1. Briefing to the Portfolio Committee: Department of Labour 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
To provide the portfolio committee with applicable information and guidance on the Cooperative Governance portfolio’s audit outcomes so that they, the committee, can ensure effective oversight.

4. Content Role Of Oversight 5 Portfolio Committee Mandate 6
Attributes of an effective oversight committee 7
Combined assurance model 8
PC focus area 9
Accounting officers mandate 10
PC focus areas continued 11
Budget vs actual expenditure 12
Overall audit outcomes
Root causes
Accountability
Questions

5. AG audits accountability information
1. Role of Oversight
Oversight body
Vote
Assess & adjust
Identify the desired impacts
Strategic planning
Specify performance
indicators
Oversight Cycle
This illustration has been taken from the NT framework for managing program performance information and clearly illustrates where oversight begins and ends. Oversight is an ‘all-year’ process: Parliament’s oversight role –
starts before the budget is passed with the scrutiny of departmental strategic plans and their alignment to the budget,
continues during the spending year, and
concludes after the end of the spending year through the review of annual reports and AGSA reports.
At any given time, therefore, information from multiple years is being considered by Parliament: plans and budgets for next year; implementation for the current year; and reporting on last year's performance. Although performance information is reported publicly during the last stage, the performance information process begins when policies are being developed, and continues through each of the planning, budgeting, implementation and reporting stages.
Oversight activities of the various oversight committees therefore relate to in-year spending, the achievement of the policy objectives / service delivery objectives of spending, and regular, efficient and effective spending.
The yellow part indicates the role of the AG as the external auditor of the national government departments when at year-end the departments submits information on their financial and non-financial performance during the year to the AGSA for auditing.
The departments are responsible for producing financial and non-financial information throughout the year, disclose it at the end of the year in formats prescribed by authorities such as National Treasury and the Accounting Standards Baord, whereafter it is submitted to the AGSA for auditing.
Institution
Department
Public entity
Year-end reporting
AG audits accountability information
Budgeting / operational planning
Implementation /
in-year reporting
Monitor & take corrective
action
Set targets & allocate
resources

6. 2. Portfolio committee mandate
Role of Portfolio Committees (Rule 201)
consider, amend, approve or reject legislation (bills in its portfolio)
1. Legislation
consider and approve budgets and monitor expenditure of the Departments and entities reporting to them
2. Budgets
consider progress reports (monitoring) from line-function departments, and provincial and local government authorities and entities on their respective mandates
3. Mandates
ensure that all appropriate executive organs of state in its portfolio are held accountable for their actions (oversight); and
4. Accountability
conduct oversight over the executive authority and consult/liaise with any other executive organ of state and make recommendations
5. Oversight

7. 3. Attributes of an effective oversight committee
Adequate powers and functions, and enough time to meet
Capacity building of members & continuity of membership
Competent secretariat / professional support (research / legal)
Annual oversight objectives / effective planning structure/s
Innovative oversight practices, e.g. oversight inspections
Constructive working relationship among members
Reliance on assurance role players such as AGSA and Audit Committee
Positive relations with media and other stakeholders
Executive authority support / accounting officer cooperation
Self- assessment by committee / M&E of all committees by Speaker’s
office
Sources:CCAF, LSOM and APAC best practice handbook

8. 4. Combined assurance model
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

9. 5. PC focus areas
Involvement of audit committees in the accountability processes;
Advocating for the establishment and strengthening of internal audit units within entities;
Intensification of oversight visit as an additional facet to PC hearings;
Advocating for political accountability by inviting the Ministers to attend hearings
Get quarterly in year monitoring reports from national treasury on a quarterly basis
Get quarterly key controls from the portfolio

10. Role of accounting officer Robust financial and performance management
6. Understanding and monitoring of the accounting officer’s mandate are key to improving internal control environment
Role of accounting officer
Robust financial and performance management
systems
Oversight and
accountability
Commitment and
ethical behaviour
Effective, efficient and transparent systems for
financial and risk management
internal controls (under control of audit committee)
procurement and evaluation
Effective, efficient, economical and transparent use of resources
Prevention of unauthorised, irregular and fruitless and wasteful expenditure and, if discovered, reporting to treasury
Efficient and economic management of available working capital
Manage and safeguard assets and liabilities
Take appropriate disciplinary steps against any official contravening the PFMA
The role of the accounting officer is critical to ensure:
timely, credible information + accountability + transparency + service delivery
Chapter 5 of the Public Finance Management Act, 1999

11. 7. PC focus areas continued
1st quarter
The PC ensure that the use of resources allocated to the programme – financial, human, and capital – is consistent with projections made earlier in the year. Check if expenditure is 20% less than projected
2nd quarter
The committee will concentrate on the status of the project irt the projections at the start of the year. The PC can assess the state of affairs around the priority which the project or sub-programme is designed to address. This means, once again, being briefed on the environmental policy information and a reappraisal of the relationship between the sub-programme and the priority/priorities it hopes to satisfy.
3rd quarter
The committee must continue to satisfy itself with the use of resources in the programme implementation process, and the achievement of its outputs. Any identified efficiencies or inefficiencies must be discussed with the department.
4 Quarterly Report
prepares a committee to issue a judgement on the success/value of the project, in conjunction with its consideration of the next financial year's budget.
It effectively becomes a key verification mechanism for the committee irt the sound planning of the department.

