1. Department of Rural Development and Land Reform (DRD&LR)
Audit outcome 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: DRDLR Portfolio
Purpose of the meeting
To brief the Portfolio Committee on: DRDLR Portfolio
Subject
Slide number
1.Portfolio Audit outcomes and key control status
4 - 8
2.Progress on previous commitments 9
3.Recommendation commitments for clean administration
10 -12
4. Key focus areas 13
5. Other matters of interest 14
6. Pyramid of Accountability 15
7. Combined level of assurance 16 3

4. 1. Portfolio audit outcomes and key control status
Opinions
2010/11
2011/12
Entity
Financial Statements
Predetermined Objectives
Compliance
DRD&LR
Qualified opinion – Immovable assets
Qualified
Expenditure management, Financial and performance management
, HR Management
Qualified Usefulness and Reliability
Improvement: HR Management
Agricultural Land Holding Account (ALHA)
Unqualified opinion with findings
Not applicable – (Audited with DRD&LR)
Expenditure management
Unqualified opinion
Regression: Revenue Management and Asset Management
Deeds Trading Account
Unqualified with findings
Adverse
SCM management, Financial and performance
Qualified opinion
SCM management, Financial and performance management 4

5. 1. Portfolio audit outcomes and key control status
Opinions
2010/11
2011/12
Entity
Financial Statements
Predetermined Objectives
Compliance
Ingonyama Trust Board
Qualified opinion – immovable assets and provisions
Unqualified opinion
Expenditure management; Asset management; Revenue Management; Annual financial statements.
Qualified opinion – immovable assets and provisions
Regression: Budget; Procurement and contract management. 5

6. 1. Portfolio audit outcomes and key control status
Dept/Entity
Key control status (regression/ improvement/ unchanged)
Leadership
Financial and Performance Management
Governance
DRDLR
ALHA
Deeds
ITB 6

7. Further analysis on DRDLR key controls classified as causing concern

8. Further analysis on entities of DRDLR key controls classified as causing concern

9. 2. Progress on prior year commitments
Commitment made
DRDLR
ALHA
Deeds
ITB
Current Status
Comment
Management to draft and implement new operational and financial policies to help the department/entity to mitigate risks, detect and prevent irregularities and safeguarding assets and records. X
Intervention required overall
Overall DRDLR and ALHA needs to draft, implement and update policies and procedures addressing all internal control deficiencies and giving guidance for operations
Management to develop action plans to address weakness in system of internal controls and to give progress reports quarterly. These reports are made available to the audit committee and discussed at senior management committee (SMC) of the department
The action plans has been drafted but has not been implemented or monitored
General Controls on the IT systems
Intervention required
Still repeat findings
Management committed to resolve immovable assets qualification
Management committed to address the following,
completeness of royalty revenue.
valuation of land.
- recovery of fruitless and wasteful expenditure
Commitment to address AOPO findings reported for 2010/11
In progress
Still in progress
Commitment to conduct quarterly reviews on SCM process
Improved
Irregular expenditure relating to SCM decreased from the prior year

10. 3. Recommended commitments for clean administration
DRD&LR
ALHA
Deeds
ITB
Consultants skills transfer to be monitored and evaluated monthly progress reports from consultants on skill transfer 
Effective implementation of approved organisational structure, taking into account the:
skills gap identified and develop
IT systems producing credible financial and non financial information
bodies with skills relevant to finance, performance , compliance and information system
Sustainability of in house Internal Audit
Monitoring and compliance unit strengthened responsibility(compliance)
Management self assessment using key control document.
The department will need to develop a process and reconciliation of state land that will ensure a complete and accurate register is maintained.
Interaction between the DRD&LR, DPW, National Treasury and other custodians of state land need to take place to ensure that all state land is complete and accurate. 10

11. 3. Recommended commitments for clean administration
DRD&LR
ALHA
Deeds
ITB
Monitor compliance with policies and procedures and take decisive action on non compliance 
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

12. 3. Recommended commitments for clean administration
DRD&LR
ALHA
Deeds
ITB
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 
Quarterly reinforcement of clean administration processes by Accounting Officer 12

13. 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
DRDLR
Some improvement
No improvement
ALHA
No matters
This is done as part of DRDLR
Deeds
ITB 13

14. 5. Other Matters of interest
Auditee
Irregular Expenditure
Fruitless and Wasteful
Movement
2010/11
2011/12
DRDLR
7,835,000
45,536,000
6,724,000
73,406,000
ALHA
439,000
45,000
Deeds
1,933,000
115,000
43,000
4,000
ITB
545,084 14

15. 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 15

16. Assurance Model
The assurance model mirrors the accountability model.

17. Thank You 17