1. AGSA Strategic Plan and Budget 2011-2014 SCoAG Presentation
October 2010 (v1)

2. This is our reputation promise
Mission
The Auditor-General has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our constitutional 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 Strategic plan and budget 2011-2014 Audit tariffs
Overview of AGSA Commitments
Organisational Environment
Overview of each goal
Simplicity, Clarity and Relevance of our reports
Visibility of our Leadership
Funding
Strengthen Human Resources
Lead by Example
Detailed Budget
Conclusion and SCoAG interventions
Audit tariffs
Audit directive

4. Overview of AGSA Commitments
We are committed to discharge our mandate in such a way that it provides value and benefits to the citizens of our country and to lead by example through being a model organisation
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 identification of root causes and recommendations and deepening of stakeholders understanding of our audit reports
Improving the visibility of our leadership through clear communication in championing the implementation of audit recommendations
Focusing on the funding model with a view to stabilising our margins and cash flow situation
Strengthening the human resource strategy, with particular emphasis on the comprehensive trainee auditor scheme
Leading by example on matters of risk management, internal controls, transformation and quality and timeliness of our products

5. Organisational environment
Our current reputation and image continues to be strengthened by an unwavering commitment to encouraging clean administration in the public sector
Our risk management framework ensure that we keep the following identified risks under control
Potential loss of stakeholder confidence in the AGSA that is mitigated mainly through our effective communication of audit messages
Shortage of appropriate skills that is being addressed through our Trainee Auditor scheme and our vigorous recruitment drive
Inability to collect from debtors is a risk that we continue to manage through more effective debt collection efforts that include the internal and external escalation of specific areas such as municipal debt

6. Simplicity, clarity and relevance of our reports
Objective: Identify root causes and make recommendations
Initiatives
Understanding new government and public sector development
Technical development
Enhancing auditing capacity
Provide new intake with appropriate technical training
Continually assessing the quality of engagements
Conducting cost effective stakeholder surveys
Encouraging clean audit administration through both audit processes and stakeholder interactions
Focusing on key control programme
Manage risk associated with changes in municipal administration in 2011

7. Simplicity, clarity and relevance of our reports
Objective: Identify root causes and make recommendations
Performance measure
Target
Target
Target
Quality of messages in all reports 3
Tool
Qualitative top-down rating by immediate supervisor on all reports delivered (audit reports, management reports, general reports, annual report, strategic plan and budget). Our targets are based on a 4-point rating scale (1 – 4).
Source of information: Actual reports, roadshow and presentation experience
page 7

8. Visibility of our leadership
Objective: Develop stakeholder relationships so as to encourage clean administration
Initiatives
Stakeholder interaction programmes, which are monitored and assessed at business unit level every quarter
Enhancement and timeous updating of the Audit Stakeholder Management Information System (AS:MIS)
Extending stakeholders’ capacity to optimally utilise our reports
Cost-effective stakeholder surveys
Auditor-General of South Africa 2011 Centenary

9. Visibility of our leadership
Objective: Develop stakeholder relationships so as to encourage clean administration
Performance measure
Target
Target
Target
High-quality, value-adding stakeholder interactions are conducted and escalated, where necessary 3
Tool
Qualitative top-down rating by immediate supervisor. Our targets are based on a 4-point rating scale (1 – 4).
Source of information: Quarterly stakeholder MIS and interactions, roadshow and presentation experience
page 9

10. Funding Containing the cost of audit
Implementing interventions to collect debt and improve cash flow
Controlling our overheads
Continuing ongoing assessment of the funding model
Continually reviewing our cost structure
Considering funding alternatives for discretionary audits
Generating sufficient surplus for reinvestment in the business

11. Funding
Objective: Execute the AGSA mandate economically, efficiently & effectively
Performance
measure
Target
% Net surplus 4%
Tool
Analysis of the income statement
page 11

12. Funding
Objective: Execute the AGSA mandate economically, efficiently & effectively
Performance measure
Target
Target
Target
Creditors days
45 days from voucher date
Tool
Analysis of the creditors ageing report
page 12

13. Funding
Objective: Execute the AGSA mandate economically, efficiently & effectively
Performance measure
Target
Target
Target
% debt collected within 30 days (National depts, Gauteng & W. Cape)
75% - 80%
% debt collected within 30 days (Limpopo & KwaZulu-Natal)
65% - 70%
% debt collected within 30 days (N.West, Free State, N.Cape, E. Cape and Mpumalanga)
55% - 60%
Tool
Analysis of the debtors ageing report
page 13

14. Strengthen human resources
Objective: Have a motivated, high-performing and diverse workforce
Initiatives
Executive and leadership development through coaching and mentoring
Leadership pipeline and succession planning for the AGSA
Continuous review of AGSA structure
Effective teams and Employees engagement
Repositioning of the TA scheme
Continue to grow the number of qualified professionals
Introducing 360 degree evaluation
Entrenching our competency framework
Performance management
Value Rollout
Deepening public sector insights and knowledge

15. Strengthen human resources
Objective: Have a motivated, high-performing and diverse workforce
Performance measure
Target
Culture index
Industry norm (3.2)
Industry norm (3.2)
Leadership Index
Employee engagement index
Tool
Survey and Focus group interviews and other assessments
page 15

