1. AGSA Strategic Plan and Budget 2013-2016 Presentation to SCoAG 19 October 2012

2. 22 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 Reputation promise/mission

3. 33 1.Overview of AGSA commitments 2.What the plan focuses on 3.Strategic environmental context 4.Strategic risk profile 5.Strategic goals, objectives and performance measures 6.Sustainability strategy 7.Budget 2013 - 16 Content

4. 4 Overview of the AGSA’s commitments  We continue on the path established over the past few years  Our five strategic goals remain relevant and unchanged, but we are strengthening certain aspects or introducing new activities  We seek to solidify our achievements by institutionalising our best practices

5. 55 Main focus areas in the strategic plan Increased portion of performance audits Integration of performance audit and investigations with regularity audits Increased prioritisation of the quality of our audit reports Exploring ways to collect debt more effectively Institutionalisation of the project management approach within the organisation Intensifying the learning and development initiatives through the work of our newly established L&D unit Sustainability strategy

6. Goal 1

7. 7 Simplicity, clarity and relevance of our messages Objective 1: To identify root causes and make recommendations Performance measure Target 2013-142014-152015-16 Clear communication of relevant root causes and recommendations 333 Tool  Qualitative top-down rating by immediate supervisor of communication to the auditee, the executive and oversight, whether through reports (audit reports, management reports, dashboard report, general reports) or other communication (presentations, briefings, etc.)  Source of information: Reports and presentation experience

8. 8 Simplicity, clarity and relevance of our messages Performance measureTarget 2013-142014-152015-16 % adherence to all quality standards Audit engagements 87% (C2 and C3 rating) ToolQuality control assessment % adherence to all quality standards Non-audit deliverables 333 Tool  Qualitative top-down rating by immediate supervisor of all non-audit deliverables. Our targets are based on a four- point rating scale (1-4)  Source of information: Non-audit deliverables Objective 2: Continued excellence of the quality of audits performed

9. 9 Simplicity, clarity and relevance of messages – initiatives / focus  Increase the volume of performance audits to 10% of the audit work within five years - a growth strategy and plan for the medium term to 2018 will be finalised shortly  Intensify the proactive evaluation of fraud risks through assessment of process and financial statement reporting  Achieve further integration of our diverse expertise and products and the deployment of multi-skilled audit teams  Deliver a consolidated audit message  Achieve IRBA assessment results above our own targets (already above industry standard level)

10. Goal 2

11. 11 Visibility of our leadership Performance measureTarget 2012-132013-142014-15 High-quality, value- adding stakeholder interactions are conducted and escalated, where necessary 333 Tool  Qualitative top-down rating by immediate supervisor of communication to the auditee, the executive and oversight, whether through reports (audit reports, management reports, etc.) or other communication media (presentations, briefings, etc.)  Source of information: Reports and presentation experience Objective: To develop strong stakeholder relationships to encourage clean administration

12. 12  Increase the rigour of the analysis in our general reports  Ensure continuity in understanding the audit outcomes  Encourage acceptance of ownership for internal controls by the appropriate responsible officials  Intensify our visibility at all levels, widening the circle of engagements  Increase our participation in various governance forums Visibility of our leadership – initiatives / focus

13. Goal 3

14. 14 Funding  Our focus remains on providing value-for-money audits to the public sector – i.e. executing the organisation’s mandate economically, efficiently and effectively by ensuring that our services to our auditees are cost-effective, while at the same time ensuring our long-term financial sustainability.  We pay special attention to effective debt collection as this has the potential to undermine our very existence as an independent assurance provider. Our main challenge remains collecting debt from local government auditees.

