1. Briefing to the Portfolio Committee on Telecommunications and Postal Services for the 2014-15 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, it 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 members of parliament with the necessary information/guidance on the 2014/15 audit outcomes for the Telecommunications and Postal Services portfolio to enable the Portfolio Committee to effectively execute their oversight function Annually oversight committees set aside time to focus on assessing the performance of departments. On completion of the process, portfolio committees are required to develop department-specific reports, namely budgetary review and recommendations reports (BRRR) which express the committee`s view on the department’s budget for recommendation to the National Treasury ahead of the following year`s budget period. Our role as the AGSA is to reflect on the audit work performed to assist the portfolio committee in its oversight role in assessing the performance of the departments taking into consideration the objective of the committee to produce a BRRR.

4. The scope of AGSA audits

5. Contents Slide no. 1.Overall audit outcomes for portfolio 6 2.Auditor-general’s six key focus areas 7 3.Quality of submitted financial statements 8-13 4.UIFW expenditure 14 5.Root causes and recommendations 15 6.Combined assurance and assessment of assurance providers 16 7.Drivers of key controls for portfolio 18 8.Minister’s commitments to address root causes19

6. 1. Overall audit outcomes for telecommunications and postal services portfolio Unqualified no findings Unqualified with findings Qualified with findings Outstanding 6 8 auditees 2014-15 PFMA

7. 2014-15 PFMA 7 2. Auditor-general’s six key focus areas Quality of submitted financial statements Quality of submitted performance reports Good Of concern Intervention required Regressed Stagnant or limited progress Supply chain management Financial health Human resource management Information technology Improvement

8. 8 Financially unqualified with/without findings Financially qualified (qualified/disclaimed with findings) Outcome if NOT corrected Outcome after corrections Avoided qualifications by correcting material misstatements during audit process 2014-15 Outcome if NOT corrected Outcome after corrections 2013-14 3 auditees DTPS USAASA USAF 3 auditees DTPS SITA BBI 3. Quality of submitted financial statements 2014-15 PFMA

9. 3.1 Quality of annual performance reports 9 9 With no findings With findings 2014-15 PFMA UsefulnessReliability Regressed Stagnant or little progress Improved of reports were reliable and useful compared to 75% in the previous year. of auditees who submitted information did so in time for the audit. of auditees did not prepare an annual performance report (2013-14: 0). 100% 0%

10. 10 Annual performance report not materially misstated Annual performance report contained material misstatements Outcome if NOT corrected Outcome after corrections Avoided findings by correcting material misstatements during audit process 2014-15 Outcome if NOT corrected Outcome after corrections 2013-14 4 auditees NEMISA USAASA USAF SITA 1 auditee USAF 3.2 Quality of submitted annual performance reports 2014-15 PFMA

11. 2014-15 PFMA 11 3.3 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 Good Concerning Intervention required Regressed Stagnant or limited progress Management of procurement and/or contracts Management of strategic planning and performance Human resource management Internal audit and audit committee Improvement

12. 3.4 Compliance matters for portfolio Payments within 30 days Human resource management Strategic planning and management Supply chain management Prevention of unauthorised and fruitless and irregular expenditure Material amendments 12 6 auditees8 auditees 2014-15 PFMA

13. 13 2014-15 PFMA Good Concerning Intervention required Status of the information technology focus areas Security management User access management IT service continuity IT governance DepartmentsPublic entities Improved Stagnant or little progress Regressed 2014-15 PFMA 3.5 Information technology

14. DTPS R8 741 000R1 182 000R21 000 NEMISA-R633 297R510 USAASA--R374 000 USAF - -- Sentech - R3 833 000R117 000 SITA -R13 980 190 R8 530 842 TotalsR8 741 000R19 628 487R9 043 352 Expenditure incurred in contravention of key legislation, prescribed processes not followed 4. UIFW expenditure Unauthorised expenditure Expenditure not in accordance with the budget vote/ overspending of budget or programme Irregular expenditure Fruitless and wasteful expenditure Expenditure incurred in vain and could have been avoided if reasonable steps had been taken. No value for money! Legends: Decrease in incurred expenditure No change Increase in incurred expenditure Definitions 14

15. 5. Root causes and recommendations (top four) 15 Root causeRecommendation Slow response by management in addressing the root causes of poor audit outcomes Responses to implement corrective actions should be enhanced and tracked by management. Although action plans were generally in place, their implementation was not done effectively to ensure that the issues were resolved in time. Instability or vacancies in key positions Stability within the portfolio should be increased by filling key vacant positions. Although there had been some improvement, there were still vacant key positions within the portfolio, and these had a negative impact on the outcomes. Slow response by political leadership Interventions regarding operations of public entities should be implemented in a reasonable time to allow optimal functioning of the public entity in meeting its mandate. Lack of consequences for poor performance and transgressions All officials who transgress SCM regulations should be held accountable. 2014-15 PFMA 15

16. Senior management Senior management Accounting officers/ authority Accounting officers/ authority Executive authority Executive authority 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 Management assurance First level of assurance Senior management Senior management Accounting officers/ authority Accounting officers/ authority 6. Combined assurance – complementary mandate Oversight assurance Second level of assurance Oversight assurance Second level of assurance Coordinating/ monitoring institutions Coordinating/ monitoring institutions Internal audit Internal audit Audit committee Audit committee Extensive Required assurance levels Oversight’s assurance role National Treasury/DPSA – monitor compliance with laws and regulations, and enforce appropriate action Internal audit – follow up on management’s actions to address specific recommendations, conduct own audits on the key focus areas in the internal control environment, and report on quarterly progress Audit committee – monitor risks and the implementation of commitments on corrective action made by management as well as quarterly progress on the action plans Independent assurance Third level of assurance Independent assurance Third level of assurance Oversight (portfolio committees/ councils) Oversight (portfolio committees/ councils) Public accounts committee Public accounts committee National Assembly Extensive Required assurance levels Role of independent assurance Oversight (portfolio committees) – review and monitor quarterly progress on the implementation of action plans to address deficiencies Public accounts committee – exercise specific oversight on a regular basis of any report that it may deem necessary National Assembly – provide independent oversight of the reliability, accuracy and credibility of national and provincial government 16

17. 6.1. Assessment of assurance providers for portfolio 17 2014-15 PFMA Improvement Stagnant or little progress Regressed 17 First level Second level Third level Provides assurance Provides some assurance Provides limited/ no assurance Vacancy Not established/ evaluated

18. 7. Driver of key controls for portfolio 2014-15 PFMA 18 Good Concerning Intervention required Improvement Stagnant or little progress Regressed Drivers of internal control Department and entitiesLeadershipFinancial and performance management Governance Effective leadership culture Oversight responsibility HR management Policies and procedures Action plans IT governance Proper record keeping Processing and reconciling controls Reporting Compliance IT systems controls Risk management Internal audit Audit committee Department of Communications Universal Service and Access Agency of South Africa Universal Service and Access Fund State Information Technology Agency Sentech National Electronic Media Institute of South Africa

19. 8. Minister’s commitments to address root causes 2014-15 PFMA 19 Status of key commitments by minister Ensure stability within the staff of the department, thereby increasing stability in the public entities. Fill all vacant key positions in the department. Ensure that performance agreements are signed in time. SOE: Oversight will be tasked with closely monitoring SAPO. Consider the budget for the NEMISA/iNeSi merger, as its lack adds to the uncertainty of their future and reason for existence. Clarify the role (that is, space) of each entity, as there is overlapping of functions and responsibilities. Not implemented In progressImplementedNew

20. Questions