1. Briefing to the portfolio committee: Social Development Audit outcomes of the Social Development portfolio for the 2014-15 financial year October 2015

2. Reputation promise/mission The Auditor-General of South Africa (AGSA) has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, 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. Purpose of the presentation 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 recommendation reports (BRRRs) 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. 3

4. Content 1.Overall audit outcomes of Social Development portfolio 5 2.Auditor-General’s six key risk areas6 - 9 3.Unauthorised/irregular /fruitless and wasteful expenditure11 4.Drivers of key controls for portfolio12 5.Root causes and recommendations 13 6.Combined assurance and assessment of assurance providers14 - 15 7.Minister’s commitments to address root causes16 4

5. 1. Overall audit outcomes of Social Development portfolio Unqualified no findings Unqualified with findings Qualified with findings Adverse with findings Disclaimer with findings Audit not finalised 5 7 auditees 7 auditees 7 auditees 2014-15 PFMA

6. 2014-15 PFMA 6 2. Auditor-General six key risk areas Quality of submitted financial statements Quality of submitted performance reports Good Concerning Intervention required Regressed Stagnant or limited progress Compliance with legislation Financial health Human resource management Information technology Improvement

7. 7 Financially unqualified with or 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 1 auditee (SASSA) 2 auditees (SASSA and NDA) 2.1 Quality of submitted financial statements 2014-15 PFMA 71% (5)

8. 2.2 Quality of submitted annual performance reports 8 With no findings With findings 2014-15 PFMA 100% Usefulness Reliability Regressed Stagnant or little progress Improved of auditees that submitted information, did so in time for auditing of reports were reliable and useful compared to 100% in previous year. 100%

9. 9 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 2 auditees (SASSA and NDA) 0 auditees 2.3 Quality of submitted annual performance reports 2014-15 PFMA

10. 2014-15 PFMA 10 2.4 Some 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 & consequence management Internal audit & Audit committee Improvement

11. 2014-15 PFMA 11 3. Unauthorised, irregular and fruitless and wasteful expenditure Unauthorised expenditure Irregular expenditure Fruitless and wasteful expenditure Definitions Expenditure not in accordance with the budget vote/ overspending of budget or programme Expenditure incurred in contravention of key legislation; goods delivered but prescribed processes not followed Expenditure incurred in vain and could have been avoided if reasonable steps had been taken. No value for money! DSD -R17 873 000R152 000 SASSA -R40 787 746R5 302 223 NDA -R1 698 964R22 395 Relief funds (DRF, SRF, RRF, SPF) --- Totals-R60 359 710R5 476 618 Legends: Decrease in incurred expenditure No change Increase in incurred expenditure Finding not repeated New finding Repeat finding 88% identified by auditees 36% identified by auditees

12. 4. Driver of key controls for portfolio 12 2014-15 PFMA 12 DepartmentSASSANDARelief funds Leadership Effective leadership Oversight responsibility Human resource controls Policies and procedures Audit action plans IT governance Financial and performance management Proper record keeping Daily and monthly controls Reporting Review and monitoring compliance IT systems controls Governance Risk management Internal audit Audit committee GoodConcerningIntervention required Improvement Stagnant or little progress Regressed

13. 5. Top root causes and recommendations 13 2014-15 PFMA 13 Recommendation Appropriate consequence management for poor performance and transgressions must be implemented. Performance of staff must be monitored by adequate performance management systems and deficiencies addressed. Management should be more responsive in providing adequate review on the quality of submitted financial statements and performance reports to ensure that performance indicator descriptions are well defined according to the criteria of being specific, measurable, achievable, relevant and time bound (SMART) and reviewed by the appropriate level of management. 2014-15 2013-14 Improved Stagnant or little progress Regressed

14. Senior management Senior management Accounting officers/ authority Accounting officers/ authority Executive authority Executive authority Required assurance levels Extensive Management’s assurance role Senior management – takes immediate action to address specific recommendations and adhere to financial management and internal control systems Accounting officers/ authorities – hold officials accountable for 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 – complimentary 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 – monitors compliance with legislation and enforces appropriate action. Internal audit unit – follows up on management’s actions to address specific recommendations, conducts own audits on the key focus areas in the internal control environment and report on quarterly progress. Audit committee – monitors 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 – exercises specific oversight on a regular basis on any report which it may deem necessary. National Assembly – provides independent oversight on the reliability, accuracy and credibility of national and provincial government. 14

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

16. 7. Minister’s commitments to address root causes 2014-15 PFMA 16 Status of key commitments by minister Not implemented In progressImplementedNew (1) Amend the existing action plan for the DSD to specifically address proper record keeping and review processes as well as compliance with applicable legislation None (1) Evaluate the environment of the relief funds for closure or amalgamate with either the NDA or SASSA. (2) Monitor and implement action plans to ensure the movement to clean administration for SASSA and NDA (3) Fill vacancies in critical positions at SASSA and the NDA. None

17. Questions 17