15. 15 Funding Performance measure Targets 2013-142014-152015-16 % net surplus1%2% ToolAnalysis of the income statement Creditor days 45 days from voucher date ToolAnalysis of the creditors ageing report Objective: To execute the AGSA mandate economically, efficiently and effectively

16. 16 Funding Objective: To execute the AGSA mandate economically, efficiently and effectively Performance measure Targets 2013-142014-152015-16 % debt collected averaged over 12 months All National BUs 99% -101% 1% debt collected from National Treasury averaged over 12 months – Finance BU 100% % debt collected averaged over 12 months All Provincial BUs 96% - 98% ToolAnalysis of the debtors ageing report

17. 17 Funding goal – initiatives / focus  Increase the efficiency and effectiveness of our audits  Analyse and understand the inefficiencies of the entire public auditing process  Enhance the outsourcing of contract audit work  Provide for minimum surplus margins

18. Goal 4

19. 19 Strengthen our human capital Our strategic focus remains on:  further enhancing and building our high-performance culture which focuses on engagement, understanding and accountability  attracting, retaining and cultivating key talent by adopting the care and growth leadership principles  building a highly skilled workforce that is representative of the demographics of our country by enhancing and developing the skills and competency base of our employees

20. 20 Strengthen our human capital Performance measure Targets 2013-142014-152015-16 % occupancy level90% Tool Staff occupancy rate report from PeopleSoft management system Culture index3.4 Leadership index3.4 Culture index3.4 Tools.Survey and focus group interviews and other assessments. The industry norm is 3.2 and is rated according to the five- point Likert scale (1 – 5). Objective: To have a motivated, high-performing and diverse workforce

21. 21 Strengthen our human capital - initiatives / focus  Intensify the relevant training and skills development  Create audit professionals with impeccable integrity and ethics  Develop leadership pipeline  Make active use of the total performance system to build high-performing teams and to give regular and timely feedback to employees for their continuous improvement

22. Goal 5

23. 23 Lead by example  As a Supreme Audit Institution, we accept the responsibility to lead by example through:  consistently behaving in an ethical manner  producing quality work that demonstrates our unquestionable competence and technical ability  assuming accountability for the management of our business risks  effectively sharing information and knowledge  using all available systems, tools and expertise in an integrated manner

24. 24 Lead by example Performance measureTarget 2013-142014-152015-16 A clean audit report for the AGSA Clean audit report ToolExternal audit report Objective 1: To continuously adhere to standards of excellence for clean administration

25. 25 Lead by example Performance measureTarget 2014-152015-162016-17 % compliance with statutory and legislative deadlines Strategic plan and budget, annual report, general reports 100% Performance audits – deadlines as agreed by the DAG and the AG Investigations - deadlines as set out in the engagement letter to the auditees 95% Audit reports (PFMA, MFMA) 90% ToolProject tracking tool Objective 2: Continued improvement of the timelines of AGSA reports

26. 26 Lead by example Objective 3: To maximise the AGSA’s contribution to transformation Performance measureTarget 2013-142014-152015-16 Achieve identified B-BBEE level 333 ToolIndependent review conducted by external agency

27. 27 Lead by example - initiatives / focus  Make operational excellence the standard method of work  Identify and institutionalise critical good practices  Maintain adequate information and communication technology  Optimise infrastructure  Enhance our audit software and solutions  Mature the information governance of the AGSA  Provide strong support to the BBBEE imperative with a focus on the CA Charter

28. 28 Sustainability aspect of our operations  We acknowledge that, like any other organisation, we have an impact on the physical environment and the society in which we operate, thus we regard as important all matters that relate to our sustainability as a business.  Our considerations are also consistent with the INTOSAI recommendations which emphasise the importance of sustainability and the principles of good governance, transparency and accountability.  For our first year in reporting on some of the sustainability aspects, we commit to establishing the baselines for the following: –Electricity use- Water use –Paper use- Paper waste generated –Business travel – vehicles- Business travel – flights –Carbon footprint –Completion of annual disclosure of interest declarations –Incidents of integrity breach by our staff

29. BUDGET 2013 - 16

30. 30 Budget 2013–14 vs. budget 2012 – 13 Gross profit percentage - 31% Own hours efficiency - 45% CWC income percentage - 25% Bad debt provision: increased by R15,383 million (376%) S&T irrecoverable: increased by R3,93 million (23%) Stakeholder relations: increased by R6,96 million (19%) L&D: increased by R26,09 million (32%) Technological services: increased by R15,95 million (41%) Surplus - R25,34 million (1,02%) of audit income (2012-13: R45,99 million (2,03%)

31. 31 Determination of audit tariffs Major drivers Recoverable hours - Head count - Available hours - Recovery rate Tariff per hour - Salary cost - Recoverable hours - Mark-up factor