12. 8. Budget vs actual expenditure 2014-15 (Adjusted ENE)
Department
Budget
R ’000
Actual expenditure
(Over)/ underspending
R’000
Variance %
Programme 1: Administration    
 88 962
 11.6
Programme 2: Inspection Enforcement Services  
1 527
 0.4
Programme 3: Public Employment Services
16 269
 3.4
Programme 4: Labour Policy and Industrial Relations    
19 598
 2.3
Total
4.9
Main areas of expenditure
Budget
R ’000
Actual expenditure
(Over)/ underspending
R’000
Variance %
Compensation of employees  
9 989
 1.0
Goods & Services
18.3
Payments for Capital Assets
37 583
36 102
1 481
3.9

13. 9. Overall audit outcomes – Department of Labour (DoL) 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
Qualified with findings
Disclaimer with findings
Provides assurance
Provides some assurance
Provides limited/ no assurance
Vacancy
Not
Assessed
Good
Concerning
Intervention required 1
To improve/maintain the audit outcomes …
Please include department names or entity names to indicate which ones had exceptions (can included the names of the lesser amount because by default the remaining will then form part of the majority) 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
Risk areas
Root causes
Legends
Quality of submitted financial statements
Quality of submitted performance reports
Supply chain management
Slow response by management (Accounting officer and senior management)
Portfolio
Movement
A = DoL
B = CF
C = UIF
D = CCMA
E = SEF
F = NEDLAC
Improvement
Stagnant or limited progress
Regressed
Instability or vacancies in key positions
Human resource management
Financial health
Information technology
Key officials lack appropriate competencies
Good
Concerning
Intervention required

14. 9.1 Quality of submitted financial statements
Outcome if NOT corrected
Outcome after corrections
2 auditees
Financially unqualified with 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 14

15. 9.2 Quality of annual performance reports
of reports were reliable and useful compared with 3 in previous year.
of auditees that submitted information, did so in time for audit
auditees did not prepare annual performance report 6
Legends:
With no findings
With findings
Improvement
Stagnant or limited progress
Regressed
Usefulness
Reliability

16. 9.3 Most auditees did not comply with legislation in the 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
Regressed

17. 9.4 Unauthorised, Irregular and Fruitless and Wasteful expenditure
Unauthorised expenditure
Irregular expenditure
Fruitless and wasteful expenditure
Expenditure not in accordance with the budget vote/ overspending of budget or programme
Expenditure incurred in contravention of key legislation, prescribed processes not followed
Expenditure incurred in vain and could have been avoided if reasonable steps had been taken. No value for money!
Definitions
DOL -
64 000 CF
UIF
CCMA
SEF
NEDLAC
Totals R R
Legends:
Decrease in incurred expenditure
No change
Increase in incurred expenditure

18. 10. Top three root causes and recommendations
Slow response by management in addressing the root causes of poor audit outcomes
PORTFOLIO
A = DoL
B = CF
C = UIF
D = CCMA
E = SEF
F = NEDLAC
This is due to action plans being inadequately implemented, and monitored. Management across all the entities need to develop , and implement action plans timeously , so that the results can be assessed and changed made accordingly.
Instability or vacancies in key positions
This is due to inadequate HR processes ,that have resulted in protracted recruitment process , as well as inadequate personnel being appointed and thereafter redeployed .The entities need to enhance the vetting process to ensure that it is completed timeously and that the correct personnel are appointed
Key officials lack appropriate competencies
Improved
Stagnant or little progress
Appointments are made with no job descriptions. It is therefore increasingly difficult to determine the level of competence needed to perform the job. Also, auditees do not always assess the competencies of the finance and SCM staff, which means that they would not be aware of any shortcomings.
Regressed

19. 11. Minister commitments to address root causes
Status of key commitments by minister
Decisive action against poor performance to be implemented
Ensure that the performance contracts of the senior management and staff are aligned to the strategic plans of the department
Monitor evaluate and follow up commitments made on a regular basis
Increased oversight focusing on monitor compliance with policies and procedures and take decisive action for non –compliance
Effectively utilising oversight and governance structures
Share good practices within the portfolio
Increase executives oversight of entities in the portfolio
Filling all vacant positions as per the establishment
Not implemented
In progress
Implemented
New

20. 12. Accountability and remedies to address transgressions and poor performance
A common reaction to the general reports relates to the questions posed by many, including key role players in government, about the need for accountability and consequences and how these can be enforced.
Legislation provides the answer to this question as it clearly defines accountability and the remedies.
Details are available on pages 44 to 65 of our booklet:
In Brief: The Auditor-General of South Africa
This AGSA booklet highlights the legislation that enables remedies to be applied where national and provincial departments are guilty of transgressions and poor performance. It addresses the following typical matters reported in the general reports:
Failure to comply with legislated obligations and responsibilities
Unauthorised, irregular and fruitless and wasteful expenditure
Possible fraud and corruption
Poor work performance – officials and suppliers
Other non-compliance with legislation

21. Questions