1. Department of Basic Education
Audit outcomes for year ended 31 March 2012
9 October 2012

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. To brief the Portfolio Committee on: DBE Portfolio
Purpose of the meeting
To brief the Portfolio Committee on: DBE Portfolio
Subject
Slide number
1.Portfolio audit outcomes and key control status
4 - 6
2.Progress on previous commitments
8 - 10
3.Recommended commitments for clean administration
11 -12
4. Key focus areas 13
5. Other matters of interest 14
6. Sector audit outcomes and focus areas
15-16
6. Pyramid of Accountability 17
7. Combined level of assurance 18 3

4. 1. Portfolio audit outcomes and key control status
Opinions
2010/11
2011/12
Entity
Financial Statements
Predetermined Objectives
Compliance
Basic Education
Unqualified with findings
Adverse
Expenditure management, Financial and performance management
HR Management,
Transfer payments
Unqualified opinion with findings
Expenditure management, Financial and performance management,
HR Management
Umalusi
Unqualified opinion with no findings
Unqualified with no findings
No findings
SACE 4

5. 1. Portfolio audit outcomes and key control status
Opinions
2010/11
2011/12
Entity
Financial Statements
Predetermined Objectives
Compliance
ELRC
Unqualified opinion
with findings
Unqualified
Expenditure Management,
Procurement and contract management,
Revenue Management,
Strategic planning and performance management
Unqualified opinion with findings
Expenditure Management, Procurement and contract management,
Revenue Management, Strategic planning and performance management
and
Audit Committee 5

6. 1. Portfolio audit outcomes and key control status
Dept/Entity
Key control status (regression/ improvement/ unchanged)
Leadership
Financial and Performance Management
Governance
DBE
UMALUSI
SACE
ELRC 6

7. Supply Chain Management Material errors in AFS submitted
4. Key focus areas
Auditee
Supply Chain Management
AOPO HR
IT controls
Material errors in AFS submitted
DBE
Some improvement
No improvement
UMALUSI
No matters
Regress
SACE
ELRC
No matters 13

8. 5. Other matters of interest
Auditee
Irregular Expenditure
Fruitless and Wasteful
Movement
2010/11
2011/12
DBE
R81.7m
R74.8m
UMALUSI
SACE
ELRC
R2.5m
R644K
R116K
R87K 14

9. Further analysis on DBE key controls classified as causing concern7

10. 2. Progress on prior year commitments
Commitment made
DBE
UMALUSI
SACE
ELRC
Current Status
Comment
The department committed to account for all loans and assets received form the “old department of education” in the financial statements for the as per advice from National Treasury X
Addressed
The department accounted for these loans in its financial statements. Supporting source documentation were presented for audit review and the existence and valuation of these assets were positively confirmed
Review and awareness of procurement policies and procedures to ensure compliance with laws and regulations relating to procurement
Action plan to address this was implemented effectively. No repeat findings were reported in the current year
Compliance with human resources regulations relating to leave management
In progress
Still in progress
Enforce compliance with government procurement regulations by service provider appointed to assist on the Kha Ri Gude project 8

11. 2. Progress on prior year commitments
Commitment made
DBE
UMALUSI
SACE
ELRC
Current Status
Comment
Follow-up on control deficiencies identified at PEDs reported on the sector service delivery focus areas:
LTSM, NSNP, LTS
Education Infrastructure
HIV/ Aids life skills education X
Intervention required
No progress made
Still repeat findings
The entity committed to sustain its current performance and continue to achieve clean audit outcomes
Adverse conclusion on performance information in the
Management committed to perform the risk assessment to identify all risks affecting the entity
Risk assessment not performed
Non compliance reported in the audit report
Commitment to address shortcomings relating the management of performance against pre-determined objectives
In progress
Still in progress 9

12. 2. Progress on prior year commitments
Commitment made
DBE
UMALUSI
SACE
ELRC
Current Status
Comment
Commitment to address shortcomings relating the management of performance against pre-determined objectives. X
In progress
Finding reported in the audit report 10

13. 3. Recommended commitments for clean administration
DBE
Umalusi
ELRC
SACE
Monitor compliance with policies and procedures and take decisive action on non compliance a
Monitoring of bad planning by entities resulting in an increase in non compliance with PFMA, Treasury Regulations etc.
Identify and monitor strengths and weaknesses of the portfolio(Sustainability)
Develop checks and balances to ensure credibility of all information.
Monthly financial and performance reports that include disclosure items
In line with best practice, update SCM policies to ensure that approval of requests to deviate from normal SCM process by the accounting officer/authority is based on recommendations by the bid adjudication committee based on their evaluation of the submission for such a request.
Effective utilisation of Internal Audit: Review internal audit scope to include adequate coverage of AOPO and compliance in their plans 11

14. 3. Recommended commitments for clean administration
DBE
Umalusi
ELRC
SACE
Training programs to incorporate:
understanding of why AFS are prepared (for operational management purposes, eg analysis of financial performance )
understanding of why key controls are essential
understanding of why service delivery reporting is critical
Continuous professional and skills development for all staff and monitoring thereof a
Quarterly reinforcement of clean administration processes by Accounting Officer / Executive Authority 12

15. 6. Sector audit outcomes Summary of audit outcomes (Comparison between 2011-12 and 2010-1115

16. 6. Sector focus areas Sector focus areas for 2011-12
HIV and Aids life skills education
National school nutrition programme
Technical secondary schools re-capitalisation
Learner teacher support material (LTSM)
Learner transport scheme (LTS)
Allocation of funds to schools
Education infrastructure
Sector report in finalisation stage 16

17. 7. PYRAMID OF ACCOUNTABILITY
Speaker/ Legislature
SCOPA/PC’s
Executives
Accountable Leadership
Audit Committee
Internal Audit
Skills, competence ethics and integrity
Daily, weekly, monthly financial and performance disciplines
Embedded systems of IC underpinned by policies and procedures
Monthly reporting on financial and performance/ Interim financial statements
Understanding of requirements as well as cause and effect
Accountable and transparent government
"Public Accountability"
Oversight
Flow of credible information
Re-enforcing accountability at all levels, escalation and robust communication
Reporting and governance
"Assurance Agents"
The bottom layer of the pyramid illustrates the foundation for the first line of defence in administration (that ensures credibility of information) being skills, competence, etc; embedded systems of IC; understanding of requirements, cause and effect. Daily, weekly monthly financial and performance disciplines (including reporting will be fully supported and fit into this environment easily.
For the reporting and governance layer, the foundation is effective and accountable leadership and effective internal audit and they support the audit committee with credible information for them to be effective in carrying out their functions. With both layers functioning properly, credible information will be submitted and reported to oversight committees.
"First in of defence"
Administration 17

18. 8. Assurance Model
The assurance model mirrors the accountability model. 18

19. Thank You 19