32. 32 Financial highlights (1 of 2) Budget 2012-13 R’000 2013-14 R’000 Revenue 2 226 0312 474 157 Direct audit cost (1 545 969)(1 700 958) Gross profit 680 062773 199 Other Income 73 54480 709 Expenses (707 607)(828 570) Net surplus for the year 45 99925 338

33. 33 Financial highlights (2 of 2) Budget2012-13 R'000 2013-14 R'000 Own hours revenue 1 714 4161 923 487 Regulatory audit Specialised audit S&T recoverable 1,447 454 157 759 109 203 1 591 415 218 437 113 635 Contract work revenue 554 097590 039 Regulatory audit Specialised audit 539 540 14 557 565 364 24 675 Accounting adjustment (42 482)(39 369) Total revenue 2 226 0312 474 157 Less direct cost (1 545 969)(1 700 958) Gross profit 680 062773 199 Gross profit % of own hours revenue 42% Gross profit % of total revenue 31%

34. 34 Net surplus as % of audit income Budget 2012-13 Budget 2013-14 Forecast 2014-15 Forecast 2015-16 Net surplusR46 million R25 million R56 million R 66 million Net surplus as % of audit income 2,07%1,02%2,00%2,13%

35. 35 Overhead analysis Operating costsBudget 2012-13 R’000 Budget 2013-14 R’000 Move- ment R’000 % Staff remuneration – support 217 767255 31737 55017% Other personnel costs 99 610110 61611 00611% Consultant fees26 92917 393(9 536)(35%) Accommodation80 58682 6262 0403% Stakeholder relations36 12543 0816 95619% L&D82 668108 75326 08532% Technological services 39 05855 01215 95441% Office maintenance21 85725 3533 49616% Other (see next slide)103 007130 41927 41227% Total707 607828 570120 96317%

36. 36 Other expenses analysis Operating costsBudget 2012-13 R’000 Budget 2013-14 R’000 Movement R’000 % Oversight governance 1 4431 288 (155)11% Audit expenses 4 9596 600 1 64133% Bank charges 355357 21% Finance charges 1 686144 (1 542)(91%) Recruitment expenses 8 87810 549 1 67119% EWP 10,2328 140 (2 092)(20%) Insurance & legal fees 2 5732 821 24810%) Communication 10 40611 363 9579% Depreciation 40 05247 423 7 37118% Other 5 12820 511 15 383300% S&T Irrecoverable 17 29521 223 3 92823% Total 103 007 130 41927 41227%

37. 37 Key overhead drivers (1 of 2) 2012-13 R’000 2013-14 R’000 Movement R’000 Salaries217 768255 31837 550 New structure15 238 Support salary increases217 768240 08022 312 Due to growth in staff1 642 Due to annual increase16 300 Compensation progression4 400 Maintaining business operations67 53688 58521 049 Depreciation40 05247 4237 371 ICT maintenance15 11424 8759 761 Networks12 37016 2873 917 Provision for bad debts5 12720 51015 383 Executive leadership initiatives1 8442 390546 Secondments1 7132,300587

38. 38 Key overhead drivers (2 of 2) Budget 2013 R’000 Budget 2014 R’000 Movement R’000 Learning & development-16 016 Study support incentive scheme-4 039 Foundations programmes-8 000 Tertiary assistance-3 977 AG Farewell-6 850 Regional stakeholder functions-1 350 External & internal stakeholder-1 000 Combined staff farewell-4 500 Other110 913144 00533 092 Group life policy7 61010 7723 162 Performance bonus68 44278 3039 861 Advertisements1 2003 2742 074 S&T training8 47716 1457 668 Membership fees10 55015 7605 210 Study assistance employees14 63419 7515 117 Total403 188533 674130 486

39. AG Directive 2012/13

40. 40 In terms of Sec 13 of the PAA the AG must determine the standards, scope and nature of audits after consultation with SCoAG. It is against this background that we are advising SCoAG that the current AG audit directive as published in the Government gazette No. 34783, vol 557, Pretoria, 28 November 2011 remains in force.

41. 41 End of presentation