis
2009 R’000
2008 R’000
% Growth
Net cash inflow from operating activities
46,474
406
11 347%
Net cash outflow from investing activities
(36,750)
(20,923)
76%
Net cash inflow / (outflow) from financing activities
53.024
(1,774)
3 089%
Net increase / (decrease) in cash and cash equivalents
62,748
(22,291)
381%
Cash and cash equivalents at end of the year
180,838
117,318
54%
Overall Commentary:
The growth in cash holdings was due to non refundable National Treasury grant of R90 million received during the reporting period.

33. Debtors Ageing Analysis – 31 March 2009
Current R’000
30 days R’000
60 Days R’000
90 Days R’000
120 Days R’000
120 Days R’000
Total R’000
National
52,235
7,213
4,547
(695) 49
1,293
64,642
Provincial
70,472
2,073
1,500
550
873
7,427
82,895
Local
45,123
8,047
4,438
14,304
9,725
23,014
104,651
Statutory
28,054
1,450
972
2,704
1,470
6,293
40,943
Other
25,285
390
842
325
293
3,039
30,174
Total
221,169
19,173
12,299
17,188
12,410
41,066
323,305 %
68% 6% 4% 5%
13%
100%
Note: Total balance excludes provision for impairment of receivables amounting to R25 million.

34. Ageing of trade payables
Current R’000
30 days R’000
60 Days R’000
90 Days R’000
120+ Days R’000
Total R’000
Trade payables – Contract work
63,256
30,140
19,036
5,527
4,860
122,819
Trade payables - Other
27,007
4,638
9,142
444
15,240
56,471
United Nations contract – prepaid income
18,346 -
Total
108,609
34,778
28,178
5,971
20,100
197,636 %
55%
18%
14% 3%
10%
100%

35. Funding Key Challenges Initiatives
Continued erosion of AGSA margins
Monitoring and Controlling overheads and contract work
Declining working capital from 1.01 in year 2008 to 0.86 in year 2009
Ability of local and provincial government to settle their accounts on time
Increased outstanding debt of R323 million as at 31 March 2009 from R255 million as at 31 March 2008
Streamlining debt collection
Engaging political heads
Exploring legal debt collection process

36. Actual performance versus target at 31 March 2009
Table 10: Summary of actual performance against targets
Main focus area
Sub-focus areas
Target
Actual performance
Financial performance
Efficiency gains (net surplus)
Additional 1% on projected efficiency gains
0% on efficiency gains
Deficit amounting to
R16,1 million
Debt collection
National and provincial not more than 30 days
Local government not more than 90 days
National = 18 days
Provincial = 37 days
Local government = 104 days
Statutory bodies = 38
Cost of auditing
Additional 1% on the projected efficiency ratios of 30%
22% efficiency ratio
Performance auditing
10% of total audit income
6% of total audit revenue
International Auditing
Not more than 5% of total audit income
Income from international audits makes up 2% (R28m) of total audit income, which is within the targeted range of up to 5%

37. Lead by Example Key achievements Developed AGSA BBBEE strategy
Achieved Employment Equity set target: 80% on targeted group and 20% on non-targeted group
Crafted the organisational wide risk management framework to cover strategic, financial and operational risks that are monitored by EXCO on a regular basis
Revamped ICT, HC and Finance processes

38. AGSA BBBEE and Affirmative action profile
Figure 9: Achievement of affirmative action targets excluding trainee auditors (levels A to G)
Overall Commentary:
African: Increased from 55% to 60% (08 to 09)
Colored: Decreased from 7% to 5% (08 to 09)
Indian: Remained same at 9%
White: Decreased from 28% to 25% ( 08 to 09)
Disabled: Remained same at 1%
Figure 10: Achievement of affirmative action targets excluding of trainee auditors (levels A to F)
Overall Commentary:
African: Increased from 38% to 39% (08 to 09)
Coloured: Increased from 7% to 8% (08 to 09)
Indian: Increased from 10% to 12% (08 to 09)
White: Decreased from 44% to 38% (08 to 09)

39. BBBEE audit work allocation
Table 12: Allocation of audit work to private audit firms
Size of firms
Allocation target
( % )
Budget
( RM )
% of budget total
Actual
% of Actual
total
Big and large
45%
101
146
47%
Medium
35% 78
107
34%
Small
20% 45 58
19%
100%
224
311*
10%
*Note: The reporting is based on 20% allocation only

40. Actual performance versus target at 31 March 2009
Table 13: Summary of actual performance against argets
Main focus area
Sub-focus area
Target
Actual performance
Employment equity
Transformation
80% from target groups and.
88% from target groups and
20% non-target groups.
12% non-target groups.
Broad-based black economic empowerment (BBBEE)
100% compliance with BEE criteria per annum
100%
Process
Operational excellence
Level of maturity of business process at least:
0% at CMM level 1*
75% at CMM level 2**
25% at CMM level 3***
0% at CMM level 1
44% at CMM level 2
56% at CMM level 3
Note *: Absence of documented and standardised processes
Note **: Although processes are standardised they are either not documented or not communicated
Note ***: Processes are documented, standardised and communicated

41. Conclusions
Submission of timely performance reports addressed with auditees, with National & Provincial Treasuries
AGSA Financial sustainability addressed through the implementation of the revised Funding model in 2009
AGSA Risks closely monitored
Leadership visibility being improved
More focus on the recruitment and retention of Trainee Auditors to address skills shortage
Substantial development & growth of key processes
BBBEE closely monitored