16. Lead by example
Objective: Continual improvement of the quality of AGSA reports
Performance measure
Target
Target
Target
% adherence to all quality standards
Audit reports
86% (C2 and C3 rating)
87% (C2 and C3 rating)
87% (C2 and C3 rating)
Tool
Quality control assessment
Non-audit deliverables 3
Qualitative top-down rating by immediate supervisor. Our targets are based on a 4-point rating scale (1 – 4).
Source of information: Non-audit deliverables
page 16

17. Lead by example Objective: Timeliness of all our reports
Performance measure
Target
Target
Target
% compliance with statutory and legislative deadlines
Strategic plan and budget, annual report, general reports
100%
Performance audits, investigations
95%
Regularity audits
90%
Tool
Project Tracking Tool
page 17

18. Lead by example
Objective: Adhere to standards of excellence for clean administration
Performance measure
Target
Target
Target
Achieve AGSA clean audit report
Clean audit report
Tool
External audit report
Initiatives
Align our organisation with the king III guidelines on risk management
Modernisation of our environment, including our technology and process
Ongoing implementation of the Go –Green programme
page 18

19. Lead by example
Objective: Maximise the AGSA’s contribution to transformation
Performance
measure
Target
Achieve identified BBBEE rating plan 4
Tool
Independent review conducted by external agency
Initiatives
Engagement sessions with all relevant stakeholders on AGSA BBBEE strategy
CSI plan focusing on rural schools programme
Implementation of a high –level 3 year plan on enterprise development
Implementation of the BBBEE plan
Focus on preferential procurement, employment, management control and skills development
page 19

20. Detailed Budget 2011/12

21. Table of Contents Budget assumptions Projected income statement
Financial highlights
Net surplus as % of audit income
Overhead analysis

22. 1. Budget assumptions
Tariffs are determined by applying a mark up factor of 1.9 (average) to direct salary costs
Budgeted for anticipated headcount rather than predefined vacancy percentage
Available hours per annum are 2042 per head
Tariff increases impacted by market related salary increase of 8.5%
Recovery rate percentage reduced from an average of 66,6% to 63.7% (year on year)

23. 2. Projected income statement
Actual
Forecast
Budget
31 March 2010
31 March 2011
31 March 2012
31 March 2013
31 March 2014 Rm
AUDIT INCOME
1,644.6
1,919.5
2,087.6
2,301.2
2,496.9
Own hours
1,086.2
1,307.7
1,457.7
1,586.8
1,721.7
S&T recoverable
60.5
92.5
116.9
127.3
138.2
Contract work
497.9
519.3
513.0
587.1
637.0
DIRECT AUDIT EXPENDITURE
1,155.1
1,281.4
1,399.7
1,549.6
1,681.3
CW % of audit income excl S&T
32%
28%
26%
27%
Gross profit
489.5
638.1
687.9
751.6
815.6
Own hrs gross profit
495.0
638.8
815.5
Gross margin % of audit income
30%
33%
Other income
62.0
47.1
43.0
47.4
51.5
Contribution to overheads
551.5
685.2
730.9
799.0
867.1
Overhead expenses
419.6
572.2
611.4
664.3
721.8
Overhead as % of audit income
29%
Depreciation
26.3
38.0
41.0
42.2
43.3
Net surplus before special events
105.6
75.0
78.5
102.0
Net surplus as % of audit income 6% 4%
Special events
6.5
36.6 -
Net surplus after special events
99.1
38.4

24. 3. Financial highlights (1 of 2)
Budget 2011
R’000
Budget 2012
Revenue
1,835,522
2,087,635
Direct audit cost
(1,204,604)
(1,399,690)
Gross Profit
630,918
687,945
Other Income
21,919
43,024
Expenses
(583,674)
(652,495)
Net surplus for the year
69,163
78,474

25. Financial highlights (2 of 2)
Budget 2011
R'000
Budget 2012
Own hours revenue
1,368,010
1,574,633
Contract work revenue
467,512
513,002
Total revenue
1,835,522
2,087,635
Less direct cost
(1,204,604)
(1,399,690)
Gross profit
630,918
687,945
Gross profit % on own hours revenue
46.1%
43.7%
Gross profit % on total revenue
34%
33%

26. 4. Net surplus as % of audit income
Budget 2011
Budget 2012
Forecast 2013
Forecast 2014
Net surplus
R69 million
R78 million
R93 million
R102 million
Net surplus as % of audit income 4%

27. 5. Overhead analysis Budget Operating costs 2011 R’000 2012 Movement %
Staff remuneration - support
211,201
198,825
(12,376)
(6%)
Other personnel costs
44,678
69,098
24,420
55%
Contract work irrecoverable
27,036
28,097
1,061 4%
Accommodation
58,954
61,707
2,753 5%
Liaison
21,536
34,219
12,683
59%
Professional assistance
72,647
85,898
13,251
18%
Technological services
38,213
38,684
471 1%
Auxiliary services
18,754
21,257
2,503
13%
Other
51,876
73,661
21,785
38%
Total
544,895
611,446
66,551
12%

28. Conclusion and Proposed SCoAG interventions

29. Conclusion and Proposed SCoAG interventions
This strategic plan and budget outlines the AGSA leadership’s commitment to realising our mission and vision
We are confident that we will achieve the set targets
We request SCoAG’s intervention in the following areas
Encouraging robust leadership monitoring and oversight at auditees to address audit findings
Engaging political stakeholders to assist us in the collection of outstanding fees

30. (outlined in detail in the strategic plan and budget document)
Audit Tariffs
(outlined in detail in the strategic plan and budget document)

31. Audit Directive (is included in this submission)